Chinese Banking Advisor Rips Wall Street Banks

Andrew Sheng, Chief Advisor to the China Banking Regulatory Commission, has a scathing commentary on Caixin Online-Bankers Confirm Wall Street’s Barbarianism.

US banks should be very concerned about what he says, both for their future business prospects in China as well as for his calls for an Asian investigation of their business practices. Some of Mr Sheng’s choice quotes:

In emails among themselves, the traders flaunted the fact that their products were crap. Thank you, Wall Street, for such honesty after the fact. We Asians bought some of that crap, thinking you were selling safe products.

I think Asian financial regulators should look into how many of these products were sold in Asia.

Wall Street’s culture is all about treating clients as suckers, because adults are supposed to know what they’re doing. But some of these adults are local government treasurers, or managers of corporate, pension and insurance funds, who did not fully understand that these well-dressed, highly educated and trusted Wall Street bankers were selling toxic products. Unfortunately, taxpayers and savers are now paying for this gross dereliction of fiduciary trust.

The highly paid bankers just don’t get it. Why should they? They have already laughed all the way to the bank with fat bonuses. The man in the street can expect such behavior from street gangs, but not from revered bankers. They are supposed to be the crème de la crème of society. Our children actually aspire to join them. God help them.

It is hard to imagine that the public exposure of some of the seedier practices will not affect the Chinese government’s recruiting of overseas financial talent, as I discussed in an earlier post.

And isn’t it sadly ironic that American banking regulators seem to have abdicated truth-telling to a Chinese regulator?

Please tell me what you think in the comments.

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16 thoughts on “Chinese Banking Advisor Rips Wall Street Banks

  1. He’s shifting the blame and making it sound like those treasurers and fund managers (ill-educated and dressed in rags?) have no fiduciary duty. Take that article with a very large grain of salt.

  2. Talking about the pot calling the kettle black. I’m no sympathizer of Wall St., but what does China do with its own bad loans and NPLs from its state-owned banking sector? Only difference between China and US re NPLs: US exported bad debt worldwide, China leaves Chinese citizens holding the bag.

    • US taxpayer is the one paying the bill for the Wall Street banks’ garbage, just like the Chinese citizens pay for the Chinese NPLs. guess we are more alike than different…

  3. He's shifting the blame and making it sound like those treasurers and fund managers (ill-educated and dressed in rags?) have no fiduciary duty. Take that article with a very large grain of salt.

  4. Talking about the pot calling the kettle black. I'm no sympathizer of Wall St., but what does China do with its own bad loans and NPLs from its state-owned banking sector? Only difference between China and US re NPLs: US exported bad debt worldwide, China leaves Chinese citizens holding the bag.

  5. US taxpayer is the one paying the bill for the Wall Street banks' garbage, just like the Chinese citizens pay for the Chinese NPLs. guess we are more alike than different…

  6. My guess is that this is being used to gain negotiating leverage on the Americans. Next time they sit down to negotiate, the Chinese can wave this in front of the Americans.

  7. You do realize that a huge portion of the bad loans and NPLs, in the 90s, were generated to keep SOEs afloat and their employees on the iron rice bowl, right? Whether the latest stimulus boom will lead to a rapid rise in NPLs, time will tell. We can tell easily when the bubble bursts in the next few months, by the degree of contagion, how negligent the banks have been.

    Re: The US bankers: Two sides were at fault here, the quants and their assistants for selling bad product, and their customers for being so damn greedy. Their customers have already gotten their comeuppance through their fiscal losses; Sheng probably isn’t the toast of the CPC for all the imploded investments Chinese sovereign wealth has made, while the quants are so far relatively unscathed.

  8. You do realize that a huge portion of the bad loans and NPLs, in the 90s, were generated to keep SOEs afloat and their employees on the iron rice bowl, right? Whether the latest stimulus boom will lead to a rapid rise in NPLs, time will tell. We can tell easily when the bubble bursts in the next few months, by the degree of contagion, how negligent the banks have been.

    Re: The US bankers: Two sides were at fault here, the quants and their assistants for selling bad product, and their customers for being so damn greedy. Their customers have already gotten their comeuppance through their fiscal losses; Sheng probably isn't the toast of the CPC for all the imploded investments Chinese sovereign wealth has made, while the quants are so far relatively unscathed.

  9. Article is just populist and simplistic. If fund managers and investors buy something they don’t understand and lose money, they are the ones who should be lynched. And what was the reason for these products going bad? Who were responsible for the underlying mortgage defaults and the irresponsible lending?

  10. Article is just populist and simplistic. If fund managers and investors buy something they don't understand and lose money, they are the ones who should be lynched. And what was the reason for these products going bad? Who were responsible for the underlying mortgage defaults and the irresponsible lending?

  11. That’s richy ironic. “We Asians bought some of that crap, thinking you were selling safe products.”

    We American bought your crap (dry wall, baby food, heavy-metal contaminated baby products ….), thinking you were selling us safe products.

    Barbarism and criminal behavior is not a unique attribute of Western Finance. Some cultures/countries have been engaged in the same behavior for millennia.

  12. That's richy ironic. “We Asians bought some of that crap, thinking you were selling safe products.”

    We American bought your crap (dry wall, baby food, heavy-metal contaminated baby products ….), thinking you were selling us safe products.

    Barbarism and criminal behavior is not a unique attribute of Western Finance. Some cultures/countries have been engaged in the same behavior for millennia.

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