After our nation's "henhouse" was cleaned out in 1929, trust in banks was destroyed by 1934 when the SEC was formed to restore confidence to battered investors. Pres. Roosevelt appointed Joseph P. Kennedy its first Chairman; and when asked why Kennedy, a stock speculator, FDR said simply – “Set a thief to catch a thief.”
How well has that worked? History repeats itself – in 11 stock market crashes since WWII. Now trust in government is gone bust & trust in banks is once again hanging by a thread. Whatever happened? Farmers Bush-Cheney & Company (Farmer Bush & Team) ignored history in the name of eradicating that ultimate evil - regulation. Our nation’s 5 largest investment banks complained of burdensome regulation… poor babies whined!
The Fox – the nation’s largest banks - had already formed “holding companies” to shield themselves from oversight of subsidiary “regulated” banks. In 1999 under Sen. Phil Gramm's leadership, the Gramm-Leach-Biley Act allowed financial holding companies to offer banking, securities, and insurance products under one corporate roof. The law didn’t permit the SEC to examine holding companies’ books nor require sufficient equity to meet the SEC’s capital requirements. The SEC needed new legislation to close that gap – especially after global hedge fund, Long-Term Capital Management (LTCM) collapsed in 1998, and the following stock market mini-crash in 2000.
The gap in SEC enforcement was left gaping by the Senate Committee on Banking (Financial Institutions, Securities & Investments Subcommittees) and the House Financial Services Committee - which have jurisdiction over the SEC & Securities Investor Protection Corporation. These Committees are responsible for oversight of government-issued securities, financial exchanges and markets, financial derivatives, accounting standards, and insurance. Who was in charge of the henhouse?
By 2001, Fox knew Farmer Bush & Team had locked the “shotguns” away rather than “keep it behind the door” as earlier SEC Chairmen did. Still believing Fox is best at catching a thief in the henhouse, Farmer Bush & Team - armed with a Republican majority in Congress - sat on the porch smoking… what? Pot???
In 2005, the year after the SEC tossed out capital requirements, Farmer Bush & Team Congressman Christopher Cox in charge of guarding the henhouse. Rep. Cox (R-CA) spent years leading efforts to block investor lawsuits & investigation of complaints, and to keep rules favoring executive stock options. Yep… Rep. Cox was a true Friend of Fox (FOFox).
As new SEC Chairman, FOFox Cox dismantled the risk oversight office assigned by former Chairman Donaldson, and then fully embraced Bush & Team’s new Treasurer, Henry Paulson. Paulson, Uber-Fox at Goldman Sachs, master-minded gutting of capital requirements in 2004. Not too surprising that FOFox Cox also embraced Uber-Fox’s ultimate plan to lock up ALL shotguns in Farmer Bush Team’s Cabinet, too. Farmers Bush-Cheney & Company quickly shushed complaints.
Fox & Friends were free to gorge on chicken to the point of becoming very sick. With bellies full of the offending evidence, Fox & Friends went to Uber-Fox who took it up with Farmer Bush & Team to… what? Put them out of their misery? Nope… Uber-Fox begged them to buy more chickens while Fox & Friends upchucked all over the farm & then some. GM-Fox will be next after gorging on SUV profits. With Paulsen’s blueprint, will there be ANY chickens left to reproduce a brood???
What would George Orwell say today? He’d probably repeat what he wrote in Animal Farm – “Some animals are created more equal than others.”
