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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?


To: altair19 who wrote (162298)3/5/2009 6:50:46 PM
From: stockman_scott  Read Replies (1) | Respond to of 361804
 
Are Federal Regulators To Blame For The Crash?

cbsnews.com

Posted by Declan McCullagh

Here's a question that seems pretty timely: How much of the unsustainable sizes of the stock market and housing bubbles is due to regulatory incompetence or mistakes?

There may never be a definitive answer, especially because there are so many explanations for why the economy became so bubblicious, including the Federal Reserve's excessively low interest rates, tax law changes and garden-variety fraud.

But this week's news about Darrel Dochow may provide a partial answer. Dochow was the west coast regional director at the Treasury Department's Office of Thrift Supervision, which is tasked with the job of regulating savings banks and savings and loans. OTS's official mission is "to supervise" such companies "to maintain their safety and soundness."

The problem is that Dochow may not have done exactly that. In fact, he seems to have done the opposite.

Dochow was removed from his job in December after an internal investigation found that he had allowed IndyMac Bank to backdate a transaction, yielding a falsified report that let it be rated as "well capitalized." As we now know, IndyMac subsequently collapsed, making it the second-largest failure to date.

Treasury's inspector general, Eric Thorson, ominously noted in a December letter to members of Congress that IndyMac was not the only example of legerdemain: Dochow's agency let other banks cook the books too.

The Washington Post reported at the time: "It is the second time Dochow has been removed from a position as a senior thrift regulator. He was demoted in the early 1990s after federal investigators found that he had delayed and impeded proper regulation of Charles Keating's failed Lincoln Savings and Loan." That S&L was at the heart of the Keating Five scandal, which led to prison time for Keating and cost taxpayers billions. (Here's a 1990 article with some details about Dochow's role.)

In an August 2007 letter from Dochow to CEOs of banks he regulated, Dochow stressed his intention to "continuing the close working relationship that I have enjoyed with many of you" and said there would be no "significant changed in this office's general philosophy."

Now Dochow has been allowed to retire apparently with his full pension based on a $230,000 annual salary -- as opposed to being fired for cause -- according to an ABC News report this week. Meanwhile, taxpayers are on the hook for even more with IndyMac's failure than they were for the failure of Lincoln Savings and Loan.

As a side note, federal law says: "Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the... Office of Thrift Supervision... shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both."

Dochow isn't the only recent example of regulatory failure.

There's also the failure of the Securities and Exchange Commission to stop Bernie Madoff, even though Harry Markopolos had tried repeatedly to direct the agency's attention to Madoff's alleged Ponzi scheme. Peter Schiff, president of Euro Pacific Capital, also raised concerns about Madoff.

It probably didn't hurt that his niece Shana Madoff (a former compliance officer at Madoff Investment Securities) married Eric Swanson, a former assistant director at the SEC's Office of Compliance, Inspections and Examination. Another bit of trivia: President Obama's SEC Chairman Mary Schapiro was running the Financial Industry Regulatory Authority when it investigated Madoff -- and failed to stop him.

And then there's the Office of Federal Housing Enterprise Oversight, which was supposed to ensure "the safety and soundness" of Fannie Mae and Freddie Mac. OFHEO had nearly 300 employees, all devoted to this task.

But OFHEO was slow to recognize problems, and when it did, it had limited powers. The result? Fannie and Freddie already have received a $400 billion bailout in the form of stock and debt guarantees; Fannie lost $59 billion last year and has said it needs $35 billion more in bailout funds.

Let's not forget about American International Group, which has already put $170 billion in bailout funds at risk and lost $62 billion in the last three months of 2008. At a Senate Banking committee hearing on Thursday, Scott Polakoff, acting director of the Office of Thrift Supervision, admitted a "failure to recognize in time the extent of the liquidity risk to AIG" and said his agency "focused too narrowly" on the wrong areas.

We're likely to hear a lot in the next few months about market failures by politicians pushing new laws. But regulatory failures can be just -- or even more -- destructive.



To: altair19 who wrote (162298)3/5/2009 11:56:08 PM
From: stockman_scott  Respond to of 361804
 
The MBAs of the Meltdown – Where Did Those Bankers Go to Business School?

wowowow.com

Here’s a question, fellow 401K-robbed victims of the meltdown: Exactly where did this toxic batch of bankers and businesspeople — who engineered the economy into the ditch, the stock market into free fall and frittered away the fortunes of our country and maybe even the world — learn their craft? Which MBA, economics and law programs produced the perpetrators of the calamities that have befallen the great Wall Street institutions and, now, Main Street Americans as well? Which schools are the Academies of the Apocalypse, and who and how many went to each?

Winner: Harvard

Runner-up: New York University’s Stern School of Business

Third Place: Cornell

It’s well-known by everyone except those with an MBA that the rest of the world hates the average overeducated-in-the-wrong-way whiz kid who emerges from an elite graduate school of business. These soulless, humorless, real-world-experience-starved scammers descend upon Wall Street and corporate America by the truckload every May, typically making life miserable for the professional peasants who work at the unfortunate firms to which they flock, for those who must stand mutely by as their new bosses proceed to make Every Mistake in the Book. The craftiest and most mendacious of each generation invariably finds their way to the corner office, where for years now they’ve been shipping jobs overseas, changing the focus of their firms from making products to managing money and getting richer than Marie Antoinette could have ever imagined.

Well, now these geniuses have failed even farther upwards and we have on our hands a full-fledged global economic meltdown.

Taking an inventory of CNN’s Ten Most Wanted: The Culprits of the Collapse, Time magazine’s 25 People to Blame For the Financial Crisis, plus a peek at the pontificators on CNBC (where the soaring level of screaming and finger-pointing makes for great daytime reality TV), we found ourselves wondering: From which schools did the stars of the meltdown emerge?

Harvard - 9 Stars

Stanley O’Neal, Harvard MBA: Ousted as Chairman, CEO of Merrill Lynch, after the firm posted its first $8 billion in losses due to the sub-prime crisis. Received a severance package valued at the time at $161 million in stock and options.

John Thain, Harvard MBA: Hired to succeed O’Neal at Merrill Lynch and eventually managed to sell it to Bank of America. Forced out when it was revealed that he spent $1.3 million to decorate his office, and, according to The Wall Street Journal, asked for a 2008 bonus of $5-10 million, prompting President Obama to complain about "the reports that we’ve seen over the last couple of days about companies that have received taxpayer assistance, then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately." In January ‘09, NYS Attorney General Andrew Cuomo subpoenaed Thain about the purported billions in executive bonuses paid out to Merrill employees.

Christopher Cox, Harvard MBA: Former Chairman of the SEC, the organization that missed Bernie Madoff’s massive Ponzi Scheme even though the agency investigated him numerous times is known for his lax enforcement of Wall Street.

Henry Paulson, Harvard MBA: Secretary of the Treasury under President Bush, spoke ardently against government regulation of Wall Street. The resulting financial meltdown forced Paulson to oversee the greatest infusion of American taxpayer money into the banking system of any Treasury Secretary in history, including the $750 billion unregulated TARP plan. His choice to let Lehman fail after bailing out Bear Stearns and AIG has also been faulted for dramatically worsening the financial crisis.

Andrew Hedley Hornby, Harvard MBA: Failed former CEO of what used to be one of the UK’s largest bank group, HBOS, which had to merge with Lloyds in the face of bad mortgage loans.

Lawrence Summers, Harvard PhD, Economics; Former President, Harvard University: Current head of President Obama’s National Economic Council, and former Deputy Secretary of the Treasury under Bill Clinton, where he helped prevent government employee Brooksley Born from imposing government oversight of derivatives, those toxic Wall Street investments now believed to be at the root of much of the current crisis.

Franklin Raines, Harvard Law: Former CEO of Fannie Mae, took "early retirement" amid an accounting investigation.

Daniel Mudd, MPA, Harvard JFK School of Government: Took over Fannie Mae from Raines, and increased the number of subprime mortgages it guaranteed until the government dismissed him in 2008, when the Feds had to put Fannie into conservatorship to keep it afloat.

George W. Bush, Harvard MBA: Rode herd over the most alarming financial meltdown since the Great Depression, as the tsunami of unregulated Wall Street derivatives collided with the bursting of the housing bubble.

New York University - 3 Stars

Alan Greenspan, MA, Economics, NYU: Former Federal Reserve Chairman and lifelong acolyte of Ayn Rand l’aissez-faire capitalist theories, kept Wall Street unregulated and the lending rate low, allowing the mortgage bubble to expand until it finally blew up, taking the economy with it.

Dick Fuld, NYU/Stern MBA: Former CEO of Lehman Brothers, the 158-year-old investment bank that, under his leadership, had to file for bankruptcy after it went deep into the subprime mortgage and CDO cesspool.

