Tag: Wall St.

Cross posted from The Stars Hollow Gazette

In his latest expose at Rolling Stone, contributing editor Matt Taibbi reports how Wall Street is making millions in profits looting the pension funds of American workers. He opens the piece with an outline of Rhode Island Treasure Gina Raimondo’s Rhode Island Retirement Security Act of 2011 and how state workers ended up funding their own “disenfranchisement”

What few people knew at the time was that Raimondo’s “tool kit” wasn’t just meant for local consumption. The dynamic young Rhodes scholar was allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast. One of her key supporters was billionaire former Enron executive John Arnold – a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation’s Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers.

Nor did anyone know that part of Raimondo’s strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb’s Third Point Capital was given $66 million, Ken Garschina’s Mason Capital got $64 million and $70 million went to Paul Singer’s Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 “Urban Innovator” of the year. [..]

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn’t just about money. Crucially, in ways invisible to most Americans, it’s also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.

Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they’re also being forced to sit by and watch helplessly as Gordon Gekko wanna-be’s like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings.

In a preview of the article, Matt outlines three reasons to follow this scandal:

1)     Many states and cities have been under-paying or non-paying their required contributions into public pension funds for years, causing massive shortfalls that are seldom reported upon by local outlets.

2)     As a solution to the fiscal crises, unions and voters are being told that a key solution is seeking higher yields or more diversity through “alternative investments,” whose high fees cost nearly as much as the cuts being demanded of workers, making this a pretty straightforward wealth transfer. A series of other middlemen are also in on this game, siphoning off millions in fees from states that are publicly claiming to be broke.

3)     Many of the “alternative investments” these funds end up putting their money in are hedge funds or PE funds run by men and women who have lobbied politically against traditional union pension plans in the past, meaning union members have been giving away millions of their own retirement money essentially to fund political movements against them.

(all emphasis is mine)

Last week, Matt joined Amy Goodman and Juan González on Democracy Now! to discuss how hedge funds are looting the pension funds of American workers

“Essentially it is a wealth transfer from teachers, cops and firemen to billionaire hedge funders,” Taibbi says. “Pension funds are one of the last great, unguarded piles of money in this country and there are going to be all sort of operators that are trying to get their hands on that money.”

Cross posted from The Stars Hollow Gazette

Earlier this year, the Justice Department brought a $5 billion fraud law suit against the ratings agency Standard and Poors for knowingly giving triple “A” ratings to financial products the agency’s analysts understood to be unworthy. The financial crisis that began in 2007 was mostly caused by those fraudulent ratings. Senators Al Franken (D-MN) and Roger Wicker (R-MI) worked together on an amendment that was included in  Dodd-Frank (pdf) to bring accountability and transparency to the ratings process. The amendment also required that the Securities and Exchange Commission conduct a study, that study has been completed (pdf). It found that there were “inherent” conflicts of interest in the system contributed to the 2008 crisis.

Contributing editor and investigative journalist for Rolling Stone Matt Taibbi published an in depth look at the ratings agencies and how ratings agencies like Moody’s and Standard & Poor’s helped trigger the meltdown with new documents. The documents surfaced from two lawsuits that files against S&P by  a diverse group of institutional plaintiffs with King County, Washington, and the Abu Dhabi Commercial Bank. The plaintiffs claimed that S&P, along with Morgan Stanley, fraudulently induced them to heavily invest in a pair of doomed-to-implode subprime-laden deals. Matt calls these new revelations the “Last Mystery of the Financial Crisis:

What about the ratings agencies?

That’s what “they” always say about the financial crisis and the teeming rat’s nest of corruption it left behind. Everybody else got plenty of blame: the greed-fattened banks, the sleeping regulators, the unscrupulous mortgage hucksters like spray-tanned Countrywide ex-CEO Angelo Mozilo.

But what about the ratings agencies? Isn’t it true that almost none of the fraud that’s swallowed Wall Street in the past decade could have taken place without companies like Moody’s and Standard & Poor’s rubber-stamping it? Aren’t they guilty, too?

Man, are they ever. And a lot more than even the least generous of us suspected.

Thanks to a mountain of evidence gathered for a pair of major lawsuits, documents that for the most part have never been seen by the general public, we now know that the nation’s two top ratings companies, Moody’s and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash.

