Published: Monday 12 November 2012
“Several Wall Street heavyweights have recently said that banks need to rethink the sky-high compensation they’ve been paying (which has helped exacerbate the nation’s income inequality).”

Citigroup CEO Vikram Pandit was pushed out the door of his company in October after overseeing a precipitous decline in his bank’s value. Overall, Citigroup lost nearly 90 percent of its stock price during Pandit’s tenure. But that won’t stop Pandit from walking off with $6.7 million for his last year on the job:

READ FULL POST 13 COMMENTS

Published: Thursday 30 August 2012
Don’t count on; the GOP to do it, but it’s time to hold accounting firms - you should forgive the choice of words -accountable.

The presence of scandal-ridden accounting firms on Mitt Romney's fundraising list got me to thinking: What do they expect to get for their money? And why does the accounting profession seem to be so riddled with corruption? And it reminded me of something that happened years ago.

I thought I'd seen it all. As a teenager in pre-punk rock and roll bands I'd been hustled by junkies and serenaded by drag queens from coast to coast. As a political activist I'd been beaten up by goons. As the housemate of a witness to the Patty Hearst kidnapping I'd been wiretapped.

But nothing had prepared me for the world of accountants gone wrong.

Bad Accountant

I was a financial analyst in my early thirties when I was suddenly confronted with a demand from a CEO known as "the meanest boss in America." His corporation's accounting firm, ...

Published: Wednesday 29 August 2012
“A 2011 New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken anti fraud laws they had agreed never to breach.”

Almost daily we read about another apparently stiff financial penalty meted out for corporate malfeasance. This year corporations are on track to pay as much as $8 billion to resolve charges of defrauding the government, a record sum, according to the Department of Justice. Last year big business paid the Securities and Exchange Commission $2.8 billion to settle disputes.

Sounds like an awful lot of money. And it is, for you and me. But is it a lot of money for corporate lawbreakers? The best way to determine that is to see whether the penalties have deterred them from further wrongdoing.

The empirical evidence argues they don’t. A 2011 New York Times analysis of enforcement actions during the last 15 years found at least 51 cases in which 19 Wall Street firms had broken anti fraud laws they had agreed never to breach.

Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America, among others, have settled fraud cases by stipulating they would never again violate an anti fraud law, only to do so again and again and again. Bank of America’s securities unit has agreed four times since 2005 not to violate a major anti fraud statute, and another four times not to violate a separate law. Merrill Lynch, which Bank of America acquired in 2008, has separately agreed not to violate the same two statutes seven times since 1999.

Outside the financial sector the story is similar. Erika Kelton at Forbes reports that Pfizer paid $152 million in 2008; $49 million a few months later; a record-setting $2.3 billion in 2009 and $14.5 million last year. Each time ...

Published: Sunday 26 August 2012
“A June survey of 500 senior financial services executives in the United States and Britain turned up stunning results.”

Money laundering. Price fixing. Bid rigging. Securities fraud. Talking about the mob? No, unfortunately. Wall Street.

These days, the business sections of newspapers read like rap sheets. GE Capital, JPMorgan Chase, UBS, Wells Fargo and Bank of America tied to a bid-rigging scheme to bilk cities and towns out of interest earnings. ING DirectHSBC and Standard Chartered Bank facing charges of money laundering. Barclays caught manipulating a key interest rate, costing savers and investors dearly, with a raft of other big banks also under investigation. Not to speak of the unprecedented wrongdoing that precipitated the financial crisis of 2008.

Evidence gathered by the 

Published: Thursday 23 August 2012
On Wednesday, the Securities and Exchange Commission (SEC), charged with overseeing U.S. stock exchanges, approved rules on the implementation of two widely anticipated provisions of a broad financial reform package passed by the U.S. Congress in mid-2010.

 

 After a 16-month delay, a U.S. government regulator charged with investment oversight has voted on rules that will now govern U.S.-listed companies operating in the extractive industry as well as those that use minerals whose sale may fuel violence in other countries, particularly in central Africa.

On Wednesday, the Securities and Exchange Commission (SEC), charged with overseeing U.S. stock exchanges, approved rules on the implementation of two widely anticipated provisions of a broad financial reform package passed by the U.S. Congress in mid-2010, known in part as Dodd-Frank.

“We have received significant public input on this rulemaking through the written comment process, which generated more than 400 letters,” SEC Chair Mary Schapiro announced Wednesday morning.

“In response, we incorporated many changes from the proposal that are designed to address concerns about the costs…The rules we are considering use the same process as proposed, but many of the mechanisms within the process have been modified ...