Kathleen Corbet, NYU/Stern MBA: Ran ratings agency Standard & Poor’s as they slapped Triple-A ratings on risky pools of loans, luring investors all over the world to invest in now-worthless CDOs.

Cornell University - 2 Stars

Sandy Weill, Cornell BA, Government: Former CEO of Citibank, created the banking behemoth that put commercial banking and investment banking under one roof for the first time since the 1930s, after successfully lobbying for the repeal of Depression-era regulations that kept those banking functions separate. The result is a Citibank that the government just recently took a 38% stake in to keep it afloat.

Richard Marin, Cornell MBA: Former CEO of Bear Stearns Asset Management, ran two highly leveraged hedge funds that blew up in the summer of 2007, kicking off the credit crisis cascade that eventually saw 85-year-old Bear Stearns dismantled and sold to JP Morgan Chase for parts.

Honorable Mention:

London School of Economics

Robert Rubin: Former Treasury Secretary under Clinton who reportedly strongly opposed government regulation of derivatives. Later he served as board director of Citigroup during its disastrous decline that led to the government taking over 38% of the company’s shares to keep it from going under.

University of Southern California

Chuck Prince, USC Law: Replaced Sandy Weill as CEO of Citibank until the firm’s poor risk management led to his replacement. Citibank now is 38% owned by taxpayers and trades for under $2 from a high of $55 in ‘07.

University of Georgia

Phil Gramm, U of Georgia Ph.D., Economics: Former Republican U.S. Senator (Rep) who co-authored the infamous 1999 repeal of the Depression-era Glass-Steagall Act, which regulated the banking industry and kept the economy depression-free for 66 years. As predicted, eight short years later, the banking meltdown and the so-called "Greatest Depression" was on.

Yale

Bill Clinton, Yale Law: Former President of the United States signed the Gramm-Leach-Bliley Act dissolving the depression-preventing Glass-Steagall Act, into law.

University of Virginia

David Lereah, UVA Ph.D., Economics: Former Chief Economist of the National Association of Realtors, whose ever-cheerful economic forecasts helped fuel the home-buying, mortgage-lending frenzy of the mid-2000s. Noted for authoring the 2006 book, Why The Real Estate Boom Will Not Bust — And How You Can Profit From It.



To: altair19 who wrote (162298)3/6/2009 12:44:38 AM
From: stockman_scott  Respond to of 361804
 
U.S. Bancorp, Northern Trust to pay back TARP

thedeal.com

Published March 5, 2009 at 4:49 PM

Could things be turning around? After all, two banks, U.S. Bancorp (NYSE:USB) and Northern Trust (NASDAQ:NRTS), are reportedly planning on paying back the U.S. Treasury's Troubled Asset Relief Program investments, according to House Financial Service Committee Chairman Barney Franks, D-Mass., in comments to Bloomberg.

That's good news for U.S. taxpayers and government, who will likely be able to see the returned money used to fund President Obama's Financial Stability Plan. But does the return of capital infusions signify an improving economy or a response to growing calls for oversight of TARP recipients?

According to Frank, Northern Trust already has returned the government's $1.6 billion investment. The Chicago-based institution, which is not bleeding like most of the industry because it did not participate in the mortgage business, was the subject of controversy last month for hosting a professional golf tournament and associated parties. Despite its profitability (fourth-quarter net income rose to $342.3 million, or $1.47 a share, from $125 million, or 55 cents a share, in the same period 2007), Northern Trust became the poster boy for more TARP oversight.

Meanwhile, U.S. Bancorp recently made moves to free money that could be used to repay its $6.6 billion TARP funds. The Minneapolis-based bank cut its dividend 88% to .05 cents on Wednesday, which would preserve $2.6 billion of capital per year.

U.S. Bancorp president and chief executive officer Richard K. Davis said in a press release the dividend reduction was not done from a position of weakness but "from a position of strength and a desire to continue to invest in and expand our business."

