The case addressing this question, Standard Chartered v FINRA, has been appealed to the highest court in our land. As such, one might think that most Americans would care to learn if our nation’s top financial regulator did, in fact, engage in a fraud which had a monetary value of between $175-$350 MILLION plus. Not exactly chicken feed.

Why hasn’t this case received more attention? 

For the very simple reason that our major financial media have spent little to no time focused on it. If you don’t think our media is controlled in this country, then you may want to ask why this case has not received more meaningful coverage.

I first addressed this case in the fall of 2009. I personally believe it belongs on the front page of every business section in our country. Why? This case addresses the core of what I have long defined as the Wall Street-Washington incest. The $175-350 million which FINRA retained — rather than having appropriately distributed to its member firms — allowed the major firms on Wall Street and selected FINRA executives to benefit at the expense of smaller broker-dealers. Sound a little incestuous perhaps? You think?

More importantly, this case addresses the fact that Ms. Schapiro and her fellow FINRA colleagues signed a proxy statement used for the merger of the NASD with the regulatory arm of the NYSE to form FINRA that included misinformation. If utilizing a proxy statement which includes misinformation is not an abuse of capitalism and a fraud, I do not know what is.

My link above references several angles in this case and other FINRA and assorted partners’ ‘incestuous’ follies. I strongly recommend you review this wealth of material. You will be busy, but you certainly will not be bored.

Are you sufficiently intrigued to learn a little more about this situation? Let’s navigate and review a recent commentary written by Dan Jamieson of Investment News. Dan writes, B-D Wants Supreme Court to Rule on FINRA Suit:

The high court this month is expected to decide whether to take up a lawsuit brought against NASD by Standard Investment Chartered Inc. over the self-regulator’s 2007 merger with the regulatory unit of the New York Stock Exchange.

Standard, an investment banking boutique, insists that the proxy used by the NASD in soliciting member approval for the merger was fraudulent.

NASD since has been renamed the Financial Industry Regulatory Authority Inc.

Government entities, including private organizations with government-delegated authority, generally enjoy absolute legal immunity in performing official duties. Court cases have granted protection specifically to securities self-regulatory organizations.

Absolute immunity covering a financial transaction? Sniff, sniff. Do you smell something? Me, too.

Standard argues that the merger was not a legally protected regulatory function of Finra.

The brokerage firm wants the Supreme Court justices to hear that case because it claims that lower courts have issued conflicting opinions on immunity for SROs and other state actors.

The Standard suit has already been thrown out twice by courts — in 2010 by a New York U.S. District Court judge and then again last year by the 2nd U.S. Circuit Court of Appeals.

But the Supreme Court could take a different view. In June 2010, it ruled that the Public Company Accounting Oversight Board, a private oversight body set up under the Sarbanes-Oxley law, was unconstitutional because its members were not sufficiently overseen by the executive branch.

The Standard appeal has attracted an unlikely assortment of allies among business and consumer groups.

“The case presents a situation where a quasi-governmental entity is abusing its power,” said Ilya Shapiro, a constitutional lawyer at the libertarian Cato Institute, which joined with the Competitive Enterprise Institute in filing an amicus brief on behalf of Standard.

“Our legal interest is really to make government accountable,” he said.

There’s a larger principle at stake: to what extent state actors can be held accountable, said William Anderson, one of Standard’s lawyers at Cuneo Gilbert & LaDuca LLP. “That’s why the various groups have weighed in” with amicus briefs, he said.

“We’re concerned about the court’s overextension of immunity” to private organizations, said Scott Michelman, a staff attorney at the Public Citizen Litigation Group, which, together with Consumer Action, The Project On Government Oversight and the U.S. Public Interest Research Group, also is urging the Supreme Court to take the case.

“In this case, immunity has been extended to private corporate actors … in a way that could prevent corporate accountability,” he said.

Standard and its supporters dispute the earlier court findings that NASD’s proxy and merger were “incident to” its regulatory activities and thus protected.

The Cato Institute argues that such a standard “would be the equivalent of shielding a judge who ran down a pedestrian on his way to the courthouse simply because his travel there eventually will lead to his exercising judicial power.”

Courts first gave SROs legal protection in 1985, and the breadth of that immunity has expanded ever since, according to Standard’s supporters.

“It seems to me that what [Finra was] doing was acting as a business entity rather than as a regulator,” Mr. Shapiro said.

Jack Norberg, chairman of Standard, did not return a call seeking comment.

For its part, Finra insists that there is no issue with immunity for SROs.

“Every court of appeals to consider the issue has agreed that SROs are absolutely immune from private lawsuits for money damages attacking conduct that falls within the scope of their regulatory functions,” Finra said in a filing with the Supreme Court.

While FINRA’s lawyers have continually embraced their position on immunity, NOT ONCE have I ever heard or seen these lawyers or Ms. Schapiro address and categorically deny the premise of a fraudulent proxy. What say you, Mary? Did you and your colleagues willingly and intentionally misrepresent, that is LIE, in regard to the facts presented in that proxy?

Finra spokeswoman Michelle Ong declined to comment.

No surprise there. No transparency there, either.

The 2007 merger required NASD members to approve bylaw changes that significantly reduced their voting power in the new organization.

NASD was able to get the changes approved with the help of a one-time $35,000 payment. Standard claims that NASD lied in its proxy and other communications when it claimed that $35,000 was the most it could pay under IRS rules.

An IRS opinion letter laying out permissible amounts that could be paid to broker-dealers to approve the merger has been subject to a court-ordered seal, but in a 2009 hearing, one of Standard’s attorneys said the letter indicated that member firms could have received an additional $35,000 to $76,000.

An additional $35-76k multiplied by 5100 member firms equates to a cool additional $175-350 MILLION plus!!

If the Supreme Court takes the case and rules for Standard, the dispute could go back to lower courts for rehearing, and member firms could possibly get a larger payout, Mr. Anderson said.

One would think a ruling for Standard would also expose Ms. Schapiro and the other defendants in this case for having perpetrated a fraud. What are the ramifications of that? Or is that potential too explosive and unseemly for our nation in its current state? Are we that weak and pathetic?

Where are America’s collective balls? Come on. How about we create some public pressure? Share this commentary as wide and far as possible. Our founding fathers would thank you.

But some doubt that the Supreme Court will let that happen.

“SROs are immune — that’s the law,” said Jonathan Kord Lagemann, a veteran industry defense attorney and founder of the Lagemann Law Offices.

“Whether it should be that way is another story.”

Of course it SHOULD NOT be that way. Providing the cover of absolute immunity for misrepresentations within proxy statements by senior financial regulators is no way to run a country.

Remember, absolute immunity without total transparency is a license to steal . . . perhaps even as much as $175 million.

