Category Archives: Regulations and regulators

Mirabile Dictu! ECB Chief Draghi Being Investigated for Membership in the Group of Thirty

It’s easy for Americans to labor under the delusion that other parts of the the world have less obvious forms of corruption or its milder form, conflict of interest, than our revolving door system (one of my favorites was when the NY Fed staffer tasked to overseeing AIG left….to AIG).

And ex banking, that actually is true in most advanced economies. But as a reminder of how backs get scratched in Europe, we have Mario Draghi.

Yet Another Barmy Obama Administration Excuse for Preserving the Banking Status Quo

The Administration, meaning the Treasury Department, is never wanting for a defense of the big financial services incumbents.

Is the ECB Ready and Able to Cross the Rubicon?

The big news of the day on Thursday was Mario Draghi’s pronouncement that the ECB would do “whatever it takes” to shore up the Euro. He also used the same phrases about the need to keep the monetary channel open prior to preceded previous interventions. Two-year Spanish bond yields, which had risen to unprecedented levels, came in by over 150 basis points and global stock markets rallied.

But how seriously should we take this talk?

The Real Significance of Sandy Weill’s “Break Up Big Banks” Recommendation

The two finance personality stories of the day were Timothy Geithner’s appearance before the House Financial Services Committee for a periodic Financial Stability Oversight Council Report, and former Citigroup CEO Sandy Weill’s unexpected conversion to the “smaller banking is better” faith. As Adam Levitin and Dave Dayen recount, Geithner reverted predictably to a combination of memory lapses and a “nothing to see here” stance on Libor (oh yeah, with the added wrinkle that if there was anything to see, it wasn’t his job to look anyhow). If any other grownup said he didn’t remember things as often as Geithner does, he’d be a candidate for an Alzheimer’s ward.

Occupy the SEC Urges the SEC to Investigate JP Morgan Over Likely (As in Bloomin’ Obvious) Sarbanes Oxley Violations #OWS

We’ve written at length how the Obama Administration claim that it couldn’t prosecute bank CEOs and senior executives because they didn’t do anything illegal is utter hogwash. Sarbanes Oxley, passed in the wake of Enron, was designed to prevent CEOs and other top executives from escaping liability by claiming they were clueless face men. And it provides for a clear path to criminal prosecutions.

But the way Sarbanes Oxley was defanged is by making it an exercise in form over substance.

NYT’s Jackie Calmes’ “Grossly Inaccurate” Hit Piece on Neil Barofsky

It isn’t surprising that the knives are out. Former Special Inspector General of the TARP Neil Barofsky’s new book Bailout depicts the Treasury, where his effort was housed, as completely, hopelessly in thrall to the banks. While Hank Paulson at least seemed genuinely to appreciate the need for procedures and checks to protect taxpayers’ interests, Geithner chafed at any interference in catering to every whim of the financial services industry and used every bureaucratic trick at his disposal to undermine Barofsky.

Although Barofsky’s book has generally gotten very positive reviews, including one from the New York Times’ Gretchen Morgenson last weekend, a rearguard action by Friends of the Administration was inevitable. And it has come in the form of a book review by a Washington reporter for the Grey Lady, one Jackie Calmes.

Josh Rosner: Eurozone Crisis – No More Safe Havens

Josh Rosner of Graham Fisher published a report last week urging subscribers to short bunds, beating the Moody’s negative watch for Germany and the Netherlands by a full week.

The article provides a data-rich analysis of how a banking crisis has morphed into a sovereign debt crisis as the authorities have refused to impose losses on investors in banks in the so-called core Eurozone countries. And as Rosner argues, the current path of denial and delay has increased the eventual costs to Germany and the global economy, with the tab to Germany already €500 billion higher than it would otherwise have been.

Satyjit Das: The LIBOR Fix – Part II

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk and Traders Guns and Money. Jointly posted with roubini.com

The scandal surrounding the manipulation of LIBOR sets raises a number of issues. The first part of this two part piece set out the known facts. In the second part, we discuss the broader implications of the episode.

Randy Wray: Why We’re Screwed

By L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City. Cross posted from Economonitor

As the Global Financial Crisis rumbles along in its fifth year, we read the latest revelations of bankster fraud, the LIBOR scandal. This follows the muni bond fixing scam detailed a couple of weeks ago, as well as the J.P. Morgan trading fiasco and the Corzine-MF Global collapse and any number of other scandals in recent months. In every case it was traders run amuck, fixing “markets” to make an easy buck at someone’s expense. In times like these, I always recall Robert Sherrill’s 1990 statement about the S&L crisis that “thievery is what unregulated capitalism is all about.”

EuroCrisis Intensifies as Spain Spirals Downward, Greek Impasse Nigh

It is increasingly difficult to find metaphors adequate to describe the pathological dysfunction among European leaders as their rigidities and biases make a full blown crisis look inevitable.

Satyajit Das: The LIBOR Fix – Part 1

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk (2011)

The scandal surrounding the manipulation of LIBOR sets raises a number of issues. In the first part of the two part piece, the known facts are outlined. In the second part, the broader implications of the episode are discussed.

Libor Scandal Apologist Avinash Persaud Displays Inability to Do Math

Nothing like putting your foot in mouth in public and chewing.

Departing IMF Economist Blasts Fund

Although the resignation letter of Peter Doyle, who was an advisor to the IMF’s European Departments, which is running the rescue programs for Greece, Ireland, and Portugal, is more terse that Greg Smith’s resignation from Goldman via a New York Times op ed, it is no less devastating.

Why the Obama Administration Will Hate Neil Barofsky’s Book “Bailout”

Having read an advance copy of former Special Inspector General of the TARP Neil Barofsky’s new book, Bailout, I am pretty confident most NC readers would enjoy it. He got to be what I call a designated asshole in his DC incarnation, not that that was the way it had to turn out. For some unfathomable reason, the Bush White House decided it wanted someone who’d take the SIGTARP role seriously in the job. And they chose a Democrat, perhaps figuring that as much as he’d be a thorn in their side, Obama would be hard pressed not to keep him on, and he’d be even more of a problem for them.

Six reasons why the Obama Administration will hate this book: