SEC investigating possible Hollywood bribes in China

I'm no fan of Hollywood and would laugh if they violated the law but the love of god, can the SEC please investigate Wall Street and their actions that led to the crash of 2008? (Searching for bribes handed out in China is like searching for espresso in Italy. It's everywhere.) These side shows that are meaningless in the big picture and do nothing to prevent the next crash are really annoying. Insider trading wasn't what caused the crash nor were the possible bribes in China to film movies. Whoever is leading these silly side shows needs to get a clue that Americans are a lot more upset with what ruined the economy than these efforts. More on the SEC effort to chase Hollywood, from the NY Times. Read the rest of this post...

SEC sues Wells Fargo for ignoring subpoenas

Things must be ugly if the bank has ignored multiple requests for information about mortgage backed securities that went bad. How is it that the banks can even get this far along without responding to the SEC? They certainly enjoy a privileged position within certain circles, seemingly above the law. While the SEC is now forcing the issue, it remains to be seen how this will proceed.

I wonder how easily it would be for a private individual to try this approach of ignoring, then becoming indignant when called out.

U.S. securities regulators accused Wells Fargo & Co on Friday of repeatedly ignoring its subpoenas for documents in connection with a probe into the bank's $60 billion sale of mortgage-backed securities.

The Securities and Exchange Commission's filing in a San Francisco federal court seeks to compel the fourth largest U.S. bank to hand over documents. The SEC said it has issued several subpoenas since September.

A Wells Fargo spokeswoman called the SEC's action "inappropriate" and pledged the bank would "vigorously defend itself in court" against the SEC action.

As a side note, someone at the SEC needs to know that this might not help their job opportunities when they flip back to private industry. This embarrassing moment won't be forgotten by Big Finance. Read the rest of this post...

NY Times study: SEC soft on Wall Street crime

In the Romney Rule America, law and order only applies to the 99%. If you wear an expensive suit and work on Wall Street, all is forgiven.

The problem with the SEC - like much of Washington - is that the job is only a stepping stone to a more profitable career in private industry. Taking a hard line against Wall Street is a job prospect killer for those working at the SEC. Think of the SEC as the minor league baseball training ground for the big leagues. The massive insertion of cash into political campaigns is widely discussed but the revolving door is just as damaging, if not worse.

Until these cozy relationships are ended, there's no hope of ever holding Wall Street accountable. Political class insiders can spin it any way they like, but this stinks of corruption. The justice system for the 1% is in desperate need of reform. NY Times:

An analysis by The New York Times of S.E.C. investigations over the last decade found nearly 350 instances where the agency has given big Wall Street institutions and other financial companies a pass on those or other sanctions. Those instances also include waivers permitting firms to underwrite certain stock and bond sales and manage mutual fund portfolios.

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies — Dell, General Electric and United Rentals among them — have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

Read the rest of this post...

Will the SEC ever stop abusing 'admit nor deny' with settlements?

There are no doubt times when agreeing that the defendant neither admits nor denies something, but the SEC abuses this practice. Nearly every settlement with the Wall Street gang that trashed the economy has been settled this way. There is at least one judge who has had enough of it and the SEC is now claiming the practice is changing, but that's just more deception. The changes are only in limited cases though the SEC is promoting this update as a major change. It's not. It's easy to understand why the SEC settles like this with Wall Street, because most at the SEC are only there to set themselves up for a promotion and big money working on Wall Street. It's the infamous Washington revolving door at work. The days of a different rule of law for Wall Street has to end. CNBC:

The SEC has come under pressure — mostly from one federal judge and some lawmakers — to rethink the ease with which it lets companies settle without admitting wrongdoing. Judge Jed Rakoff, a federal district court judge for the Southern District of Manhattan, has called the practice into question in a number of cases. He’s actually rejected a couple of settlements — or at least refused to immediately approve them — on the grounds the SEC should “see that the truth emerges.” This latest ruling doesn’t touch on the types of cases with which Rakoff has been dealing. They involve no criminal accusations, much less convictions. And the SEC is not, so far as anyone can tell, thinking about revisiting this for the vast majority of purely civil cases.

Read the rest of this post...

Why is the NYT protecting the SEC’s unwillingness to take on Citibank?

We've written before about the seemingly corrupt deal the SEC cooked up to "punish" Citibank for unspecified wrong-doing, which in turn would never have to admit doing anything wrong — all cozily out of public view.

(For background, see here for the Citibank scam, and here for Judge Rakoff's decision overturning the SEC "deal.")

If you followed this story (or read the first link above), you know that a Federal judge finally put the kibosh on the string of sweetheart deals engineered by the SEC — in this case by nixing a deal between SEC’s head of enforcement Robert Khuzami and Citibank that came before him for approval. He didn't approve.

Well, neither the SEC nor Citibank (whose interests are perfectly aligned) are taking that sitting down. So they got a Pulitzer Prize–winning writer, James B. Stewart, to make their disingenuous case in the pages of the New York Times.

Why "disingenuous"? Here's Yves Smith from Naked Capitalism (my emphasis and reparagraphing, because our columns are narrow):

There is nothing more useful to people in authority than when a writer with an established brand name does their propagandizing for them.

Harvard Law graduate and Pulitzer Prize winning author James B. Stewart penned a remarkable little piece in the New York Times over the weekend. Titled “Few Avenues for Justice in the Case Against Citi,” it contends that Judge Jed Rakoff’s ruling against a proposed $285 million SEC settlement with Citigroup over a $1 billion CDO (Class V Funding III) that delivered $700 million in losses to investors and $160 million in profits to Citi is misguided.

Stewart argues, based on “some reporting,” that the SEC is unlikely to do better in the trial that Rakoff has forced on the agency by nixing the settlement.

We will look at the caliber of Stewart’s “reporting” in due course, since his article reads like dictation from the SEC’s head of enforcement Robert Khuzami (the SEC’s interests are aligned with Citi’s in wanting the settlement to go through). Stewart either did not read or chose to ignore critical information in the underlying complaints, which the Rakoff ruling cites, and he also overlooked relevant cases.

Smith then details those cases, and along the way exposes Robert Khuzami's serious conflicts of interest:

But let’s first examine the dead body in the room that Stewart and other commentators have conveniently managed to overlook.

Why hasn’t the SEC been tough on CDOs, even though they were at the heart of the crisis?

As we discussed at length in ECONNED, it was the collapse in the value of AAA tranches of so-called asset backed CDOs (ones based heavily on subprime-related exposures) that blew holes in bank balance sheets around the world. ...

Look no further for an answer than the SEC chief of enforcement, Robert Khuzami, Stewart’s primary and probably sole source for this article. He was General Counsel for the Americas for Deutsche Bank from 2004 to 2009. That means he had oversight responsibility for the arguable patient zero of the CDO business, one Greg Lippmann, a senior trader at Deutsche, who played a major role in the growth of the CDOs, and in particular, synthetic or hybrid CDOs ... (Readers of Michael Lewis’ The Big Short will remember Lippmann featured prominently. That is not an accident of Lewis’ device of selecting particular actors on which to hang his narrative, but reflects Lippmann’s considerable role in developing that product).

Any serious investigation of CDO bad practices would implicate Deutsche Bank, and presumably, Khuzmami. Khuzami simply can’t afford to dig too deeply in this toxic terrain[.]

I don't want to quote any more of this startling piece; you should read it for yourself.

Bottom line — Khuzami is damaged goods. He moved from Wall Street manager of "patient zero" in the world-wide CDO collapse, to chief of enforcement of the SEC. And his SEC has the goods, including evidence of fraud, on Citibank, and won't go after them. Nice. Presumably his next job is on Thank You Street?

On the media side, Khuzami has Pulitzer Prize journalist James B. Stewart carrying his water (and only his), as Smith amply shows. (Start reading at "Now let’s turn to Stewart’s brazen and remarkably fact free assertions" for a list of his sins.)

