Tag Archives: CFTC

S. 3468: It’s Baaack…and shouldn’t be

Heads Up!  They’re back, againS. 3468 is yet another attempt by the financialists and related banking lobbyists to hamstring efforts to regulate the financial services sector.   It’s not like these interests have ever given up their campaign to revert to Business As Usual  such that the Wall Street Wizards can become yet another font of ill advised, incomprehensible, albeit highly profitable synthetic or otherwise manufactured financial products — You know, things like those adorable synthetic CDO’s which flooded the financial market with valueless toxic paper.

Here’s the CRS summary of the bill submitted by Senator Rob Portman (R-OH) on behalf of the banking sector:

Independent Agency Regulatory Analysis Act of 2012 – Authorizes the President to require an independent regulatory agency to: (1) comply, to the extent permitted by law, with regulatory analysis requirements applicable to other federal agencies; (2) provide the Administrator of the Office of Information and Regulatory Affairs with an assessment of the costs and benefits of a proposed or final significant rule (i.e., a rule that is likely to have an annual effect on the economy of $100 million or more and is likely to adversely affect sectors of the economy in a material way) and an assessment of costs and benefits of alternatives to the rule; and (3) submit to the Administrator for review any proposed or final significant rule.

Prohibits judicial review of the compliance or noncompliance of an independent regulatory agency with the requirements of this Act.

Translation: If any of the financial regulatory agencies, like the SEC, the OCC, the FDIC, or the CFTC wants to approve regulations which might have a “significant effect” on some bank’s bottom line, then the agency would have to present a “cost – benefit analysis,” and submit the rule for administrative (read executive branch) review.

There are some very cogent reason to be extremely skeptical about this bill.

#1.  It dramatically changes the relationship between the administration (executive branch) and the independent financial regulators.   The SEC, et. al. are supposed to be independent of the executive branch, which is why their leadership is subject to confirmation.  To require that the agencies present their proposed rules for executive approval inserts presidential politics directly into the rule making process.

Those who find the diminution of regulatory oversight disturbing will not be pleased with this proposal. Nor will those who decry the transference of yet more power to the executive branch.   There’s nothing here for either end of the political and ideological spectrum.

#2.  It invites endless litigation.  S. 3468 could be alternately named the Wall Street Attorneys’ Full Employment Act.  For those of us who believe that the interminable foot-dragging on CFTC regulations of the derivatives market has gone on long enough, this is entirely too much, [CFTC law] the Portman bill merely serves to add yet another bureaucratic roadblock before regulations can be finalized.  [Lieberman/Collins pdf]

#3. It prevents agencies from acting in a timely manner.  Again, inserting a secondary layer of “review” invites both executive interference and financial sector slow walking before any effective oversight of financial institutions can be effected.

#4. It is redundant.  All the agencies involved, with the single exception of the Federal Reserve, are already required to do formal cost-benefit analyses of proposals.  In case no one had noticed during the attempts to get the provisions of the Dodd Frank Act implemented that the banks have been availing themselves of these requirements to slow down the whole process — they have.  All this bill accomplishes is to slow the process down from a crawl to a drag.   Here’s why:

“The thirteen new analytic requirements this legislation could impose are only the beginning of the delays and burdens it would create. The mandated OIRA review of significant rules would take up to six months. In addition, the review process could force agencies to go back to the drawing board or do a re-proposal of the rule, which could add years to the regulatory process. While agencies could overrule an OIRA determination that a rule or a cost-benefit analysis was inadequate, such a step would render the regulation highly susceptible to court challenge. It would make industry attempts to overturn new rules in court almost inevitable. The increased risk of court reversal will discourage independent financial agencies from finalizing any regulation that receives a negative OIRA review.” [AFR pdf] (emphasis added)

In short, what we have here is a bill that simply refuses to die… and one which is unnecessary, unwarranted, and merely serves to benefit the financialists who don’t want oversight of their speculation in the Wall Street Casino.

Perhaps we might initiate newly elected Nevada Senator Dean Heller’s in-box with a few e-mails indicating that this is not a bill which deserves the support of 99.9% of the American public?

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Filed under conservatism, Economy, financial regulation, income inequality, income tax, tax revenue, Taxation

Deregulation Debacles: And, Heller Wants To Repeal Dodd Frank?