Larry Doyle

The first is in the State Department. This wasn’t just a wasteful decision, but an unethical, immoral, and I have to hope, illegal one. Within the State Department was a woman named Kathleen McGrade. The Daily Caller did some good, old-fashioned investigative reporting on her, and guess what they discovered? Ms. McGrade had funneled $52 MILLION of yours and my taxpaying dollars to her daughter, and her secret husband. I am not making this up, and neither is the Daily Caller:

[snip] Kathleen McGrade helped their company, Sterling Royale Group, win 43 federally funded contracts over the last few years.

McGrade acted as the Contracting Officer (CO) for awards to Sterling Royale Group. McGrade’s husband, Brian Collinsworth, serves as the company’s Vice President. McGrade’s daughter, J.L. (Jennifer) Herring, is its president and CEO.

When TheDC first reached Collinsworth for comment, he denied being married to McGrade. “She is the CO on our contracts, but we are not married in any way, shape or form. That’s kind of funny, but, okay,” Collinsworth said, adding that he and McGrade have no relationship “other than a professional one of a CO to a company.”

Collinsworth also denied that Herring is McGrade’s daughter, and his stepdaughter.[snip] (Click here to read the rest.)

Surprise, surprise, Collinsworth is a big liar. They are indeed married.

Fortunately, the State Department quickly did the right thing – they fired Ms. McGrade:

[snip] “Upon learning of the allegations, the Department immediately relieved Ms. McGrade of her responsibilities,” Laine said in an email. “Subsequently, the Department instructed her company that her employment at the Department is terminated.”

McGrade worked as a federal government contractor, handling the disbursement of taxpayer money for the State Department to other contractors. She worked on-site at the State Department in the office of Overseas Building Operations.[snip] (Click here to read the rest.)

Well, that’s just terrific, but, what about our money? And why hasn’t she been brought up on charges? Forced to pay restitution? Something? The State Department is being mum on any further action, according to the article. Oh, well, okay then. That’s fine – not.

Second, we have the ten year lease signed by representatives of the SEC. Oh, this is a doozy. The Wall Street Journal has the story:

[snip] Chairman Mary L. Schapiro has been under fire for the SEC’s decision last year to sign a 10-year lease valued at more than $500 million for 900,000 square feet of space in a D.C. office building known as the Constitution Center. A recent report on the lease by the SEC’s Office of Inspector General found that the SEC unnecessarily limited the locations it could consider because it overestimated the amount of space it needed. The report cited one employee who described the process used to calculate the space needs as a “`WAG,’ (wild-ass guess) and a ‘back of the envelope calculation.’”

The SEC made its projections based in part on the increased responsibilities related to the Dodd-Frank financial-overhaul law but also on budget projections that had not yet been approved. After the anticipated budget increase didn’t materialize, the SEC determined it would not need the space in the building, which is owned by David Nassif Associates.[snip]

Oops. Yep, they signed the lease, but then didn’t need the space after all, so…Good grief. These are the people running our government???

Now you see why they were called on the carpet:

In a hearing Wednesday before the Subcommittee on Economic Development, Public Buildings and Emergency Management to discuss the lease, Ms. Schapiro acknowledged missteps and said she wanted to SEC to cede its authority to lease space to the General Services Administration. U.S. Rep. Jeff Denham (R., Calif.), chairman of the subcommittee, also questioned why there was an urgency to get the deal done in spite of the “collapse of the real estate industry.”

Ms. Schapiro said she had heard there were few options for space. “It was presented to me…that if we were going to have any growth at all, we had to take this space,” Ms. Schapiro said.[snip] (Click here to read the rest.)

You’ll be glad to know that, according to the article, the Office of the Comptroller has been able to rent some of the space, but they are still looking for tenants for the other third of the sf available. Any takers? Oh, and they are considering whether to investigate this or not.

I’m sorry, but what’s the question there, exactly?? Sheesh.

And finally, last but definitely not least, is the third example of wasteful government spending I have heard of in just two days. If the second one was a doozy, this one is a wallop. It seems that two, not one, but two, Navy tankers which have yet to be completed, are now heading to the scrap heap. They only cost $300 million, so not as bad as the 10 year lease, but still, a mighty hefty amount of taxpaying dollars:

[snip] The Isherwood, stretching more than 660 feet, began its final journey this week, unceremoniously towed Tuesday from its mooring spot in the James River Reserve Fleet, also known as the “ghost fleet,” near Fort Eustis in Newport News.

Its destination: International Shipbreaking Limited in Brownsville, Texas, just above the Mexico border. There, the vessel will be cut up, its innards removed and disposed of, and its steel and other metals sold as recycled products.

The Eckford, of equal size, is scheduled to follow next Tuesday, leaving behind fewer than 20 junk ships in the ghost fleet, the smallest number since its inception during World War I.

Once the two Navy oilers have departed, “it will close one of the saddest chapters in American shipbuilding and for that matter, federal fiduciary folly,” wrote Joseph Keefe, a global maritime commentator, this week on the website MaritimeProfessional.com. [snip] {Click here to read the rest.)

This just begs the question: why were these tankers ever even authorized?

Someone asked recently what we are sending to countries that do not think highly of us, according to a recent Pew poll. We are going to give Egypt $1.3 billion this year for military aid; thanks to the Kerry-Lugar-Berman bill, $1.5 billion a year to Pakistan; and the list goes on. Since the Congress has failed to provide or pass a budget for the past couple of years, this CRS report on aid to East and South Asia should provide fairly up-to-date information.

But we cannot leave out the billions of US dollars in aid to Afghanistan that has been stolen, or “lost,” there. Holy crap.

“Waste not, want not” should be our mantra. This is especially true as our Congress and president fight over how much more in debt this nation is willing to go. And at what cost to us, our reputation, and our economy, they are willing to accept on our behalf. They can begin by being a helluva lot more careful as to how they spend our tax dollars, whether for programs at home, lack of oversight of personnel who have no authority to be signing contracts, and to those who do have the authority to sign away millions and millions without doing their freakin’ homework first.

These are just three examples in the past two days that have come to my attention. I am sure you can come up with a few more. Our Congress needs to remember they work for US, and when they waste money on programs or goods they are not going to use, they must answer to US. This isn’t Monopoly money after all, it’s for real. It is well past time they started acting like it.

But I digress. Okay. Hold onto your hats. The amount each job cost from the Obama Stimulus was: $278,000. Yes, each new or saved position cost almost THREE HUNDRED THOUSAND DOLLARS!!!! This figure is from Obama’s OWN White House economists.

But check this out. If you go to the White House’s own website, Recovery.gov, the number is $1.4 MILLION dollars, according to Eric Bolling of Fox Business News. How many jobs were saved? Not all that many, really – 560,000. In fact, they are saying that there would have been MORE jobs created without the stimulus.

To add insult to injury, 1.8 MILLION jobs have been lost since the Stimulus.

Here’s my favorite part of this report:

[snip] The figures mean the U.S. government could have given a $100,000 cheque to everyone whose employment was made possible by the $800billion American Recovery of Reinvestment Act (ARRA) – and taxpayers would still have come out $427billion ahead, The Weekly Standard reported. [snip] (Click here to read the rest.)

Dang, I’d rather have the (corrected) 100 THOUSAND grand, wouldn’t you? We could put that $427 BILLION toward our massive deficit. And you know if we were each given that kind of cash, we would have put a lot of it back into the economy, right?

Great plan there, Obama. And great execution. Nothing like spending way more on job saving/creation than many jobs pay. With our tax dollars, too, I might add.

See, this is what happens when you have someone in office who hasn’t the foggiest about economics or business, not ever having anything to do with either. Not only was Obama clueless, but he picked the wrong people to handle his economic decisions. No wonder all but Timmy Geithner have jumped ship (though it still amazes me that those who did leave, like Austan Goolsbee, or Christina Romer, got other jobs after failing so spectacularly with the nation’s economy).

I would sure love to hear from one of these folks who has a “created” or “saved” job, particularly just how much they make a year. Just wondering. But I am pretty sure they don’t make over a quarter million dollars a year. How about you?

The Wall Street-Washington incest MUST end.

This coming Tuesday, America has a chance to ring that bell, expose that incest, cleanse the system, and deliver the message loud and clear. The peal of that bell must emanate from the 4th District in the state of Massachusetts.

You do not need to read Sense on Cents to appreciate that many politicians from both sides of the aisle have badly forsaken our nation’s future with misguided and ill-advised policies over the last few decades. Many of these politicians now look to save their skins– if not their souls– by professing a newly found religion with an anti-Wall Street mantel. America, and the residents of the 4th District in Massachusetts, should not be so easily hoodwinked. These politicians, especially Barney Frank, must be held accountable and sent home.

I implore the voters of the 4th District to think long and hard and appreciate that their longstanding elected representative Barney Frank embraced the people and the policies which continue to crush our nation. Which people? What policies? Those which were centered in America’s great financial sinkhole known as Fannie Mae then led by its former CEO Franklin Raines. During my own career on Wall Street, I witnessed Barney’s bear hug of Fannie and Franklin from up close. Do not forget Barney’s desire to ‘roll the dice’ with sub-prime mortgage financing.

Many media outlets will look the other way in holding Barney accountable; I have no interest in that.

In my strong opinion, Fannie Mae was nothing more than a Washington sponsored “Enron on steroids.” Who led the charge on Capitol Hill for the ‘private profit, social loss’ housing monster? Many Democrat and Republican politicos gladly stuck their hands in the Fannie Mae gift bag, but no politician more stridently promoted the programs of Fannie Mae than Barney Frank. Recalling Barney’s work on behalf of Fannie over the years, it was readily apparent to me that he had no understanding of the risks of mispricing capital. For those involved in the private sector and focused on properly pricing risk, the reality of a career politician not appreciating the proper price of capital is not difficult to understand. Regrettably, all of America now pays the price for Barney’s shortcoming and that of so many of his colleagues. While we pay that price, we do not need to and must not suffer from that shortcoming any longer.

I am not endorsing Sean Bielat simply because Barney ran interference for Fannie Mae and its failed socialized housing program for the last few decades. No, my interest in seeing the voters of the 4th District in Massachusetts “retire Barney” is also predicated on events of the last twelve months as well. How so? Where else did Barney fail us? Let’s continue to navigate.

Barney Frank is the chair of the House Financial Services Committee. In that role, he led the charge to supposedly re-regulate Wall Street via the Dodd-Frank Financial Regulatory Reform legislation. Say what you want about that legislation, but let me remind all of America that our pal Barney did not venture close to ‘ground zero’ during this process. Really? How so? As I wrote last March 22nd in my commentary, The BIG Hole in Financial Regulatory Reform:

Why am I so skeptical that Senator Chris Dodd’s proposed Financial Regulatory Reform (for overachievers in the audience, the link connects to the 89-page proposal) will truly change behaviors on Wall Street? For the very simple reason that I have seen no highlighting of the Financial Industry Regulatory Authority within the proposed Financial Regulatory Reform. Strike you as a little odd? It strikes me that the Wall Street lobby is hard at work keeping its self-regulator, that being FINRA, right where they want it.

The fact that FINRA is not singled out by name in Dodd’s report is a HUGE red flag. Over and above that, Dodd’s proposal is nothing more than a review of the SEC’s oversight of FINRA. Why only once every three years? A review of the reviewer? That’s accountability? That’s transparency? Not in my book. In my opinion, that’s both a joke and a confirmation that the Wall Street lobby was hard at work to keep the wolves at bay!!

While my commentary last March focused specifically on Chris Dodd, the simple fact is Barney Frank walked very much in lock step with Dodd on this reform. The ultimate 2000-plus page Dodd-Frank Financial Regulatory Reform legislation barely makes mention of the Financial Industry Regulatory Authority (FINRA). Strike you as a little odd? Yes, me too. Very odd!!

Regrettably, America has come to understand that most political and financial reform is ultimately that in name only.

Neither Dodd nor Frank can say that they were not FULLY apprised of ALL the issues within FINRA. I shared all of my concerns regarding FINRA with the Project on Government Oversight early this year. POGO itself was also looking hard at the structural and practical failings of FINRA. Regular readers of Sense on Cents are well aware of my calls for increased transparency for FINRA. Those calls were echoed by POGO but they fell upon deaf ears in Washington. I wrote in my March commentary:

Perhaps Senator Dodd and his colleagues may want to review the Project on Government Oversight’s thoughts on FINRA in which they call the very concept of self-regulation for Wall Street into question. POGO’s letter to four separate Congressional sub-committees can be found here.

Neither Dodd, Frank, nor anybody else on Capitol Hill ever addressed POGO’s letter and grave concerns. That fact should be the final nail in Barney Frank’s political coffin.

Chris Dodd’s political career is over.

I implore the citizens of the 4th District in Massachusetts to do our nation an enormous service and end Barney Frank’s political career this coming Tuesday.

Sense on Cents strongly endorses Sean Bielat!!

Larry Doyle

P.S. I typically shun from this type of commentary. That said,  given the historic nature of this election and this specific race, I believe it is my civic responsibility to share my feelings and a link to my March commentary. Comments, questions, and constructive criticisms are encouraged and appreciated.

Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

The consumer protection bureau was the brainchild of Elizabeth Warren, a bankruptcy expert, consumer advocate and Harvard Law Professor who lobbied heavily for the creation of bureau.  So naturally, Ms. Warren seemed the obvious, as well as the ideal, person to head the new consumer protection bureau.

(Video by the Main Street Brigade in support of Elizabeth Warren candidacy for the Consumer Financial Protection Bureau directorship.)

Pressure mounts for ‘Sheriff’ Elizabeth Warren says Jennifer Liberto at CNN Money:

Last week, 43 House Democrats sent a letter to President Obama, asking him to nominate Warren and requesting a meeting at the White House to discuss Warren’s appointment.

“You have an opportunity to appoint to head this body a true visionary — not the usual Washington careerist. You have an opportunity to appoint to this body the single best-qualified choice,” said the letter, signed by Rep. Barney Frank, D-Mass., and Rep. Carolyn Maloney, D-N.Y., among others.

But Ms. Warren hasn’t exactly made friends with the powerful Banking community or the Treasury Department in her role as Chair of the Congressional Oversight Panel for TARP (Troubled Asset Relief Program).

(h/t Alain Sherter for this oldie, but goodie of Ms. Warren and Mr. Geithner)

From the moment the bill was signed into law the Obama administration was quick to point out Warren isn’t the only candidate for the director job.  And even some congressional allies began sounding like detractors.  Chris Dodd, chairman of the Senate Banking Committee warned Warren’s nomination could cause a protracted and lengthy battle in the Senate.  And he has repeatedly questioned whether Warren has the appropriate management skills to lead a large federal bureaucracy.

As Shahien Nasiripour at Huffington Post explains Dodd Questions Elizabeth Warren’s Management Experience — A Concern He’s Never Raised Before

… it’s the first time Chairman Dodd has publicly raised such an issue when it came to evaluating presidential nominees to agency positions under the banking committee’s purview.

A review of transcripts from past confirmation hearings shows that Dodd has never questioned the management experience of nominees to head federal agencies his committee oversees. The heads of the Securities and Exchange Commission, Department of Housing and Urban Development, Federal Housing Administration, the Export-Import Bank and the National Credit Union Administration all survived hearings under Dodd’s chairmanship without him once asking a question about the experience needed to guide their respective agencies.

Nor did Dodd raise any management questions when prospective bank regulators came before his committee — even when the regulators did not have significant management experience. In the two years prior to his assuming the chairmanship in 2007, the heads of the Federal Reserve, the Federal Deposit Insurance Corporation, Office of Thrift Supervision, Office of the Comptroller of the Currency, and a prior chief of the SEC all came before his committee. Each time, Dodd declined to ask about their experience running bureaucracies, a review of transcripts shows.

In fact, Dodd didn’t even show up for two of those hearings.

Two names that are bandied about to the director Michael Barr, a top lieutenant to Treasury Secretary Timothy Geithner, and Eugene Kimmelman, a top lawyer in the Justice Department.  But a third might win the prize.

In Obama & Frank: double dips and Washington exit strategies, Christopher Whalen:

It is becoming clear that the Obama Administration may not pick a candidate for the CFPB job until after the November election in order to dodge this very political issue.  By holding the voting on the new agency head until after the election, members of both parties will be able to extract maximum contributions from the banking lobby.  But I hear that the choice may have already been made.

It may surprise some observers that House Financial Services Committee Chairman Barney Frank may want the CFPB job for himself.  Frank reportedly has already expressed interest to the White House.  Sad to say, Chairman Frank probably has seniority over Chairman Warren.

“Barney did some heavy lifting,” says a source on the committee who is close to Frank.  “He might want a different gig, especially if he loses the chairman’s seat in November.  Frank would not want to hang around in Congress as part of the minority.  Being the first CFPB emperor, however, could be a more interesting gig than, say, eventually being made head of HUD of the FHA.”

Elizabeth Warren explains her problem with Congress’ response to protecting the American people during a radio interview in June ’10 with host Tom Ashbrook of On Point:

I got nothing when I walk into the room. You have to understand this. I don’t walk in with any votes, I don’t have any money to give. I just want to talk to people about what’s going on. And I think the part that is the hardest is sometimes I will talk to people in Congress – look, I think most of them, they didn’t go to Congress in order to lie, cheat, and steal. I think most of them went because they had some sense somewhere in their hearts at some point about public service. And I talk about what happens to middle class families and I watch faces, I watch eyes, connect on this, that say, “Yeah, I go back home, too.” And they name towns across America. And they say, “People are scared, people are worried, people are out of work. These are the things I hear in the grocery store, these are things I hear in the town hall meetings.”

TOM ASHBROOK: So what’s the counterweight then?

ELIZABETH WARREN: And then I say, “OK, look, here are three things we can do. But it’s about reining in an incredibly powerful industry. It’s about reining in a group that gives money and knows how to exercise power in Washington.” And I just watch the light go out, because it’s not going to happen.

Elizabeth Warren wants to protect the people.  But it’s the Bankers, not Ms. Warren or the American people, that have the money and the power to keep the lights on for Congress and President. So Congress knows who they need to protect first and foremost.  And its not the people.  Or Ms. Warren.

But why Barney Frank for the Director of the consumer financial protection bureau?

From Alain Sherter’s at BNet - Is Barney Frank After Elizabeth Warren’s Job Even Before She Has It?:

Frank, a fixture on Capitol Hill, knows how to cut deals with big business, as he showed in helping lead the fight over financial reform. It’s no accident that his leading financial contributor over his career is the American Bankers Association, followed by JPMorgan Chase (JPM).

So what are the odds of the Bankers getting what the Bankers want?

***

I love that line. I first heard it on the trading desk at Bear Stearns in the early ’90s. For the last twenty years, I have used the line often to counter those who would bemoan an outcome with the standard, “If only . . .” My response typically generates a healthy chuckle and we then move on.

At this point, I feel comfortable amending the line from above to “If my aunt had balls, she’d be Mary Schapiro.” Too harsh, you say? I think not. How so?

Let’s review a recent Wall Street Journal article, Madoff’s Ghost Still Haunts SEC:

Financial executives aren’t the only folks lawmakers are pursuing. They also want to see more heads roll at the Securities and Exchange Commission.

Nearly 18 months after Bernie Madoff’s multibillion-dollar Ponzi scheme was exposed and almost a year after the SEC’s inspector general issued a blistering report, lawmakers are still questioning how the SEC staffers who reviewed the Madoff firm and investigated fraud allegations were being punished.

SEC Chairman Mary Schapiro told Congress during an oversight hearing that 15 of 20 enforcement attorneys and 19 of 36 examination staffers that dealt with the Madoff matter had left the agency. The SEC was still conducting a disciplinary process, she said, but it should be concluded soon.

Republican Rep. Bill Posey of Florida –- home to many Madoff victims -– said he wants to know if those SEC employees ended up at other regulatory agencies, working for companies they were supposed to regulate, or retired with government pensions.