In incriminating e-mail after incriminating e-mail, executives and analysts from these companies are caught admitting their entire business model is crooked.

Matt joined MSNBC’s All In host Chris Hayes to discuss how these newly-revealed documents are “the smoking gun of the financial crisis” revealing the corruption and dishonesty at the core the industry.

Cross posted from The Stars Hollow Gazette

The former special inspector-general of the troubled asset relief program (TARP), Neil Barofsky says that it is time for a “post mortem” analysis former Treasury Secretary Timothy Geithner’s doctrine, the preservation of large banks, the largesse of Wall St. and the perversion of of the US criminal justice system. In this article posted at naked capitalism, Mr. Barofsky looks at the effect of the “Geithner Doctrine” and the weak response to the LIBOR scandal:

The recent parade of banking scandals, such as the manipulation of Libor rates by Barclays, Royal Bank of Scotland and other major banks, can be traced back to the lax system of regulation before the financial crisis – and the weak response once disaster struck.

Take the response of the New York Federal Reserve to Barclays’ admission in 2008 that it was submitting false Libor rates and was not alone in doing so. Mr Geithner’s response was to in effect bury the tip. He sent a memo to the Bank of England suggesting some changes to the rate-setting process and then convened a meeting of regulators where he reportedly described only the risk but not the actual manipulation of the rate. He then put the government imprimatur on the rate via bailout programmes. His inaction helped permit a global crime to continue for another year.

When it was UBS’s turn to settle its Libor charges, even though a significant amount of the illegal activity took place at the parent company level, only a Japanese subsidiary was required to take a plea. Eric Holder, US attorney-general, demonstrated his embrace of the Geithner doctrine (a phrase coined by blogger Yves Smith) in explaining the UBS decision. He said that a more aggressive stance against the parent company could have a negative “impact on the stability of the financial markets around the world”.

This week we saw the latest instalment of the saga. In fining RBS £390m, the DoJ only indicted one of the bank’s Asian subsidiaries, avoiding the more damaging result that would have stemmed from charging the parent company.

Instead of seeking deterrence and justice, the US government increasingly appears to have fully absorbed the Geithner doctrine into its charging decisions by seeking a result that has a minimal impact on the target bank but will generate the best-looking press release. Some banks today are still too big to fail – and they are still too big to jail.

There are no meaningful consequences for this criminality. The fines with a promise not to do this again are just a game to allow the banks to continue the fraudulent conduct and find better ways to cover it up. Mr. Barofsky concludes that we must ditch the “Geithner Doctrine” to end “the game of incentives gone wild, and the lack of accountability in the aftermath of the crisis has only reinforced those bad incentives.”

o reclaim our system of justice, the global threat posed by the failure of any of our largest financial institutions must be neutralised once and for all. They must be reduced in size, their safety nets must be dramatically constricted and their capital requirements enhanced far beyond the current standards. Then, and only then, can the same set of rules apply to all.

In an extended interview with “The Daily Show“ host Jon Stewart, Mr. Barofsky discussed the double standards of the TARP program and the alien culture of Washington DC and explains why the banks will never face true justice..

Cross posted from The Stars Hollow Gazette

Pres. Barack Obama nominated former US Attorney of the Southern District of New York, Mary Jo White, to head the troubled Securities and Exchange Commission. The announcement comes a day after the damning PBS Fraontline expose of the Department of Justice’s failure to prosecute bank fraud and the resignation of Lanny Breuer, the head of the DOJ criminal division. Ms. White certainly has a fine reputation of being a tough prosecutor during her tenure as US Attorney, she managed something Rudi Guiliani failed to do, finally putting notorious mobster John “The Teflon Don” Gotti behind bars. However, in the 10 years since she left that office, Ms. White has worked diligently to protect the heads of the “Too Big To Fail” banks. In his Salon article, David Sirota called her a “Wall Street enabler” and goes on to enumerate the evidence:

Matt Taibbi, Rolling Stone contributing editor, in his article “Why Isn’t Wall Street in Jail,” recounts how during her tenure as head of litigation at the New York law firm Debevoise & Plimpton, Ms. White defended some very high profile bankers and played a key role in the “squelching of then-SEC investigator Gary Aguirre’s investigation into an insider trading incident involving future Morgan Stanley CEO John Mack”

   The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn’t likely to fly, explaining that Mack had “powerful political connections.”…

   Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO … It didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement…

   Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive – not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target’s firm is being represented…by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC’s enforcement division…

   Aguirre didn’t stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued.