Again, please do read. It will take a few minutes, but it's nicely done. All you need to know to understand why we don't have nice things — like Rule of Law.

GP Read the rest of this post...

Taibbi on the SEC & our "parallel, secret criminal justice system"

We've written about this before (here and here), the tale of the judge who "bitch-slapped the SEC" (Taibbi's formulation) for wrist-slapping Citibank (mine) in exchange for forgiveness for crimes no one would specify, or would have to admit to.

Matt Taibbi takes a second look at Judge Rakoff's ruling and finds several notable aspects. The most important is Rakoff's criticism, not just of the SEC, but of the whole system by which the SEC operates (my emphases):

By accepting hundred-million-dollar fines without a full public venting of the facts, the SEC is leveling seemingly significant punishments without telling the public what the defendant is being punished for. This has essentially created a parallel or secret criminal justice system, in which both crime and punishment are adjudicated behind closed doors.

This system allows for ugly consequences in both directions. Imagine if normal criminal defendants were treated this way. Say a prosecutor and street criminal come into a judge’s chamber and explain they’ve cooked up a deal, that the criminal doesn’t have to admit to anything or plead to any crime, but has to spend 18 months in house arrest nonetheless.

What sane judge would sign off on a deal like that without knowing exactly what the facts are? Did the criminal shoot up a nightclub and paralyze someone, or did he just sell a dimebag on the street? Is 18 months a tough sentence or a slap on the wrist? And how is it legally possible for someone to deserve an 18-month sentence without being guilty of anything?

Such deals are logical and legal absurdities, but judges have been signing off on settlements like this with Wall Street defendants for years.

For years. That's forever in DC precedent-setting terms.

Much of Taibbi's piece revolves around how revolutionary (my word) this ruling is and how generally it applies.

First, the ruling rejects the idea that a company can be punished if no crime has been proved or alleged; thus, no judge can bless such a non-transparent deal. This could indeed echo forward — remember, Judge Rakoff isn't offering advice; his ruling itself adds to precedent.

Second, he admonishes the SEC for not considering the public interest primarily. Taibbi:

This issue of whether or not the SEC must consider the public interest in granting these cozy settlements gets to the heart of what OWS is all about. The SEC in this case incredibly argued – out loud, on paper – that it could make regulatory decisions without considering the public interest. ... Translating loosely: “When we decide to let thieving megabank off with just a promise to never do it again, we don’t have to consider whether or not this is in the public interest.”

Taibbi says that "these crappy settlements have evolved into a kind of cheap payoff system" in which small fines are paid.

Quoting Judge Rakoff's opinion directly (again, my emphasis):

As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.

What neither mentions is the other payoff, in which the loyal SEC types get their own reward — that sweet job on Thank You Street with Wall Street paying the freight. That's also the "cost of doing business" — where the "business" is institutional bribes that let you skate the Rule of Law.

The crime itself, financial in nature, finances its forgiveness. Or as Hamlet said:

The wicked prize itself buys out the law

Groucho's reply: "Clip me off a piece of that."

GP Read the rest of this post...

Taibbi: Finally, a judge stands up to Wall Street

Paul McKinnon / Shutterstock

The headline is the news. The elements of the back-story are all too familiar by now. The crime, repeated far too many times, looks like this:

■ Wall Street bank creates made-to-fail derivative product.

■ Bank sells this product as known-good to its large second-tier customers (foreign banks, your pension fund). Volume is key to commissions.

■ Bank buys highly leveraged bets against its own product and stashes those bets in its own account.

■ Optional: Bank clues its first-tier customers to join the sure-thing bet it just made.

■ Product fails (i.e., performs according to spec); bank makes hundreds of millions; consumers and taxpayers clean up the mess.

That's all there is to it. Five quick steps to Easy Money.

Where's the SEC? you ask. If you answered, "Captured, complicit or impotent," there's a Federal judge who might agree with you. Matt Taibbi on what this judge is up to:

Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.

The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.

This case was similar, but worse. Here, Citi similarly told investors a package of mortgages had been chosen independently, when in fact Citi itself had chosen the stuff and was betting against the whole pile.

