Tuesday, April 20, 2010
Are people going to pay more or less attention to this news on account of the enforcement action against Goldman Sachs announced on Friday? Moments ago:
The man of the hour is Anton Valukas, the bankruptcy investigator into Lehman Brothers’s collapse. The public’s trust, Valukas tells the House Financial Services Committee, in the Securities & Exchange Commission’s regulation of Lehman was not fulfilled.
The SEC knew that Lehman was failing its own risk limits in 2008, but never required Lehman to address the breach of risk limits, nor to disclose the breach.
Further, the SEC did not know of Lehman’s use of Repo 105 that year because “the SEC did not ask the right questions.”
MORE: Henry Blodget has perhaps the best explanation yet for the timing of the Goldman suit.
The people who ought to be indicted are Bernanke and Geithner. Isn't it their job at the Fed to monitor bubbles and set the interest rates so these don't occur? If it wasn't for sovereign immunity they should be indictable for criminal negligence. Instead we promote them and let them give away billions to fix the mess they created.
And how about that Ponzi scheme run by the Obama Administration and Congress called "Social Security"? Wait until hyperinflation hits.
Since all Libertarians now seem to be classed as criminally insane I'm thinking about applying for disability so I can get some money out before this pyramid collapses.
Hold on to your Krugerrands...
So, obviously, what is needed here is more regulation ? When ,at least to this laymans eyes, the problem was a lack of competence. So, in order to "correct" the problem, we write more regulations for a regulatory organization that has yet to show us the ability to properly interpet and apply those existing, at least as applies to these circumstances. Brilliant, absolutely brilliant, definitely confidence inspiring. Or am I being to harsh on the idiots whom stood by and watched as the economy imploded ?
What a joke. I'll bet certain members of the Democratic congress will now use this as the next scare to stoke their warchests for the 2010 midterms. As if they didn't squeeze enough out of the health care sector already.
The shakedown of Goldman has begun, with the rest of Wall Street soon to follow.
Welcome to the Chicago way, "pay to play." The SEC announcement was timed perfectly to squeeze the maximum political benefit, while at the same time filing an inherently weak case that will be settled for the maximum fine allowable by law, like Totyota, $ 16 million bucks.
While the Goldman managers divvy up a bonus pool of 5 billion this year thanks to all the cheap Fed money they have been borrowing.
What a bunch of hypocrites. I reiterate, this government should be prosecutable for criminal negligence. The SEC couldn't find a Ponzi scheme if they tripped over it.
So the SEC screwed up obvious criminality in the Madoff case, despite being repeatedly and specifically warned at multiple levels of the agency, over a period of years, and they screwed up their firm oversight responsibilities in at least the Lehman case (what about Bear?). What else is coming? Where is the Congress in fulfilling their oversight responsibilities? Before legislating, shouldn't they at least haul the SEC people in and figure out where our older reform (the SEC) has failed before we reform yet again?
Hey, we can forget Blodgett when we have a credible source like Elliot Spitzer:
Former New York Gov. Eliot Spitzer said on Monday there are “no coincidences” in the Securities and Exchange Commission filing a lawsuit against Goldman Sachs just as Democrats are about to bring up financial regulatory reform in the Senate.
The SEC, which announced the civil suit Friday, is forbidden by law from acting in concert with the White House in choosing which cases it prosecutes and when to do so.
Asked about the timing of the SEC action during an interview Monday on CNBC, Spitzer, who prosecuted securities fraud as the state’s attorney general, said that “there’s no question the SEC is desperate to prove that it can enforce the law, desperate to bring in the great white whale.”
“This was not a coincidence,” asserted the former Democratic governor, who resigned after an affair with a prostitute became public. “There are no coincidences in this world. None.”
“It could be both a witch hunt and legitimate exercise of regulatory authority,” he added.
Asked during his regular briefing Monday whether the administration knew the charges against Goldman Sachs were coming, White House press secretary Robert Gibbs responded tersely, “The SEC is, by law, an independent agency.”
The SEC was lax before the market meltdown, including on capital requirements for I-banks which essentially got put on an honor system. This allowed I-banks like Bear, Lehman, Merrill, Morgan Stanley and Goldman to get away with a lot, including over-leverage. JPMorgan's Jamie Dimon actually went public to criticize this at one point, as he had to deal with more onerous bank regulators. Leverage directly affects ROE, which in turn affects CEO compensation.
The SEC ran a controlled experiment on whether you could create runs on I-banks. They took away the uptick rule and there was a run on Bear. They put it back, and things stabilized. They took it away again, and Lehman failed. [The connection between the uptick rule and I-Bank runs has more scientific validity than AGW theory.] For years, the SEC has been totally ineffective in enforcing its own rules against naked short selling, which contributed to this.
Morgan Stanley and Goldman were a week away from failing, don't kid yourself. They got approval to become bank holding companies within days so they could get the kind of Fed bailout -- all the liquidity they needed -- that wasn't made available to Bear or Lehman.
Another nerdish example. Back in the 1980s, Michael Milken got jail time for "parking" --- facilitating the non-reporting by his clients of greater than 5% stakes in companies. In recent years, 13D compliance has become optional for "activist investors." They just hire a bank and use derivatives -- the bank buys the shares in the market to hedge their short -- the "activist investor" can settle the contract by taking the shares, and paying a fee. Voila. Some have even bought vote without economics to sway M&A approvals. But the SEC hasn't lifted a finger.
The moral isn't that we need more rules. We just better enforcement of the ones we already have.
"Spitzer: Goldman suit no coincidence"
If you google "SEC Goldman" you get a paid ad from www.barcackobama.com for "Help Change Wall Street." This ad buy was made days before the SEC filed charges against Goldman last Friday -- the charges Goldman was suprised by on Friday.
Hey, let's give the dems a break here! Dodd is "retiring." He needs an all-weather swimming pool and tennis court for his Irish palace. Maybe, Goldman can help with some of the details in return for some help here!