“There’s a necessity to know where they went,” said Posey. “It’s like letting a pedophile slink out the door or change neighborhoods. We’re dealing with the same type of problem here.”

Wow!! Representative Posey is being aggressive here, but I commend him because the nation still deserves answers to so many Madoff questions that have been swept under the SEC’s and FINRA’s rugs. The WSJ continues:

Schapiro strongly disagreed. “These aren’t bad people. In some cases they were people who were very junior and not adequately trained or supervised.” In other cases, she said, they were pulled from one project to another.

‘Junior people’ logically implies that in other cases there were senior people. In fact, the people calling the shots on the Madoff investigation were certainly not junior.

Why were the investigators pulled from the Madoff case? Were some of them getting too close for comfort? Were they asking too many questions? Were they being frozen out by the SEC’s inner circle? I do not ask these questions in a rhetorical fashion. I ask them because those were the clear cut impressions left by an SEC attorney well trained in the school of options trading who was making real progress in deciphering the Madoff scam. To whom do I refer? Longtime readers of Sense on Cents and listeners to No Quarter Radio’s Sense on Cents with Larry Doyle may recall my interview in October 2009 with Genevievette Walker-Lightfoot, a former SEC attorney who investigated Madoff. Genevievette was not bashful in excoriating the senior laden ‘inner circle’ at the SEC. Perhaps Mary may want to listen to the interview or call on Ms. Walker-Lightfoot. Maybe she’ll learn something.

What does Mary Schapiro have to say now about the impact Mr. Madoff has made on current work at the SEC?

During examinations, Schapiro said, “We don’t rely on the word of somebody like Madoff.”

Wow!!!!

Mary has some set of cojones!! Industry insiders have shared with me that Mary kept close company with Mr. Madoff at industry conferences. Now she has the balls to let America know that SEC investigators do not currently rely on the word of somebody like Madoff.

You can’t make this stuff up.

Sense on cents compels me to inquire, “Mary, how would you even know? If you were not able to detect the likes of a scam artist such as Madoff for decades, what makes you think America believes you might be able to detect another scam artist now?”

Yes indeed. If my aunt truly did have balls, she would be Mary Schapiro.

LD

Elizabeth Warren

Truth, transparency, and integrity!

If our nation is to have any chance to recover from the throes of the worst economic crisis since the 1930s, it had better start elevating and embracing these aforementioned virtues. Time and time again, when we review business practices and political decisions at the center of our crisis, we have seen a glaring lack of these prized virtues. Why and how were these principles compromised? The pursuit of short term profit. Regrettably, this pursuit came at the expense — if not total violation — of these principles. The ultimate long term costs are now being borne by the nation as a whole.

Sense on Cents abhors those who would compromise these core values. Similarly, Sense on Cents embraces those who cherish these values. To that end, I strongly endorse Elizabeth Warren to head the Consumer Financial Protection Agency.

Make no mistake, the pursuit of truth, transparency, and integrity in the course of business is not always an easy proposition. People and institutions who believe they benefit by compromising these principles and accompanying practices will fight hard and spend big money to protect their turf and short term profits. America badly needs an individual who will stand firm and fight hard in return. There is no doubt that Elizabeth Warren is the right person at this point in our nation’s history to head the Consumer Financial Protection Agency.

While Elizabeth is the strongest candidate to head this agency, we learn a lot about our current economic crisis and the Wall Street-Washington incest that lies at its core by witnessing who is working behind the scenes to keep Warren from this post. Who is representing those who would seemingly benefit by a continued blurring if not blinding of our prized virtues in pursuit of short term profits? Reports indicate that none other than Treasury Secretary Tim Geithner is working to block Warren from this critically important post at this critically important time. The Huffington Post reports, Tim Geithner Opposes Nominating Elizabeth Warren to Lead New Consumer Agency:

Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner’s views.

The financial reform bill passed by the Senate on Thursday mandates the creation of a new federal entity charged with protecting consumers from predatory lenders.

But if Geithner has his way, the most prominent advocate for creating the agency may not be picked to lead it.

Warren has been aggressive in putting Geithner and other members of the Obama administration and Congress on the spot in her attempt to generate the transparency needed to understand and expose the practices that caused our economic crisis. She has shown no allegiances other than to our prized virtues and in turn our nation as a whole. Clearly, Geithner has conflicting interests.

We will learn a LOT about President Obama at this point in time. If he chooses not to appoint Elizabeth Warren in the face of the pressure applied by Geithner and in turn the Wall Street banks, we will know for sure that Wall Street still owns Washington.

We have ample evidence that Treasury Secretary Geithner is a compromised individual who is largely beholden to the large Wall Street banks. His attempts to sabotage Ms. Warren’s elevation to head the CFPA confirms that.

President Obama, what’s it going to be?

Will you choose the ‘tough as nails’ Elizabeth Warren, who has shown she will work doggedly for the nation? Or, will you placate Secretary Geithner, pay lip service to the American public, and confirm Wall Street’s continued ownership of Washington by not appointing Ms. Warren?

LD

The most famous of these delinquent tax payers (otherwise known as “tax cheats”) is now the head of the IRS, Timmy Geithner, who “forgot” to pay a boatload of taxes. I know, I know, the irony is just too rich. But the damn Congress passed him anyway – even knowing he owed $26 thousand dollars in back taxes. Wow. I cannot dwell on this too long, or else my head will explode.

Well, now another member of Obama’s Administration has been identified by Rep. Darrell Issa as not paying his taxes and reporting earned income. Presumably, Patrick Gaspard may have continued to “forget” that he received $37,000 in funds from SEIU last year had Issa not made the discovery. And, yes, that SEIU of the purple shirts union which utilizes scare tactics, intimidates people at their homes, and demands the US Government bend to its will, which Obama seems all too willing to do.

Remember, the now-retired director, Andrew Stern, of the SEIU was a frequent visitor to the White House, and may have even violated lobbying rules. I wouldn’t look for any investigation into that at any time soon, though. Not with this crowd anyway. Bear in mind the Department of Justice dismissed out of hand a clear case of voter intimidation by the New Black Panthers. So, don’t look for them to do anything about Andy hanging out with Barry in the White House.

Anyway, I don’t know how one forgets that kind of money, but that’s just me. Here are the particulars:

The discrepancy was caught by California Rep. Darrell Issa, the top Republican on the House Oversight and Government Reform Committee. In a letter to the White House, he told Deputy Chief of Staff Jim Messina of the unstated income.

“As I am sure you are aware, there are very specific limitations on the outside earned income of presidential appointees,” Issa wrote.

The administration downplayed Gaspard’s failure to include the income on this and last year’s disclosure forms. White House spokesman Bill Burton told Politico that the political director was in the process of correcting the forms to reflect that he did have an agreement for severance.

“We have made the small administrative change to this year’s and last year’s forms to indicate that part of the final payout to Patrick reflected in their typical severance of one week of pay for each of his nine years of service at Local 1199,” Burton said.

So for two years he “forgot” that he had to pay taxes on this income? Seriously – have NONE of these people heard of TurboTax? It is not that hard. And he should have gotten a slip of paper indicating that he received these funds that the IRS woulds have gotten, too.

I’m just curious. How is it that these people in government never have the IRS come after them? They don’t sound hard to find, do they? I mean, gee willikers – they are right there in DC. I just don’t get it. And this cavalier attitude just irritates me.

Oh, one last quote from this article, which you can finish reading here:

Gaspard is a key player in the Obama White House, which maintains deep ties to labor unions, especially the service-industries’ union. He worked for nearly a decade for SEIU 1199 before joining Obama’s campaign

.
In other words, he can’t be dismissed as some flunky in the Administration who slipped through the cracks. Huh uh. He is a close aide to the president. And he’s a tax cheat along with Tim Geithner. What stand up people Obama hangs with, am I right?

And isn’t it a comfort that the SEIU has someone right there in the White House who worked for them for 10 years? That’s just perfect.

Hey, here’s a thought. Instead of hiring over ten thousand new IRS agents for $1 billion a year to harass business owners to cough up big bucks for Obamacare, maybe they can just enforce the laws as they stand now to make federal employees, including those in the White House, pay their due. Shoot, they probably wouldn’t even need a thousand new agents to do that, and they would bring in several billion bucks easy. I realize that getting federal employees and White House aides to pay their taxes like the rest of us do is a stretch, but hey – it would sure help offset the costs of programs like Obamacare, wouldn’t it?

Maybe this is just too much of a common sense solution – hire fewer people to enforce current IRS laws for federal employees to reap bigger benefits. But it’s worth a shot, right?

One last thought – maybe instead of these people in government only ponying up their fair share when they get caught (Geithner, Rangel, and this Gaspard guy come to mind), maybe they can just do the right thing and obey the LAW. What a concept.

Any other suggestions for people like Gaspard? I’m sure can think of a few…

**I will be on vacation for a week. My partner and I are taking our godson to Aruba to celebrate his high school graduation. He is joining the Marine Corps upon his return. We have had him for at least a week each year since he was 8, but we may not have too many more opportunities for that now…We are so proud of the young man he has become – very smart, great grades, star athlete in at least two sports, and a lifeguard to boot. He’s a wonderful young man, and will make a fine Marine, no doubt. Anyway, just wanted to let you know I’ll be away for a few days.

With the details provided in this story, Gary Aguirre clearly shows himself to be a great American and as such earns immediate induction into the Sense on Cents Hall of Fame. The General Accountability Project reports SEC Settles with Aguirre:

In what may be the largest settlement of its kind, the Securities and Exchange Commission (SEC) has agreed to pay $755,000 to settle the wrongful termination claim of Gary J. Aguirre, the attorney who headed the SEC’s insider trading investigation of Pequot Capital Management until his firing in September 2005.

A judge with the Merit Systems Protection Board (MSPB), the federal agency with jurisdiction over Aguirre’s termination claim, issued an order today finalizing the settlement. The settlement sum equals Aguirre’s pay for four years and ten months (the elapsed period since his September 2005 discharge), plus his attorneys’ fees. Aguirre agreed to dismiss two related cases against the SEC.

Government Accountability Project Legal Director Tom Devine stated “Unfortunately, this large settlement is the exception that proves the rule. Until Congress provides real protections for financial regulatory employees such as Aguirre, existing law will remain the best excuse for government regulators to turn a blind eye.”

The SEC’s settlement with Aguirre comes one month after the SEC filed insider trading charges against Pequot, its founder, Arthur Samberg, and David Zilkha, a former Pequot employee, based on facts uncovered by Aguirre. Pequot and Samberg paid the SEC $28 million to settle the charges against them. The case against Zilkha continues.

In August 2007, two Senate committees published a scathing 108-page report criticizing the SEC’s decision to fire Aguirre and close the Pequot investigation, which included Pequot’s suspected insider trading in securities of 20 publics companies.

The Senate report chronicles Aguirre’s promising career at the SEC, including management’s decision to give him a two-step pay raise at the end of his first year for “consistently [going] the extra mile, and then some.”

But the praise vanished when Aguirre tried to subpoena an elite Wall Street banker, John Mack. His supervisors blocked the subpoena, telling Aguirre that Mack had “juice” and “political clout.”

Spell that “Wall Street-Washington incest” at its finest!!

Aguirre’s July 27, 2005, email to his supervisors explained why the Mack subpoena was essential and expressed concern that “treating Mack differently is [not] consistent with the Commission’s mission.” The Senate Report tells what happened next: “Just days after Aguirre sent an e-mail to Associate Director Paul Berger detailing his allegations, his supervisors prepared a negative re-evaluation outside the SEC’s ordinary performance appraisal process.”

One month later, the SEC fired him without warning. The Senate report concluded that Aguirre’s “termination appears to be merely the culmination of the process of reprisal that began with the August 1 re-evaluation.”

Approximately one year after the Senate report, SEC Inspector General H. David Kotz delivered his own report on Aguirre’s firing to then-SEC Chairman Christopher Cox. Kotz recommended that Aguirre’s supervisors be disciplined. To date, neither the current SEC Chairman, Mary Schapiro, nor Cox, has done so.

Why not? The smell of incest continues to reign. Where is the real leadership necessary at the head of the SEC?

The Pequot investigation appeared to have run its course when the SEC released its “Case Closing Report” in December 2006, explaining its decision to close the entire investigation, including Pequot’s trading in Microsoft options, without filing charges.

But Aguirre did not stop his Pequot investigation. He continued to collect and piece together the evidence that Samberg had used illegal tips to trade options on Microsoft stock. In April 2008, Aguirre obtained a court order forcing the SEC, over its objection, to turn over to him key records of its Pequot investigation.

Aguirre clearly embodies the drive and determination possessed by truly great Americans. I commend him.

In late 2008, Aguirre uncovered the last pieces of evidence necessary to prove an insider trading charge against Pequot, Samberg, and Zilkha. On January 2, 2009, Aguirre sent a letter to SEC Chairman Cox enclosing the new evidence.

Aguirre’s 16-page letter explained how this new evidence, when combined with the evidence uncovered by him in 2005, proved that Samberg had used illegal tips in directing trades in Microsoft options, generating $14.2 million in profits to Pequot hedge funds under his management. But still the SEC would not file a case.

