From the Wall Street Journal, Heard on the Street column. I picked it up on Cory's site under members only.

-- seraphima (seraphima@aol.com), November 13, 1999

Answers

Link?

-- Y2KGardener (gardens@bigisland.net), November 13, 1999.

Sorry, 40 billion, then 14 billion, now 5 billion. Well, a billion here, a billion there........

-- seraphima (seraphima@aol.com), November 13, 1999.

www.kiyoinc.com/current.html

-- seraphima (seraphima@aol.com), November 13, 1999.

Somebody is sitting on a VERY large yacht right now. It was bound to happen sooner or later.

-- I'm Sipping (Martini's@My.Yacht), November 13, 1999.

Just curious, how did you choose your "seraphima" name? Are you Orthodox??

None of my business, anyway,

-- Magnolia (Magnooliaa@yahoo.com), November 13, 1999.

You should have placed an OT? on this information before posting it. Giving people the idea that 40 billion dollars has been misplaced erroneously due to Y2K problems is irresponsible and borders on the kind of disinformation being put out by the likes of Kosky and Nerc. This problem, although a signifigant computer error costing a LOT of money, does not appear to be Y2K inspired. It should however serve as a reminder to us that banks are not infallible, in fact some are so large as to allow for screwups like this one.

If you have more insidy info on this from Cory then by all means post it. I like reading his stuff. But post all of it.

For educational and research purps only:

November 9, 1999

Chase Manhattan 'Checkbook' Goes Awry, Prompts Inquiry By PAUL BECKETT Staff Reporter of THE WALL STREET JOURNAL

NEW YORK -- Tellers in branches of Chase Manhattan, the nation's third-largest bank, readily give instructions on how to balance a checkbook.

Maybe the bank itself could use a lesson or two.

The Securities and Exchange Commission is investigating why Chase has a discrepancy in an internal tracking system, the equivalent of an in- house checkbook, that started at more than $40 billion -- yes, billion -- according to people familiar with the matter.

The problem accumulated over as many as 10 years in Chase's Capital Markets Fiduciary Services division, which is hired by companies and municipalities to pay interest and principal on corporate and municipal bonds. By the end of September, the discrepancy was whittled down to about $14 billion. It stands at under $5 billion now, after Chase spent months on the painstaking process of picking through thousands of bond issues. People familiar with the matter say the reconciliation should be completed by the end of the first quarter next year.

The SEC's investigation comes at a time when the agency is taking a keen interest in company internal accounting issues that go beyond the basics of financial reporting on which most investors depend.

Yet the discrepancy isn't likely to affect Chase's reported financial results, and no restatement of earnings is expected. Nor have any customer funds been lost. Indeed, in the course of its digging to reconcile the problem, Chase realized it had overpaid $7 million in interest on some bonds that Chase should have called. The bank will absorb that $7 million as a loss, people familiar with the matter say.

"We are cooperating with all of the regulatory authorities, and we do not believe the impact on our financial statements will be material," says Marc Shapiro, a Chase vice chairman, in an interview.

Still, the bank, with the help of its auditors, PricewaterhouseCoopers, has been working hard to solve the problem, which was uncovered during an internal audit more than a year ago, when PricewaterhouseCoopers recommended that the reconciliation take place.

Such a large snafu could prove embarrassing and raises prickly questions about the bank's internal tracking systems. Chase is one of the biggest participants in the industry for servicing corporate and municipal bonds. Moreover, it is widely viewed as having good internal controls and prides itself on its internal discipline. But that reputation already was called into question by a separate incident recently.

Last week, Chase revealed that a portion of its trading accounts had been improperly inflated by the misstatement of foreign-exchange transactions. A trader, Christopher Goggins, was dismissed. Mr. Goggins didn't return calls seeking comment.

Chase Says Transaction Misstatements Improperly Inflated Trading Accounts (Nov. 2) Chase said the foreign-exchange problem would result in a reduction of $40 million in its trading profit in the fourth quarter and that it is conducting an investigation into the matter. On the New York Stock Exchange Monday at 4 p.m. Monday, Chase shares closed down $1.875 to $84.375. They stood at $87.25 when Chase announced the misstatement Nov. 1.

The roots of the reconciliation issue in the fiduciary-services division, part of the Chase Global Services unit, has been traced to the way Chase used BondMaster, a software system used by Chase and many other big banks, according to people familiar with the matter. Indeed, Chase not only had its own reconciliation problem but has inherited similar problems from its 1996 merger with Chemical Banking and from bond portfolios it has acquired.

Made by SunGard Data Systems, Wayne, Penn., BondMaster allows banks to keep track electronically of when they should pay interest and principal payments to bondholders on behalf of companies and municipalities. The companies and municipalities give banks the money to pay the bondholders and also pay a fee to the bank for the payment service.