Published: Wednesday 1 August 2012
“Despite slightly lower oil and gasoline prices over the past three months, these companies still made a combined $236,000 per minute this year.”

Second-Quarter Earnings Race Ahead, Boosted by Tax Breaks

Middle-class families may have gotten some relief in the second quarter of 2012 due to slightly lower gasoline prices compared to the first quarter of the year, but billions of dollars in big profits continue to pile up at the Big Oil companies. In the first half of 2012, the five biggest oil companies—BP plc, Chevron Corp., ConocoPhillips, ExxonMobil Corp., and Royal Dutch Shell Group—earned a combined $62.2 billion, or $341 million per day. This compares to an average dip in the average price of gas at the pump for American consumers of a mere 3 cents per gallon between the first and second quarters.

Despite slightly lower oil and gasoline prices over the past three months, these companies still made a combined $236,000 per minute this year. This income is more than what 96 percent of American households earn in an entire year.

Table

Profits continued to grow for ExxonMobil and Chevron, while dropping slightly for ConocoPhillips and Shell compared to last year. ExxonMobil saw a 67 percent increase in profits while Chevron enjoyed an 11 percent increase. The New York Times reported that these slightly lower profits compared to the second quarter of 2011 were linked to “international benchmark prices for oil [which] had declined by more than 7 percent in the second quarter, compared to the same period last year when turmoil in North Africa and the Middle East caused a spike in oil ...

Published: Friday 20 July 2012
Just over a month ago the Federal Reserve quietly released a proposal to implement Basel III, an international agreement signed by twenty-seven nations aimed at ensuring the global economy’s resilience against financial disintegration.

 

 

While corporate news media speculate on just how many luxury cars Mitt Romney owns or whether Chief Justice John Roberts is a Subaru-driving, soy-loving, closet-liberal, they’re missing what is arguably the most decisive political story of the summer: regulatory capital “reform.

Just over a month ago the Federal Reserve quietly released a proposal to implement Basel III, an international agreement signed by twenty-seven nations aimed at ensuring the global economy’s resilience against financial disintegration. The directive, drafted by a cadre of central bank representatives and national regulators known collectively as the Basel Committee on Banking Supervision, devised rules focused on both the type and amount of capital banks must hold to protect themselves against potential losses

Since the first iteration of the Basel Accords in 1988 (Basel I), one of the most critical features of the international agreement has been the leverage ratio requirement. Financial leverage refers to the relationship, often expressed as a percentage, between the money a bank borrows and the capital (both liquid and long-term) it has available to it. More simply, leverage for a bank is essentially the amount of equity a bank possesses relative to its assets; the leverage rate is defined as the ratio of total assets to equity. That is, leverage is a measure of how much a firm borrows relative to its total assets and low leverage rates often indicate the strength and stability of a financial institution. 

Prior to 2004 when the Securities and Exchange Commission (SEC) relaxed leverage requirements on lending institutions, most depository banks had leverage ratios of around 10:1

Published: Saturday 30 June 2012
The 2013 Financial Services bill is heading to the House floor after being considered by the Rules Committee on Thursday.

 

House Republicans, after failing to prevent the 2010 Dodd-Frank financial reform law from passing Congress, have attempted to undermine it by refusing to give Wall Street regulators adequate funds to do their jobs. Both the Securities and Exchange Commission and the Commodity Futures Trading Commission are short of the funding they require, and House Republicans recently voted in committee to fund the SEC $245 million below the Obama administration’s request for 2013.

However, should that funding bill actually reach President Obama’s desk, he has announced that he will veto it:

The 2013 Financial Services bill is heading to the House floor after being considered by the Rules Committee on Thursday.

The bill severely undermines key investments in financial oversight and implementation of Wall Street reform to protect American consumers, as well as needed tax enforcement and taxpayer services. It also hampers effective implementation of the Affordable Care Act (ACA),” the White House statement reads.

House Republicans on the Appropriations Committee also recently approved a cut of $25 million to the CFTC’s budget.

Just ten days ago, the Republican chairman of the House Financial Services Committee admitted that Wall Street regulators do not have the resources necessary to do what Congress has asked of them. However, House Republicans have not acted to rectify the situation, instead bringing to the House floor a bill that would simply exacerbate the problem.

Published: Tuesday 5 June 2012
The federal standard in place to protect workers like Revers from beryllium is based on an Atomic Energy Commission calculation crafted by an industrial hygienist and a physician in the back of a taxi in 1949. For the last 12 years, an effort to update that standard has been mired in delay.

