Posts filed under “Legal”
“It is a smart, simple and tough piece of work that would protect taxpayers from costly rescues in the future. This means that the bill will come under fierce attack from the big banks that almost wrecked our economy and stand to lose the most if it becomes law.”
-Gretchen Morgenson, NYT
“It’s clear there’s too much Wall Street in this administration.”
This weekend, we saw a flurry of reporting on a new bi-partisan proposal introduced by Senators Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican.
This is a very simple, straight forward piece of legislation that mandates adequate capital reserves, eliminates the opportunity for bankers to hide liabilities off balance sheet or game the various asset classes:
-Stricter capital requirements on megabanks, defined as institutions with over $500 billion in assets.
-Six U.S. banks — JPMorgan Chase., Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo — meet the TBTF criteria.
-Eliminates risk-weights as part of a capital assessment (less reliance on unreliable ratings).
-Does not rely on ratings agency grades.
-Removes off-balance-sheet assets and liabilities as different class — they are treated as if they were on-balance sheet.
-Requires derivatives positions to be included in a bank’s consolidated assets.
-Requires capital cushion that a bank hold be liquid
-Mandates capital measures be more transparent
-Eliminates Basel III as a regulatory requirement
-Restores competition to industry by removing competitive disadvantages mega banks have over smaller and regional community bankers.
For those people who complain Dodd-Frank is too complex, let’s see how they like “the new simplicity.”
Brown-Vitter faces two large, deeply intertwined opponents: Wall Street banks and the Obama administration. The pushback has already begun. For the banker’s views, we go to the NYT’s Dealbook. It is overseen by Andrew Ross Sorkin, author of Too Big to Fail and now a CNBC morning anchor. As seen in its recent headline, The Seductive Simplicity of a New Banking Bill, Dealbook is a touch skeptical of the legislation, but notes “in a major way, the Brown-Vitter bill effectively sidesteps the need for reliable regulators. It simply says that all big banks would have to set up a buffer for potential losses – called capital in the industry – that is equivalent to 15 percent of their total assets.”
Simon Johnson takes a different tack. He warns that there are two competing narratives about financial-reform efforts, with the financial-sector executives claiming that “all necessary reforms have already been adopted.” Johnson pushes back on this, noting “the world’s largest banks remain too big to manage and have strong incentives to engage in precisely the kind of excessive risk-taking that can bring down economies. Last year’s “London Whale” trading losses at JPMorgan Chase are a case in point.”
The best read of the proposal comes from FDIC Vice-chairman Thomas Hoenig — he is in favor the legislation.
Hoenig is the single best reason you know the TBTF act is the a good step in the proper direction for bank regulation.
Sources:
Banks Have Become “Too Big To Fail” Again. Uh-Oh. And there’s only so much governments are willing to do about it.
Simon Johnson
Slate, April 28, 2013
http://www.slate.com/articles/business/project_syndicate/2013/04/financial_reform_too_big_to_fail_is_back.html
Sherrod Brown Takes On Megabanks — And The Obama Administration
Brian Beutler
TPM, April 26, 2013
http://tpmdc.talkingpointsmemo.com/2013/04/sherrod-brown-takes-on-megabanks—-and-the-obama-administration.php
Trying to Slam the Bailout Door
GRETCHEN MORGENSON
NYT, April 27, 2013
http://www.nytimes.com/2013/04/28/business/two-senators-try-to-slam-the-door-on-bank-bailouts.html
The Seductive Simplicity of a New Banking Bill
PETER EAVIS
NYT, April 26, 2013
http://dealbook.nytimes.com/2013/04/26/the-seductive-simplicity-of-a-new-banking-bill/
Category: Bailouts, Legal, Regulation, Taxes and Policy
Columbia Economist Dr. Jeffrey Sachs speaks candidly about corruption in the United States: from Washington DC and Wall Street, including the entire financial/banking system
Category: Bailouts, Crony Capitalists, Legal, Video
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER PROTECTION met in OPEN SESSION to conduct a hearing entitled “Outsourcing Accountability? Examining the Role of Independent Consultants”. The witnesses on Panel II were: Mr. Konrad Alt, Managing Director, Promontory Financial Group, LLC; and Mr. James F. Flanagan, Leader, U.S. Financial Services Practice, Pricewaterhouse Coopers LLP. Subcommittee Member Senator Elizabeth Warren (D-MA) Questions Panelists.