** Altogether too many Nevadans were happy to sign adjustable rate mortgages based on the COFI.    COFI is the Cost of Funds Index, i.e. a monthly weighted average interest paid on checking and savings accounts offered by financial institutions in California, Arizona, and Nevada.  [QNA]   It could have been worse, the loans could have been based on LIBOR,  the London Interbank Offered Rate.   Barclays Bank (as in Premier League) has now settled with U.S. and British financial authorities for $453 million. Why? “Barclays admitted to trying to make Libor look artificially low, to avoid signaling the bank’s distress to markets during the financial crisis. The bank also manipulated borrowing rates to benefit its trading positions.” [Reuters] (emphasis added)  Before anyone gets too comfortable about the shakeout from the financial meltdown of 2008, refer to Gradman’s Top Five RMBS Cases now winding their way through the courts.

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

** Meanwhile, the SEC has filed allegations that Philip Falcone, hedge fund manager of Harbinger Funds, manipulated the market, gave preferential treatment to Goldman-Sachs, and got a company loan to pay his taxes. [Bloomberg]

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

**  Then, we have MBIA v. Countrywide, Bank of America, in the NY Supreme Court.  “MBIA has been looking for just this type of smoking gun (documentation of knowledge, reliance on fraud)  since the beginning of their case, and it appears they believe they’ve found it, in the form of internal Countrywide documents relating to its fraud hotline and internal fraud investigations.  If Countrywide knew there was widespread fraud in its loan origination processes, and covered up that information, it could certainly form the foundation for a finding that it intentionally misled MBIA into providing insurance coverage.  And Countrywide has certainly acted like MBIA is knocking on the door of a treasure trove of damaging evidence, as it has fought like crazy to avoid producing these documents.”   [IGrad]

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

** The Securities and Exchange Commission opened a preliminary  investigation into the JPMorganChase “London Whale” debacle, “An important avenue for the S.E.C. investigation, the people said, is the firm’s accounting methods relating to the trades. Investigators could take a close look at a measure known as value-at-risk. The company disclosed earlier this year that it changed the way it calculates the metric, which may have masked some of the risk surrounding this trade.” [DealBook]

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

** The SEC is also looking into possible NASDAQ improprieties in the Facebook IPO.  [CNBC] “The S.E.C. is also examining whether some exchanges give undue priority to high-frequency trading firms and big institutional investors through its order types and data disclosure.” [DealBook]

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

** On June 7, 2012 the CFTC filed charges against a Florida “Wealth Management LLC; ” The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed a civil enforcement action against Jose S. Rubio (Rubio) and Rubio Wealth Management, LLC (RWM) of Surfside and Coral Gables, Fla., respectively. The CFTC complaint charges Rubio and RWM with defrauding investors in connection with operating a commodity pool to trade commodity futures and off-exchange foreign currency (forex) contracts. The CFTC complaint also charges Rubio with making false statements to pool participants, misappropriating pool funds, commingling investor funds with those of RWM, failing to register as a commodity pool operator, and failing to produce documents to the CFTC.”

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

On June 25, 2012 the SEC announced a settlement with Ayuda Equity Funding:   “According to the SEC’s complaint, Ayuda and AmeriFund reaped more than $3.2 million of illegal gains on loans to public company officers and directors who put up stock as collateral. Although some borrowers received written and oral assurances that the stock would not be sold as long as they did not default on their loan payments, Ayuda and AmeriFund sold the shares before or soon after making the loans, the SEC alleged.”

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

On June 26, 2012, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York charging Tai Nguyen, the owner of the California-based equity research firm Insight Research, with insider trading.  The charges stem from the SEC’s ongoing investigation of insider trading involving so-called “expert networks” that provide specialized information to investment firms.”

And, Senator Heller (R-NV) believes we should repeal the Dodd Frank Act which sought to reform financial sector regulation.  [GovTrack]

Enough Said?

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Filed under financial regulation, Heller

More Fun with FRED: Someone’s Doing Fine, The Banks

Nudge, nudge, shove, shove. If you’ve not already found FRED, it is a veritable Eden of make your own graph fun from the Federal Reserve Bank of St. Louis.

Since the horrific moments when the banking system in the United States almost melted down under the weight of its own toxic assets, the result of their avaricious appetite for mortgages to transform into CDOs, and the consequent collapse of the Wall Street Casino in 2008, some sectors of the economy are doing better than others.  The banking sector’s lines seem to be headed in the right direction.

Consider the following graphs:

Their returns are going up, their nonperforming loans and net loan losses are going down.  Their profits are over the moon. So, why are the bankers worried about another four years of the Obama Administration?  A quick answer: The Dodd-Frank Act.

