The Good, The Bad & The Ugly – Week of 7/15/13

Good

  • The Federal Energy Regulatory Commision (FERC) will fine JP Morgan Chase “close to $1 Billion” for manipulating energy prices in an Enron-esque scheme in Michigan and California. Could easily be an Ugly as Taibbi reviews all the fines “the good bank” Chase has racked up since the crisis. Matt Taibbi at Rolling Stone July 18, 2013.
  • In what still might be an overly optimistic headline, Jessie Eisinger posits that “Finally the Bank Regulators Have Had Enough.” With capital ratios increasing to $6 for every $100, and new derivatives rules being put in place, you can bet the banks will fight back tooth-and-nail. Furthermore there is still time for regulators to back down. We can only hope Mr. Eisinger is right. Only time will tell. Jesse Eisenger at ProPublica July 17, 2013.
  • The SEC has filed suit against hedge fund titan Steven Cohen of SAC Capital for failure to supervise fund managers who were engaging in insider trading. While it would be better if this “failure” was prosecuted at the big banks too, it’s still good to see the regulators going beyond lower- and mid-level folks. Joshua Gallu & Katherine Burton at Bloomberg July 19, 2013

Bad

  • By contrast, the “Fabulous Fab” Tourre trial is nothing more than an attempt to pin the notorious ABACUS case on a lower-level employee while the executives who were really behind it sit in the wings after Goldman signed one of those “neither admit, nor Deny” agreement with the SEC. It’s “like prosecuting a foot-soldier for war crimes” Heidi Moore at The Guardian July 15, 2013.

Ugly

  • Detroit’s emergency manager Kevyn Orr and governor Rick Snyder arranged a rushed bankruptcy filing for the city, the largest in US history. Orr has made clear that he will treat the tens of thousands of retirees who rely on the city’s pension funds as “unsecured creditors” on a par with Wall Street borrowers, regardless of the fact that Wall Street has already pulled nearly $500 million in underwriting fees out of the beleaguered city. Steven Church, Dawn McCarty & Margaret Cronin Fisk at Bloomberg July 19, 2013

The Good, The Bad & The Ugly – Week of 7/8/13

Good

  • Elizabeth Warren along with a group of bipartisan lawmakers are introducing a bill aimed at recreating the Glass-Steagall Act, which separated commercial banking from investment banking, before it was repealed under Clinton with the Gramm-Leach-Bliley Act in 1999. Carter Dougherty and Cheyenne Hawkins at Bloomberg July 11, 2013.

Bad

  • Chase gets caught robo-signing affidavits in credit-card collection lawsuits in order to make selling credit card debt to collection companies even easier. Matt Taibbi at Rolling Stone July 11, 2013.
  • The dust is still settling, so we don’t know yet how this will work out, but the CFTC caved to pressure from industry and overseas regulators to limit the scope of US oversight of crossborder swaps. In a 3-1 vote today, the Commissioners agreed to put out guidance for swaps dealers and investors about how the new regulatory boundaries would work. Considering London’s notoriously “light touch” approach to regulation that brought us the London Whale, it’s hard to be optimistic. Silla Brush at Bloomberg July 12, 2013.

Ugly

  • The SEC gives Wall Street a huge gift as it allows hedge funds to advertise to investors who are “accredited” (people who have at least $1 million net worth not including housing). Nine million people are “accredited”, many of whom will wade into the risky waters of hedge funds for a taste of their  alleged prestige. This is vindication for all those Mary Jo White skeptics who questioned her nomination. Heidi Moore at The Guardian July 10, 2013.
  • Timmy Geithner’s post-Treasury activities highlight the lucrative speaking fee circuit that seems to be the thing to do these days (rather than the bad-optics of lobbying) for slimy politicians after they leave office. Lynn Parramore at Alternet July 10, 2013

The Good, The Bad, & The Ugly – Week of 7/1/2013

Good

One side effect of the Snowden leaks and the revelations of the U.S. spying on it’s supposed “allies” might be the collapse or at least the weakening of two “Free-Trade” Agreements (which really just give aways to multinational corporations), the Trans Pacific Partnership and the US-European “Free Trade” Agreement. Yves Smith at Naked Capitalism July 1, 2013.

Bad

The FED is “clear as mud” as to when the too-big-to-fail banks will have to comply with capital standards setting a hazy “phase in” stage starting January 2014 which may not ever even happen. Pam Martens at Wall Street on Parade July 3, 2013.

Ugly

The FED gives Goldman a huge concession as it gives them two more years (July 12, 2015) to comply with a requirement to divest part of its derivatives business to a separately capitalized unit. Ronald D. Oral at Marketwatch (Wall Street Journal) July 3, 2013.