John Paulson, if you remember, was the guy who made an estimated $2.3 billion in 2009 — because that just how much harder he works than the rest of us. (For all that, he only made fourth on the list; the top guy nearly doubled that number.)

Back to this year's perp, Taibbi tells us that "Citi made a $160 million profit, while its customers lost $700 million." That's $860 million in damage, if my math is right. (After all, if Citi lied to its customers, what story was it peddling to its counterparties?)

And the SEC's settlement request was tiny — just $285 million, less by almost half than in the much less egregious (but still arguably criminal) Abacus case linked above. No wonder the judge rejected it. (Nice. A wise judge; an honest judge; a Daniel come to judgement — for a change.)

The article is a good find; it's up to Taibbi's standards for both clarity and research.

He closes by looking at the corrupt legal and financial landscape that calls itself Wall Street and asks, "Are people with backbones really that rare?" Must not be a Penn State fan; I think they could answer that.

GP Read the rest of this post...

SEC may seek legal action against S&P

Standard & Poors and the ratings agencies are still the 98 pound weaklings of Wall Street compared to the banks, but taking action against them is still a good idea. Obviously it would be better if the SEC was taking legal action against one of banks that triggered the global economic crisis, but that doesn't seem realistic at this point. Between the general discomfort with confrontation the administration plus the SEC employees always keeping an eye out for a job promotion to Wall Street, nobody should get their hopes up.

The staff of the Securities and Exchange Commission is considering recommending civil legal action against the Standard & Poor's debt ratings agency over its rating of a 2007 collateralized debt offering.

Collateralized debt obligations, also known as CDOs, are securities tied to multiple underlying mortgage loans. The CDO generally gains value if borrowers repay. But if borrowers default, CDO investors lose money. Soured CDOs have been blamed for making the 2008 financial crisis worse. Ratings agencies have been accused of being lax in rating CDOs.

The SEC staff said it may recommend that the commission seek civil money penalties, disgorgement of fees or other actions.

S&P should still rest easy, as there is a lot of history that suggests a relatively easy settlement that gives them blanket protection from any new legal action is already on the table. It gives the administration an opportunity to say "we fought Wall Street" without any real consequences for anyone. Read the rest of this post...

Interview with Matt Taibbi on the SEC scandal

Matt Browner Hamlin reported on Matt Taibbi's stunning Rolling Stone piece here.

The revelations — that the SEC has been destroying evidence of potential crimes if no investigation was contemporaneously undertaken — are shocking. As Taibbi implies, No Cold Case Files for you, Mr. & Ms. Wall Street.

Here's a great, and listenable, interview with Taibbi. Easy on the eyes, if you prefer to hear your information rather than read it.



Talk about captured government. The SEC reminds me of the Gimp in Pulp Fiction: captured, caged, and slavishly compliant.

Did you notice when Taibbi said this practice, of shredding MUIs, started? Early 1990s. Hmm, what happened in the early 90s? Oh that's right; Bill Clinton recaptured the White House after 12 years of Republican rule and installed Wall Street (in the form of Robert Rubin and acolytes) as economy-czar. Looks like someone made someone very happy after the election.

Or as Yves Smith puts it at the excellent Naked Capitalism, re Arthur Levitt, SEC chairman at the time (my emphasis):

[T]he timeline is revealing. It apparently dates to at least 1993, when Clinton appointee Arthur Levitt became chairman. This is well before most people would date Wall Street having much impact on undermining regulation (although if my memory serves me right, a significant first step was the Greenspan Fed abandoning oversight of primary dealers, which took place in 1992). Levitt was from Wall Street, he had been the chairman of the American Stock Exchange. But he has tried to wrap himself in the mantle of being the friend of the small investor and blamed the erosion of the SEC on regular threats by Congressmen like Joe Lieberman, the Senator from Hedgistan, who found this stance to be too much and threatened to cut SEC funding. It isn’t clear if the practice started under Levitt, but Levitt notably was the first SEC chairman for decades who was not an attorney. ...