On May 26, 2010, Aguirre filed papers in his FOIA case seeking an order directing the SEC to release additional Pequot records to him. He argued the SEC had to turn over the records under FOIA, because it had filed no case against Pequot or anyone else. Early the next morning, the SEC filed charges against Pequot, Samberg, and Zilkha. The allegations closely track the facts stated in Aguirre’s January 2, 2009 letter.

Asked how he feels about the settlement, Aguirre replied, “I think it’s fair to the public that the SEC pays for my work over the past four years and ten months, since it generated $28 million to the U.S. Treasury. But it’s a shame the team I worked with at the SEC did not get to complete the Pequot investigation. The filing of the case in 2005 or 2006, before the financial crisis, would have been exactly what Wall Street elite needed to hear at the perfect moment: the SEC goes after big fish too.”

Gary Aguirre, a great American!!

Mary Schapiro? Chris Cox? Washington establishment? John Mack? Art Samberg? ….gutless!!

LD

Our friends at the Project on Government Oversight (POGO) released a report just yesterday highlighting the pathetic disciplinary measures and massive double standard at the SEC in responding to recommendations from its own Office of Inspector General (OIG). POGO reports:

….this is not the first time the SEC has refused to follow an OIG recommendation for disciplinary action. A report recently released by House Oversight and Government Reform Committee Ranking Member Darrell Issa (R-CA) made note of the fact that the SEC has repeatedly failed to implement reforms or hold wrongdoers accountable. The report mentioned an investigation by POGO which revealed that the SEC has failed to act on hundreds of recommendations made by the OIG in recent years.

Following up on that investigation, we’ve prepared a new document summarizing the agency’s response to reports in which the OIG specifically recommended disciplinary action. This information mostly comes from the OIG’s semiannual reports to Congress and documents obtained through the Freedom of Information Act (FOIA). As you can see, the SEC has taken little to no action on many of these recommendations, especially when the individual cited is a senior official.

By failing to take disciplinary action against the two senior officers named in the OIG’s FWRO (Fort Worth Regional Office) report, the SEC continues to broadcast the message that senior management will not be held personally accountable for misconduct, no matter how egregious.

Just how egregious are some of the findings made by the OIG? Let’s navigate and review the report from POGO highlighting 18 separate instances in which the OIG recommended disciplinary action and in which ‘no action’ was taken. I found the following six to be the most outrageous. The OIG’s findings include (I recommend you take a deep breath first!!):

1. Disclosure of non-public information
2. Inappropriate conduct
3. Misuse of official position
4. Misuse of government computer resources to assist Ponzi scheme and violations of standards of ethical conduct. (Are you kidding me? This is not a major front page story? A Supervisor in the SEC’s Office of Administrative Services is found by the OIG to have engaged in these behaviors and is allowed to retire without disciplinary action being taken?? What a joke!!)
5. Suspicions of insider trading and appearances of impropriety in financial transactions. (In light of this reality, we should certainly not expect the SEC’s OCIE to pursue the insider trading and front running at FINRA in its liquidation of auction-rate securities in 2007!!)
6. Conflict of interest and improper solicitation of gifts.

For those interested in viewing the POGO report in its entirety, please click on the image:

Yes, boys and girls, that is your government and your tax dollars at work. Accountability? Transparency? Integrity? A ‘new’ SEC? Talk is cheap. This report is strong evidence that the senior inmates are running the asylum at the SEC.

In light of this report, is there truly any surprise how and why Wall Street has run roughshod over Main Street?

What happened to our country?

LD

P.S. Hats off to POGO for great work!!

Oh, yeah – Freddie Mac is asking for TEN Billion Dollars. I reckon they just want to add it to their tab:

ABC News’ Matthew Jaffe reports:

Government-backed mortgage giant Freddie Mac today asked for $10.6 billion in additional federal aid after reporting a loss of $8 billion in the first three months of this year.

To date Freddie Mac has been provided with around $51 billion in government funds. The new aid would bring the total assistance to the lender to over $61 billion.

Late last year the Treasury Department essentially agreed to provide a blank check to Freddie Mac and fellow government-backed lender Fannie Mae when the agency controversially removed the cap on federal support for the lenders.

A “blank check”? That is what Geithner wants to give Freddie and Fannie? I reckon that’s what happens when you have someone in charge who can’t even fill out his own tax forms properly (or, as I like to say, a Tax cheat). Some folks aren’t happy about it, though:

Republicans have blasted the administration for that move, as well as for not putting forth a plan to overhaul the government-sponsored enterprises. Thus far the administration’s only action has been the April 14 release of a series of questions for public comment on what to do with the mortgage giants.

In addition, Treasury Secretary Tim Geithner has acknowledged that the government expects to suffer “very substantial losses” on its investments in the lenders, with recent estimates ranging around a minimum of $85 billion.

Well, that’s just jake – “a minimum of $85 billion.” That’s our money, folks.

And let’s not leave Fannie Mae out of this mix. Oh, no – now Fannie is asking for some more cash, too, a cool for $8.4 Billion more?:

Fannie Mae requested another $8.4 billion from the federal government on Monday, saying that it expects its deficits to continue due to trends in the housing and financial markets.

The government-controlled mortgage giant said it lost $13.1 billion applicable to common shareholders in the first quarter of 2010. In the year-earlier quarter, Fannie suffered a $23.2 billion loss, but an accounting change makes comparing the year-over-year losses difficult.

Fannie’s request for more federal funds comes just four days after Fannie’s twin Freddie Mac also asked for a handout – to the tune of $10.6 billion – after posting an $8 billion quarterly loss.

In using Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) to prop up the mortgage market, the government in December lifted a $200 billion limit on their bailouts, essentially giving the twin housing lenders a blank check. Fannie Mae has already received $76.2 billion from the federal government and Freddie has gotten $50.7 billion.

“In the first quarter, we continued to serve as a leading source of liquidity to the mortgage market, and we made solid progress in our ongoing efforts to keep people in their homes,” Fannie Mae President and CEO Mike Williams, said in a press release.

Just to recap, Fannie Mae and Freddie Mac were largely responsible for bringing down the housing market (click HERE to read the rest of the article).

Yes, indeedy, so no doubt the new Finance Reform Bill begins with Fannie and Freddie, right? Oh, so wrong. Chris Dodd, who benefited mightily from Fannie Mae and Countrywide says, “Nooooooooo.” Dodd thinks it should wait:

Sen. Chris Dodd (D-Conn.) said Friday that legislation to address troubled mortgage lenders Fannie Mae and Freddie Mac will have to come after the current financial-reform effort.

Fannie and Freddie, which are known as “government-sponsored enterprises” (GSEs), have been a lightning rod for criticism of Democrats during the financial reform debate.

Dodd, who is chairman of the Banking Committee and has led the effort to craft a financial regulatory reform bill, said that there was not enough room in the legislation for rules covering Fannie and Freddie.

“Fannie and Freddie and the whole GSE system and it’s a great question and a legitimate one in desperate need of reform,” he said on CNBC. “But candidly there’s only so much I could only take on with this bill, and so that comes up. But not in this round. It’s in the next wave here we have to deal with GSEs.”

Well, sure, that makes sense, right? If you live in Upside-Down World, anyway (click HERE to read the rest). What a glaring, blatant, prop-up for those two entities that have done SO much to destroy the housing market. Unbelievable.

Frankly, I think this is a dereliction of duty on behalf of our Congress people. They refuse to hold accountable the very companies who wreaked havoc with our economy. They are in collusion with them. Even worse, they continue to throw money down the money hole.

I have used this video before, but it seems mighty timely given the requests of Fannie and Freddie (Onion video alert):

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

If only this were a joke…

Testimony Could Undercut SEC Charge Against Goldman

The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson’s position.

CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson’s position in the portfolio, named Abacus 2007-AC1.

“Did you tell her that you were interested in taking a short position in Abacus?” a government official asked Pellegrini, referring to the name of the CDO portfolio.

“Yes, that was the purpose of the meeting,” Pellegrini responded.

Oops. I am guessing that is not the answer they anticipated:

The exchange is key in that the Securities and Exchange Commission is charging that the failure to disclose Paulson’s position was a “material” factor that could have caused both ACA and German Bank IKB to back out of the CDO investment. When the CDO failed, Paulson reaped a gain of more than $900 million, the government has said.

The SEC does not mention the exchange in its complaint against Goldman.

“We look forward to presenting a complete and accurate evidentiary record in court,” SEC spokesman John Nester said in a statement to CNBC.

CNBC further learned that Pellegrini and Schwartz met at least three times to discuss the CDO and Paulson’s short position on Abacus.

Because of the deal’s structuring, Paulson stood to gain $900 million from the deal but lose only $20 million.

Here’s the thing. Couldn’t they have actually done a TAD more investigating before making these charges against Goldman Sachs? I mean, they make the charges just the other day, and voila, a few days later, this testimony comes out completely contradicting their charges. I’m just saying, maybe SOMEONE could have done a little more homework before leveling these charges, don’t you think?

And while I am at it, NQ reader Peggy Sue supplied this fascinating testimony from William Black on Lehman Brothers to the House Finance Committee. It is quite an indictment of a number of federal entities, especially the Fed, as well as the SEC:

Holy smokes. Mr. Black didn’t mince any words, did he? He is exactly the kind of straight talker we need to clear up this big, huge, mess. And he exposes the sheer incompetence of those who have been charged with oversight of financial institutions, especially continuing “business as usual” when that business was costing us millions and millions of dollars.

It sounds to me like there are a helluva lot of people running this show deserving of lawsuits, too – I’m not holding my breath that they will get their comeuppance, though. They’ll probably get promotions…

Did you catch that? Our federal debt will exceed 100% of our GDP. Um, that’s a bit of a problem, folks. And ten years is not that far away, either.

Regrettably, America deals with this pandering and posturing from our political leaders and regulators all too often. While Americans are being told one thing, what are the regulators telling the banks? Hold cash.

I am not shocked, but certainly disappointed, that American financial periodicals failed to run this story detailing these recommendations from our bank regulators. The London based Financial Times highlights this bombshell in writing, Regulators Tell U.S. Banks to Hold Funds: >>>>

US regulators have told banks not to increase dividends or buy back shares until political and economic uncertainty surrounding the industry dissipates, in a move that will delay by months the return of capital to shareholders.

Some investors in financial stocks argue that winners of the credit crisis, such as JPMorgan Chase and Goldman Sachs, have profitable businesses and strong balance sheets and should consider raising dividends or buying back stocks.

Executives at the two companies have talked in public and with regulators about the possibility of returning cash to investors after taking action to conserve resources during the turmoil. But they say they are not in a rush to go ahead, especially if their watchdogs oppose such moves. “Regulators are gun-shy at this stage, partly because they fear that giving the green light to healthier banks to return cash to investors would prompt demands from more troubled institutions to do the same,” one senior Wall Street executive said.

People close to the situation said government agencies, led by the New York Federal Reserve and the Treasury, told banks they would have to wait until the economic and legislative picture became clearer before returning funds to investors.

In a letter sent in December, officials reminded financial groups they would have to meet criteria, such as “stress-testing” their balance sheets and achieving sustainable profitability, before releasing funds to shareholders. The New York Fed and Treasury declined to comment.

Mike Mayo, an analyst at CLSA, said: “The word banks have used the most … is ‘fragile’.

Economic growth is predicated on the flow of money, otherwise known as the velocity of money. With news like this, we should expect that velocity to remain at a trickle.

The burden will remain on the Fed to keep its Fed Funds rate low so these banks can continue to recover. The burden should also remain on the regulators and bank executives to not allow the Fed liquidity to walk right out the front door of these banks in the form of big fat bonuses.

LD

What rock did Herb just crawl out from?

The Wall Street Journal addresses Herb’s ridiculous comment in writing, Treasury Official: ‘No Too Big to Fail Guarantee’ for Big Financial Firms:

There is no U.S. government guarantee to protect the largest financial firms, a Treasury Department official said Thursday, as a congressional watchdog criticized the $45 billion in government aid provided to Citigroup Inc.

Herbert Allison, who oversees the Treasury’s $700 billion financial rescue plan, disagreed with members of a congressional oversight panel that some financial firms benefit from the assumption that the government would step in to prevent their failure.

“There is no too big to fail guarantee on the part of the U.S. government,” Mr. Allison said.

How often did we hear similar drivel about Freddie Mac and Fannie Mae?

What happens to people when they get inside the Beltway? Do they instinctively become serial panderers, if not outright liars?

Elizabeth Warren, who chairs the five-member Congressional Oversight Panel, said it was clear that financial markets do assume the guarantee exists, pointing to a recent ratings agency report that specifically noted the government’s role in backing Citigroup.

“The market clearly perceives that there is a too big to fail guarantee,” Ms. Warren said. “That gives Citi an advantage in raising capital. … That is very valuable to Citi.”

Panel members locked horns with Mr. Allison over his reluctance to answer some questions, primarily regarding the health of Citigroup when the government injected capital into the bank in late 2008. Panel member Damon Silvers, pressing Mr. Allison on whether the bank was at risk of failure at the height of the financial crisis, said it was “extraordinary that it is not possible to have a straightforward conversation.”

The fact that America can not get straightforward and honest answers from our government officials plays right into my commentary the other day, Harry Markopolos: “Don’t Trust Your Government”.

Bend over, Herb.

LD