Category Archives: Regulations and regulators

Game Over: California Attorney General Breaks From “50 State” Mortgage Settlement

We’ve been saying for months that the 50 state attorney general settlement was not going to happen. Despite the vigorous efforts by people on the side of the Federal regulators involved in the negotiations and Tom Miller’s (the AG leading the negotiations’) office to make it seem as if the deal was moving forward, the content of the reports showed otherwise. There was a huge gap between the positions of the banks and even the bank friendly position of the state AGs at the table and the banking regulators. Like the Vietnam War, where negotiations of two fundamentally opposed dragged on till one side capitulated, there was not going to be a settlement that was anything other than an abject sellout with a 11 figure payoff to mask that fact. And there were too many attorneys general who were already troubled by the terms of the deal that Miller had put forward for that to happen.

Now that Kamal aHarris, the California state attorney general, has officially abandoned the talks, they don’t mean much, at least from the state side. The departure of such a big state, in population, foreclosure exposure, and Electoral college terms, along with other states (New York, Delaware, Nevada, Massachusetts, Kentucky, Minnesota, likely Arizona) means any settlement has limited practical meaning from the state side and even less credibility.

Quelle Surprise! SIGTARP Report Finds Citi, Bank of America Allowed to Leave TARP Prematurely

We said at the time it was inexcusable for the Treasury to allow banks to repay the TARP as early as they did (US banks are still below the capital levels many experts consider to be desirable; Andrew Haldane of the Bank of England has made a well-substantiated case that higher capital levels cannot remedy the problem, since the social costs of a major bank blow up are so great, and you therefore need very tough restrictions on their activities).

And why were the bank so eager slip the TARP leash? To escape some pretty minor restrictions on executive compensation. This had NOTHING to do with the health of the enterprise and everything to do with executive greed. And not surprisingly, Treasury indulged it.

Bank of America to Charge $5/Month for Any Debit Card Use; Financial Reform Blamed

Banks don’t like it when their imperial right to loot customers runs into interference, do they?

The Los Angeles Times reports that Bank of America intends to start charing customers $5 per month for any debit card use starting next year.

New Zealand: Where Health Scam Companies Get Stock Exchange Listings

New Zealand is playing host to the sort of large scale miracle cure scam that would get investigated for wire fraud in the US. One company even has a New Zealand stock exchange listing!

Bank of America Deathwatch: $50 Billion Securities Fraud Suit Over Merrill Acquisition

If mortgage litigation and losses on second mortgages aren’t enough to put Bank of America in a terminally impaired state, the $50 billion private lawsuit filed earlier today represents another major blow.

Is the SEC Finally Taking Serious Aim at the Ratings Agencies?

If the grumblings in the comments section are any guide, quite a few citizens are perplexed and frustrated that the ratings agencies have suffered virtually no pain despite being one of the major points of failure that helped precipitate the global financial crisis. If there were no such thing as ratings agencies (i.e., investors had to make their own judgments) or the ratings agencies had managed not to be so recklessly incompetent, it’s pretty unlikely that highly leveraged financial institutions would have loaded up on manufactured AAA CDOs for bonus gaming purposes.

But the assumption has been that the ratings agencies are bullet proof. Their role is enshrined in numerous regulations and products that make ratings part of an investment decision. And they get a free pass on mistakes, no matter how egregious. (Note that there have been rulings that have taken issue with the ratings agencies reliance on the invocation of the First Amendment defense, but to date they have been on procedural matters. To my knowledge, no party has been awarded damages against a ratings agency based on a judge deciding that a First Amendment defense was inapplicable)

So why, pray tell, has the SEC sent a Wells notice to Standard and Poors, which is a heads up that the regulator may file civil charges, which could result in penalties and disgorgement of fees, on a 2007 Magnetar CDO called Delphinius?

Can European Politicians Beat the Clock and Stave Off a Crisis?

