Why Not Prosecute Nonfeasant Regulators?

The “Datapoint of the Day” comes from the NYT column we referenced yesterday: The mind-boggling drop in Justice Department criminal referrals over the past decade.

I find this specific factoid astounding:

“Data supplied by the Justice Department and compiled by a group at Syracuse University show that over the last decade, regulators have referred substantially fewer cases to criminal investigators than previously.

The university’s Transactional Records Access Clearinghouse indicates that in 1995, bank regulators referred 1,837 cases to the Justice Department. In 2006, that number had fallen to 75. In the four subsequent years, a period encompassing the worst of the crisis, an average of only 72 a year have been referred for criminal prosecution.”

This is more “Nonfeasance” — that is what I accused the Greenspan Fed of doing in Bailout Nation. It is also what the Office of the Comptroller of the Currency did and what the Office of Thrift Supervision engaged in.

They did not do a bad job int he discharge of their duties. THEY REFUSED TO DO THEIR JOBS AT ALL. They simply refused to discharge their legal obligations, because the people in charge did not believe, philosophically, in regulations.

This is yet another crime we should be prosecuting people for. It is no different than safety regulators who failed to inspect carnival rides and 100s of children died. The bank regulators who refused to discharge their duties for ideological reasons should be prosecuted. That means investigating John Duggan and John M. Reich for nonfeasance. How are they any different from people who took payoffs from carnies and allowed children to die on unsafe rides?

Consider how bad it was under these to radical deregulators: We’ve mentioned this stat previously, but its worth repeating: Referrals for criminal prosecution plummeted under the Bush administration fell by 95%. While I have been frustrated by the poor policy and personnel choices Obama has made — and continues to make — the Bush administration was uniquely incompetent when it came to filling regulatory positions with anti-regulators. (Think Harvey “Shred-’em-before-the-subpoena-arrives” Pitt as SEC chair).

Its no surprise that these criminally negligent appointees did not do their jobs. These so-called regulators were far too cozy with the regulated. Friends, pals, drinking buddies. And so, they failed their charges, and left the taxpayer at the mercy of thieves.

• Why was John M. Reich, a former banker and Senate staff member appointed in 2005 by President George W. Bush, uninterested in prosecuting Countrywide or Angelo R. Mozilo, its chief executive? Reich said that “he was a good friend of Mozilo’s.”

• Why were FCIC investigators (during Obama’s Presidency) told “Countrywide was off limits?”

If you want to understand why the public remains so angry about the bailouts, these facts are merely frosting on the cake. The bailouts work to prevent the government from fulfilling its duties as prosecutors. Once they get in bed with banks, they refuse to do anything to “harm” that investment.

And the public gets angrier and angrier.

Category: Bailout Nation, Bailouts, Legal, Really, really bad calls, Regulation

Minsky Conference Update

From an institutional sales desk that must remain anonymous ~~~ There something very unnerving about this Minsky conference and I may be getting closer to putting my finger on what that is. There are myriad differences between adherents of the Austrian School of economics (“Austrians” from now on) and Minskians, who view themselves as a…Read More

Category: Bailouts, Philosophy, Think Tank


April 14, 2011
David R. Kotok




Situated on the southern coast of Sicily, the city of Agrigento embraces the ruins of the ancient city of Akragas, established 2500 years ago by Greek colonists. The geography of the area allowed Akragas to become a prominent, well-defended city during the Golden Age. According to our local archaeological guide, Luigi Napoli, its population of 150-250,000 was fourth largest in the ancient world, behind Athens, Siracusa, and Corinth, respectively. Through to the Middle Ages, the city survived many wars and many occupiers.

What is most remarkable is the archaeological site, the Valle dei Templi. This acropolis has seven structures, constructed of yellow sandstone and in the Doric style. Undoubtedly the best preserved is the Temple of Concordia, or Harmony. It stands without reconstruction, just as it has for over two millennia. It is a testament to the grandeur of the ancient world. Built on a rock formation, the temple remains intact, as an underground layer of clay functions as a shock absorber, protecting it from earthquakes. In addition to this natural defense, the edifice was converted into a Catholic church dedicated to Saints Peter and Paul during the medieval period, continuing its conservation. Today, we can appreciate its beauty and history as it lies entire before us.

One can observe in Agrigento the play of history from pre-Hellenistic times, when local tribes were the occupants, through to the present day, as discussed in our last commentary. As did the ancients, we create monuments and documents that will become remnants and memories. We do so, only for scholars to pour over them in the attempt to interpret their meanings, decades, centuries, and even millennia after their creation.

And so, in that spirit, our economics discussions continue here.

Today we focused on an issue involving currencies and the current status of oil markets. The issue derives from the fact that oil producers tend to allocate their reserves against an index or other proportion, and plan accordingly in the deployment of their reserves. Since the producers are mostly Middle Eastern or North African, those reserves tend to have some political bias. In some cases, it is against the dollar and in favor of other currencies and assets. The same thing happens with Asian reserves, which tend to lean in favor of the dollar in greater proportion. The difference between the two creates an interrelationship among currencies, their exchange rates, and various levels of economic activity and price change throughout the world.

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Category: Think Tank

I’ve Got Some Good News & Some Bad News . . .

That’s what my accountant said before he dropped the bombshell: “You owe Uncle Sam. Big. Ugly. Write a check. Lots of zeros.” “How much?” “Well, pea brain, you get all these 1099s for book royalties and speaking engagements and the blog. You don’t pay withholding (as I asked you last year and you ignored me)….Read More

Category: Taxes and Policy

Late-Week Reads

My top 10 reads for today • History bodes ill for stock market (Marketwatch) • 9 Things The Rich Don’t Want You To Know About Taxes (Willamette Week) • Martin Wolf: The radical right and the US state (FT.com) • How to Pay No Taxes (Business Week) • Why One Contrarian Looks Beyond Earnings (Forbes)…Read More

Category: Financial Press

Algo Monkey

I don’t know why — maybe because we’ve all met Institutional sales guys who sound JUST LIKE THIS –  but this is way too funny: > click for live algo chatting monkey: “You’ll be beating the hi-Freqs!”

Category: Trading

European Nuclear Union

Interesting map from Spiegel: > > Source: Paying for the Energy Revolution German Nuclear Companies Stop Eco-Fund Contributions Spiegel, 04/11/2011 http://www.spiegel.de/international/business/0,1518,756251,00.html

Category: Digital Media, Energy

Why Physics Ends the Free Will Debate?

Newtonian Determinism says that the universe is a clock, a gigantic clock that’s wound up in the beginning of time and has been ticking ever since according to Newton’s laws of motion. So what you’re going to eat 10 years from now on January 1st has already been fixed. It’s already known using Newton’s laws of motion. Einstein believed in that. Einstein was a determinist.

Category: Science, Video

Do You Know Carl Levin?

Joseph Saluzzi (jsaluzzi-at-ThemisTrading.com) and Sal L. Arnuk (sarnuk-at-ThemisTrading.com) are co-heads of the equity trading desk at Themis Trading LLC (www.themistrading.com), an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the…Read More

Category: Regulation, Think Tank, Trading

The Easter Egg-Bot

The incredible Easter Egg-Bot: via NYT

Category: Weekend