Saturday, September 5, 2015

Aguilar Proposes Transparency Fix for Broken SEC Waiver System

Since Kara Stein became a commissioner on the SEC, we’ve heard a lot about the agency’s waiver policy. Basically, if a financial institution commits a crime, the SEC has a series of automatic penalties that are “automatic” in name only, because the agency routinely waives the penalties. Stein’s outcry at this turn of events always makes people like Matt Levine, in his usual role of intentionally missing the point, completely befuddled, because the punishments wouldn’t fit the crimes, and banks would lose access to entire lines of business for some unrelated transgression, and that just wouldn’t be fair, now would it?

The point, of course, is that automatic penalties are either automatic or not. If the punishment of banning institutions from managing mutual funds or working with private companies to find investors, or forcing SEC approval for any stocks or bonds that the firm issues on its own behalf, is simply too harsh as a consequence of committing a crime, then the SEC can go ahead and eliminate the automatic trigger. But having them in place, and then routinely waiving them, makes a mockery of any sort of accountability whatsoever. I personally believe that having these penalties in place are a solid way to ensure compliance across business lines, with the only threat that matters – a threat to the pocketbook – in reserve. If it would be too costly for banks to break the law, well maybe they’ll be a little more careful. But I would rather just eliminate the penalties altogether than have the SEC bow and scrape to ensure that committing fraud doesn’t lead to anything bad happening to the perpetrator.

Links 8/30/15

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CalPERS’ Private Equity, Exposed: Executive Summary

Senior private equity professionals at CalPERS do not understand the economics of private equity funds, raising questions about the staff’s competence.

Perry Mehrling: Defending the RMB

It’s hard to short China, but not so hard to short China’s currency, and that’s a problem for the central bank.

Permaculture in Cold Climates

Permaculture in Vermont and “the jackpot.”

Links 8/29/15

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China Sneezes, Europe Catches a Cold

European stock prices, financial contagion and the trade exposure to China. How the turmoil in China’s stock market is affecting European stock markets through Europe’s trade exposure to China

2:00PM Water Cooler 8/28/15

Today’s Water Cooler: 2016 and ka-ching, the Fed and Jackson Hole, Mr. Market afterburn, Emmett Till, Terry Pratchett, little libraries

CEOs Call for Wage Increases for Workers to Address Inequality! What’s the Catch?

It is beginning to dawn on the top echelon that too much inequality is not good for them.

Links 8/28/15

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More on Why Bank IT and Payment Systems Matter

The IT challenges of a Grexit are important not only in and of themselves, but as a window into the creaky state of bank IT and the systemic risk it poses.

Don Quijones: Mexican Gourmet Chefs Sharpen Knives in Monsanto GMO War

GMOs have had a hard time in Mexico.

Governance Matters

This post illustrates how dominant the neoliberal paradigm has become all over the world, and how it fails to acknowledge, much the less address, the well-known failings of markets, such as externalities.

2:00PM Water Cooler 8/27/15

Today’s Water Cooler: Clinton on guns, Trump on third party, Sanders on scaling, GDP revision, epigenetic change, tsundoku (unread books)

Conflict Over Water In Central Asia

Expect water wars to become more common and deadly.