In February of 2012 on a panel at a New York University School of Law even, Ms White expressed her doubts about whether banks had committed crimes ahead of the financial crisis stating that care should be taken to “distinguish what is actually criminal and what is just mistaken behavior, what is even reckless risk-taking, and not bow to the frenzy.”

Another point of conflict is Ms. White’s husband. Yves Smith at naked capitalism notes that “John White, who headed the SEC’s corporate finance section under Chris Cox and was heavily involved in detailed Sarbanes Oxley rulemaking, and now that he is back at Cravath, has been lobbying against regulation.”

Nor does Ms. White have a background in finance or the “inner workings of the trading system:”

Although she has represented many executives accused of financial crimes, White is not an expert on the inner workings of trading systems, a lack of knowledge that may not serve her well as the SEC struggles to keep up with rapid changes in increasingly complex financial markets.

“The problem with the SEC is that they don’t seem to have a grip on” high-frequency trading and other major issues affecting modern financial markets, said Joe Saluzzi, co-head of equity trading at independent brokerage Themis Trading and a frequent critic of high-speed trading. “We’re concerned about cleaning up the market, and we need the SEC to take the lead here.”

Her background puts to question how aggressively White might prosecute financial fraud and enforce new rules under the Dodd-Frank financial reform law — most of which have not yet been adopted by the SEC.

Matt Taibbi recounts a conversation he had with a head fund manager regarding Ms. White’s:

His point about White is simple and it makes a lot of sense. She may very well at one time have been a tough prosecutor. But she dropped out and made the move a lot of regulators make – leaving government to make bucketloads of money working for the people she used to police. “That move, being a tough prosecutor, then going to work defending scumbags, you can only make that move once,” was his point. “You can’t go back again, you know what I mean?”

Think about it: how do you go back and sit in S.E.C.’s top spot after all of those years earning millions as a partner for a firm that represented Morgan Stanley, Bank of America, Goldman, Sachs, Deutsche, Chase, and AIG, among others? Think that fact that his firm has retained her firm has anything to do with Jamie Dimon coming out and saying that White is the “perfect choice” to run the S.E.C.? Think of all the things she knows but can’t act upon. Could she really turn around and target Morgan Stanley after being their lawyer for all those years?

Ms. White is not only another example of the government’s revolving door from public service to private practice back to public service but of Pres. Obama’s signal to Wall Street that they are safe to continue with business as usual. Mary Jo White is the fox in the hen house.  

Cross posted from The Stars Hollow Gazette

While we have been distracted by the irrational exuberance of a second term for Barack Obama, Benghazi (again) and gun control, the European Union has come around to the realization that there is a need to do something about the economy. On Tuesday the the EU approved a financial transaction tax (FTT) for eleven nations:

Eleven countries won the EU’s backing for a financial transaction tax (FTT), with Germany, France, Italy and Spain adding their names to eurozone neighbours Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

The UK, which already imposes a tax on share trades, could benefit from a shift in banking business if Germany and France tax foreign exchange or derivatives trading in Frankfurt and Paris.

The levy, which could raise as much as €35bn (£29.3bn) a year for the 11 countries, is designed to prevent a repeat of the conditions that stoked the credit crunch by reining in investment banks. Following the decision, the European Commission will put forward a new proposal for the tax, which if agreed on by those states involved, would mean the levy could be introduced within months. Although critics say such a tax cannot work properly unless applied worldwide or at least across Europe, countries such as France are already banking on the extra income from next year.

Former Labor Secretary Robert Reich tweeted:

Despite past unsuccessful attempts to introduce a FTT, two Democratic representatives, Rep. Peter DeFazio (D-OR) and Sen. Tom Harkin (D-IA), will reintroduce the FTT which would raise an estimated $352 billion over the next decade by imposing a 0.03 percent tax on trades. That translates to 3 dollars on every $100 in trades. Critics have said that it will have a detrimental effect on economic growth, one of the bill’s sponsors have stated that has already been proven to be false:

“For 50 years we had a tax that was about seven times larger than this when the country was seeing the greatest growth in its history, post-World War II,” he said. “So we’ve proven this will not have a detrimental impact on growth. In fact, it perhaps is beneficial to growth. It’s not necessarily beneficial to salaries of hedge fund managers on Wall Street.”