For both banks, returning the money would naturally mean they would no longer have to worry about constant criticism from politicians and taxpayers, who have been very vocal, deriding corporate strategies of some banks that received TARP money that include spending on bonuses or making recent M&A deals. Such restrictions may encourage other banks to follow Northern Trust's and U.S. Bancorp's leads. - Gerald Magpily



To: altair19 who wrote (162298)3/6/2009 3:48:28 AM
From: stockman_scott  Respond to of 361804
 
Whole World Is Rough, It’s Just Gettin’ Rougher /

by Christopher Cooper

Published on Wednesday, March 4, 2009 by CommonDreams.org

Something happens. I can't tell you what precipitates the conversion, or even if it has a single trigger. More likely, I think, the change is a process of internal reorganization that those of us unaffected or not paying close attention fail to notice or remark until it's complete, until some startling, irrational action or pronouncement signals that a new creature has emerged and begun to feed and corrupt its environment. And I certainly lack the resources in these constricted times to do the research that might help us understand how more or less reasonable and sometimes even quite intelligent human beings can accept and believe and promulgate such fantasies with so much conviction so soon after taking an oath of office. But it is so, and because it is so you and I might as well plant our gardens and watch the sunsets and read the better poets and forget about much of anything going in any direction but worse.

Take our governor. Or, probably, almost any governor, but Governor John Baldacci, State of Maine, is the executive whose recent little speech brings me to this focus this afternoon.

A great windfall has deposited upon his desk. This windfall has a name: the American Recovery and Reinvestment Act Of 2009. You may better know it as the "economic stimulus", the 780 billion dollar loan we're taking out so we can give ourselves about 270 billion dollars worth of tax cuts and pay over the rest mostly to private contractors for a variety of projects, interest on the whole to be paid by whichever of our descendants may survive the wars and ecological ruin we shall leave them. And how did our governor decide to spend Maine's spurt of stimulus? He's going to rebuild a road. Or part of a road. Or half of a part of that road.

That is to say, Maine will engage Pike Industries to rebuild the rough and sagging northbound lanes of that portion of Interstate 295 that runs from Topsham to Gardiner. The southbound lanes were done previously. This twenty-four mile stretch of road will cost us thirty-four million dollars. I do not argue with the price (although I do wish Maine didn't farm out everything possible, from local road plowing to school bus operation, to private industry, building in the cost of contractor profit and administrative overhead). I question the application of the money to this purpose.

This bit of Interstate was completed, I remember, about 1976 or so. It was among the last of the odd-lots of connectors and bypasses designed to complete the Interstate scheme. Troubled at the outset, certain sections had inadequate concrete and had to be redone. Since, thirty years of traffic and groundwater and settling have indeed produced rough spots and cracks and even whole concrete pours that simply slumped. Several remediations, some including new pieces of concrete, some merely filling cracks and holes with concrete or hot top, have already been effected. And there is no question that the new southbound lanes are smooth and nearly perfect. But to what great purpose?

Look at a map. Several state routes parallel 295 through this area. In fact, during construction all traffic is diverted to Route 201, a perfectly good and satisfactory two-lane highway. So what can you do on the Interstate you can't do on the roads that were there before it was built? You can drive seventy-five instead of fifty-five or sixty without worrying about the law. In fact the cops frequently breeze right by you at that speed. (A few years ago this occasioned some embarrassment when a trooper chauffeuring the governor on this very road operated at the proverbial "speed imprudent for conditions" and got Mr. Baldacci a concussion and a broken rib.)

Now, in a limitless world you would want to keep the Interstates in perfect repair. Not only could the governor then have the state SUV wound up like a screaming turbojet as the maximum lawman detailed to drive hauls his skinny ass from meeting to meeting to photo-opportunity to emergency room visit, but all manner of commercial and recreational vehicles could enjoy the broad curves and gentle grades of America's version of the Autobahn. But that world without limit never was. And now and increasingly painfully, we know it.

Look at your map. State Route 24, River Road, will also get you from Topsham to Gardiner. But you won't enjoy the ride, and in winter, in bad weather, at night, you might fear for your life. This road needs to be rebuilt. Narrow, shaded by overhanging trees, and with a thin, water-saturated base and in places not nearly enough shoulder or open space to plow snow off the travel surface, it becomes a roller-coaster tunnel of icy dread that pitches and yaws the whole of its length from the first deep cold spell in January through its eventual settling sometime in late April. And then, for the rest of the year, it's merely miserable.

But hundreds of people live along this road. They're not hauling truckloads of plastic crap to the Bangor Wal-Mart, they're going about their lives forced to use a road that is a hazard and a disgrace. The damned thing needs to be dug up, drained, reconfigured and rebuilt with better sight lines, new guardrails, adequate shoulders, brush removal and enough good base and new surface to render it safely passable year-round. What might thirty-four million dollars do for a road like this?

What would my road commissioner do with Alna's share of the sum, were the governor to apportion it among the municipalities?

For that matter, where else could we do some good with this amount of cash? Suppose we built a fleet of traveling dental vans, hired some eager, public-spirited young dentists (there must be some), and went out into the countryside and fixed the teeth of the residents of this state who, since the advent of dental insurance, have found they can't afford the price of a filling? Did you ever try to work with an infected tooth? Consider the improved productivity we would gain by reducing such suffering.

You could no doubt find a dozen or a hundred other good uses for thirty-four million dollars. But all Governor Baldacci could think to do was to dump it down the funnel of conventional thinking and let it spread out to enrich and enable the participants in the well-known fossil fuel economy. This is my complaint-not so much this particular project, but the attraction to the same old quick fix, big idea, business-as-usual ideas. Even the "alternative", "outside the box" thinking our representatives and leaders come up with are of the same ilk: big, expensive, often obsolete at conception and frequently contributory to the problem they were designed to fix.

"Energy independence", a fantasy at best, is one such thought that spills out the mouths of politicians, much as maggots erupt from the bodies of the long dead. Ferreting out "waste, fraud and abuse" in programs supported by the opposition party is another. And pretty much every damned one of them has proclaimed it his or her sacred duty to "make Maine more business-friendly." It wears me out just listening to the radio and reading the newspapers.

Last month the governor went up to Kingfield and got all chummy with the boys from Poland Spring Bottling Company (the Nestle Corporation), who are putting Maine groundwater into plastic bottles for shipment to discerning drinkers who, one must assume, do not have spigots in their homes. Now, this outfit uses fossil fuels and electricity and petrochemical feedstock to manufacture plastic bottles that they load on trucks (probably mostly diesel) for delivery. Some, no doubt gets delivered to customers in the neighborhoods of competing bottlers who, likewise, send their products to Maine, thus increasing the idiotic waste factor considerably. We can buy Fiji water in Maine; can Fijians, likewise, drink Poland Spring?

Some of the bottles may be recycled (using more energy) into plastic lawn furniture and plastic composite decking. Ultimately even this brief re-use will only keep the product out of a landfill or dioxin-generating incinerator for a few years. Most go there directly after a single use. Not a few end up floating around the oceans as part of the vast, strangulating plastic mat that gyres in deadly currents, killing and poisoning..

But everybody was in a happy mood that day, including the governor, the corporate suits, and the reporters who uncritically pumped up the company line, because it's (yes, they really said this) such a wonderfully green industry we have among us. Green like money? Or green like puke?

Here's what we do. This is how we look to the world. We lock ourselves to a bad idea and then we play a game with ourselves whereby the more obvious our folly, the more proudly we cling to it, the more we spend on it, the greater the collateral damage we will tolerate in its promulgation. So we build roads we may not much longer have fuel to drive on, we promote businesses that ruin our air and water and deplete our forests and give us cancers. And when we grow those cancers we give twenty per cent of every health care dollar to an insurance company instead of a doctor.

And our government is so busy handing over money to insurance companies (another big lot to AIG, just this week), car companies, banks, investment houses, and any other outfit with no business sense, no shame, and a desire for a free lunch, that there has not yet been time to look into this rumor that something is happening with the Arctic ice or the Amazon forests or the North Atlantic Gyre that might soon give us a bigger change than this new president (himself as in love with the disbursement of billions to the benefit of billionaires as any of the rest of them) thought he'd be dealing with when he told us he'd give us the change we needed.

The resurfacing of twenty-four miles of Route 295 is supposed to last twenty years. I might still be alive in twenty years. I'm betting the worries we'll have then will be bigger than whether to make a good superhighway just a little smoother. We'll still be paying interest on the stimulus bill that made the project happen long after the work has crumbled and the road returned to ruin.

Do politicians take a Conventional Wisdom injection? Do they catch shallowness from their associates? Or are they born with limited vision? Somebody should study this. Maybe there's money for research in the stimulus bill.

We would do better, Cooper believes, to keep our local and state roads in safe repair and let the vacationers and salesmen and merchandise haulers and governors in a hurry slow down on the slightly rougher Interstates. To this end, he has been keeping the ditches open on his driveway all this long and depressingly snowy winter, that erosion will not displace the gravel he spends the warmer months grading and replenishing. If you cannot travel to see his work in Alna, Maine, you may E-mail him at coop@tidewater.net.