Fraud at heart of financial meltdown.

(9 am. – promoted by ek hornbeck)

Get a load of Senator Dodd’s executive summary of his own proposed financial reform package:

This legislation will not stop the next crisis from coming.

Thank you, Senator Dodd.  Well said.  Enjoy your gig on Wall Street.

Dodd’s reforms amount to an “inside job” by a Financial Stability Oversight Council composed of the same corrupt bastards at Fed, Treasury, and regulatory agencies who failed last time.  

The Financial Stability Oversight Council

– Expert Members: A 9 member council of federal financial regulators and an independent member will be Chaired by the Treasury Secretary and made up of regulators including: Federal Reserve Board, SEC, CFTC, OCC, FDIC, FHFA, the new Consumer Financial Protection Bureau. The council will have the sole job to identify and respond to emerging risks throughout the financial system.

Notice the language on Too Big to Fails and the vaunted “Volcker rule:”

– Volcker Rule: Requires regulators to implement regulations for banks, their affiliates and bank holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds. Nonbank financial institutions supervised by the Federal Reserve will also have restrictions on their proprietary trading and hedge fund and private equity investments. Regulations will be developed after a study by the Financial Stability Oversight Council and based on their recommendations.

“After a study” by the same corrupt bastards, the Volcker rule could not be more non-committal.  With the exception of the new, nebulous consumer protection agency, these are the exact same people who failed last time.  Breaking up “too big to fails” will only be done “if they pose a grave threat” and “only as a last resort.”   Brilliant: Take action after the sparks are flying off the guard-rail.

Look at this gem, requiring companies to keep some “skin in the game” to reduce securities risk to buyers:

Reducing Risks Posed by Securities

– Skin in the Game: Requires companies that sell products like mortgage-backed securities to retain at least 5% of the credit risk, unless the underlying loans meet standards that reduce riskiness. That way if the investment doesn’t pan out, the company that packaged and sold the investment would lose out right along with the people they sold it to.

Only five-percent skin?  Unless the securities meet unspecified standards thatreduce risk?  Pathetic.

The proposal isn’t uniformly this crappy, but I sense a lot of evasion in this proposal.  Also, there’s no mention of auditing the Fed, and no mention of the black holes known as Fannie and Freddie, et al.  

Doddy, Doddy, Dodd.  Just retire already.  You’ve done enough damage.  Leave us alone.

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Moreover, the problem is not simply that a complex system crashed.  It was a complex system of fraudulent criminal activity and stinking cover-ups!

Barry Ritholz read the Lehman report and smells dead rats:

The bankruptcy report on Lehman is both revealing and damning. Once again, the investing public learns – after the fact – the basic truisms of modern markets:

-Major accounting firms are worthless to investors. They were either unable or unwilling to detect fraud amounting to 50 billion dollars. The incompetents at Ernst & Young deserve the same fiery death as Arthur Anderson; Whether they are hired guns or paid whores, they – like the rating agencies – are worthless to investors.

– Corporate management engages in fraud all too regularly: Am I reading this correctly – that Dick Fuld’s defense will be “I didn’t know that Lehman was a giant Ponzi scheme, and I was unaware we were hiding billions in bad debt and leverage off balance sheet?”

Based on the release of the bankruptcy court report, LEH was technically insolvent perhaps years before it collapsed;

– The Shortsellers turn out to be the good guys. Consider the absurdity fraud of “protecting” the bankster frauds – from the truth, as revelaed by Einhorn et. al.

-The SEC is utterly incapable of comprehending how markets function. They believe the criminals who commit the fraud, and ignore the whistleblowers who uncover it;

-The ban on short selling is an indictment of the inability of the SEC to understand WTF is going on, and a reward to the criminal corporate management teams;

-The Media did a terrible job uncovering the fraud as well. Some media folk were used by CEOs. Some of the TV press who relied on access to their subjects, actually rallied to the defense of these CEOs, including Fuld, and trashed the short sellers. Most notably Charlie Gasparino from his CNBC days, but their were others as well.

-The Analyst community, for the most part, failed as well.  The few who publicly acknowledged the debacle were notable for being so far outside of the herd. 95% of them were wrong.

Pathetic

All in all, the entire system failed. The situation is utterly disgusting, and if the investing public pulls its money out of the completely corrupt public markets for a generation or more, it would not surprise me . . .

Maybe Senator Kaufman is on to something here by keeping criminal conduct at center stage where it belongs:

“fraud and potential criminal conduct were at the heart of the financial crisis”

The United States is one giant criminal enterprise.

We’re ruled by mobsters.

Updated: Comments on Dodd’s reform package by three well-known liars:

Obama:

A fine foundation for continued abuse by big banks and their cocksucking senatorial lapdogs.

Geithner:

I’m talking: Proof positive the bill does nothing.  There’s an awesome profile of me in the last issue of New Yorker.

Sen. Shelby

Should anyone need proof that Dodd’s proposal does nothing worthwhile, an endorsement from me, Senator Shelby, should prove it.