Complaints that an FTT would encourage businesses to move elsewhere are countered by the facts that 52 financial executives, including several former heads of mega-banks JP Morgan and Goldman Sachs, endorsed the idea and forty countries around the world have already embraced a transactions tax.

Journalist Economist and author David Cay Johnston joined Ed Schultz on the The Ed Show what the FTT would mean for the American economy.

With the capitulation on filibuster reform and the feral children still running the asylum, there is little chance that something this sensible will even get out of committee. That is a very sad state of affairs for this country.

Correction: We received a very kind e-mail from Pulitzer Prize winning journalist David Cay Johnston noting that he is not an economist. He is a renowned investigative journalist who has written about economics and the US tax system.  

Cross posted from The Stars Hollow Gazette

If anyone had any doubts that the US Government is no longer a “government of the people” but of corporation and Wall St, you need only read the recently released FBI documents that labeled Occupy Wall Street a “terrorist group” and coordinated with banks and cities nationwide to suppress the protests with strong arm tactics and targeted assassinations (see pg 61 of document). This all started before the protest even began without evidence that the protests would be anything but peaceful and despite the internal acknowledgment that the movement opposed violent tactics. The documents prove that the government blatantly lied about the Department of Homeland Security involvement in coordinating the violent crackdown in New York City, Oakland and other major cities. Partnership for Civil Justice obtained the heavily redacted FBI documents revealing that the surveillance began at least a month before the protest in Zuccotti Park began and that the #OWS movement was being treated as potential criminal and terrorist activity.

The PCJF has obtained heavily redacted documents showing that FBI offices and agents around the country were in high gear conducting surveillance against the movement even as early as August 2011, a month prior to the establishment of the OWS encampment in Zuccotti Park and other Occupy actions around the country.

“This production, which we believe is just the tip of the iceberg, is a window into the nationwide scope of the FBI’s surveillance, monitoring, and reporting on peaceful protestors organizing with the Occupy movement,” stated Mara Verheyden-Hilliard, Executive Director of the Partnership for Civil Justice Fund (PCJF).  “These documents show that the FBI and the Department of Homeland Security are treating protests against the corporate and banking structure of America as potential criminal and terrorist activity.  These documents also show these federal agencies functioning as a de facto intelligence arm of Wall Street and Corporate America.”

“The documents are heavily redacted, and it is clear from the production that the FBI is withholding far more material. We are filing an appeal challenging this response and demanding full disclosure to the public of the records of this operation,” stated Heather Benno, staff attorney with the PCJF.

Author and activist Naomi Wolf reported in The Guardian that these “new documents prove what was once dismissed as paranoid fantasy: totally integrated corporate-state repression of dissent.”

It was more sophisticated than we had imagined: new documents show that the violent crackdown on Occupy last fall – so mystifying at the time – was not just coordinated at the level of the FBI, the Department of Homeland Security, and local police. The crackdown, which involved, as you may recall, violent arrests, group disruption, canister missiles to the skulls of protesters, people held in handcuffs so tight they were injured, people held in bondage till they were forced to wet or soil themselves – was coordinated with the big banks themselves.

The Partnership for Civil Justice Fund, in a groundbreaking scoop that should once more shame major US media outlets (why are nonprofits now some of the only entities in America left breaking major civil liberties news?), filed this request. The document – reproduced here in an easily searchable format – shows a terrifying network of coordinated DHS, FBI, police, regional fusion center, and private-sector activity so completely merged into one another that the monstrous whole is, in fact, one entity: in some cases, bearing a single name, the Domestic Security Alliance Council. And it reveals this merged entity to have one centrally planned, locally executed mission. The documents, in short, show the cops and DHS working for and with banks to target, arrest, and politically disable peaceful American citizens.

The documents, released after long delay in the week between Christmas and New Year, show a nationwide meta-plot unfolding in city after city in an Orwellian world: six American universities are sites where campus police funneled information about students involved with OWS to the FBI, with the administrations’ knowledge (p51); banks sat down with FBI officials to pool information about OWS protesters harvested by private security; plans to crush Occupy events, planned for a month down the road, were made by the FBI – and offered to the representatives of the same organizations that the protests would target; and even threats of the assassination of OWS leaders by sniper fire – by whom? Where? – now remain redacted and undisclosed to those American citizens in danger, contrary to standard FBI practice to inform the person concerned when there is a threat against a political leader (p61).