This evidence of an institutionalized effort to change the playing board in favor of the financial services industry puts an entirely different coloration on Levitt’s posture. It now looks like a precursor to the Obama playbook of giving the industry virtually everything it wanted on what counts (Levitt sided with Rubin and Greenspan in opposing regulation of credit default swaps) but engaging in some “friendly to the public” gestures to hide that fact from the Democratic base. And it’s hard to believe now, but in 1993, both the rule of law and propriety carried much more weight than they do now. It’s hard to imagine that those involved were ignorant of the significance of these measures, and the fact that they continued for 20 years before anyone called them out points to a deeply corrupt culture at the SEC.

I’m not easily shocked, but this is shocking. It’s like discovering your a colleague didn’t merely have some problems with his taxes, but was money laundering on behalf of a major drug ring. I hope the Taibbi piece leads to a much broader look into dubious practices at the SEC. But given how the banks seem to own DC, I’m not holding my breath.

For fun, pair this report with the income inequality segment on PBS. It's the same story, just differently told.

GP Read the rest of this post...

Taibbi: SEC is covering up Wall Street crime

Matt Taibbi of Rolling Stone has an explosive look at how he says the SEC has been routinely destroying evidence of financial crimes by Wall Street.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The SEC hasn't just done this a handful of times, Taibbi finds that over 18,000 separate MUIs were destroyed.
The Taibbi piece also provides an in-depth look at the revolving door between the SEC and top Wall Street banks and law firms. To make matters worse, the biggest participants in the revolving door come from the SEC's Enforcement Division - the people whose day to day job is investigating Wall Street and stopping criminal behavior.

The whole story is absolutely a must-read. But here's where this gets really important for the average American:

Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm's executives were suspected of insider trading in September 2008?

Taibbi points out that the answers to these questions are essentially unknowable. But there's no doubt that the information that the SEC destroyed was important. Hell, there's no doubt that the failure of a regulatory agency to actually investigate and conduct oversight of the industry it is tasked to oversee is a huge problem. The story of the financial collapse is largely a story of the ignorance of regulators, risk management officers and bank executives. Much of this ignorance was deliberate. Refusing to investigate complaints of bad behavior is a pretty clear example of how this willful ignorance was maintained.

Taibbi's piece discusses how Senator Chuck Grassley's office has attempted to get answers from the SEC about the destruction of MUIs. Not shockingly, the SEC has basically told him to bugger off. Hopefully a curmudgeon like Grassley will get ticked off enough about the SEC's disrespect of his office to do something. Clearly there need to be meaningful congressional investigations into the SEC's destruction of evidence in contravention to the law. In the mean time, I'd hope that Taibbi's piece opens the eyes of administration officials to the massive problems at the SEC. This behavior cannot be allowed to continue if there's any hope of rebuilding the US economy in a way that doesn't put it at the perpetual mercy of banksters deciding to break the law to line their pockets. Read the rest of this post...

SEC confirms Congress above insider trading laws

It's good to be da king! No wonder they're all millionaires and are more concerned about tax cuts for the richest Americans rather than helping the middle class. Why should Congress benefit from secret information? Changing the law has to happen to level the playing field.

The SEC generally does not view trading on the basis of advance knowledge of Congressional action to be insider trading. Both House and Senate ethics manuals say that members of Congress are not supposed to make any personal profit from confidential knowledge, although no member of Congress has ever been publicly sanctioned for such trading.

Critics of the loose rules say they can’t prove that members of Congress or their staffs are actually trading and profiting from their positions, but they still believe that’s the only explanation for the returns members of Congress generate over time.

“It just boggles the imagination to think that members of Congress are so much smarter than we are and other traders that they just for some reason enjoy a much higher rate of return on their stock investments than the rest of us,” said Holman. “I just don’t believe that.”

Read the rest of this post...

