Category Archives: Regulations and regulators

Sheila Bair Visits Occupy Wall Street

Sheila Bair, the former FDIC chairman who heads the Systemic Risk Council, and Ricardo Delfina, a fellow Systemic Risk Council member, met on Sunday with members of several Occupy Wall Street working groups: Occupy Bank, Alternative Banking, and Occupy the SEC. I’ve watched presentations by Bair twice previously: once when she was at the FDIC, another not long after she had left government service. Even though she had been pretty direct in those discussions, she was surprisingly specific in this meeting about some of the impediments she faced during the crisis. Some of the topics:

Markets Applaud Draghi’s New, Improved Kick the Can Down the Road Strategy

On Thursday, ECB chief Mario Draghi announced a bond-buying program that had been largely leaked the day prior, namely that of a new bond buying program, the Outright Monetary Transactions, or OMT. Bond yields in Italy and Spain had already come down on the rumor, and stock markets around the world rallied on the news.

The enthusiasm appears overdone when you look at the sketchy details.

The Banks Are Bluffing – They Aren’t Moving Anywhere

Yves here. This is a subject near and dear to my heart. Banks occasionally harrumph that if regulators are too mean, they’ll just pack up and go somewhere else. That’s complete bluster as far as TBTF banks are concerned. Any major bank needs to be backstopped by a real central bank. The Caymans don’t begin to cut it. And central banks are actually not all that welcoming of world scale players trying to take advantage of the slack they give to banks they’ve been in bed with a long time. UBS considered splitting in two and relocating its investment banking operations when the Swiss National Bank announced it would impost 20% equity requirements. It has concluded it has to stay put.

Andrew Norton debunks another sort of threat made by large banks: that they will move significant activities out of particular financial centers like London.

Mortgage Settlement Monitor Hires Firm that Has Worked on Countrywide Matters

Sadly, there is a reason that the Obama Administration believes that any problem can be solved by better propaganda.

Time to Rethink a Broken Market

Yves here. Readers are likely to assume that the “broken market” of the headline is US housing related, say the private mortgage securitization market, but the subject is what once was the gold standard of trading markets, equities.

Index Universe has cited a study by the Tabb Group that finds that investor confidence in stock markets is even lower than in the period immediately following the flash crash of 2010. Back then, 53% of respondents had high or very high confidence in the markets, and only 15% weak or very weak confidence. As of its August 2012 survey, the number with positive views and negative views were equal, at 34%. This interview with Chris Sparrow, an expert on high frequency trading, describes why he thinks the market is now fundamentally flawed and what can be done to reform it.

Quelle Surprise! Banks Getting Credit for What They Would Have Done Anyhow in Mortgage Settlement

Today, Joseph Smith, the official monitor for the Federal-state mortgage settlement entered into earlier this year with five major servicers, released a glossy initial report on program progress. Needless to say, my cynicism was piqued both by the glossy format of the document and the decision to release it well before the required date of second quarter 2013.

But the distressing part is the way the settlement is playing out according to script.

Bain’s “Commitment to Transparency” Canard

By Nanea, a private equity insider

I’ll be having much more to say later about the Bain documents posted on Gawker.

In the meantime, I would like to point out the utterly misleading nature of the statement issued by Bain Capital in response to the documents’ release.

Quelle Surprise! Former JP Morgan Chairman Offers Dubious Defenses of Big Banks

Ordinarily, it might not seem worth the bother to debunk yet another piece of bank propaganda. However Thursday’s op ed by former JP Morgan Chase chairman William Harrison, “Don’t Break Up the Big Banks,” recites a classic set of time-worn canards. As regulatory compliance expert Michael Crimmins said via e-mail, “It’s sounding desperate that they’re dragging Harrison out of retirement to spout this drivel.”Thus shredding this piece makes for one-stop shopping on this topic.

Greece’s Great Depression: “Everyone is Going into a Black Hole”

RT interviews University of Athens economics professor Yanis Varoufakis on the latest round of Greek bailout negotiations.

Ezra Klein Deems Joe Stiglitz, Paul Krugman, and Elizabeth Warren (Plus Other Serious People) Not Credible

Ezra Klein demonstrated how far he’s has to descend into the Humpty Dumpty world of words meaning just what he chooses them to mean in order to defend failed Administration policies.

New York Times Publishes Apology for Obama’s Failed Housing Policies

On the one hand, the dismal failure of the Administration’s cosmetic responses to the foreclosure mess is so evident that the New York Times is willing to acknowledge it, via a first page article titled, “Cautious Moves on Foreclosures Haunting Obama.” On the other, what the story offers is a whitewash, not an analysis.

Quelle Surprise! SEC Plans to Make the World Safer for Fraudsters, Push Through JOBS Act Con-Artist-Friendly Solicitation Rules

If you merely looked at the SEC’s record on enforcement, you’d conclude that it suffered from a Keystone Kops-like inability to get out of its own way. The question remains whether that outcome is the result of unmotivated leadership (ex in the safe realm of insider trading cases) and long-term budget starvation leading to serious skills atrophy, or whether the SEC really, truly, is so deeply intellectually captured by the financial services industry that it thinks industry members don’t engage in fraud, they only make “mistakes”?

It’s sure looking like the latter.

Spain Out of Options

Yves here. We’ve flagged in earlier posts how the Spanish banking crisis has the potential to become destabilizing politically, as if Spain wasn’t already at considerable risk of upheaval. Spanish depositors were pushed to convert their deposits into preference shares, which they were told were just as safe. This was a simple desperation move by the banks to save their own skins, customers be damned, by raising equity from the most unsophisticated source to which they had access. And now that that gambit failed, these shareholders are due to have those investments wiped out unless the Spanish authorities can cut a deal to spare them. Don’t hold your breath.

Marcy Wheeler: Standard Chartered Bank Admits Promontory’s Estimates of Its Iran Business Were Wrong

Yves here. A few quick comments on the New York state settlement.

Bill Black: Romney Takes His Political Inspiration from Europe’s Worst Mistakes

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly posted with New Economic Perspectives

One of Governor Romney’s criticisms of President Obama is that he “takes his political inspiration from Europe….”