Posts filed under “Regulation”

The Broken SEC Enforcement Mechanism

Today, I am compelled to direct your attention today to a column by my Bloomberg colleague Jonathan Weil, titled “The Best SEC Speech Ever.”

The speech that Weil referred to in the headline was the retirement speech of Jim Kidney, a 25-year veteran trial attorney at the Securities and Exchange Commission.

Three things stood out to me in Kidney’s farewell (you can read the full text here).

1. The SEC has a “very serious” revolving door problem.

2. Fines are insignificant and insufficient: “We are at most a tollbooth on the bankster turnpike. We are a cost, not a serious expense.”

3. The main metric used to evaluate the enforcement division — the volume of cases filed as opposed to their quality — “is a cancer.”

The veteran litigator speaks far more eloquently on these three topics than I ever could.

My focus, instead, is the underlying cause of these problems: The SEC’s budget.

Back in March 2002, a Government Accountability Office report to Congress identified an exploding workload at the agency. Meanwhile, targets of SEC investigations were lobbying Congress in an effort to crimp the agency’s budget. It should come as no surprise they were quite successful. Even if they couldn’t win in court, they could win in Washington. All it took was a corrupt Congress up for sale to the highest bidder. Those who might run afoul of the SEC enforcement mechanisms had stacked the deck.

Instead of the kind of enforcement that serves as a deterrent, we got fines and mealy-mouthed deals in which wrongdoers promised never to misbehave again. The fines are merely a cost of doing business for Wall Street. The bad old days of the SEC turning over cases to Justice Department for criminal enforcement are a distant memory.

I have said this before, but it’s worth repeating: Former Federal Reserve Chairman Paul Volcker was wrong. The greatest financial innovation over the last few decades wasn’t the automated-teller machine. “The greatest innovation of the financial sector is not the ATM machine or interest-bearing checking accounts or securitization: It was convincing the powers that be that prosecuting them for their actual crimes would (once again) bring the economy to the edge of the abyss.”

Jim Kidney reminds us how this occurred. We owe him a debt of gratitude.


Originally published here


Category: Legal, Regulation

SEC: “A Tollbooth on the Bankster Turnpike”

Jim Kidney’s SEC Farewell Speech   Now what you have all come here for. To hear some final words from Jim Kidney. Emphasis on FINAL. I originally planned this to start at noon so I could give a four hour speech getting even. But sadly, it is not to be. I went through my grudge…Read More

Category: Legal, Regulation, Think Tank

Michael Lewis on Charlie Rose

Michael Lewis discusses his latest book: “Flash Boys: A Wall Street Revolt.”

Category: Regulation, Trading, Video

HFT: Fragility, Bubbles & Mayhem

Ian Fraser: “Not only is HFT legalized front-running. It is also a socially worthless activity that amplifies market movements, increases market fragility, inflates asset price bubbles, and naturally worsens market crashes. And as we saw with the ‘Flash Crash‘ of May 2010, it can also fuel market mayhem.” -Q-Finance Discuss . . .

Category: Really, really bad calls, Regulation, Trading

Fracking Regulation

Source: Oil Buyer’s Guide, Bloomberg Brief

Category: Energy, Regulation

Rigged? High Frequency Trading Is Legalized Theft

On “60 Minutes” last night, author Michael Lewis made a bland assertion: High-frequency traders, he said, working with U.S. stock exchanges and big banks, have rigged the markets in their own favor. The only surprising thing about Lewis’s assertion was that anyone could be even remotely surprised by it. The math on trading is simple:…Read More

Category: Regulation, Technology, Trading

60 Minutes: Is the U.S. stock market rigged?

Steve Kroft reports on a new book from Michael Lewis that reveals how some high-speed traders work the stock market to their advantage

Is the U.S. stock market rigged?

Read More

Category: Really, really bad calls, Regulation, Trading, Video

Attention Suckers: Send Us Your Money!

  Those almost 10,000 early investors on Kickstarter participated in one of history’s most lucrative funding rounds from the perspective of the people receiving the funding: a $2.4 million early-stage investment in what would become a $2 billion business in a year and a half, in return for 0.0% equity.” – WSJ’s Corporate Intelligence on…Read More

Category: Investing, Really, really bad calls, Regulation, Venture Capital

Christie vs. Tesla?

How New Jersey Governor Chris Christie clamped down on one of America’s most innovative companies.

Category: Really, really bad calls, Regulation, UnGuru, Video

Behaviorally Informed Financial Services Regulation

Category: Psychology, Regulation, Think Tank