Mara Verheyden-Hilliard, executive director of the PCJF, sat down for an interview with Amy Goodman on Democracy Now!

Transcript can be read here

So much for paranoia. The government is out to stop peaceful protest in anyway they can.

Cross posted from The Stars hollow Gazette

The the second half a web exclusive interview, Neil Barofsky, the former Special Inspector General for the U.S. Troubled Asset Relief Program (TARP), talks with Bill Moyers. They discuss, what Mr. Moyes described as the “incestuous orgy” that is going on between the banks and the federal government, the need to tackle banking reform and the real possibility of another financial collapse.

The first part of the interview is here

The transcript is here.

Cross posted from The Stars Hollow Gazette

High Speed Frequency Trading (HFT) has been known to rattle traders and disrupt the stock market but has yet to be harnessed by regulators, until now.

Germany Acts to Increase Limits on High-Speed Trades

by Melissa Eddy and James Kanter

Chancellor Angela Merkel’s government approved draft legislation on Wednesday that foresees imposing additional controls on such trading. The proposed measures include requiring that all high-frequency traders be licensed, requiring clear labeling of all financial products traded by powerful algorithms without human intervention and limiting the number of orders that may be placed without a corresponding trade. Traders who violate the limits, which would be set once the law took effect, would face a fine.

“Computer-generated algorithmic transaction involves a variety of new risks,” Germany’s finance ministry said in a statement. “Germany is reacting to these risks with legislation that will create more transparency, security and a better overview.”

The legislation, which is subject to approval by both houses of Parliament, was written with an eye toward similar legislation being discussed in Brussels that could eventually apply across the European Union, which has 27 member nations, the official said.

A prime example of what happens when HFT runs amok occurred in August this year by Knight Match, a system used by high speed trades, nearly bankrupted the trading company Knight Capital that lost $440 million in 45 minutes.

Knight was saved by a hastily assembled $400 million from a consortium of investors, but it appears the damage to Knight’s reputation with customers, particularly high frequency traders, will take longer to repair. Knight says the volume numbers, which were compiled by stock market and technology research firm Tabb Group, exclude the trading glitch, which happened on August 1st. Knight was forced to shut down its systems for part of that day. The volume drop shows that traders shied away from Knight longer than just in the days following the trading glitch. A Knight spokeswoman says the company won’t comment on whether trading volumes rebounded in September until early next month.

The HFT system has caused some concern in Washington. At a Senate Banking Committee hearing trading professional expressed the the fears of investors:

It no longer is your parents’ or grandparents’ stock market. Rather, it’s become a Wild West of trading, with errant technology too often in control and setting stocks, commodities, currencies and futures up for violent moves that could make the $1 trillion flash crash of May 2010 look tame by comparison, testified David Lauer, who has designed trading technology and worked as an analyst for Allston Trading and Citadel Investment Group.

“U.S. equity markets are in dire straits,” Lauer said. “We are truly in a crisis.”

He noted that “retail investors have been fleeing the stock market in droves” and that the Chicago Booth/Kellogg School Financial Trust Index shows “investor confidence is nonexistent – with only 15 percent of the public expressing trust in the stock market.”

Rather than buying a stock and holding onto it, institutions using high-frequency trading buy and sell stocks constantly in milliseconds, or much faster than a blink of the eye. Lauer said about 50 to 70 percent of the volume of trading in the stock market now takes that form. Often trading systems send out phony trades aimed at manipulating others into buying or selling. The activity can mislead legitimate traders working for mutual funds, pension funds or individuals to buy a stock at too high a price or sell it at too low a price.

The system is also riddled with fraud:

A New York-based brokerage allowed overseas clients to run a scheme aimed at distorting stock prices by rapidly canceling orders, according to the U.S. Securities and Exchange Commission.

