Posts filed under “Regulation”

The Prisoners Dilemma: John Thain vs Ken Lewis

“Regulators are supposed to tell you to obey the law, not to disobey the law. If you’re the CEO, your first obligation is not to your regulator, it’s to your institution and shareholders.”

-Jonathan R. Macey, deputy dean of Yale Law School

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I have not commented on the allegations by Bank of America CEO Ken Lewis that he was forced into making a disastrous acquisition of Merrill Lynch.

Why? Because they appeared to me be utter and shameless nonsense, an attempt to worm out of responsibility.  Indeed, the very statements by Bank of America CEO Ken Lewis appeared to be excuse-making for a lousy acquisition (which Bof A has quite the history of). Its the sort of weasely responsibility evading CEO speak we have come to expect these days. To be blunt, I was astonished anyone took them very seriously.

Yet they were taken seriously, by quite a few people — including a huge front page Wall Street Journal article. The mere accusation means that we are likely to see former Treasury Secretary Hank Paulson — a major cause of the credit crisis and a horrific bailout steward — up for a major grilling in Congress.

This morning, in the same WSJ venue, we learn that many of the statements Ken Lewis made under oath were directly contradicted by former Merrill CEO John Thain (but not under oath). Thain claims these understandings were in in writing.

One of these  two CEOs is lying, and if its the guy who was doing so in sworn testimony, he may have a very big problem on his hands.

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Category: Bailouts, Legal, M&A, Regulation, Taxes and Policy

Regulatory Malfeasance and the Financial System Collapse

Regulatory Malfeasance and the Financial System Collapse by Joseph R. Mason April 14, 2009 Kotok comment: we are pleased to forward this guest commentary by Professor Joe Mason. In it he outlines ways in which the securitization process went awry and led to the financial crisis we have been experiencing. Joe notes some of the…Read More

Category: Bailouts, BP Cafe, Regulation

SEC Examining Oversight of Credit Rating Agencies

Looks like an interesting panel — anyone near D.C. on April 15 should consider going . . .

10:10 a.m. — Panel One: Current NRSRO Perspectives: What Went Wrong and What Corrective Steps Is the Industry Taking?

  • Daniel Curry, DBRS
  • Sean Egan, Egan-Jones Ratings
  • Stephen Joynt, Fitch Ratings
  • Raymond McDaniel, Moody’s Investor Service
  • Deven Sharma, Standard & Poor’s

11:30 a.m. — Panel Two: Competition Issues: What are Current Barriers to Entering the Credit Rating Agency Industry?

  • Ethan Berman, RiskMetrics Group
  • James H. Gellert, RapidRatings
  • George Miller, American Securitization Forum
  • Frank Partnoy, University of San Diego
  • Alex Pollock, American Enterprise Institute
  • Damon Silvers, AFL-CIO
  • Lawrence J. White, New York University

12:30 p.m. — Lunch Break

1:15 p.m. — Panel Three: Users’ Perspectives

  • Deborah A. Cunningham, Securities Industry and Financial Markets Association
  • Alan J. Fohrer, Southern California Edison
  • Christopher Gootkind, Wellington Management
  • James Kaitz, Association of Financial Professionals
  • Kurt N. Schacht, CFA Institute
  • Bruce Stern, Association of Financial Guaranty Insurers
  • Paul Schott Stevens, Investment Company Institute

2:45 p.m. — Panel Four: Approaches to Improve Credit Rating Agency Oversight

  • Richard Baker, Managed Funds Association
  • Jörgen Holmquist, European Commission
  • Mayree C. Clark, Aetos Capital
  • Joseph A. Grundfest, Stanford Law School
  • Glenn Reynolds, CreditSights
  • Stephen Thieke, Group of Thirty

The roundtable is expected to end at approximately 4:15 p.m. with concluding remarks by Erik R. Sirri, Director of the SEC’s Division of Trading & Markets.

In the fall of 2006, Congress passed the Credit Rating Agency Reform Act, providing the SEC for the first time with authority to supervise credit rating agencies. Using this authority that became effective in June 2007, the Commission has adopted two major rulemakings, has conducted an extensive 10-month examination of three major credit rating agencies, and has several pending proposals to further the Act’s purpose of promoting accountability, transparency, and competition in the rating industry.

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Category: Bailouts, Credit, Legal, Regulation

The Cult of Finance

I mentioned the “cult of equities” earlier this morning; An article in the Atlantic on the Cult of Finance is making the rounds:  The Quiet Coup. I found it very similar to Bailout Nation. If this sort of stuff floats your boat, then you will love the book — it gets much more granular than…Read More

Category: Credit, Derivatives, Legal, Markets, Politics, Regulation

Paul Krugman is Wrong About Securitization

Since the credit crisis began, I have frequently found myself in agreement with Paul Krugman. Not everything, but for the most part, especially on many major points, we are sympatico: He has been correct about Moral Hazard, about the folly of these many bailouts, about the advantages of nationalizing the banks. And, I suspect he…Read More

Category: Bailouts, Credit, Derivatives, Federal Reserve, Legal, Regulation

When Smart People Do Dumb Things

Joe Nocera had a brutal — and brutally honest — column today. He essentially states that the Madoff victims were willing accomplishes through their own naivete and bad judgment. “And yet, just about anybody who actually took the time to kick the tires of Mr. Madoff’s operation tended to run in the other direction. James…Read More

Category: Legal, Regulation

Interactive Bank Failure Map

Nice interactive map, via TheStreet.com: > > Source: Interactive Bank Failure Map Philip van Doorn TheStreet.com 02/17/09 – 11:20 AM EST http://www.thestreet.com/story/10464237/1/new-interactive-bank-failure-map.html

Category: Corporate Management, Credit, Legal, Regulation

Interview with Jim Chanos

NBR’s Darren Gersh talked with Jim Chanos, President of Kynikos Associates. He asked the legendary short seller for his take on investment opportunities in this market. A portion of the interview aired in tonight’s program. You can watch the extended version here. Just click the image below. (You need Flash installed to watch.)

click for video


11:44
Thursday, February 12, 2009

via Nightly Business Report

Category: Markets, Regulation, Short Selling, Video

Did the Credit Ratings System Lead to Economic Crisis?

Avinash Persaud, founder and Chairman of Intelligence Capital, discusses regulatory solutions that would avoid this happening next time: Lending to a Credit Rating

The credit rating section begins at ~22 minute

Gresham College, Running time 51 min 45 sec

One of the puzzles of the 2007/8 credit crunch is how a relatively small loss of capital in a tiny market segment was transformed into a global financial crisis costing close to $1 trillion and sending the world economy into slowdown.

Key players in this tragedy are a set of legal and accounting principles that are well-meaning, but turn financial hiccups into liquidity black holes.

Category: Bailouts, Credit, Regulation, Video

Band-Aids for the Ailing Economy

Nice interactive timeline via Portfolio: This is 1935 – 2008; The earlier version 1865-1935 is also here

Category: Bailouts, Digital Media, Legal, Regulation