 

At 58, retired machinist Bruce Revers is tethered to his oxygen machines — a wall unit when he’s at home, a portable tank when he’s out. The simple act of walking to the curb to pick up his newspaper is a grind.

“This is a hell of a thing to live with,” Revers, of Orange, Calif., said of his worsening lung disease. “There’s nothing I can do without my air.”

His undoing was beryllium, a light and versatile metal to which he was exposed in a Southern California factory that makes high-tech ceramics for the space, defense and automotive industries. His bosses tried to keep the place clean and well-ventilated, Revers says, and he wore a respirator to shield his lungs from the fine metallic dust. Nonetheless, he was diagnosed with chronic beryllium disease in 2009.

He will not recover.

The federal standard in place to protect workers like Revers from beryllium is based on an Atomic Energy Commission calculation crafted by an industrial hygienist and a physician in the back of a taxi in 1949. For the last 12 years, an effort to update that standard has been mired in delay. A plan to ...

Published: Friday 1 June 2012
Suspicions are high that a select few were told about Facebook’s recently disappointing revenues, which might not justify the initial public offering price of $38.

In the beginning, there was pump and dump. In the dot-com bubble of the late '90s, the stock-analyzing arms of investment banks would pump up a new stock's price with rave reviews. The banker arm underwriting the new stock issue would sit back, watch the price explode and then dump it — as would their favored customers. The folks who fell for the hype and bought in at inflated prices were the little investors, also known as "dumb money."

This scheme was deemed unfair to ordinary investors, so a reform was put in place that appeared to require analysts to keep their mouths shut before an initial public offering. It forbade analysts to publish written reports, be they on paper or electronic, containing new information about the company. Notably absent was any mention of telephones.

Along comes the fantabulous Facebook stock offering and ensuing fallout. Suspicions are high that a select few were told about Facebook's recently disappointing revenues, which might not justify the initial public offering price of $38. They got out the minute they could, or they sold the stock short or made other bets that the stock price would fall. The Securities and Exchange Commission is looking into the matter. And a shareholder class-action suit has been filed. Meanwhile, if the conversations about Facebook's revenues were done by telephone or over cocktails, it is unclear that anyone broke the law.

But this is clear. The Facebook IPO dance was not about investing for the long term, though the dumb money may have thought so.

Did you notice how, in the goodness of their hearts, Facebook and the bankers made an unusually high number of shares available to the public at the initial offering price? As of Tuesday, Facebook's stock ...

Published: Sunday 27 May 2012
“Imagine if, all of a sudden, there are eight times the number of teams on the [football] field, but only seven refs,” Gensler said. “There would be would be mayhem on the field. The fans would lose confidence.”

Two of the nation’s top financial regulatory agencies don’t have enough funding to competently regulate the Wall Street banks they oversee, top regulatory officials told the Senate Banking Committee yesterday. The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) both took on new regulatory responsibilities under the 2010 Dodd-Frank Wall Street Reform Act, but multiple rounds of Republican-led budget cuts aimed at neutering the new law have left them without sufficient funding to carry out those mandates.

As a result, the agencies are “outgunned” by the Wall Street banks they oversee, SEC head Mary Schapiro and CFTC head Gary Gensler told the committee Tuesday, the Huffington Post reports:

We’re way underfunded at the CFTC,” Gensler told lawmakers, after a question on the subject from Senator Chuck Schumer (D- N.Y.). “Imagine if, all of a sudden, there are eight times the number of teams on the [football] field, but only seven refs,” Gensler said. “There would be would be mayhem on the field. The fans would lose confidence.”

SEC chief Schapiro echoed the point: “We’ve been asked to take on very significant new responsibilities,” she said. Though the SEC has made progress in hiring new staffers and improving its technological capabilities, Schapiro conceded that, in some areas, the efforts haven’t gone far enough.

As Think Progress noted in January, adequately funding the CFTC and SEC is imperative to successfully implementing new regulations and policing Wall Street. Republicans oppose those efforts and have 

Published: Tuesday 22 May 2012
Published: Tuesday 3 April 2012
America’s capital market was already a giant casino. Why now turn the rest of America into one?

Anyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you’ll always get a number far lower than what you put into the pot. The only sure winners are the organizers – casino owners, state lotteries, and con artists of all kinds.

Organized gambling is a scam. And it particularly preys upon people with lower incomes – who assume they can’t make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money.

Yet America is now opening the floodgates.

