Another success for the Obama Administration--and us: financial reform

Creating a consumer agency: Establishes an independent Consumer Financial Protection Bureau housed inside the Federal Reserve. Fees paid by banks fund the agency, which would set rules to curb unfair practices in consumer loans and credit cards. It would not have power over auto dealers. Credit scores: All consumers have been able to get one free credit report a year from the credit rating agencies. But the bill would also allow a consumer to get an actual credit score along with a report. Interchange fees: Lawmakers want the Fed to crack down on debit card swipe fees, which retailers pay to banks to cover the operational cost of transferring money. The Fed could cap the fees and make them more reasonable and proportional. Banning 'liar loans': Lenders would have to document a borrower's income before originating a mortgage and verify a borrower's ability to repay the loan. Mortgage help for unemployed: Unemployed homeowners with good credit would be eligible for low-interest loans to help them avoid foreclosures. The bill would spend $1 billion on such relief, using funds that had been directed for Troubled Asset Relief Fund bailing out the financial system. Fixed-equity annuities: Prohibits tougher federal rules on life insurance products, in which customers pay a lump sum upfront in exchange for monthly income over time, pegged to an index. The Securities and Exchange Commission had been gearing up to step in and start requiring more disclosure for these products, often sold to seniors, that are currently regulated by state insurance commissioners. Lawmakers decided to stop the SEC from tougher federal regulation. Too big to fail New oversight power: Creates a new 10-member oversight council consisting of financial regulators to look out for major problems at financial firms and throughout the financial system. The Treasury Secretary gains a key role in enforcing tougher regulations on larger firms and watching for systemic risk. The council also has veto power over new rules proposed by new consumer regulator. Unwinding powers: Gives the FDIC new powers to take down giant financial firms in the same way it takes down banks. Banks would be taxed to reimburse the federal government for the cost of resolving these firms after a failure occurs. Breaking up banks: Gives regulators strengthened powers to break up financial companies that have grown too big, but only if the firms threaten to destabilize the financial system. Checking on the Fed: Allows Congress to order the Government Accountability Office to review Fed activities, excluding monetary policy. Audits would be allowed two years after the Fed makes emergency loans and gives financial help to ailing financial firms. Forcing 'skin in the game': Firms that sell mortgage-backed securities must keep at least 5% of the credit risk, unless the underlying loans meet new standards that reduce risk. Financial system fee: Banks and financial firms would be taxed to pay for the $19 billion cost of implementing the Wall Street reform bill. Risky bets Regulating derivatives: Attempts to shine a light on complex financial products called derivatives that many blame for bringing down American International Group (AIG, Fortune 500) and Lehman Brothers. Would force most derivatives to be bought and sold on clearinghouses and exchanges. Some derivatives, including those traded by agriculture companies and airlines to mitigate risk, would still be unregulated. Spinning off swaps desks: Big banks that want to engage in nontraditional bets, such as on mortgage products or certain commodities, would have to spin off their swaps divisions. Reining in risky bets: Limits giant Wall Street banks from making trades on their own accounts, although with a long lead time and opportunities for delays up to seven years. While the original proposal would have banned banks from owning hedge funds, the bill would allow banks to sink up to 3% of capital into hedge funds or private equity funds. Improving credit ratings: Agencies that rate securities must disclose their methodologies. The Securities and Exchange Commission would have to study a way to find an independent way to match credit rating agencies with financial firms seeking ratings. After two years, they'd have to implement such a process, or appoint a panel to independently match ratings agencies with firms that need securities rated. Curbing executive pay: The bill would also impose new rules for how all publicly-traded companies, not just banks and other financial firms, pay top executives. Shareholders will be given a nonbinding advisory vote on how top executives are paid while in office. Shareholders also get a nonbinding advisory vote on executives' outsized severance payments, or so-called "golden parachutes." The new rules would also beef up oversight of pay practices within the financial industry, which some critics have suggested helped fuel the crisis by encouraging workers to place risky bets. The bill, for example, would require industry regulators to draft their own set of rules aimed at eliminating risky pay practice among banks and other financial firms. Link to original post: http://www.cnnmoney.com/2010/06/25/news/economy/whats_in_the_reform_bill/index.htm

More financial travesties

You no doubt read about the large bank failing this past week and the many more millions (billions?) of dollars it's going to cost the American taxpayer (read: you and me).

Don't look now but 2 more failed last evening, in Illinois.