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Sunday, October 12, 2008
Wednesday, October 8, 2008
TOOTHTELLING: Economic Facts
Check Facts Here: VoteSmart- FactCheck- OpenSecrets
TOOTH TELLING: News flash about deregulation of the banks... can't pin that one on Clinton. Bank deregulation was one of the first big pieces of legislation the Republican leadership pushed through beginning in Jan. of 1995 - when the GOP took over the majority in both House & Senate - that bill wasn't Bill's! Both House & Senate outflanked Clinton (Oxford Rhodes Scholar in economics) - in office only 2 years & a pragmatic centrist politician (and flagrant philanderer!). The rest of the story is here
Now for a bit more economic history. The US financial system has been operating for almost 30 years on Reagan's "trickle-down" economic plan (mid-1980's), and NAFTA was another of his plans carried out later by GOP leadership in the mid-1990's - with Clinton's blessing. Our economic system weathered the following:
McCain downplays his proposed tax on employee healthcare benefits while touting his $5000 tax credit ($2500 singles). Now his tax on benefits that grow at 10-20% per year will soon swamp a tax credit growing at only 3-5% per year. Well, you do the math & get a clue.
Notice how NonsenseNews bleats on & on about silly distractions while failing to discover & inform the public about the fallout on Wall Street? Where were their investigative reporters while Swedish officials were briefing our Treasury & Federal Reserve chiefs on the outcome of Sweden's bank bailout from its similar implosion 10 years ago? Had they informed the public, people would've had some warning to move out of stock funds before getting burned so badly.
Are you tired of hearing McCain can go any minute? Another news flash! Either candidate could have a short life span from natural or unnatural causes. Carefully evaluating the VP candidates is very important because the VP is needed to help govern - whether advising the Cabinet or casting the lone deciding vote to break a Senatorial tie. Ck those dudes out - Bridges - More Bridges
Don't know about you, but I am also SO tired of hearing about change, reform, maverick, or getting government on the side of the people (as opposed to off our backs or out of our bedrooms).... Need I go on? You're tired of it, too??? We need to keep in mind that regardless what either party/candidate says now, their promises will go by the wayside once in office what with that bloated budget, bailout & a war soon to surge into Afghanistan.
Financing our government will be the war we fight over the next decade. Hopefully voters will consider - very carefully - which candidate & VP, along with their team of Cabinet members, has the smarts & capability to deal with ALL of those problems AT ONCE! The rest on NonsenseNews is best left behind....
An better informed electorate makes a better nation! ~ MomsHugs
TOOTH TELLING: News flash about deregulation of the banks... can't pin that one on Clinton. Bank deregulation was one of the first big pieces of legislation the Republican leadership pushed through beginning in Jan. of 1995 - when the GOP took over the majority in both House & Senate - that bill wasn't Bill's! Both House & Senate outflanked Clinton (Oxford Rhodes Scholar in economics) - in office only 2 years & a pragmatic centrist politician (and flagrant philanderer!). The rest of the story is here
Now for a bit more economic history. The US financial system has been operating for almost 30 years on Reagan's "trickle-down" economic plan (mid-1980's), and NAFTA was another of his plans carried out later by GOP leadership in the mid-1990's - with Clinton's blessing. Our economic system weathered the following:
- collapse of the country's immense savings & loan industry,
- Chicago's Continental Bank in 1984 (largest until now),
- fallout of the Asian financial implosion in 1997, and
- bailout of hedge-fund Long-Term Capital Management in 1998.
McCain downplays his proposed tax on employee healthcare benefits while touting his $5000 tax credit ($2500 singles). Now his tax on benefits that grow at 10-20% per year will soon swamp a tax credit growing at only 3-5% per year. Well, you do the math & get a clue.
Notice how NonsenseNews bleats on & on about silly distractions while failing to discover & inform the public about the fallout on Wall Street? Where were their investigative reporters while Swedish officials were briefing our Treasury & Federal Reserve chiefs on the outcome of Sweden's bank bailout from its similar implosion 10 years ago? Had they informed the public, people would've had some warning to move out of stock funds before getting burned so badly.
Are you tired of hearing McCain can go any minute? Another news flash! Either candidate could have a short life span from natural or unnatural causes. Carefully evaluating the VP candidates is very important because the VP is needed to help govern - whether advising the Cabinet or casting the lone deciding vote to break a Senatorial tie. Ck those dudes out - Bridges - More Bridges
Don't know about you, but I am also SO tired of hearing about change, reform, maverick, or getting government on the side of the people (as opposed to off our backs or out of our bedrooms).... Need I go on? You're tired of it, too??? We need to keep in mind that regardless what either party/candidate says now, their promises will go by the wayside once in office what with that bloated budget, bailout & a war soon to surge into Afghanistan.