Clients of Hold Brothers On-Line Investment Services were “repeatedly manipulating publicly traded stocks” by placing and erasing orders in an illegal strategy designed to trick others into buying or selling, the SEC said today in a release. Hold Brothers, its owners, and the foreign firms Trade Alpha Corporate Ltd. and Demonstrate LLC agreed to settle allegations that the New York broker failed to supervise customers and pay $4 million in total SEC fines.

The SEC complaint targeted practices that abused high-speed computer trading on American equity venues. As high-frequency activity has grown in recent years, the agency’s efforts to stop fraudulent practices such as “layering” or “spoofing” have extended to the automated trading tactics.

However, the SEC has been called the “Barney Fife” of regulators when it comes to regulating HFT and their competence has been questioned:

But the agency is clearly outgunned when it comes to dealing with high-frequency trading, many experts agree. And a new lawsuit goes so far as to accuse the SEC of covering up high-speed fraud so nobody will know just how incompetent it really is, Courthouse News reports.

In the suit, a Wisconsin company called EMM Holdings accuses the SEC of not investigating a Houston high-speed trading firm called Quantlab Financial. According to EMM, Quantlab is perpetrating fraud amid all the high-speed churning and burning it does in the stock market. EMM notes that Quantlab has been flagged six times in the past eight years by the Financial Industry Regulatory Authority, the brokerage industry’s self-regulatory body, for not properly documenting its trades. EMM thinks this is evidence that Quantlab is trying to cover up some fraud, and it has asked the SEC (pdf) for any documents showing an investigation of Quantlab. The SEC has refused (pdf), on the grounds that doing so might interfere with law-enforcement activities. EMM has sued the SEC to force it to give up whatever goods it has on Quantlab.

Trouble is, it’s not entirely clear if the SEC is actually investigating Quantlab at all. EMM argues in its complaint that the only way the SEC could deny its record request is “if there is an on-going and active investigation.” And EMM accuses the SEC of letting this investigation fester, hoping the statute of limitations will run out.

“Given [the SEC’s] near complete abdication of its prosecutorial duties during the 2008 financial crisis, inaction and delay may unfortunately have become [the SEC’s] modus operandi for dealing with complex financial malfeasance,” EMM said in its complaint.

At least the Germans are willing to take the “bull by the horns” by limiting the ability of these trades to disrupt the market with rules that would slow trading, curb the volume and make it more expensive for traders to cancel large volumes of orders.  

Cross posted from The Stars Hollow Gazette

Nothing surprising about the revelation in today’s New York Times that the SEC has failed to get tough with the big banks but it does highlight how Occupy Wall St. has change this conversation in the traditional media that is now taking a more critical look at what is wrong with the economy and why. Despite all the whining from the agency that it doesn’t have the resources or the tools, when in fact it does but has refused to use them against the biggest and repeat offenders. The SEC has repeatedly granted waivers to the laws and regulations that stop fraud:

JPMorganChase, for example, has settled six fraud cases in the last 13 years, including one with a $228 million settlement last summer, but it has obtained at least 22 waivers, in part by arguing that it has “a strong record of compliance with securities laws.” Bank of America and Merrill Lynch, which merged in 2009, have settled 15 fraud cases and received at least 39 waivers.

Only about a dozen companies – Dell, General Electric and United Rentals among them – have felt the full force of the law after issuing misleading information about their businesses. Citigroup was the only major Wall Street bank among them. In 11 years, it settled six fraud cases and received 25 waivers before it lost most of its privileges in 2010.

The SEC also does keep an organized data base of the waivers it granted, so in its investigation the NYT’s had do some digging but found some very telling facts about the SEC’s failures to protect investors while protecting the big banks from lawsuits and prosecution:

JPMorganChase is among the big Wall Street firms that have been granted multiple waivers with nearly every settlement of S.E.C. fraud charges. Last July, it agreed to pay $228 million to settle civil and criminal charges that it cheated cities and towns by rigging bids with other Wall Street firms to invest the money raised by several municipalities for capital projects.

JPMorgan received three waivers related to that case for privileges that it otherwise would have lost. But the S.E.C. said the company’s fraudulent actions didn’t involve misleading investors about JPMorgan’s business. [..]

Despite six securities fraud settlements in 13 years, JPMorgan rarely if ever lost any special privileges. It has been awarded at least 22 waivers since 2003, with most of its S.E.C. settlements generating two or more. In seeking the reprieves, lawyers for JPMorgan stated in letters to the S.E.C. that it should grant a waiver because the company has “a strong record of compliance with the securities laws.”