SEC settles on another Wall Street case

Besides being a ridiculously small amount of money, once again, the chumps at the SEC allowed Wall Street to get away with avoiding any wording that suggested guilt or wrongdoing. There is still a chance that there may be additional charges against individuals but the record of prosecuting Wall Street abuses under Obama is no better than it was during the Bush years. But hey, it's election season and there are boots to lick if you want to raise campaign money. Change we can believe in, right?

The bank neither admitted nor denied wrongdoing under the settlement.

For JPMorgan, the settlement amounts to less than 1 percent of the bank's 2010 net income of $17.4 billion -- which amounts to less than what JPMorgan earns in one week.

The bank agreed to settle the charges two weeks after Jamie Dimon, CEO of JPMorgan Chase & Co., complained to Federal Reserve Chairman Ben Bernanke that new financial regulations designed to prevent another financial crisis were too burdensome on banks.

Read the rest of this post...

Wall Street causes huge economic meltdown, so GOP guts SEC oversight

So besides helping the next Wall Street meltdown, how is this helping create jobs? Heck, how is this helping America outside of Wall Street? Did I miss the memo that confirmed regulation caused the financial collapse? No? I didn't think so either.

The new financial regulation law gave the Securities and Exchange Commission a big new job to police hedge funds, derivatives dealers and credit agencies — some of the main culprits in the financial meltdown. It authorized raising the commission’s budget to $2.25 billion, over five years. Now Congress is threatening to deny the S.E.C. the necessary financing to carry out its duties.

What makes this even more absurd is that the S.E.C. doesn’t cost taxpayers a dime. Its budget, like that of other financial regulators, is covered by fees assessed on Wall Street firms. While the other regulators decide their own financing needs, Congress sets the S.E.C.’s budget.

The agency’s budget was due to rise $200 million this year to $1.3 billion, but hasn’t because of the across-the-board freeze in discretionary spending. If House Republicans get their way and roll back spending to 2008 levels, the S.E.C. budget would fall to $906 million.

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SEC approves 'say on pay' for executives

Unless the votes are going to be binding, why bother? We've already seen businesses ignore the non-binding votes and it's not clear how any future votes will differ. Politicians love this idea and the executives probably do as well. It gives the impression of change without actually delivering change. Bloomberg:

The U.S. Securities and Exchange Commission gave shareholders the right to weigh in on pay packages for top executives to increase scrutiny of compensation practices blamed for fueling Wall Street risk-taking.

SEC commissioners voted 3-2 today to enact the say-on-pay measure that will subject compensation plans to non-binding shareholder votes as often as once a year. The proposal is part of the agency’s rulemaking under the Dodd-Frank Act.

Dodd-Frank, the regulatory overhaul enacted in response to the 2008 credit crisis, directed the SEC to let investors vote their views on executive pay amid public furor over incentives that rewarded the kind of risky trading that toppled Lehman Brothers Holdings Inc. and Bear Stearns Cos.

Read the rest of this post...

Mozilo settlement with SEC is a sad joke - where's the justic?

What are the odds of a story like that coming out on a Friday afternoon? Yes, it would not have been good news for Bank of America either, who bought Countrywide. The reason it would not have been good news for BofA is that despite the horrible AP article that ignores the actual ugly details of the settlement, BofA is funding much of the settlement with the SEC. If you read the AP article you might think that Mozilo has a deep hole in his pocket but no, that will be yet another hole in the pocket of BofA who is footing the bill. How is such a bailout of this guy even possible? Even worse, Mozilo now has the benefit of not admitting guilt which will help buffer him from other lawsuits. It also will make the Justice Department criminal case against him that much more difficult.

Justice in America is obviously for the select few with the deepest pockets. At least the LA Times put some effort into showing what a lousy settlement this was. Where else besides a Banana Republic can one of the central figures in the economic collapse get off so easily? Settlements like this is what infuriates the public.

The deal allowed Mozilo, Sambol and Sieracki to avoid going to trial next week on allegations that they misled investors about the risky loan portfolio and deteriorating financial condition of the Calabasas company, once the nation's top originator of home loans.

The sting of the penalty, however, was dramatically reduced because Bank of America and insurance will foot much of the bill, said John Coffee, a securities-law professor at Columbia University.