Financing our government will be the war we fight over the next decade. Hopefully voters will consider - very carefully - which candidate & VP, along with their team of Cabinet members, has the smarts & capability to deal with ALL of those problems AT ONCE! The rest on NonsenseNews is best left behind....
An better informed electorate makes a better nation! ~ MomsHugs
Monday, October 6, 2008
Loose Rules Sink Ship - Part II
And now ... for the rest of the story since 2004.
Did Henry Paulsen see the financial markets imploding when he accepted appointment as Sec. of the Treasury in 2006? Doubt it. How much did Annette Nazareth know & when did she know it? When she resigned in 2007? Good questions & only she would know... unless of course someone sues & they all get hauled into some federal court with jurisdiction. Where would that be? Can our government be hauled into the Brussels International Court? ... More & more questions come to mind as I type.
The New York Times reporters - bless their little hearts - have begun a series - "The Reckoning" - trying to answer some of my many questions. It will make the movie "Wall Street" look pithy & pale.
Get front row seats & read all about it. Good night & good luck!!
Sunday, October 5, 2008
LOOSE RULES SINK SHIP
3-6-09 Update: Former U.S. Securities and Exchange Commission member Annette Nazareth took herself out of the running to be Treasurer Geithner’s deputy after concern about public scrutiny over her SEC work and frustration at the length of the selection process. Smart move!
In 2004 the SEC Commissioners decided to loosen capitalization requirements -- after only 1 hr. & slight discussion. The 5 largest investment banks had urgently asked for an exemption to hold larger amounts of riskier assets... increasing leverage by taking on more debt - $30 to every $1 of equity - greatly increases profits, too... IF nothing caused the markets to fly off the shelf that is. The banks wanted to swap older objective rules with their own subjective computer models to measure financial risk.
One Commissioner - Harvey Goldschmid, law professor at Columbia (Democrat) – raised concerns (“We said these are the big guys that clearly will be involved here, but that means if anything goes wrong, its going to be an awfully big mess...” – a twitter can be heard). They did have one letter from Leonard Bole, a software consultant from Indian, warning the computer models proposed would not work to determine risk. Bole stated the models could not correctly anticipate market turbulence. The Commissioners simply ignored it.
Annette Nazareth, Director of SEC’s Market Regulation Division, also backed the banks. (1) Her staff explained that their proposed computer models would track variable risk, replacing previous strict capitalization requirements. Annette assured the Commissioners it was okay (“we have very, very broad discretion & will be meeting with these firms on a monthly basis… so, hopefully, we’ll have a lot of early warnings & ability to restrict activity that we think is problematic”).
They reassured the Commissioners the changes were not only for the better, but necessary. Staff explained they had hired mathematicians & auditors to review everything, “So we’re going to going to depend on the firms, obviously the front line. They’re going to have to develop their entire risk framework… we’ll be reading that first & they’ll have to explain that to us in a way that it makes sense… then we’ll do the examinations of the process in addition to approving their models & their risk control systems.” Ultimately they would have to rely on the firms to police themselves!
WHAT?!! Voluntary self-supervision??! What a novel regulatory concept!
(1) Annette Nazareth: J.D. Columbia Law - Held various positions in major NYC/DC law firms & government. She is married to Roger W. Ferguson, Jr., former vice chairman of the Board of Governors of the Federal Reserve and current CEO of TIAA-CREF. Reference: SEC Meeting 4-28-04 - Final Item #3 on the agenda: Alternative Net Capital Requirements for Broker-Dealers that are Part of Supervised Facilities and Supervised Investment Bank Holding Companies (Division of Market Regulation). Explanation | NYTimes Video
SEC’s Loose Rules: WHO wanted looser capital requirement?
Answer: Follow the money back to 2004 - when the fix was in.
In 2004 the SEC Commissioners decided to loosen capitalization requirements -- after only 1 hr. & slight discussion. The 5 largest investment banks had urgently asked for an exemption to hold larger amounts of riskier assets... increasing leverage by taking on more debt - $30 to every $1 of equity - greatly increases profits, too... IF nothing caused the markets to fly off the shelf that is. The banks wanted to swap older objective rules with their own subjective computer models to measure financial risk.
Henry Paulsen of Goldman Sachs headed the banks’ effort & Chairman Donaldson led the charge for him. He succeeded & was named Secretary of the Treasury by Pres. Bush in 2006. No wonder the President was letting him hang out there to take the heat.
One Commissioner - Harvey Goldschmid, law professor at Columbia (Democrat) – raised concerns (“We said these are the big guys that clearly will be involved here, but that means if anything goes wrong, its going to be an awfully big mess...” – a twitter can be heard). They did have one letter from Leonard Bole, a software consultant from Indian, warning the computer models proposed would not work to determine risk. Bole stated the models could not correctly anticipate market turbulence. The Commissioners simply ignored it.
Annette Nazareth, Director of SEC’s Market Regulation Division, also backed the banks. (1) Her staff explained that their proposed computer models would track variable risk, replacing previous strict capitalization requirements. Annette assured the Commissioners it was okay (“we have very, very broad discretion & will be meeting with these firms on a monthly basis… so, hopefully, we’ll have a lot of early warnings & ability to restrict activity that we think is problematic”).
Again, Goldschmid pointed out he was uncomfortable with the risk - “This is going to be much more complicated – compliance, inspection, understanding of risk – more than we’ve ever had to do.” Then he caved in reliance upon staff’s explanation.
They reassured the Commissioners the changes were not only for the better, but necessary. Staff explained they had hired mathematicians & auditors to review everything, “So we’re going to going to depend on the firms, obviously the front line. They’re going to have to develop their entire risk framework… we’ll be reading that first & they’ll have to explain that to us in a way that it makes sense… then we’ll do the examinations of the process in addition to approving their models & their risk control systems.” Ultimately they would have to rely on the firms to police themselves!
WHAT?!! Voluntary self-supervision??! What a novel regulatory concept!
(1) Annette Nazareth: J.D. Columbia Law - Held various positions in major NYC/DC law firms & government. She is married to Roger W. Ferguson, Jr., former vice chairman of the Board of Governors of the Federal Reserve and current CEO of TIAA-CREF. Reference: SEC Meeting 4-28-04 - Final Item #3 on the agenda: Alternative Net Capital Requirements for Broker-Dealers that are Part of Supervised Facilities and Supervised Investment Bank Holding Companies (Division of Market Regulation). Explanation | NYTimes Video
Sunday, September 28, 2008
True Bailout Risk: Taxpayer Revolt?
Congress received a warning letter signed by 100 leading U.S. economists, who are working very hard to get their voices heard in response to the Paulson-Bernanke Bailout Plan being negotiated as I write.
Letter To the Speaker of the House of Representatives and the President pro tempore of the Senate:
The letter (signed & dated 9/25/08) is the consensus of 100 leading economists:
3 Nobel Laureates & economists from major universities, colleges & institutes. [MIT, Chicago, Stanford, Harvard, Yale, Duke, Northwestern, Notre Dame, Vanderbilt, Stockholm, California (LA, SC, Berkley, Davis, Santa Barbara, San Diego), Columbia, John Hopkins, Indiana, Michigan, Ohio State, Iowa (UNI, UI, ISU), Wisconsin, Pennsylvania, Minnesota, Kansas, Washington, Maryland, New York, Texas (Austin, A&M), Louisiana Xavier, George Mason, Vassar, Hoover Institute, Chapman (Nobel Laureate), Boston College, Dartmouth, Miami, and the London Business School.
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