Category Archives: Regulations and regulators

Bill Black Discusses “Too Big to Jail” on Bill Moyers

Bill Black gives one of his best recaps ever of the “too big to jail” syndrome on Bill Moyers. For readers who missed the story, Black gave critical testimony in a Federal prosecution of small fry mortgage fraudsters. He helped persuaded the jury that in fact no fraud took place because the banks were willing to underwrite any predatory, poorly underwritten loan in the runup to the crisis. Black savages the posture of the Department of Justice in this case and in general.

AIG Bailout Trial and Whoppers, Um, Crisis Revisionist History

If nothing else, the legal slugfest over whether the US government did former AIG CEO Hank Greenberg a dirty by imposing tough terms on the failed insurer and giving the kid gloves treatment to the teetering-on-the-brink banks who were certain to be engulfed by an AIG collapse will be highly entertaining. Ben Bernanke, Hank Greenberg, and Timothy Geithner are all scheduled to go on the stand next week, to be grilled by America’s top trial lawyer, David Boies.

Bill Black: Fed Failure – A “Perfectly Legal” Scam is Perfectly Unacceptable to Real Regulators

Yves here. In this post, Bill Black does the yeoman’s work of stepping through one revelation in Fed whistleblower Carmen Segarra’s tapes from some of her discussions with more senior colleagues at the New York Fed. A critical section involves how Fed officials became aware of the fact that Goldman had slipped language into an already-closed transaction with the Spanish bank Santander that indicated that the Fed had been informed of the deal and had not objected, neither of which was the case. The staffers tried to rouse themselves to challenge Goldman on this misrepresentation, and lost their nerve.

But as bad as letting Goldman roll the Fed on the matter of non-existant non-objections is concerned, Black stresses the much more serious underlying failure: Goldman had created the impression that the Fed was kosher with Goldman helping Santander fool European bank regulators by pretending it was more solvent than it was. The effort to game banking regulations is an even bigger deal than the effort to pretend the Fed was all on board. Black blasts the clearly captured New York Fed “relationship manager” Mikel Silva in gratifying detail.

Fed Whistleblower Carmen Segarra, Snowden, and the Closing of the Journalistic Mind

The financial press has been awash with coverage of This American Life’s broadcast of key section of 46 hours of tapes made in secret by former New York Fed bank examiner Carmen Segarra. The broadcast and related reporting at ProPublica show how utterly craven the central bank was when it came to matters Goldman.

Now you might say, isn’t this media firestorm a great thing? It’s roused Elizabeth Warren and Sherrod Brown to demand hearing. The Fed has been toadying up to Wall Street for years. Shouldn’t we be pleased that the problem is finally being taken seriously?

Actually, no.

William R. Black on Prosecuting Criminal Banker CEOs: Obama and Holder Don’t Even Care Enough to Fake It

You don’t bat zero for the season without a plan.

The SEC Coverup for Private Equity: Worse Than for TBTF Banks

In a mere four months, the SEC has gone from calling out widespread abuses in the private equity industry to not just walking back its detailed criticisms, but actually enabling a coverup.

Mathew D. Rose: “We Need A Banking Revolution”

Yves here. Please note that Don’t Start from Here: We Need a Banking Revolution has been released in the UK and was scheduled for publication in the US in early September but apparently is not yet for sale. I hope readers will keep an eye out for it, because it appears to fill a void, that of describing in high-level accurate terms why the banking system no longer works for society at large, how post-crisis banking reforms missed the mark, and what measures need to be put in place.

Bill Black: Roger Cohen’s Ode to Colonialism and Imperialism: Why is It “Insidious” to Want Justice for Banksters?

A remarkable (in a bad way) New York Times op-ed shows that Roger Cohen is so deep in the banksters’ pockets that he cannot see that he is a leader in the movement to ensure that no bankster will ever “pay for his sins.”

An Accident Waiting to Happen: The $1 Trillion Leveraged Loan Market

A new article in Bloomberg gives a well-researched overview of a mess-in-the-making that regulators are choosing to ignore: the leveraged loan market. For newbies, “leveraged loans” means “risky loans to big companies”. For the most part, they fund private equity buyouts and restructurings. The juicy fees on these financings, 1% to 5% of the amount raised, versus an average of 1.3% for junk bonds, is a big reason why none of the incumbents is particularly eager to change a market that is working just fine for them in its current, creaky form.

Who Wins in the Financial Casino?

I received a message last week from a savvy reader, a former McKinsey partner who has also done among other things significant pro-bono work with housing not-for-profits (as in he has more interest and experience in social justice issues than most people with his background). His query:

We both know that financialization has, among so many other things, turned large swaths of the capital markets into a casino

Here’s my thought/question: is there a house?

The common wisdom is that the ‘house wins’ in casinos.

So, who or what was really the ‘house’?

Ilargi: Subprime is Back With a Vengeance

Yves here. While it remains an open question as to whether frenzied efforts to push investors even further out on the risk limb will come to fruition, the fact that so many measures are underway looks like an officially-endorsed rerun of early 2007. If the Fed indeed raises rates in the not-insanely-distant future, getting into subprime and other speculative credits is a quick path to losses. But even if the Fed and other central banks remain super-dovish, risky borrowers can and will go tits up independent of interest rates. Credit risk is not the same as interest rate risk, but the inability to get any return for the latter is producing an extreme underpricing of the former.

Maggie Mahar: 1/3 of Medicare Spending is Wasted

Yves here. Maggie Mahar’s post focuses on a pet peeve of mine, namely, the way treatments and procedures are overprescribed in the US. She includes a favorite example, that of colonoscopies.

However, I take issue with Mahar’s conclusion, that waste in Medicare means that Medicare for all should not serve as a way to get to single payer (even assuming that issue can be opened up again in the next decade).

The Fed Fails, Um, Does Irony

The Fed routinely makes decisions and pursues policies which result in it achieving the opposite of its stated goals and forecasted outcomes.