But in tracking how many bonds were outstanding to be serviced, Chase's system recorded the amount of bonds that had been originally authorized by the company or municipality. That failed to take into consideration any bonds that had been paid off, or whether the actual amount of bonds issued was different from the amount that the issuer authorized.

So Chase's BondMaster showed there were $40 billion-worth of bonds outstanding that Chase ought to be servicing, when in fact the bonds either hadn't been issued or had already been redeemed, people familiar with the matter say. The discrepancy was found in about 6,500 of the 45,000 bond issues serviced in the fiduciary-services division, these people say. At that point, Chase realized it had a serious weakness in its internal tracking system and set out to correct it.

In simple terms, it was the equivalent of not recording transactions in the front of your checkbook, even though your account balance and statement recorded them correctly.

Chase was recording the data correctly elsewhere in the division, where account managers use both paper and computer records to keep track of payments and the correct numbers of bonds outstanding. Chase also has other outside checks on its payments record: Companies and municipalities keep track of what payments the bank should be making on their behalf; and bondholders typically track when their payments are due.

The SEC's regional office in Chicago has been investigating the issue for the past several months, people familiar with the matter say. A spokesman for the SEC declined to comment, citing the commission's policy to neither confirm nor deny the existence of investigations.

In a quarterly filing with the SEC late Monday, Chase acknowledged that it has "some deficiencies in the computerized bond record- keeping system" in its fiduciary services division.

"Because of these deficiencies, Chase is currently unable to confirm through a complete reconciliation of the relevant accounts that the value of bonds that could potentially be presented for payment does not exceed the amount of cash on hand for the payment of such bonds," the filing said.

Chase added that the SEC was looking into the issue to determine whether there have been "violations of its transfer agency record- keeping or reporting regulations."

Some people familiar with the matter maintain Chase's problem is of little financial significance, because Chase's public reporting likely won't be affected. Chase is keeping the Federal Reserve informed of the problem, these people say, but it is not viewed as an issue of bank safety and soundness, which is the Fed's primary concern. A spokesman for the Federal Reserve declined to comment.

But Chase is taking the matter seriously enough to bring an in-house technology expert to complete the reconciliation and make sure such problems don't arise again. The bank recently named John Irvine, a Chase veteran who has worked in several other technology-heavy areas of the bank such as foreign exchange, as director of operations and technology for Capital Markets Fiduciary Services.

-- Gordon (g_gecko_69@hotmail.com), November 13, 1999.

When you post something without adding the relevant information necessary for forum participants to judge the validity of the story you add to the existing pile of disinformation. I think we have enough of that sort of garbage comming at us from Kosky and friends, don't you? Now if there is more background from Cory's site ( i really love his WRP's) please post it. He won't care.

Although this does not bode well for the banks, it certainly should have been listed OT?

For educational and research purposes only:

November 9, 1999

Chase Manhattan 'Checkbook' Goes Awry, Prompts Inquiry By PAUL BECKETT Staff Reporter of THE WALL STREET JOURNAL

NEW YORK -- Tellers in branches of Chase Manhattan, the nation's third-largest bank, readily give instructions on how to balance a checkbook.

Maybe the bank itself could use a lesson or two.

The Securities and Exchange Commission is investigating why Chase has a discrepancy in an internal tracking system, the equivalent of an in- house checkbook, that started at more than $40 billion -- yes, billion -- according to people familiar with the matter.

The problem accumulated over as many as 10 years in Chase's Capital Markets Fiduciary Services division, which is hired by companies and municipalities to pay interest and principal on corporate and municipal bonds. By the end of September, the discrepancy was whittled down to about $14 billion. It stands at under $5 billion now, after Chase spent months on the painstaking process of picking through thousands of bond issues. People familiar with the matter say the reconciliation should be completed by the end of the first quarter next year.

The SEC's investigation comes at a time when the agency is taking a keen interest in company internal accounting issues that go beyond the basics of financial reporting on which most investors depend.

Yet the discrepancy isn't likely to affect Chase's reported financial results, and no restatement of earnings is expected. Nor have any customer funds been lost. Indeed, in the course of its digging to reconcile the problem, Chase realized it had overpaid $7 million in interest on some bonds that Chase should have called. The bank will absorb that $7 million as a loss, people familiar with the matter say.

"We are cooperating with all of the regulatory authorities, and we do not believe the impact on our financial statements will be material," says Marc Shapiro, a Chase vice chairman, in an interview.

Still, the bank, with the help of its auditors, PricewaterhouseCoopers, has been working hard to solve the problem, which was uncovered during an internal audit more than a year ago, when PricewaterhouseCoopers recommended that the reconciliation take place.

Such a large snafu could prove embarrassing and raises prickly questions about the bank's internal tracking systems. Chase is one of the biggest participants in the industry for servicing corporate and municipal bonds. Moreover, it is widely viewed as having good internal controls and prides itself on its internal discipline. But that reputation already was called into question by a separate incident recently.