The Eurocrats finally seem to have realized time is running out. The abrupt market downdraft of last week appears to have focused their minds on the need for a much larger scale rescue mechanism of some form, with numbers like trillions attached, and that will move the Eurozone further towards fiscal integration, another badly needed outcome.

Jamie Dimon Now Trying to Beat Up on Heads of Central Banks

We’ve mentioned in older posts that Dimon’s history as a bully goes back at least to business school. Former section mates report that even by Harvard Business School standards, Dimon was a standout in the aggression category.

Readers may also recall that Dimon’s latest effort to get out of having international capital standards imposed on JP Morgan was to call them “anti-American”. It appears that, for a big bank, “American” = “not having to obey any rules”.

Top Bankruptcy Lawyer Harvey Miller on the Possibility of a Countrywide BK

Bloomberg interviewed Harvey Miller, who is regularly described as the dean of the bankruptcy bar in the US. Miller handled the Lehman bankruptcy and is thus well positioned to opine on whether Bank of America might put Countrywide into bankruptcy.

Matt Stoller: Did Geithner Really Undermine Obama on Nationalizing Citigroup?

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller

The fight over the future, in the form of the fight over who writes the history of the Obama years, has begun in earnest.

Philip Pilkington: The History of Greed – An Interview with Jeff Madrick

Jeff Madrick is a journalist, economic policy consultant and analyst. He is also the editor of Challenge magazine, which seeks to give alternative views on economics issues, as well as a visiting professor of humanities at The Cooper Union, director of policy research at the Schwartz Center for Economic Policy Analysis, The New School, a senior fellow at the Roosevelt Institute and the author of numerous books. His latest book, The Age of Greed, is available from Amazon.

Interview conducted by Philip Pilkington, a journalist and writer based in Dublin, Ireland.

Philip Pilkington: Your book The Age of Greed is a detailed historical survey of some of the key figures that facilitated — broadly speaking — the transition away from the progressive, government-regulated economy of the post-war years and toward the finance-driven, deregulated economy in which we now live. In this interview I don’t want to focus on all the figures that crop up in the book as that is done so there in great detail. Instead I want to explore the broad sweep of this history focusing both on some of the more recognisable of these figures and on the actual cultural, political and economic shift that took place over this period.

Banking Updates: More 50 State Settlement Follies; Moody’s Downgrade of Bank of America

I don’t mean to sound as if I am hectoring Shahien Nasiripour, since he has doggedly and successfully broken quite a few banking stories when he was at Huffington Post, which lead the Financial Times to snatch him up. That’s tremendous validation for a young reporter.

However, the conventions of reporting (and it may reflect FT style preferences) are having two unfortunate side effects on his latest article about the so-called 50 state attorney general settlement.

Bill Black: Why do Banking Regulators bother to Conduct Faux Stress Tests?

Yves here. This is a subject near and dear to my heart. There is one bit that Black is missing, however. McKinsey advised the Treasury on the stress tests. They discussed it openly at a presentation at an alumni meeting.

By Bill Black, an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is a white-collar criminologist, a former senior financial regulator, and the author of The Best Way to Rob a Bank is to Own One. Cross posted from New Economic Perspectives

One of the many proofs that banking regulators do not believe that financial markets are even remotely efficient is their continued use of faux stress tests to reassure markets. But why do markets need reassurance? If markets do need reassurance that banks can survive stressful conditions, why are they reassured by government-designed stress tests designed to be non-stressful?

Elizabeth Warren Leads Scott Brown by 2 Points in Latest Poll

We continue to follow the Scott Brown reelection fight because the presumed Elizabeth Warren v Brown matchup will probably be the most closely watched Senate race in 2012.

Public Policy Polling released the results of its latest survey, which show that the press surrounding the Warren campaign launch has led to a big change in the results:

New Zealand: a Great Place to do Business…and Scams

By Richard Smith

The little story NC carried a couple of months ago about New Zealand scam companies has come out from behind the paywall, courtesy of the NZ Herald (hat tip: John G.). We hinted at the time that the problem’s large and nasty, and the NZ Government admits this in a cabinet paper: