Category Archives: Regulations and regulators

Yet Another Obama Big Lie: Mortgage Fraud Investigation Not Even Staffed

The Administration has managed the impressive task of operating in a more cynical fashion than even its worst critics predicted.

Yanis Varoufakis on Ringfencing Europe

Yanis Varoufakis gave an energetic, pointed, and insightful talk at the INET conference in Berlin. His message was that the efforts by European authorities were misguided, in that they were seeking to ringfence individual countries, when it was the Eurozone as a whole that needs to be shored up. And he contends this can be done now without special approvals.

Bill Black: The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor

Yves here. One of the themes in this Bill Black post is that a senior official who understands the importance of effective regulation can have an impact in a relatively short period of time. It’s important to keep that in mind as a reminder that the obstacle to reining in banks isn’t feasibility but lack of political will.

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. Cross posted from New Economic Perspectives.

April 9, 2012 is the twenty-fifth anniversary of the most infamous savings and loan fraud, Charles Keating’s, successful use of five U.S. Senators to escape sanction for a massive violation of the law. The Senators were Alan Cranston (D. CA), Dennis DeConcini (D. AZ), John Glenn (D OH), John McCain (R. AZ), and Donald Riegle (D. MI). They became infamous as the “Keating Five.” I was one of four regulators who attended the April 9, 1987 meeting. I took the notes of the meeting, in transcript format, that were so detailed and accurate that the Senators testified that they were sure I had tape recorded the meeting. (The reality is that I owe my note taking abilities to Bill Valentine, my high school debate coach, and experience debating for the University of Michigan.)

Reviewing my (near) transcript of the April 9 offers a large number of important lessons that would have allowed us to avoid future crises.

Jobs Act 2012 a Recipe for Fraud

It is hard to say enough bad things about the Jumpstart Obama’s Bucket Shops act in a short space. I’m in the UK now, and a contact asked me to explain it to him. When I told him of some of the major provisions, he could not believe what he was hearing. He said (correctly) that it was a great boon for conmen and aside from a few companies who were early to raise money under the new law, would make obtaining equity funding more difficult and costly for legitimate operators.

This Real News Network interview with Bill Black gives an overview:

Occupy the SEC’s Goldstein Exposes Rep. Carolyn Maloney’s Banker-Favoring Ways

As we pointed out, the representative from the Upper East Side, Carolyn Maloney, in being maneuvered into position in an effort to displace Maxine Waters, who would otherwise become either the ranking member or the chair of the House Financial Services Committee, depending on which party wins this fall. The idea of Waters, who is acutely skeptical of bankers and not afraid of making a ruckus, having even more influence on a key committee is something financiers are keen to stop. (Full disclosure: I’m a Waters fan simply by virtue of her remark: “The Tea Party can go to hell. I intend to help them get there.”)

David Apgar: The Most Cynical Court’s Most Dangerous Decision

Yves here. I have some quibbles with Apgar’s argument, since he avoids the obvious, but unpalatable-to-Obama solution of a public health care system. That’s why defense and homeland security don’t have free rider problems: they are tax funded. But he also raises the issue that a ruling that strikes down Obamacare could do collateral damage.

Latest Award of Frederic Mishkin Iceland Prize for Intellectual Integrity: Promontory Financial Whitewash of MF Global’s Risk Control

We normally limit our awards of the of Frederic Mishkin Iceland Prize for Intellectual Integrity to academic work, since the economics discipline seems increasingly to hew to the James Carville theory of motivation: “Drag a hundred-dollar bill through a trailer park, you never know what you’ll find.” However, we’ve been unduly narrow in considering who might be deserving of this recognition, so we are bestowing the award to Promontory Financial for its work on MF Global.

Sheila Bair Told Administration Its Housing Programs Would Bomb, Was Rebuffed on Better Solutions

No wonder Geithner and the other financial regulators complained about Sheila Bair not being a team player. If you want to do what is expedient and you are confronted with someone who cares about fixing the problem, then yes, they aren’t on your side. And bully for them.

Goldman Ex-Prop Traders Flopping on Their Own

John Whitehead is being proven right.

Europe Holds Back the Fire for Now

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Two weeks ago I wrote a post on Professor Sinn and the growing concern from the German central bank about TARGET2 liabilities. The pressure from the German camp is on-going and late last week it appears they had a win of sorts.

Not-So-Dumb Consumers Shun OCC’s Bogus Foreclosure Reviews

Consumers seem to have wised up to the fact that the Administration is not on their side, particularly as far as housing is concerned.

Bill Black on How the Jumpstart Obama’s Bucket Shops Act is Just Another in a Long Series of Fraud-Promoting Legislation

Yves here. The Washington Post reports tonight that there is some pushback about the decried-by-anyone-who-knows-bupkis-about-securities-markets-and-isn’t-on-take JOBS Ac, which appears to be certain to be signed into law.

Bill Black reminds us that tons of absolutely terrible financial regulation (as in deregulation) over the last 25 years have passed with large margins.

A Qualified Defense of DeMarco, the Administration’s Favorite Scapegoat for Its Failed Housing Policies (Updated)

There’s been an interesting contretemps over an article by Gretchen Morgenson over the weekend, “A Bailout by Another Name.” Morgenson made the hardly-controversial observation that writing down Fannie and Freddie first mortgages without wiping out any relate second is a back door bailout. Remember, this was one of our key objections to the bank-friendly mortgage settlement, that a requirement to write down firsts and only write down related seconds to a degree is a subsidy to banks when if you were to believe the PR, the settlement is supposed to redress past abuses.

Morgenson also defends DeMarco’s refusal to do principal mods on Fannie and Freddie loans, arguing that he is subject to a requirement to preserve taxpayer assets and that the studies on this have been inconclusive. She adds that the focus is again incorrectly on Fannie and Freddie and not the banks. HAMP mods on GSE paper appear to be roughly proportional to their market share of original lending (around 40% before the crisis) when given their much lower default/delinquency rates, you’d expect them to represent a smaller share than they do relative to mods of bank owned and private label securitized loans.

The fact that this article has gotten heated responses from Felix Salmon and Dean Baker appears to be more a function of tribalism of various sorts than about the policy issues at hand.

Memo Show Corzine Ordered Raiding MF Global Customer Account of $200 Million

We know America is a hopeless kleptocracy, but if Corzine does not go to jail, given the revelation that he approved the raiding of a customer account of $200 million, it means that no one in the officialdom is interested in keeping up the pretense that we have a functioning regulatory and judicial system.

The revelation per Bloomberg: