DISGUSTING

The SEC Just Blew It

Robert Rubin: Architect of Doom (excpet for his buddies)

At some point in time the realization that the world has been conned by a group of plutocrats will become painfully obvious--as if it hasn't already.

Institutional Risk Analytics

Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show — Center on Budget and Policy Priorities

Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show — Center on Budget and Policy Priorities

How's Supply Side Economics Working Out For You ?

The four stated goals of Supply Side Economic Policy
1. Reduce government spending,
2. Reduce income and capital gains marginal tax rates,
3. Reduce government regulation of the economy,
4. Control the money supply to reduce inflation

Government Spending


Effective Individual Income Tax Rates

Adjusted Monetary Base


Wealth Distribution



Total Government Debt as a % of GDP



It seems to be working out rather well for the banks.
Six Giant Banks Made $51 Billion Last Year

And not going away any time soon....

OTC Derivatives: Failed Banks or Failed Nations? - Hera - The Mises Community

This is a comprehensive discussion about the risk that UNREGULATED derivatives play in the world economy. An opinion like this--coming from a strong proponent of the Austrian School says volumes about how badly out of whack Wall Street, K Street and The Beltway have become.

Well worth the read !

OTC Derivatives: Failed Banks or Failed Nations? - Hera - The Mises Community

The Profitability of Business Ethics

New ethics column at Advisor.ca

Sure, Go Ahead: Blame the Socialists.

The thing that I find fascinating is that the problem of bureaucracy is a systemic problem worldwide. I tend to agree that socialism—as defined and demonstrated by Marxists –is an inefficient theory of both political economy, and implicitly, social justice. Where I begin to have a problem with criticism of socialism is that the antagonists are as much to blame for the world’s woes as the failed Marxists. It is interesting to note that since the collapse of the Berlin Wall—and essentially Marxist political economy, the deterioration of individual economies—and as a consequence—the global economy government deficits, financial malfeasance, and other macroeconomic problems have proliferated. This is not to categorically assign blame to ‘capitalists’ but only to point out that much of our troubles have been self-inflicted by the free-market liberal democratic paradigm. Hypocritical politicians have campaigned on the principles of smaller government while the empirical evidence clearly reveals that law makers who claim to seat on the right side of the political teeter tooter are as complicit as those who are deemed to be socialists.(Obama did not create the problems and has merely taken over what the Bush Administration attempted to do to stop the economy from collapsing) The consequences of supply side economics are testament to how ideology can be easily corrupted by the lust for power and influence. Example: For Americans to blame their financial woes on ‘socialism’ is like blaming the boogieman. Reagan, Bush I and Bush II talked a good game on fiscal restraint and trickle down economics—but unfortunately the reality of the current situation seriously tarnishes their credibility. Ironically, it was the left wing Clinton that turned in the best economic performance since Eisenhower—although the surpluses and boom years were more an economic aberration due to the policies of an unbridled Fed than a consequence of his economic policies.

Another irony that I see in the current debate about the scourge of socialism is that the social democratic countries—namely Norway, Sweden and Finland have economic metrics with regard to fiscal management that reveal a lower financial risk than that of America and the U.K. The Scandinavian countries have managed their economies well during these tumultuous times—although they too have experienced problems in the past—and have been able to deliver a standard of living to its citizens that consistently top the rankings made by the World Bank and other institutions. While I agree that Marxism and other forms of extreme socialism will not make the world a better place in which to live—and that I think it is quite valid to make pronouncements to that effect—solely blaming socialism for the current mess is insufficient—modern capitalism and hypocritical proponents of liberal individualism warrant much of the blame.

While the deficiencies of socialism are acknowledged and the burden placed upon us by a burgeoning public sector are obvious—it seems to me that no one has the political will to address the realities of a massive downsizing of government that will be required to remedy the problem. While resources must be moved from the unproductive sector of the economy to a venue that encourages innovation and economic efficiency, the problem of ridding the public sector of literally millions of jobs seems to be constantly swept under the rug. Politicians are excellent at doing the Ostrich trick. How would a government deal with massive unemployment and the necessity of converting a static and lethargic workforce to a mobile and enthused segment of the economy? The Leviathan has to be disassembled and this certainly won’t happen without massive opposition and possible social unrest. When a politician can explain to me how and when that inevitable task would be undertaken I will be encouraged. The dilemma is daunting and will require much misery to be endured by the middle class. The social ramifications are immense.



However, in the end, the mechanism of the free market will handle this—it always has and always will—whether under the guise of capitalism—socialism—theocracy—fascism—monarchy or whatever man can throw in its way. Free markets prevail under any political context—it is just a matter of how long it can remain somewhat in balance under the misguided rule of politicians and financiers who spout their ideology but inevitably succumb to the vices of excessiveness. People have no idea what is on the horizon—I find it very disconcerting. The foundations of our society has fissures running throughout—the structure that holds our societies together and ensure that justice prevails is about to collapse on itself. The memory of the 2007-2008 economic fiasco is quickly fading—the renewed bubble in the stock market attests to the fact that no one is willing to take responsibility and that the status quo is still guiding our path into a financial abyss that has not been witnessed by the world for several hundred years. The culprit—when the history books are written--might be socialism, but the reality of the situation is that endemic greed and elitist arrogance and contempt have exploited the people who form the heart of a society that embraces liberty and the repercussions will be dramatic and filled with personal suffering and misery. When the individuals that are responsible for innovation and production—the middle class—are alienated and disenfranchised anarchy prevails. History has shown that at times like this liberty is often usurped by tyrants and man reverts to cruel and harsh measures to protect what he deems to be rightfully his.



There is only one solution to what ails us: the innate response that our planet and all its living beings employ to endeavor to survive. This will be the work of God—it won’t be pleasant but it will serve to readjust the imbalances that our deviation from virtuous behavior has caused. Later this year, when the markets truly meltdown, people will begin to appreciate the gravity of the predicament that mercenary capitalists and megalomanic politicians have placed our world in. Civilization will soon be ripe for tyrants to emerge and take advantage of the chaos.



It is fine to blame socialists for all our woes—but the evidence clearly reveals that the conservative right and big business are as complicit as the progressives in creating a situation that will change our world drastically over the next decade.

While the Banks were Diddling the Public, The SEC was.....

Yesterday I mentioned that 'It is not lack of regulation--it is the failure of regulators to do their jobs properly that is the problem. If regulators are not able to carry out their duties under the current regulatory system--another layer of bureaucratic entanglements will not remedy the problem that has become pervasive in our society.'

A new report from ABC News suggests that while the markets were crashing in 2008 SEC officials were busy attending to their own vices. I also stated that' until corporations and governments embrace and promote the cultivation of moral character in both private sector leadership and regulatory bodies nothing will be solved in eradicating the self-destructive behavior demonstrated by so many individuals and groups in contemporary society.'

Further Reform is NOT What We Need

The battle cry for further reform echoes through the corridors of finance and the committee rooms of government bureaucracies.
Not enough Regulation? GIVE YOUR HEAD A SHAKE.

Enron et al, Madoff, Robert Stanford, AIG, Bernie Ebbers, AIG, Lehman, Goldman: all were in the headlights of various regulatory bodies for extensive periods of time before being indicted by the various regulatory bodies. It is not lack of regulation--it is the failure of regulators to do their jobs properly that is the problem. If regulators are not able to carry out their duties under the current regulatory system--another layer of bureaucratic entanglements will not remedy the problem that has become pervasive in our society.
Indeed, financial reform is needed, but is needed to update a system that has not undergone any substantive changes since The New Deal. Much has changed since the 1930s although the root of the problem has not: A lack of moral character exhibited by many individuals in positions of power.
Regulation is a poor replacement for morality but it is the only tool that can be used to maintain a semblance of honesty, accountability and transparency in the financial system. Until corporations and governments embrace and promote the cultivation of moral character in both private sector leadership and regulatory bodies nothing will be solved in eradicating the self-destructive behavior demonstrated by so many individuals and groups in contemporary society.
Morality is what is missing not regulation. They are not the same thing--regulation is merely a somewhat inferior substitute of the former.

Here is a partial list of US Financial and Regulatory Agencies

Commodities Futures Trading Commission (CFTC)

Federal Deposit Insurance Corporation (FDIC)

Federal Reserve Board

Office of the Comptroller of the Currency (OCC)

Office of Thrift Supervision (OTS)

Security & Exchange Commission (SEC)

The problem currently encountered on Wall Street have been faced previously--and have been dealt with in an effective manner. Below is William K. Black's testimony to Congress with regard to the Lehman debacle.

Bill Moyers Journal . Watch & Listen | PBS

Bill Moyers Journal . Watch & Listen | PBS

How did Big Finance grow so powerful that its hijinks nearly brought down the global economy – and what hope is there for real reform with Washington politicians on Wall Street's payroll? Bill Moyers talks with authors Simon Johnson and James Kwak, two of the nation's most respected economic experts and authors of the new book 13 BANKERS: THE WALL STREET TAKEOVER AND THE NEXT FINANCIAL MELTDOWN.

IMAGINE THAT: SEC Sues Goldman Sachs

April 16 (Bloomberg) -- The U.S. Securities and Exchange Commission today charged Goldman Sachs Group Inc., accusing the company and one of its vice presidents of defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages.

The SEC announced the case in an e-mail release.

Washington, D.C., April 16, 2010 -- The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter. Additional Materials

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress."

The SEC alleges that one of the world's largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

The SEC's complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.'s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.

The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. In addition, he misled ACA into believing that Paulson & Co. invested approximately $200 million in the equity of ABACUS, indicating that Paulson & Co.'s interests in the collateral selection process were closely aligned with ACA's interests. In reality, however, their interests were sharply conflicting.

According to the SEC's complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.

Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion.

The SEC's complaint charges Goldman Sachs and Tourre with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties.

SEC Sues Goldman Sachs, Alleging Fraud in CDO Tied to Subprime - Bloomberg.com

A Good First Step for Financial Reform

Now, if we can just get American shareholders to have the backbone to do the same thing.

UBS vote not to absolve CEO Marcel Ospel and other 2007 executives from responsiblity over massive losses leaves Swiss media brimming with praise. - swissinfo

The Case for Financial Reform

Visit msnbc.com for breaking news, world news, and news about the economy

Politicians and Wall Street: ...and the beat goes on.

The news is quickly becoming farcical! Soon news of corporate-government misconduct and executive privilege will be relegated to either the back pages or the comic section of newspapers--if there are any actually left.
Whitman's ties to financial giant Goldman Sachs

Lehman Used ‘Alter Ego’ to Transfer Risks - NYTimes.com

"Greenspan is nothing if not a representative leader of his time. We live in a culture where accountability and responsibility are forgotten values. When “mistakes are made” they are always made by someone else."

It is difficult to fathom the level of hubris that causes people to blatantly disregard regulations and laws in the pursuit of money and power. Well--perhaps its not--since it permeates our culture. Justification for the 'excesses of privilege' are rationalized ad nauseam while the foundations of Wall Street crumble. The only way a free market can work in a productive, sustainable and fair manner is if all participants embrace the concept of honesty, responsibility and accountability. Unfortunately, evidence is beginning to mount with increasing frequency and credibility that many of the institutions of finance that are supposed to fuel the entrepreneurial nature of the middle class have, instead, opted to enrich themselves and a very small but powerful group of sycophants by creating investment vehicles that are self-serving and ostensibly exploitative to the middle class. In order to keep the roulette table spinning certain liberties have had to be taken with regard to the truth, responsibility, transparency and accountability. This is not isolated to a few Bernie Madoffs. The discomforting thing is that this contagion has spread to the upper echelons of power in both Washington and Wall Street. Until some semblance of personal virtue becomes a defining characteristic of the financial ethos, the foundations of capitalism will continue to deteriorate until what we now refer to as Wall Street will crumble like a derelict casino.
The evidence stacks up as the bubble inflates.

Lehman Used ‘Alter Ego’ to Transfer Risks - NYTimes.com

No One is to Blame for Anything.

Ex-Goldman trader blows whistle on silver and gold manipulation by JPMorgan, HSBC - NYPOST.com

The contagion begins to fester throughout the markets.

Ex-Goldman trader blows whistle on silver and gold manipulation by JPMorgan, HSBC - NYPOST.com

Major U.S. banks masked risk levels: report | Reuters

Transparency and accountability are the cornerstones of ethics in the financial industry. It appears that the major banks have nothing but contempt for such matters.

(Reuters) - Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York.

The paper said on Friday 18 banks, including Goldman Sachs Group (GS.N), Morgan Stanley (MS.N), J.P. Morgan Chase (JPM.N) Bank of America (BAC.N) and Citigroup (C.N), understated the debt levels used to fund securities trades by lowering them an average of 42 percent at the end of each period.

The banks had increased their debt in the middle of successive quarters, it said.

Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours.

Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.

Due to the credit crisis, banks have become more sensitive about showing high levels of debt and risk, worried their stocks and credit ratings could be punished, the Journal said.

Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.

Major U.S. banks masked risk levels: report | Reuters

See My Squiggly Lines for comments on derivatives and the 5 major U.S. Banks.

The Collapse of the Reform Initiative

Unfortunately Andrew Cockburn is probably right on the mark.

The irony is that any regulation will be ineffective if our culture does not embrace--and reestablish-- some form of moral ethos

Andrew Cockburn: Financial Reform Bids Collapse Into Farce

Trying hard not to be cynical

Exclusive: No Criminal Charges Likely in AIG Collapse - CBS News Investigates : - CBS News