"Both sides are engaging in the usual game of making this settlement look better than it appears," he said. "Both sides have an interest in putting the most positive spin on a settlement."

Read the rest of this post...

SEC looking at BP for insider trading

From Reuters:

U.S. securities regulators are investigating whether people may have illegally profited from trading on nonpublic information at BP Plc in the weeks and months following the disastrous Gulf of Mexico oil spill, two sources familiar with the investigation said on Monday.

Gonna be hard to photoshop this one away. Read the rest of this post...

Swift Boat donors charged with 'extensive securities fraud' by SEC

Excellent. From the NYT:

Samuel and Charles Wyly, the billionaire brothers from Dallas who are large donors to philanthropies and to conservative causes, were charged Thursday with conducting an extensive securities fraud that the Securities and Exchange Commission said reaped $550 million in undisclosed gains.
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The brothers, who founded Sterling Software, a business software and services company that they sold for $4 billion in stock to the software company CA in 2000, were also charged with insider trading violations from which they profited by more than $31 million, the S.E.C. said.

I do hope all the Republicans they've funded are now going to give their tainted money back:

Charles and Samuel Wyly, along with their wives, have donated $2.5 million to more than 200 Republican candidates and committees over the past 20 years, including over $1.3 million to the Republican National Committee, according to an analysis by the Center for Responsive Politics.

The top recipients of their largesse have been Texas Republicans. George W. Bush received at least $100,000 raised by the Wyly clan during the 2000 presidential election. Sen. Kay Bailey Hutchinson has received $30,400 from the family; Rep. Pete Sessions, $29,000.

Other Republican senators who've received their donations include John Cornyn of Texas, Sam Brownback of Kansas, Judd Gregg of New Hampshire, John Thune of South Dakota and Kit Bond of Missouri. Sam Wyly also funded the Swift Boat campaign that torpedoed Massachusetts Democrat John Kerry's 2004 presidential campaign.

And the Wyly brothers have been busy in the 2010 election cycle, most recently writing a check dated June 10 for $10,000 to the Republican Congressional Campaign Committee. Charles Wyly has contributed to FreedomWorks PAC, which has been instrumental in the Tea Party movement. The Wylys and their companies have also reportedly contributed $353,500 to Texas Gov. Rick Perry in recent years.

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SEC reviewing accounting practices at largest banks

It's hard not to be impressed with Mary Schapiro. The focus on the shameless behavior by Wall Street is definitely appreciated.

The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday.

Schapiro testified at a congressional hearing that the SEC is scrutinizing Lehman's use of the accounting move, known as Repo 105, that allowed it to mask its weakness before it failed. She said the agency has sent letters to the 19 banks, seeking information about any such transactions.

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Report: SEC and Fed received warnings about Lehman

Was anyone interested in the truth? Doesn't sound like it. Regulators sounded as complicit as the auditors so I hope there's something wrong with this report.

The findings raise questions over what federal regulators knew about Lehman’s accounting and when they knew it. In the account given by the Merrill officials, the SEC, the lead regulator, and the New York Federal Reserve were given warnings about Lehman’s balance sheet calculations as far back as March 2008.

Former and current Fed officials say even in the competitive world of Wall Street, it is un­usual for rival bankers to relay such concerns to the Fed.

The former Merrill officials said they contacted the regulators after Lehman released an estimate of its liquidity position in the first quarter of 2008.

And a reminder, Treasury Secretary Tim Geithner was President of the New York Federal Reserve when all of this unfolded. Read the rest of this post...

SEC will now require climate change risk details

Very interesting development. As you might imagine, the Republican members rejected the idea. Heaven forbid such a touchy subject be addressed.

The commission, in a 3 to 2 vote, decided to require that companies disclose in their public filings the impact of climate change on their businesses -- from new regulations or legislation they may face domestically or abroad to potential changes in economic trends or physical risks to a company.

Chairman Mary L. Schapiro and the two Democrats on the commission supported the new requirements, while the two Republicans vehemently opposed them.

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