One of the many recent banking takeovers rushed through in the USA was that of Philadelphia-based Sovereign Bank by Banco Santander of Spain. The takevoer had to be approved by the US Federal Reserve. As part of the process, the Fed examined the financial and managerial capacity of Banco Santander.
The Board [of the Fed] also has considered the managerial resources of the organizations involved and the proposed combined organization. The Board has reviewed the examination records of Santander’s U.S. operations, Sovereign, and their subsidiary depository institutions, including assessments of their management, risk-management. The Board has previously determined that Santander is subject to comprehensive consolidated supervision by the Bank of Spain ... Based on all the facts of record, the Board has concluded that the financial and managerial resources of the organizations involved in the proposal are consistent with approval under section 4 of the BHC [bank holding company] Act.
So the Fed signed off the takeover based on the fact that everything looked fine with Santander as far as they could see and it was up to the Bank of Spain to catch any funny stuff back home.
Fast forward to the Bernard Madoff collapse and we find out that Santander was running a hedge fund called Optimal Investment Services which had a sub-fund called Optimal Strategic U.S. Equity fund which was run Optimal Multiadvisors Ireland Plc, a Dublin based offshoot of Optimal Investment Serices.
All this Optimality consisted of getting money from clients, charging large fees, and giving it to Bernie Madoff to "invest" for them. If that's what got you past the regulators in the last few years -- the same regulators now in charge of getting us out of the mess -- we're in even deeper trouble than we think.
UPDATE: More on the Irish angle to the Madoff collapse.
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