Posts filed under “Really, really bad calls”

GOP: More Madoffs, Please

Percent Change SEC Staff Workload: 1991 – 2000

Chart sourced via GAO analysis of SEC data


If you can’t stop the legislation, you can defund it.

That is what our Chart of the Day shows, the net impact of defunding regulation. As we previously discussed 1 year ago (SEC: Defective by Design?), there has been a concerted effort at keeping regulators under-funded. The SEC has lacked sufficient staff, thus holding enforcement efforts to a minimum.

This is not an accident. Imagine being allowed to have an army and guns, but no bullets are allowed. The banks and big Wall Street firms are very comfortable with this arrangement. And as Matt Taibbi made clear (Why Isn’t Wall Street in Jail?) , the revolving door between the SEC and Wall Street has prevented any criminal prosecutions

And its not a bi-partisan issue this go around, its the crazy wing of the Republican Party:

“Congressional Republicans intent on big spending cuts are on a collision course with Wall Street’s top regulators over a plan to slash millions from agency budgets.

Lawmakers are targeting the Commodity Futures Trading Commission and the Securities and Exchange Commission. The work of both agencies is set to balloon as the Dodd-Frank financial reform law is implemented. . . .

The most recent comprehensive spending bill produced by House Republicans would chop the CFTC’s funding by $56.8 million — almost a third of the agency’s entire budget — over the next seven months. Funding at the SEC would be cut by $25 million over the same time period.”

To give you an idea of what this looks like, consider the chart above — it shows how the SEC caseload has risen, while its budget remains flat.

Chew on this: Derivatives have been radically deregulated for a decade, thanks to the misnamed Commodity Futures Modernization Act. Now imagine the entity charged with RE-regulating them, the Commodity Futures Trading Commission, has insufficient funds.

The end result of this? An increasing possibility of yet another crisis, one where traders know Uncles Sam & Ben will bail them out.

Gee, I wonder how that will play out? Guess we are gonna find out eventually . . .


SEC: Defective by Design? (March 2010)

Defanging the Regulators (November 2010)

Regulators: Wall Street reform at risk
Charles Riley
CNN/Money, March 1, 2011

Category: Derivatives, Really, really bad calls, Regulation

QOTD: Greenspan on Financial Innovation

The Maestro: “Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . . Where once more-marginal…Read More

Category: Really, really bad calls

Mike Konczal is a fellow with the Roosevelt Institute, and is a blogger at the Rortybomb Blog and New Deal 2.0. Originally posted here ~~~ Have you heard about 16.896? The fight in Wisconsin is over Governor Walker’s 144-page Budget Repair Bill. The parts everyone is focusing on have to do with the right to…Read More

Category: Politics, Really, really bad calls, Think Tank

Angelo “Agent Orange” Mozilo Off the Hook…For Now

So the LA Times reports that former Countrywide CEO Angelo “Agent Orange” Mozilo has had a criminal investigation against him dropped. It appears, as Atrios notes, that “If Everybody is Guilty Then Nobody Is.”  As the Times puts it: Columbia University law professor John Coffee said mortgage cases like Mozilo’s were muddied by the numerous…Read More

Category: Current Affairs, Really, really bad calls

Did Goldman Sachs Kill AIG ?

I have to take issue with William Cohan’s Op-Ed, How Goldman Killed A.I.G. First off, let me start out by saying that these are two bad actors; there are no “good guys” here. Second, let me remind the reader that AIG under-wrote $3 trillion worth of derivatives, a massive high-risk exposure — and collected $3…Read More

Category: Bailouts, Credit, Derivatives, Really, really bad calls

Fannie/Freddie Market Share Plummeted During Boom

You may have missed Matt Phillips massive read Friday afternoon on the GSEs in the WSJ blog Marketbeat. The entire piece is definitely worth your time, but I found one chart especially compelling: It shows Fannie & Freddie’s market share plummeting from over 70% to under 40%, as Wall Street securitized all manner of non-conforming…Read More

Category: Bailouts, Real Estate, Really, really bad calls

UltraShort Indices

I don’t understand why, but I keep seeing portfolios strewn with Ultra-Short inverse funds. These are the ETFs that bet 2X and even 3X that major indices will go down. 20, 30 even 40% of some accounts are laden with these. Please stop. Eventually, the downside bet will be a moneymaker. Eventually. But if you…Read More

Category: Really, really bad calls, Short Selling, Trading

Dow 36,000 for Bonds!

James Glassman must be a helluva salesman. How else can you explain how the co-author of Dow 36,000 was able to convince a publisher to allow him to demonstrate his lack of acumen on a related subject? After penning what became the classic exemplar of Dot Com excesses — a spectacularly wrong tome about equity…Read More

Category: Really, really bad calls

Fascinating discussion by SImon Johnson at Economix: The key finding is that chief executives were “30 times more likely to be involved in a sell trade compared with an open-market buy trade” of their own bank’s stock and “the dollar value of sales of stock by bank C.E.O.’s of their own bank’s stock is about…Read More

Category: Bailouts, Corporate Management, Really, really bad calls

Isaac: Please Let Under-Capitalized Banks Pay Dividends!

Relentlessly shameless bank shill William Isaac gets up off his knees just long enough to pen an absurd FT piece: Banks should be allowed to pay out dividends. It is such a bizarre statement that we are left truly wondering what color the sky is on his planet. Isaac seems to be just making it…Read More

Category: Credit, Really, really bad calls, Regulation