JPMorgan isn’t the only big bank that has received a pass on fraud from the SEC, Bank of America has been a recipient of favored status:

In 2009, the S.E.C. was negotiating with Bank of America over charges that it had failed to disclose to shareholders that billions of dollars in bonuses were being paid to Merrill Lynch executives just as Bank of America was bailing out the firm.

Because the S.E.C. charges involved fraudulent statements by both Bank of America and Merrill Lynch about their financial status, the merged company was in danger of losing its special privileges for both offerings and forecasts. [..]

It settled the case by agreeing to a $150 million payment. The S.E.C., however, decided not to charge the bank with fraud, which could have endangered the bank’s special status. Instead, the S.E.C. charged Bank of America with violating disclosure rules for shareholder materials and proxies, and Bank of America kept its privileges.

It took years before the SEC finally took action against Citigroup for its violations of rules and regulations but in 2010. That only happened because Citibank blatantly lied to its investors about the amount of risk it was carrying on its balance sheets. In its disclosure the bank stated that it was only holding $13 billion in risks when in reality it was $50 billion. It settled the case for $75 million but because of the falsification of its financial statement it lost the ability to insulate itself from lawsuits over mistaken predictions about its business and had to wait weeks for the SEC’s approvals to make itself eligible to sell stocks, bonds and other securities to the public. Prior to those sanctions Citibank had settled six fraud cases and received 25 waivers. Meanwhile JPMorgan, Gold Sachs and others have avoided sanctions and continue their fraudulent practices.

Yves Smith at naked capitalism in pointing out the significance of this article makes this observation:

What the article does not make quite clear is the SEC rationale for this double standard. I’d hazard that it’s that big financial players are often in the market raising funds, and restricting their access is, well, just a bit too mean since they are money junkies. Just look how hard it was for Citi when it fell out of the SEC’s most favored nations status and lost its ability to use so-called “shelf registrations” to sell stock and bonds:

   And the companies continue to use rules that let them instantly raise money publicly, without waiting weeks for government approvals. Without the waivers, the companies could not move as quickly as rivals that had not settled fraud charges to sell stocks or bonds when market conditions were most favorable.

OMG, if you break the law, you might be put at a competitive disadvantage! Can’t have that, now can we?

She concludes:

[..] As we have said, one of basic rules of regulating is to make sure the regulated know you are not cowed by them. When I was a young person working on Wall Street, investment banks were afraid of the SEC. By contrast, this article reveals, as many have suspected, that regulators have plenty of tools to bring banks to heel. They choose not to use them.

The SEC does have a defense of sorts, which is (as we have recounted) that Congress has cut off funding when it merely tried to be tough in defending retail investors from abuses under Arthur Levitt in the 1990s. The passivity of the SEC is a symptom of elite corruption. A reform-minded President could choose to cross swords with Congress and defend the agency against harassment for tough minded enforcement. But that would be in a parallel universe where the banks were not in charge.

It was the Occupy Wall St. movement and a handful of state attorneys general who have changed the conversation from protecting the 1% to investigating them and looking at their practices and the agencies that regulate them with a more critical eye.

Cross posted from The Stars Hollow Gazette

The New York City Occupiers took back Zucchotti Park a couple of hours before midnight on New Year’s Eve despite the presence of NYPD and private security:

About 100 people arrived at the park at about 7 p.m., according to witnesses, and someone put up what was described as a small multicolored tent, about two feet tall, made for a child. Two young girls, who were at the park with their mother, began playing inside.

Though the New York City Police Department had officers fanned out throughout the city for the holiday, there were police officers lined up across the street from Zuccotti Park, at the ready alongside private security guards. They stepped in.

Police officers and security guards, who stood at the ready across the street, told protesters to remove the tent, saying it violated rules issued by the park’s owner, Brookfield Properties. Meanwhile, an officer and a guard blocked other protesters, and at least one reporter, from entering the park. Some people disregarded their instructions and squeezed through the spaces between metal barricades along other parts of the perimeter.