hat tip Manal Mehta
From a longstanding Housing analyst: After reading Gretchen Morganson’s article on the front page of the business section last week (“Note to New S.E.C. Chief: The Clock Is Ticking“) we are confronted with a massive potential legacy loan fraud at SunTrust Bank against Fannie Mae — it seems to me that this is very similar…Read More
Category: Credit, Legal, Real Estate, Think Tank
From a longstanding Housing analyst: After reading Gretchen Morganson’s article on the front page of the business section last week (“Note to New S.E.C. Chief: The Clock Is Ticking“) we are confronted with a massive potential legacy loan fraud at SunTrust Bank against Fannie Mae — it seems to me that this is very similar…Read More
Category: Credit, Legal, Real Estate, Think Tank
Bipartisan Report: US Practiced Widespread Torture, Has “No Justification” Doesn’t Yield Significant Information, Nation’s Highest Officials Bear Responsibility
We Can’t Just Look Forward … We Have to Admit What Went Wrong
Yesterday, a bi-partisan panel – co-chaired by the former undersecretary of homeland security under President George W. Bush, former Republican congressman from Arkansas and NRA consultant (Asa Hutchinson) and former Democratic congressman and U.S. ambassador to Mexico (James Jones) – released a 577-page report on torture after 2 years of study.
Other luminaries on the panel include:
- Former FBI Director William Sessions
- 3-star general Claudia J. Kennedy
- Retired Brigadier General David Irvine
- Former Under Secretary of State for Political Affairs, Ambassador and Representative to the United Nations, and U.S. ambassador to the Russian Federation, India, Israel, El Salvador, Nigeria, and the Hashemite Kingdom of Jordan Thomas Pickering
The panel concluded:
- “Torture occurred in many instances and across a wide range of theaters”
- There is “no firm or persuasive evidence” that the use of such techniques yielded “significant information of value”
- “The nation’s highest officials bear some responsibility for allowing and contributing to the spread of torture”
- “Publicly acknowledging this grave error, however belatedly, may mitigate some of those consequences and help undo some of the damage to our reputation at home and abroad”
The panel also found:
- The use of torture has “no justification” and “damaged the standing of our nation, reduced our capacity to convey moral censure when necessary and potentially increased the danger to U.S. military personnel taken captive”
- “As long as the debate continues, so too does the possibility that the United States could again engage in torture”
- The Obama administration’s keeping the details of rendition and torture from the public “cannot continue to be justified on the basis of national security”, and it should stop blocking lawsuits by former detainees on the basis of claiming “state secrets”
Category: Legal, Really, really bad calls, Think Tank, War/Defense
Mike Konczal, fellow at the Roosevelt Institute and contributor to Bloomberg View, talks with Bloomberg Law’s Lee Pacchia about how the implementation of the financial reform laws in Dodd-Frank have been hampered by a series of adverse court decisions. Konczal contends that these decisions are not only a setback for proponents of reforming the financial industry, but also have a chilling effect on future efforts by regulators and lawmakers. At the same time, however, Konczal feels that these courthouse victories could end up harming the finance industry. “If it looks like the law is unable to do what it needs to you will see reformers come back with much harsher provisions…that the banks successful avoided the first time around,” he says.
Category: Legal, Regulation, Video
Congressman Grayson Asks for an Investigation into Federal Reserve’s FOMC leak
The Federal Reserve’s Open Market Committee released its recent minutes 24 hours early to a handful of big banks, private equity firms and other insiders.
Congressman Alan Grayson wrote the following letter to the Chairman of the Committee on Oversight and Government Reform (Darryl Issa) today:
I respectfully request an *investigation of the Federal Reserve leak of the Federal Open Market Committee (FOMC) minutes on April 9 and 10, 2013. According to Bloomberg News, the list of individuals who received the information included staff at Barclays PLC, BB&T Corp., BNP Paribas SA, Capital One Financial Corp., Fifth Third Bancorp, HSBC Holdings PLC, Nomura Holdings Inc., PNC Financial Services Group Inc., Regions Financial Corp., U.S. Bancorp, UBS AG and Wells Fargo & Co.
I have long been concerned about the Federal Reserve’s management of sensitive market-moving information. One example of blatant information “asymmetry” is the five-year lag before FOMC meeting transcripts are released to the public. As the Huffington Post reported in 2012, “Many of those people have since left the central bank and gone to work in the financial industry, taking with them privileged information about the Fed’s thinking that is still closed to the public.” [Here's the HuffPost article.] This includes Susan Bies, who is now a board member at Bank of America; Laurence Meyer, who founded Macroeconomic Advisors; and Brian Madigan, who is now at Barclays.
Some relevant questions to consider during your investigation include:
1) Who specifically received this information early?
2) Did any insider trading result from this leak?
3) Did Goldman Sachs release a note encouraging clients to short gold [see this and this; Goldman's note says: "We recommend initiating a short COMEX gold position ...."] right after receiving the leak information, due to the leak itself? Who else might have profited from the early release of this information?
4) What are the internal control procedures in place for the Federal Reserve to manage sensitive market-moving information? How did these procedures fail?
5) Why does the Federal Reserve continue to withhold the transcripts of FOMC meetings secret for five years, when there are many people who have been present at those meetings who have moved on to private sector employment within that blackout period?
Good questions.
Category: Bailouts, Federal Reserve, Legal, Think Tank
Medicinal marijuana markets: Weed goes legit Source: USAToday
Category: Commodities, Legal