The Good, The Bad, & The Ugly – Week of 6/24/2013

Good

Gary Gensler is holding firm on cross-border derivative reform, much to the surprise of all the big shots who thought they would get the exemptive waiver extended no problem. Here’s to Gensler going out in style. George Bailey at Naked Capitalism June 25, 2013.

Jon Corzine to be sued by federal regulators for his role in the collapse of MF Global. A rare move against an ex-Goldmanite. But in a case like MF Global, civil charges really aren’t enough. Ben Protess at The New York Times June 25, 2013.

Bad

Obama administration and bank-friendly congressmen try and give Gary Gensler the Brooksley Born treatment as the anxiety rises before the July 12th deadline. However, Gensler unlike Born holds all the cards. Here’s to Gensler not making an 11th hour compromise in the face of adversity. Yves Smith at Naked Capitalism June 27, 2013.

Mortgage rates soar from 3.93% to 4.46% for 30-year fixed mortgage in one week, the highest rate since July 2011. Prashant Gopal at Bloomberg June 27, 2013.

Ugly

A USA Today article details how two-thirds of recipients taking part in the “independent” foreclosure review received a paltry $300 – the smallest possible amount. With many lingering questions about how compensation was determined, who would get it, and the role of the big banks in the process, it’s clear that the people ravaged by the foreclosure crisis still haven’t been given anything resembling justice. Julie Schmit at USA Today June 25, 2013.

The Good, The Bad & The Ugly – Week of 6/17/13

Good

  • NY state superintendent of financial services Benjamin Lawsky (basically New York’s top cop over the banking sector) notched another win, landing a $250 million fine against Bank of Tokyo Mitsubishi-UFJ for its role in secretly handling banking for Iran and other sanctioned countries. As Jonathan Weil at Bloomberg pointed out yesterday, this is in stark contrast to the Treasury Department’s flimsy fine of $8.5 million. Yves Smith at Naked Capitalism takes a closer look today at Lawsky’s performance and is also impressed.
  • Elizabeth Warren takes a stand outside of her normal comfort zone and uses her platform to issue a strong critique of Michael Froman, Obama’s nominee for US Trade Representative, as well as the secrecy surrounding the Trans-Pacific Partnership. Although it’s important to remain skeptical of Ms. Warren, a principled public criticism with no upside should be given some credit, Yves Smith notes at Naked Capitalism June 20, 2013

Bad

  • The Senate votes 93-4 to approve Froman, a Rubinite and by extension a supporter of the Trans Pacific Partnership. Roll Call of the U.S. Senate June 19, 2013.
  • Lynn Parramore takes down the now “official” defender of the uber rich, Harvard economist Greg Mankiw after he writes a bluntly titled paper, “Defending the One Percent”. Mankiw, an extremely influential economist, isn’t even hiding his Randian views from the public. The people in the bubble truly think they are untouchable.  Lynn Parramore at Alternet June 17, 2013.

Ugly

  • The role of the credit ratings agencies in the crisis is well known, as is the outrageous lack of real penalties, but the fact that they knew exactly what they were doing by giving processed subprime junk a AAA rating make the injustice even more outrageous. Emails between rating analysts and their clients reveal how ratings were the result of negotiations rather than analysis, and that the agencies were well aware of the problems in the mortgage market even as they continued to grant AAA ratings. Matt Taibbi at Rolling Stone June 19, 2013.

The Good, The Bad & The Ugly – Week of 6/10/2013

Good

Bad

  • Mary Jo White and the SEC are applying the “Government Sachs” treatment to Deutsche bank as Robert Rice, a respondent in a complaint filed by Eric Ben-Artzi which alleged that Deutsche bank hid billions of dollars by mismarking derivatives, gets hired as chief counsel. Yves Smith at Naked Capitalism June 10, 2013

Ugly

  • Jason Furman, author of a 16-page paper entitled “Walmart: A Progressive Success Story” (*rolls eye*), is nominated by Obama for chairman of the powerful Council of Economic Advisors. 11 economists at the American Enterprise Institute praise the decision giving us more than a clue as to who Obama really wants to impress. Lynn Parramore at Alternet June 11, 2013.
  • Gary Gensler is shown the door presumably in large part for his principled stance that overseas swaps affiliates should comply with Dodd-Frank while Amanda Renteria, an ex-goldmanite with nearly zero experience with derivatives is welcomed in. This could signal not just a more bank-friendly position for the CFTC in the short-term but an aim to render the CFTC ineffectual in the long-term. Yves Smith at Naked Capitalism (For more on Renteria: Shahein Nasiripour at Huff Post) June 12, 2013.

