SEC Bombs and Moody's Blasts

spy vs spyKing of the Click Business Insider has alerted us all to an obscure comment on a proposed SEC rule for Nationally Recognized Statistical Rating Organizations. William J. Harrington, is a former Moody's Senior Vice President in the derivatives analyst group from 1999-2010. In Harrington's 80 page comment, he starts with this opening salvo:

Moody’s argues that RMBS committees could not have factored the collapse of real estate prices into their opinions, given that the scale of the collapse was both unprecedented and unforeseeable. This rationale is as unconvincing as it is disingenuous, for it pretends that Moody’s and other financial players were not designing and operating the conveyances that carried real estate prices to unsustainable levels in the first place. A roller coaster inexorably chugs up to stomach-turning heights before it hurtles downward, and both a carnival operator
and a thrill seeker understand the nature of the ride’s operations.

The rationale of “who could know?” is wholly undone through even a cursory examination of the actions of Moody’s and other financial players in the structured finance sector. Moody’s and other financial players took care to protect their earning should the real estate bubble that they were ushering into the world subsequently collapse.

"We've Known Since Enron" - Lehman Hearing Testimony

We've Known Since Enron - Bill Black

William Black, former S&L crisis regulator, is referencing the Flim-Flam man, never ending scam, coming out over the Financial collapse. The entire financial meltdown didn't need to happen if our government and regulators and especially the Federal Reserve had been doing their jobs. He calls the SEC criminally negligent. The below video clip is from the Lehman Brothers hearing in the House Financial Services Committee yesterday. The hearing is specifically the Lehman Brothers Holdings, Inc. bankruptcy examiner's report.

Why aren't these people in jail?

This may be the only time in my life I will ever utter these words: "We could learn a lot from Indonesia."

Indonesian police have used tear gas and water canon to disperse about 2,000 anti-government protesters who tried to enter the parliament building in the capital, Jakarta.
The scuffles broke out on Tuesday as members of parliament began a debate over the possible impeachment of the country's vice-president and finance minister.
His vice president, Boediono, and finance minister, Sri Mulyani Indrawati, approved the bailout and opposition leaders have demanded their resignation saying they must be held accountable for losses to the state.

What an amazing concept!

Regulation Power - Where are the Checks and Balances?

Before us we have the proposal to expand the powers of the Federal Reserve as the systemic risk regulator.

Consider this:

Thus within 18 months of taking office, Obama will likely have appointed five of the seven Fed governors . The central bank is designed to be independent from politics, so a president's best chance of influencing how the Fed will regulate banks or respond to economic changes is through these appointments.

The Federal Reserve acts independently of government, with pretty much only these appointments, each a 14 year term, and confirmation of each governor by the Senate.

fed reserve org. chart

Considering we cannot find out which institutions received Federal money or where the $12.82 trillion dollars of Federal Reserve financial commitments are, isn't this making the Democratic aspects of financial regulation even worse?

During the Bush administration we had then Treasury Secretary Hank Paulson, acting as CEO in Chief, strong arming banks and even Congress into passage and use of the TARP. No other ideas were seriously considered and Congress simply handed over the cash with a lot of scare tactic rhetoric.

Why are the same people still in charge of banks they destroyed?

The House Financial Services Committee held a hearing yesterday, Compensation Structure and Systemic Risk.

Contained within the Q&A is this fantastic question by Representative Alan Grayson (D-FL-8th): How do we hold these executives accountable when they have destroyed their own banks?

Friday Movie Night - Bear Raid Edition

hot buttered popcorn It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

This week's videos are a series on naked shorts, or bear raids causing the collapse of Lehman Brothers and Bear Stearns, a video showing the SEC response to Congress asking them how precisely they missed the biggest fraud and Ponzi scheme in history and Congressional Oversight Panel Chair Elizabeth Warren on the Daily show.