In December, the Department of Justice announced it was reversing its position that all Internet gambling was illegal. That decision is about to create a boom in online gambling. Expect high-stakes poker to be available on every work desk and mobile phone.

Meanwhile, states are increasingly dependent on revenues from casinos, lotteries, and the “Mega Millions” game (in which 42 states pool their grand prize) to partly refill state coffers.

Given who plays, this is one of the most regressive taxes in the nation. In the most recent Mega Millions game – whose winning tickets were drawn last week and whose jackpot rose to $640 million – lottery ticket buyers shelled out some $1.5 billion, most of which went to state governments.

And then there’s the “Jumpstart Our Business Startups” or “JOBS” Act, which President Obama is expected to sign into law Thursday. It allows so-called “crowd funding” by which people whose net worth is less than $100,000 can gamble away (invest) up to 5 percent of their annual incomes in any get-rich-quick scam (start-up) that any huckster (entrepreneur) may sell them.

Forget the usual investor disclosures or other protections. In the interest of “streamlining,” Congress has streamlined the way to fraud. Although ...

Published: Monday 12 March 2012
“Money market funds, a $2.7 trillion industry, remain largely unregulated.”

Plain-vanilla money market funds, part of the skeletal structure of American finance, may be a $2.7 trillion disaster hiding in plain site.

When Congress in 2010 passed the most sweeping revamp of financial regulation since the Great Depression, it tried to address most of the problems that led to or were exposed by the near-collapse of the financial system. Money market funds slipped through the cracks.

Money market funds, a $2.7 trillion industry, remain largely unregulated. They remain vulnerable to runs from investors, who retain the false perception that there's no risk in them. The funds have been pitched as "can't fail" investments, yet as recently as last summer the largest money market funds had 45 percent of their assets tied up in European bank debt.

"Nothing in financial services is as dangerous as a guarantee without capital backing it," Sallie Krawcheck, the former president of wealth management for Bank of America, warned in a recent essay in The Wall Street Journal.

In an interview with McClatchy, Krawcheck said the Securities and Exchange Commission is right to be concerned and seek ways to bolster this crucial segment of the financial sector. Although these funds offer many pages of disclosure, she said, many investors still wrongly assume that the funds guarantee at least a break-even return. They're unaware that many fund managers aren't even banks with capital reserves, but ...

Published: Sunday 4 March 2012
“There’s been much discussion of late about how to save America’s declining middle class.”

A cushion of reliable income is a wonderful thing. It can help pay for basic necessities. It can be saved for rainy days or used to pursue happiness on sunny days. It can encourage people to take entrepreneurial risks, care for friends, or volunteer for community service.

Conversely, the absence of reliable income is a terrible thing. It heightens anxiety and fear. It diminishes our ability to cope with crises and transitions. It traps many families on the knife’s edge of poverty, and makes it harder for poor people to rise.

There’s been much discussion of late about how to save America’s declining middle class. The answer politicians of both parties give is always the same: jobs, jobs, jobs. The parties differ on how the jobs will be created — Republicans say the market will do it if we cut taxes and regulation. Democrats say government can help by investing in infra¬structure and education. Either way, it still comes down to jobs with decent wages and benefits.

It’s understandable that politicians say this: it was America’s experience in the past. In the years following World War II, we built a solid middle class on the foundation of high-paying, mostly unionized jobs in ...

Published: Thursday 1 March 2012
Carina defaulted only 16 months after it was launched. Investors lost nearly $450 million.

State investigators in Massachusetts slapped the investment company State Street Global Advisors yesterday with a $5 million fine for failing to tell investors about the role of the hedge fund Magnetar in a risky collateralized debt obligation that collapsed in the housing market crisis.

In 2006, State Street and Deutsche Bank put together a $1.56 billion CDO deal, called Carina CDO Ltd.  READ FULL POST 5 COMMENTS

Published: Monday 20 February 2012
“Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010.”

A cynic might argue that business leaders and their friends in Congress weren't expecting different results.

In either case, we've become a bipolar nation, 1% manic and 99% depressive. Our affliction is caused by a 30-year experiment in the dismal economics of delusion. Deregulation for corporations and tax cuts for the wealthy have defined conservative policy since the 1970s, when University of Chicago economist Arthur Laffer convinced Dick Cheney and other Republican officials that lowering taxes on the rich would generate more revenue.

Ronald Reagan complied in the 1980s by dramatically reducing the top marginal tax rate. And while declaring government "the problem" he eased a half-century of protective regulations on mortgage lending.