The Good, the Bad, & the Ugly – Week of 6/3/2013

Good

  • FINRA has launched an investigation into dark pools – the opaque (hence the name), private trading venues that manage an increasing share of equity trades – by sending examination letters to 15 pool operators. While we would prefer that this be done by the SEC rather than the industry’s self-policing group, it’s at least a first step toward what could be more oversight. Scott Patterson of the Wall Street Journal, June 6, 2013.

Bad

  • In a seeming attempt to generate some “tough on bankers” soundbytes, prosecutors will only pursue criminal charges for mid-level traders rather than the top executives at Barclays for the massive price-fixing LIBOR scandal. Yves Smith at Naked Capitalism June 6, 2013.

Ugly

  • A whistleblower complaint filed by Kathleen Furey, a senior lawyer at the New York Regional Office of the SEC has many interesting and alarming revelations within it. The most revealing being her disclosure that superiors told her before 2008 that “we dont do IM [investment manager] cases”, basically saying the SEC deosn’t enforce two of their main tools, the Investment Advisors Act of 1940 and the Investment Company Act of 1940. It was policy not to go after Madoff. Matt Taibbi at Rolling Stone May 29, 2013

The Good, The Bad & The Ugly – Week of 5/27/13

Good

Bad

  • The revolving door spins on, this time with former CIA head David Petraeus joining former RNC chair Ken Mehlman in heading a new “research and due diligence” institute at buyout mega-firm Kohlberg, Kravis & Roberts. Dan Primack at CNN Money.

Ugly

  • Vulture investors are now circling Detroit’s municipal debt, which (thanks to the same bond insurers who failed miserably in the mortgage market) is trading at bizarre prices. Tom Hals of Reuters.

  • A new decision by the CME (a major agricultural futures exchange) to change its hours has handed an enormous advantage to speculative traders, and puts actual farmers and grain specialists – the ones the market allegedly exists to help – at an enormous disadvantage, opening the door to major price disruptions in food. Lina Khan at Salon.

The Good, The Bad & The Ugly – Week of 5/20/13

Good

  • Occupy Our Homes, the Home Defenders League and other housing advocacy groups stage a protest outside of the DOJ that highlights the DOJ two-tiered justice stance. We can only hope this is another spark for effective protest. John Knefel at Rolling Stone May 22, 2013.
  • One of the ways the horrendous Trans Pacific Partnership (TPP) can be stopped is if other countries affected by the US’s neoliberal policies deem it too radical and refuse to sign on. Rodrigo Contreras, who was lead negotiator in the TPP talks for Chile before he resigned 2 months ago, has written a piece warning of the dangers of the TPP. We will look to see if other countries heed his warning. Yves Smith at Naked Capitalism May 22, 2013

Bad

  • Dimon scores a victory as only 32% of shareholders vote for a proposal to split the CEO and Chairman roles, thus allowing him to keep his powerful hold over the bank. (Although Yves Smith has a slightly more optimistic and nuanced take for all those Dimon-haters out there). Dawn Kopecki & Hugh Son at Bloomberg May 22, 2013.

Ugly

  • The CFTC delivers another huge gift to the bankers as a rule intended to introduce more transparent pricing into the $700 Trillion (yes, with a T) derivatives market is significantly weakened, thus allowing the megabanks to continue to dominate this lucrative area of risky finance. Marc Gordon at AP News.  Our own Akshat Tewary has a piece about it in American Banker which you can read here.  For further analysis, Bill Black gives a great interview to the Real New Network. May 16, 2013.
  • Police taser multiple protesters for exercising their 1st amendment rights at the Occupy Our Homes protest displaying very bluntly who they really protect. One video has gone viral showing 21-year old Carmen Pittman, who had her family home illegally foreclosed on by JP Morgan Chase, being brutally tased. What priorities the State has. Ryan Grim, Jason Cherkis, and Will Wrigley at Huff Post  May 21, 2013.

The Good, The Bad, & The Ugly – Week of May 13, 2013

Good

One potential upside of the AP and IRS scandals gripping DC, is that austerity measures like cuts to Social Security and Medicare will be become even more politically toxic and would further illuminate the Democrats true agenda to the broader public. Greg Sargent at the Washington Post May 17, 2013

Bad

As roundtable talks commence, the SEC continually drags its feet to implement rules that would change the issuer-pays credit rating agencies model that was so integral to the financial crisis. David Dayen at Naked Capitalism May 17, 2013

Ugly
Report from watchdog group Citizens for Responsibility in Washington shows that between the 2008 and 2012 election cycles, high-frequency trading firms have increased their political donations by 673 percent. Sarah N. Lynch at Reuters May 13, 2013