That number swelled to over 500 by 10:30 as text messages and signal went out across the city. They draped the piled barricades with Christmas lights and the lighted Christmas tree was wrapped with the Occupy Wall Street banner as the OWS “bat signal” was projected on the side of a building. As the protesters were chased from the park, they took to the nearby streets, drumming and chanting as they marched. Most of the arrests were of demonstrators who were obeying police directions or walking peacefully on the side walk. Many of the protesters and others not involved in the demonstration were “kettled” into groups then arrested for obstructing pedestrian traffic or for moving as directed by the officers. Even legal observers and the press were again arrested and threatened by the NYPD. The observer from the National Lawyers Guild was later released.

Welcome to the United Police State of America where you can be “legally” detained indefinitely on the president’s word.

Cross posted from The Stars Hollow Gazette

Occupy Wall Street Thanksgiving

This Thanksgiving, Occupy Wall Street is celebrating unity and community with an open feast at Liberty Square. From 2 to 6 p.m. at Liberty Square (Zuccotti Park) we will meet to share food, stories and inspiration. All members of our global community are invited to break bread with us.

“This is all about supporting the 99%,” said Megan Hayes, an organizer with the #OWS Kitchen working group, and a former high end chef. “So many people have given up so much to come and be a part of the movement because there is really that much dire need for community. We decided to take this holiday opportunity to provide just that – community.”

More than three thousand individually wrapped plates will be distributed on Thursday in accordance with New York State Health Code. People in the community have opened their homes to cook meals. Roger Fox in New Jersey will be making 250 meals, Mia Valh and Alia Gee are also making large numbers of meals. A lot of community organizations are involved and Liberty Cafe in East NY donates space for the #OWS Kitchen working group.

Locally owned family business, Texas BBQ will be providing 2,000 of the meals. They are being purchased with donated funds and will be served along with the home-cooked meals from supporters and food from the People’s Kitchen at Occupy Wall Street. The Owners of Texas BBQ are Egyptian and are supporters of the Occupy Movement.

Indigenous voices, religious leaders, food justice activists and leaders from peoples’ movements around the world are speaking on Thursday at Liberty Square. Occupy Thanksgiving is a celebration for the entire New York community. All are invited.

There will also be a can food drive. Donations of cans will go to local food banks and pantries throughout NYC.

   You’ve been sleeping on the streets for two months pleading peacefully for a new spirit in economics. And just as your camps are raided, your eyes pepper sprayed and your head’s knocked in, another group of people are preparing to camp-out. Only these people aren’t here to support occupy Wall Street, they’re here to secure their spot in line for a Black Friday bargain at Super Target and Macy’s.

   Occupy gave the world a new way of thinking about the fat cats and financial pirates on Wall Street. Now lets give them a new way of thinking about the holidays, about our own consumption habits. Lets’ use the coming 20th annual Buy Nothing Day to launch an all-out offensive to unseat the corporate kings on the holiday throne.

   This year’s Black Friday will be the first campaign of the holiday season where we set the tone for a new type of holiday culminating with #OCCUPYXMAS. As the global protests of the 99% against corporate greed and casino capitalism continues, lets take the opportunity to hit the empire where it really hurts…the wallet.

   On Nov 25/26th we escape the mayhem and unease of the biggest shopping day in North America and put the breaks on rabid consumerism for 24 hours. Flash mobs, consumer fasts, mall sit-ins, community events, credit card-ups, whirly-marts and jams, jams, jams! We don’t camp on the sidewalk for a reduced price tag on a flat screen TV or psycho-killer video game. Instead, we occupy the very paradigm that is fueling our eco, social and political decline.

   Historically, Buy Nothing Day has been about fasting from hyper consumerism – a break from the cash register and reflecting on how dependent we really are on conspicuous consumption. On this 20th anniversary of Buy Nothing Day, we take it to the next level, marrying it with the message of #occupy…

   We #OCCUPYXMAS.

   Shenanigans begin November 25!

But of you must shop

PORTLAND, Ore. — Occupy protesters want shoppers to occupy something besides door-buster sales and crowded mall parking lots on Black Friday.

Some don’t want people to shop at all. Others just want to divert shoppers from big chains and giant shopping malls to local mom-and-pops. And while the actions don’t appear coordinated, they have similar themes: supporting small businesses while criticizing the day’s dedication to conspicuous consumption and the shopping frenzy that fuels big corporations.

Nearly each one promises some kind of surprise action on the day after Thanksgiving, the traditional start of the holiday shopping season.