In the Clinton years, Larry Summers and Alan Greenspan and Phil Gramm and others lobbied against regulations on the derivatives that evolved into toxic assets a decade later. A lonely voice of opposition, Commodities Trading Commission head Brooksley Born, was denounced by the powerful Treasury men, who were shocked by her affront to the nation's "financial stability."

The repeal of the Glass-Steagall Act in 1999 removed long-held protections for commercial bank deposits, as the newly liberated financial institutions now coveted the unprecedented profits in high-risk investments. Soon after, the 2000s brought us the Bush tax cuts, which have cost the nation over two trillion dollars, and a further assault on the Securities and ...

Published: Monday 20 February 2012
“California effort would give insurance commissioner new power to fight health insurers.”

The biggest applause line Senator Diane Feinstein (D-Calif.) got at a gathering of Democratic Party activists last week came when she endorsed a ballot initiative to give the California Insurance Commissioner power to reject excessive health insurance rate increases.

Consumer advocates there decided to go the ballot initiative route after the insurance industry’s friends in the legislature blocked a bill last year that would do the same thing. Feinstein became the first Californian to sign a petition. Insurance Commissioner Dave Jones became the second. To get the measure before voters in November, the advocates, led by Santa Monica-based Consumer Watchdog, must collect half a million more signatures.

In her San Diego speech before the party faithful, Feinstein pointed out that in the first quarter of this year, the five largest health insurers — UnitedHealth, WellPoint, Aetna, CIGNA and Humana — posted profits of $3.6 billion, 16 percent more than the same period a year earlier. One of the ways those ...

Published: Friday 20 January 2012
According to people with knowledge of the internal probe, the alarm Jain sounded went to senior levels inside the bank, including Deutsche's compliance and legal departments.

At a time when mortgage-backed securities were imploding and customers were fleeing the market, a junior analyst at Deutsche Bank AG protested when he was asked to alter the numbers in a spreadsheet to make a Deutsche security look less risky to ratings agencies, according to a person with knowledge of the matter.

The analyst, this person said, was asked by a mid-level Deutsche executive in late 2007 to make it appear that the investment would produce more cash than the bank actually expected at certain time points.

READ FULL POST 6 COMMENTS

Published: Sunday 11 December 2011
“So the Street is going to court. What’s its argument? The commission’s cost-benefit analysis wasn’t adequate.”

Wall Street is its own worst enemy. It should have welcomed new financial regulation as a means of restoring public trust. Instead, it’s busily shredding new regulations and making the public more distrustful than ever.

The Street’s biggest lobbying groups have just filed a lawsuit against the Commodities Futures Trading Commission, seeking to overturn its new rule limiting speculative trading.

For years Wall Street has speculated like mad in futures markets – food, oil, other commodities – causing prices to fluctuate wildly. The Street makes bundles from these gyrations, but they have raised costs for consumers.

READ FULL POST 21 COMMENTS

Published: Thursday 8 December 2011
The Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

It’s an issue we and others have noted again and again: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis.

Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases. Civil cases, of course, can produce penalties from the banks -- as well as promises to be on better behavior -- but don’t put any executives behind bars. Here’s the Journal:

While at the FBI, Mr. Cardona oversaw dozens of criminal probes of large financial firms. The FBI's probes haven't led to any successful prosecutions of high-profile executives in relation to the financial crisis, despite demands from some lawmakers and angry Americans. In contrast, the SEC has filed crisis-related civil-fraud cases against 81 firms and individuals, and it has ...

Published: Wednesday 2 November 2011
“Why not a single major banker has been cuffed and frog-marched to some Financial District Guantanamo is unclear.”

As a mere youth, I bought a used car in New York to drive to California to be with the woman of my dreams. Inexplicably, she decided to rush back to New York, so I promptly took the car back to the dealer. He made a shockingly low offer. The car had been in an accident, he explained. The chassis was bent. I was flabbergasted. I had just bought the car from him. If the chassis was bent, it was bent when I bought it. The salesman offered me a take-it-or-leave-it shrug. He probably now works on Wall Street.

That the morality of the used car lot has been adopted by Wall Street is now abundantly clear. Citigroup recently settled a civil complaint in which it was accused of selling mortgage-related investments that it knew were dogs. It was so certain that the investments were the financial equivalent of my used car that it bet against them — heads I win, tails you lose — and even selected the investments themselves, choosing from a cupboard of depleted and exhausted financial instruments. An investment in the Brooklyn Bridge would have been safer.

These investments are known as collateralized debt obligations (CDOs), and they consisted of the sort of mortgage securities that nearly sunk the U.S. financial system. According to federal regulators, they were sold with the full knowledge that they were careening toward worthlessness and that, by deduction, their buyers were patsies. The bank made substantial profits on them. But when the Securities and Exchange Commission decided to act, it got Citigroup to pony up a mere $285 million fine that, to presumed chuckles, will doubtlessly be taken out of petty cash. The bank last quarter reported a profit of $3.8 billion.

Mirth must have turned to guffaws when Citigroup read on. It did not even have to admit guilt — “without admitting or denying” is the language the SEC ...

Published: Saturday 17 September 2011
Proposed changes, outlined by the Chamber in 2010, include making provisions for companies with “compliance programs”, a requirement that intentions to bribe be “willful”, further specifications about the definition of “foreign official”, and elimination of civil liability for corporate subsidiary companies.

Changes to a key anti-bribery law that applies to international commerce, proposed by the U.S. Chamber of Commerce, could have disastrous consequences, hurting multinational firms, human rights, and the U.S.'s place of respect as an early adopter of the legislation, opponents to the changes argued here Friday.
 

According to a report published by the Open Society Foundation's (OSF) Open Society Policy Center, proposed changes to the Foreign Corrupt Practices Act (FCPA), corporate anti-bribery legislation passed in 1977, could create loopholes in the legislation so large as to make the FCPA largely useless. 
 

Anti-corruption advocacy organizations including Global Financial IntegrityTransparency International, and the Project on Government Oversight have written letters in support of keeping the FCPA, which applies to U.S. businesses and any businesses trading on the U.S. Stock Exchange and makes it a crime to trade favors for business advantages in countries where multinational companies do business, in its current form. 
 

They say changing the FCPA now could also reduce the strength of a law, in force for more than 30 years, which OSF says is good for governance, good for human rights, and good for democracy. OSF pointed out that corruption has been linked to higher infant and maternal mortality rates in the countries that rank high on corruption indexes. 
 

In several high-profile FCPA cases in 2009, the ...

Published: Friday 19 August 2011
“Issa’s demand to regulators is exactly what banks have been wishing for.”

Has Rep. Darrell Issa (R-CA) turned the House Oversight Committee into a bank lobbying firm with the power to subpoena and pressure government regulators? ThinkProgress has found that a Goldman Sachs vice president changed his name, then later went to work for Issa to coordinate his effort to thwart regulations that affect Goldman Sachs’ bottom line.

In July, Issa sent a letter to top government regulators demanding that they back off and provide more justification for new margin requirements for financial firms dealing in derivatives. A standard practice on Capitol Hill is to end a letter to a government agency with contact information for the congressional staffer responsible for working on the issue for the committee. In most cases, the contact staffer is the one who actually writes such letters. With this in mind, it is important to note that the Issa letter ended with contact information for Peter Haller, a staffer hired this year to work for Issa on the Oversight Committee.

READ FULL POST 1 COMMENTS

Published: Friday 12 August 2011
To award AAA ratings to those securities was “unconscionable and unbelievable, but it created the market that led to this collapse.”

With world markets suddenly sagging under the weight of the Standard & Poor's Aug. 5 downgrade of Treasury bonds, Sen. Al Franken, D-Minn., is disturbed by the monopolistic power of the ratings agencies — and still determined to curb their abuses, as he tried to do last year with an amendment to the Dodd-Frank banking reform bill.

In an exclusive Monday interview for The National Memo, the Minnesota Democrat said that the misconduct of the ratings agencies led directly to the economic catastrophe that S&P's rating decision has made even worse. Franken wondered aloud why his proposed reforms of the ratings industry should still be subject to "study" rather than action by the Securities and Exchange Commission.

By setting up an independent federal board to assign ratings jobs to the agencies — rather than letting them be paid by those who issue the securities they grade — his proposal would have severed the industry's gross conflicts of interest. Known as the "issuer pays" model, that traditional relationship let the banks reward S&P and Moody's for awarding rubber-stamp AAA ratings to worthless mortgage-backed securities (as they did for years before the housing bubble burst).

It was those abuses, he said, that left taxpayers, workers and government "holding the bag" while the bankers and ratings firms walked away with huge profits. "What I was trying to do was open this business to more competition," Franken said. "And then ultimately, as time went on, the track record of accuracy would be the thing that determined who got what (contract) and who got to grade (which securities). You'd be rewarded for accuracy instead of bribery. Put those alongside each other ...

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