Posts filed under “Really, really bad calls”
This week in encouraging news, we learn that the Securities and Exchange Commission may finally be pursuing one of the prime enablers of the financial crisis — the ratings companies. Previously, it was reported that disclosure violations were on the SEC’s radar, but truth be told, those are minor offenses.
The SEC’s Office of Credit Ratings, a division whose sole purpose is essentially to oversee Moody’s and Standard & Poor’s, seems to be stirring. The Wall Street Journal reported that the “government’s top credit-rating watchdog has kept a low profile since taking the job two years ago to help prevent another financial crisis. That may be about to change…” Multiple cases have reportedly been referred to the SEC’s enforcement division, and new regulations are due.
And a welcome change it would be. Of all the players that helped cause the financial crisis, the ratings companies have gotten off scot-free. Banks have had massive fines while many mortgage and derivative underwriters have had their garbage securities put back to them at great cost. Since 2008, there have been 388 mortgage companies that have gone bankrupt. All of that junk paper found its way into AAA-rated securitized products and derivatives. The penalty for Moody’s and S&P has been essentially nil. Fear of so-called reputational damage — the theory that concerns about their good name keeps companies in line — is the latest economic nonsense to be thoroughly debunked by events. Continues here
In my day job, I see lots and lots of really silly things. Portfolios transfer in filled to the brim with junk, silliness and evidence of malicious intent. I am working on my list of Dumbest Investment Ideas of the Year, but I am curious if any of you have seen anything that stood out…Read More
I have spilled a great deal of pixels and time in these pages discussing the importance of not letting your biases get the best of you as an investor. (See this, this, this, this, this, this, this, this, and this). Further, when you are wrong, you must do more than merely acknowledge it: Embrace the…Read More
Take Apart: Overall, it’s a swing in the financial fortune of one of the country’s top private universities and one of the world’s most esteemed Jewish institutions of more than $1.3 billion, well more than 10 times the losses from the portion of Yeshiva’s portfolio invested with Madoff. Students who applied to and enrolled at…Read More
Attention peasants: The Greubel Forsey GMT at $549,000 Source: Greubel Forsey I have been hearing a lot about the spending habits of the 0.01 percent lately. Perhaps, a little bit too much. Don’t worry, this isn’t going to be a class-warfare rant or a treatise on living the simpler, less materialistic life. Rather, it is…Read More
Remarks Before the Peterson Institute of International Economics
Commissioner Kara M. Stein
June 12, 2014
Thank you, Adam, for the kind introduction. I also would like to thank the Peterson Institute for International Economics for hosting me today.
I, like all of you in this room, believe we need to have strong, vibrant capital markets if we want to have a healthy, job-creating economy. Our capital markets must be built on a foundation that is strong enough to withstand the next storm. During the Great Recession, we started a discussion about how to help insulate us when the next crisis comes.
The next financial crisis may come from any direction. My job is to help figure out where the next crisis may come from, and how to minimize the damage it would cause. That means we must identify systemic risks and mitigate them. Today, we have convened to continue this conversation and discuss what the SEC can do to better prevent the buildup and transmission of risks that can take down our entire financial system.
I’m going to begin our discussion today with a quick reminder of how we got here. And then, I’m going to focus on the three key areas where the SEC can play a critical role in addressing systemic risks. First, we need to step outside of our silo and think broadly and cooperatively with our fellow regulators, both domestic and international. Second, we need to focus on improving the stability and resiliency of the short-term funding markets, including securities lending and repurchase agreements (repo). Third, we need to re-examine how we evaluate capital, leverage, and liquidity within the financial institutions and funds we regulate.
With the financial crisis in the rear view mirror, many forget the forces that converged in 2007. Some even deny the impact of the recession, optimistically viewing our financial markets and our economy as inoculated from a virus that spread quickly and wreaked havoc on a global economy. Yet, studies demonstrate that the Great Recession continues to affect both attitudes and behaviors. A recent survey found that the generation entering the workforce now – the Millennials, who are 21 to 36 years old – have the same fiscally conservative views as the generation that exited the Great Depression. Millennials are skeptical of the financial markets and long-term investing, yet we increasingly depend on them to invest and drive our economy.
I, too, am crisis-scarred. And I share a dream with these Millennials. I dream of never facing another financial crisis. I want to do my part to avoid ever having to face another one. The events of 2008 are indelibly etched into my memory. In 2008, while I was working for Senator Jack Reed, our country’s economic leaders began closed-door briefings with members of Congress. Concerned about the unfolding financial crisis, the Chair of the Federal Reserve and the Secretary of Treasury pleaded for help and for an unprecedented financial intervention to stave off another Great Depression. They wanted tools to protect our Nation from an invisible force that came to be known as systemic risk. A comprehensive strategy was developed to stabilize our economy and unlock the credit markets in order to save our financial system.
Government Treated Peaceful Boycott As Terrorism Anyone Who Questions the Powers-That-Be May Be Labelled a “Terrorist” The Partnership for Civil Justice (a public interest legal organization which the Washington Post called “the constitutional sheriffs for a new protest generation”) reported this week that the Obama administration treated a peaceful boycott as a terrorist threat: 4,000…Read More
Since 2008, the U.S. authorities have meted out $87.53 billion in fines to global banks. That number comes from data complied by the Financial Times. Some people believe that bankers are finally getting their due, being hit with billion-dollar penalties for their recklessness. I don’t see it that way; rather, it looks like little more…Read More