Category Archives: Regulations and regulators

As Predicted, IRS Deems Bitcoin to be Property, Limiting Its Usefulness in Commercial Transactions

We told readers earlier this month that the IRS was well-nigh certain to deem Bitcoin to be property, not a currency, and that would deter its use in commerce. We got pushback from Bitcoin defenders, who tried several lines of argument, basically along the lines of “digital currencies are inevitable” and “the tax authorities are irrelevant”. Today, the IRS issued a release that states that it regards Bitcoin as tradeable property, which will make it cumbersome to use it in commercial transactions.

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The SEC Finally Takes an Interest in Collateralized Loan Obligations

The old saying is “better late than never,” but as we hope to demonstrate, the SEC is awfully late to take an interest in collateralized loan obligations. The problems it has gotten curious about now were discernible years ago. And the failure to take interest until now means that misbehavior that was discussed in the press during the crisis is almost certain to go unpunished, since the statute of limitations for securities law violations has passed.

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Delaware Chief Justice to Shareholders: Drop Dead

We’ve argued that the notion that companies are obligated to maximize shareholder value is a theory made up by economists and eagerly adopted by corporate executives, with little to no foundation in law. We received confirmation of our thesis in the form of a Columbia Law Review article by the chief justice in Delaware, Leo Strine, arguing that shareholder activism needs to be curbed. As if CEOs are really breaking a sweat over those pesky shareholders.

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Just 83,000 Homeowners Get First-Lien Principal Reductions from National Mortgage Settlement, 90 Percent Less Than Promised

Yesterday, the National Mortgage Settlement monitor, Joseph Smith, released his final crediting reports, confirming that all five banks (Wells Fargo, Bank of America, Citi, JPMorgan Chase and Ally, now known after bankruptcy as Residential Capital, or ResCap) have now satisfied the consumer relief portion of the foreclosure fraud settlement. The banks were required to spend $20 billion in “credited” relief (some actions received less than a dollar-for-dollar credit). Smith exults that the gross relief provided totaled over $50 billion, and that “more than 600,000 families received some form of relief.”

What the mainstream media reports on this don’t tell you is that the $50 billion number is wildly inflated: for example, it includes $12 billion in deficiency waivers in non-recourse states, which the IRS confirmed have no value whatsoever. But I didn’t know just how inflated these numbers were, and how empty the promises, until I went through them.

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New Study Shows Dangers of Trade Agreements that Help Corporations Sue Governments

As the Obama administration negotiates new trade agreements with European and Pacific nations, a battle has emerged over the agreements’ egregious rules that grant giant corporations unreasonable powers to subvert democracy. These rules, dubbed “investor rights” by the corporations, allow firms to sue governments over actions—including public interest regulations—that reduce the value of their investments.

Oxfam, the Institute for Policy Studies, and four other non-profits are releasing a new study that explains why these rules are so dangerous to democracy and the environment. We are among the co-authors of this study, titled “Debunking Eight Falsehoods by Pacific Rim Mining/OceanaGold in El Salvador.” The report offers a powerful case study of everything that is wrong with this corporate assault on democracy.

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Why the Justice Department Inspector General Report on Mortgage Fraud Matters

Hello, folks! As Yves is off explaining the world to Washington, I’m manning the controls for a couple days.

This allows me to ensure that NC has that whole Justice Department IG report on mortgage fraud covered. I know that Yves heaved the written equivalent of a sigh at the news, and she wasn’t wrong. Nothing tangible is likely to happen for the borrowers victimized by the abusive practices that DoJ willfully neglected to prosecute. And there’s surely a seat being kept warm at Covington & Burling for Eric Holder’s post-government career; this won’t hurt him a bit.

But because I don’t feel the coverage so far has plumbed the depths of this corruption, and because it’s still happening, it’s not worth going silent just yet. It’s probably spitting into the wind, yes, but I’ve got the time and the spit, so I want to note a few things.

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Tax Havens Make US and Europe Look Poorer than They Are, Exaggerate Size of “Global Imbalances”

Peculiarly, despite the importance of tax havens, a pathbreaking paper published in 2013 by Gabriel Zucman of the Paris School of Economics, The Missing Wealth of Nations: Are Europe and the U.S. Net Debtors or Net Creditors? (hat tip Dikaios Logos) has received perilous little attention. Perhaps that’s because, among other things, it undercuts the Bernanke-flattering claim that “global imbalances” were a major driver of the financial crisis.

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JP Morgan/Madoff Case Puts Spotlight on Use of Lawyers as Investigation-Blockers

Whenever a scandal of sufficient magnitude arises at a bank, it’s standard practice to hire an “independent” third party to conduct an investigation and give a report to senior management and the board. But now even bank friendly regulators are starting to suspect that banks are hiring attorneys do to this work, not to come clean, but to facilitate a cover-up.

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Steve Keen: Godzilla Banks are Good for You?

Yves here. Although Keen’s use of the Godzilla metaphor is fun, the unvarnished facts he presents are plenty alarming. Bank of England Governor Mark Carney is actually gleeful at the prospect that England’s banking sector might grow to be as large relative to its economy as Iceland’s and Cyprus’ on the eve of their busts. But even worse, Carney’s enthusiasm for a banking sector that continues with its cancerous (or as Keen would have it, monstrous) growth gives license to bank lobbyists in the US and Europe to press for high rates of growth in their finance sectors so as to defend their national champions.

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Private Equity Industry Floats Trial Balloon For “Get Out of Decades of Flagrant SEC Abuses for Free” Card

In late February, Bloomberg stated that the SEC is “considering” forgiving decades of private equity firms acting as unregistered broker-dealers and possibly legalizing the practice going forward. In case you think this is not a big deal, as we explain later in the post, the SEC is in fact vigilant about enforcing these regulations, so this would be an unprecedented waiver of liability. But richer-than-Croesus private equity firms are special, right?

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