Last week, Chase revealed that a portion of its trading accounts had been improperly inflated by the misstatement of foreign-exchange transactions. A trader, Christopher Goggins, was dismissed. Mr. Goggins didn't return calls seeking comment.

Chase Says Transaction Misstatements Improperly Inflated Trading Accounts (Nov. 2) Chase said the foreign-exchange problem would result in a reduction of $40 million in its trading profit in the fourth quarter and that it is conducting an investigation into the matter. On the New York Stock Exchange Monday at 4 p.m. Monday, Chase shares closed down $1.875 to $84.375. They stood at $87.25 when Chase announced the misstatement Nov. 1.

The roots of the reconciliation issue in the fiduciary-services division, part of the Chase Global Services unit, has been traced to the way Chase used BondMaster, a software system used by Chase and many other big banks, according to people familiar with the matter. Indeed, Chase not only had its own reconciliation problem but has inherited similar problems from its 1996 merger with Chemical Banking and from bond portfolios it has acquired.

Made by SunGard Data Systems, Wayne, Penn., BondMaster allows banks to keep track electronically of when they should pay interest and principal payments to bondholders on behalf of companies and municipalities. The companies and municipalities give banks the money to pay the bondholders and also pay a fee to the bank for the payment service.

But in tracking how many bonds were outstanding to be serviced, Chase's system recorded the amount of bonds that had been originally authorized by the company or municipality. That failed to take into consideration any bonds that had been paid off, or whether the actual amount of bonds issued was different from the amount that the issuer authorized.

So Chase's BondMaster showed there were $40 billion-worth of bonds outstanding that Chase ought to be servicing, when in fact the bonds either hadn't been issued or had already been redeemed, people familiar with the matter say. The discrepancy was found in about 6,500 of the 45,000 bond issues serviced in the fiduciary-services division, these people say. At that point, Chase realized it had a serious weakness in its internal tracking system and set out to correct it.

In simple terms, it was the equivalent of not recording transactions in the front of your checkbook, even though your account balance and statement recorded them correctly.

Chase was recording the data correctly elsewhere in the division, where account managers use both paper and computer records to keep track of payments and the correct numbers of bonds outstanding. Chase also has other outside checks on its payments record: Companies and municipalities keep track of what payments the bank should be making on their behalf; and bondholders typically track when their payments are due.

The SEC's regional office in Chicago has been investigating the issue for the past several months, people familiar with the matter say. A spokesman for the SEC declined to comment, citing the commission's policy to neither confirm nor deny the existence of investigations.

In a quarterly filing with the SEC late Monday, Chase acknowledged that it has "some deficiencies in the computerized bond record- keeping system" in its fiduciary services division.

"Because of these deficiencies, Chase is currently unable to confirm through a complete reconciliation of the relevant accounts that the value of bonds that could potentially be presented for payment does not exceed the amount of cash on hand for the payment of such bonds," the filing said.

Chase added that the SEC was looking into the issue to determine whether there have been "violations of its transfer agency record- keeping or reporting regulations."

Some people familiar with the matter maintain Chase's problem is of little financial significance, because Chase's public reporting likely won't be affected. Chase is keeping the Federal Reserve informed of the problem, these people say, but it is not viewed as an issue of bank safety and soundness, which is the Fed's primary concern. A spokesman for the Federal Reserve declined to comment.

But Chase is taking the matter seriously enough to bring an in-house technology expert to complete the reconciliation and make sure such problems don't arise again. The bank recently named John Irvine, a Chase veteran who has worked in several other technology-heavy areas of the bank such as foreign exchange, as director of operations and technology for Capital Markets Fiduciary Services.

-- Gordon (g_gecko_69@hotmail.com), November 13, 1999.

Its only zeros. Why the concern? Y2K is about zeros too.

Such a large snafu could prove embarrassing and raises prickly questions about the bank's internal tracking systems. ...

The roots of the reconciliation issue in the fiduciary-services division, part of the Chase Global Services unit, has been traced to the way Chase used BondMaster, a software system...

Wonder how many banks next year will have geneology problems?

And for how long?

Diane

-- Diane J. Squire (sacredspaces@yahoo.com), November 13, 1999.

Dear Magnooliaa, Yes, I am Orthodox. And you? +

Dear Gordon, Thank you for your critique and the helpful info you posted. Obviously, 4:30 AM is too late for me to be posting. Sorry for my several mistakes in this post.

-- seraphima (seraphima@aol.com), November 13, 1999.

As a matter of fact, I am! Orthodox, that is . . . Hey, my Church is definitely y2k compliant. Pews? We don't need no stinkin' pews!

:

-- Magnolia (Magnooliaa@yahoo.com), November 13, 1999.