Less evident is the fact that, after you and I, via the government, pick up the tab for these extremely badly run banks, other bankers are asked to buy these assets (the good stuff of the bank) at bargain prices. So the other, 2nd banks, pick up a magnificent bargain, folks, and you and I paid for it.

It just keeps going on.

But wait! There's more!

In today's New York Times, 2 tiny little paragraphs in the 2nd, "Business Day" section told, first, of yet another multi-million dollar Ponzi scheme--this one out of California that came to and cost #200 million, almost unbelievably--that the SEC didn't prevent or catch, while it was going on.

Thanks again, SEC! (What have you been doing for the last 8 years?).

Secondly, the Times told of a former scumbag President of that true den of inequity, theft and lies that was Countrywide Financial, one Stanley Kurland, is not only in jail serving time for crimes committed, actually, besides being free and uncharged for crimes, he's also filing through a new company (PennyMac Mortgage Investment Trust) for an IPO.

Seems he hasn't cheated enough people in his first incarnation at Countrywide or made enough money so he's coming back 'round for more.

The foxes are still in charge of the hen houses.

On that first one, I have to ask questions again, that I asked earlier, of the SEC and those are:

1) Is this the last big Ponzi scheme that's out there?

2) How did this happen?

3) What were you--the SEC--doing while this was taking place?

4) Have new regulations and provisions been put in place to make certain this doesn't happen again/any more?

I'll probably write more soon, about Blackrock, a company that also fleeced the public for millions of dollars but is not only still in charge of the country's financial system, they're making new rules with this Administration, for others to follow, while the "help clean up this current mess", making more money, all the while.

It's incestuous and ugly.

Are you paying attention?

Links to original stories here:
http://www.nytimes.com/2009/05/23/business/23bizbriefs-FIRMLEDBYEXH_BRF.html?_r=1&sq=&st=nyt&adxnnl=1&scp=1&adxnnlx=1243098626-JXmKz0MRm1gYG99zxMVyfw

http://www.nytimes.com/2009/05/23/business/23bizbriefs-3ACCUSEDOF20_BRF.html?scp=1&sq=3%20accused%20of%20%24200%20million%20&st=cse

What oughta' happen

Did you hear that Bernie Madoff wants to keep $62 million dollars that he put in his wife's name and their $7 million dollar Manhattan home?

This guy's chutzpah just doesn't quit.

And sure, our gut reaction is "hell, no!"

But on a more cerebral, thought out plane, here are two reasons why he shouldn't get to keep either, no matter whose name they're in:

1) In all the years and with all the money--50 billion dollars, give or take--he took from people, he NEVER ONCE INVESTED ONE PENNY OF IT IN STOCKS OR ANY INVESTMENT TOOLS. Not once. The SEC, though they don't otherwise do their job, confirmed this much, anyway.

If he deliberately took this money, from the start, and never invested it, it seems pretty clear that his goal, right away, right from the start, was to scam people with a ponzi scheme. If that's the case, then everything he and his wife have is ill-gotten and should be returned to these scammed investors.

2) If you haven't read the list of people and organizations Bernie Madoff scammed, you should. (Link here: http://s.wsj.net/public/resources/documents/st_madoff_victims_20081215.html) It's staggering.

Two brief examples:

He took $14,500,000.00 froom Yeshiva University in New York, alone. And that wasn't one of the largest amounts he took, by any means.

Can you imagine stealing from a Jewish University, even if you're NOT Jewish?

The second example is also particularly egregious, to me. He took $15,000.000.00 from The Elie Wiesel Foundation for Humanity.

My God. He really had no shame at all.

The largest amount he took from one organization was a staggering 7 billion 500 million dollars (from Fairfield Greenwich Advisors).

One organization.

Those are just a few, brief examples from a very long list of people and groups from whom he stole.

And this is all staggering for three reasons.

One, the large amounts he took from people and organizations.

Two, the people and organizations he took this money from--big names, in the world and big philanthropists and philanthropic charities. He totally, absolutely showed no shame or mercy from whom he took money.

And finally, three, he had an incredible ability to take money from organizations--largely Jewish--that do, did and were doing such good, generous, philanthropic work. Again, he was shameless and exploited these people and organizations completely, totally, in some cases.

There are individuals and couples who have been destroyed, financially, because of him and his blatant, ugly, brazen theft.

So no. No sympathy or empathy for Bernard Madoff. That 62 million dollars in his wife's name now was never his. Neither was the 7 million dollar apartment in Manhattan. He got both by exploiting and exposing these people and groups completely, totally and utterly.

He should be shown the same mercy he showed his "investors", who trusted him.