One of the goals of the financial regulation reforms included in the Dodd-Frank Act was to create more transparency in the trading of credit default swaps.   There was a reason investor extraordinaire Warren Buffett called such trades “financial weapons of mass destruction.”   Opponents of regulation argue that if the swaps must be made through an exchange the transparency might make them less attractive to investors, and less suited to their purposes.   What purpose is served if the trades are secret?  If an investment has to be secret in order to be attractive, then we’d have to ask why the purpose can’t be exposed to the light of day?  This isn’t to argue that the Dodd-Frank Act was perfect, far from it, but at least it lets a bit of sunlight into the shadows of the investment banking system.

Another goal of the Dodd-Frank Act was to mitigate the possibilities that bank holding companies who have the protection of the FDIC would abuse depositor’s funds by using them for or to backstop the activities of their trading desks.  Those who didn’t like the Bank Bailouts begun under the Bush Administration,  really shouldn’t like the attempts by the banking lobby to water down or delay the implementation of the Volcker Rule.

The GOP talking point du jour about “unnecessarily burdensome regulations” goes back to early 2011:

“House Republicans on Monday said they are drafting five bills to repeal or change parts of the Dodd-Frank financial-overhaul law that have been opposed by business groups.

The bills are to be discussed at House subcommittee hearing on Wednesday. The hearing “will provide an opportunity to discuss several proposals that address some of the act’s damaging provisions,” Rep. Scott Garrett (R., N.J.) said in a statement.” [WSJournal]

Let’s take a look at some specific Republican/Banking Lobby points of attack, i.e what do they allege are “damaging?”

Republicans aim to eliminate a piece of the law attempting to make credit-ratings firms such as Standard & Poor’s, Moody’s Investors Service and Fitch Ratings liable if their initial ratings turn out to be faulty.

House Republicans will also seek to exempt companies that use derivatives to hedge commercial risk from new requirements that they route their transactions through clearinghouses. Those companies have been lobbying for the change, arguing that the Dodd-Frank law leaves uncertainty about whether they would have to clear their derivatives trades.

They would seek to exempt private-equity fund managers from a Dodd-Frank requirement that they register with the SEC. While many larger private-equity funds are already registered with the SEC, small and midsize fund advisers have been arguing that the registration requirement is expensive and burdensome.

Republicans also aim to cancel another provision requiring publicly traded companies to disclose the median annual total compensation of all employees and calculate a ratio of how employee compensation compares with that of the chief executive.

Finally, Republicans will introduce legislation to boost the offering threshold for companies that don’t need to register with the SEC to $50 million from $5 million. Republicans say this change will make it easier for smaller companies to raise money for investment.  [WSJournal]

(1) As noted herein many times, the ratings agencies weren’t just “faulty” in the run up to the Great Bubble Bust of 2008.   Ratings agencies were paid by the issuers of the bonds (CDOs) and the better the rating the more likely they were to get paid.   Not only was the conflict of interest obvious, in some cases it was blatant.

(2) If uncertainty is a problem, then why not allow the CFTC and other regulators to make the rules and get on with it.  The Banking Lobby has all but moved Heaven and Earth to impede regulatory action.  It doesn’t do to argue that the lack of regulation clarity is a reason for deregulation when you’re doing all you can to prevent the drafting of regulations much less the implementation thereof.

(3) Why would anyone want to operate away from SEC scrutiny, if the idea is that the hedge fund is advertising itself as a good place to invest?  Yes, it may cost some money for some of the smaller funds to fill out the paperwork for SEC registration.  However, which fund is obviously a better place to park one’s money — the fund that’s registered with the SEC and accepts oversight of its operations, or the fund that isn’t registered and isn’t overseen by anyone? Are smaller hedge funds really arguing that they can’t raise money for investments because they’d have to register if they had $5 million under management?  It should appear obvious that one of the selling points of their management would be “We Are Not The Fly By Night” types — we are registered with the SEC — you can trust us.

(4) And why would any shareholder or investor not want to know if the executive compensation packages bestowed upon management are completely out of whack?  If the major money is moving to the top, and the  employees aren’t getting a fair shake, then what’s happening to the shareholders and other investors?

Senator Dean Heller (R-NV) is on record favoring the repeal of the Dodd-Frank Act because of the aforementioned “burdensome regulations.”  However, someone somewhere along the line during the 2012 campaign season ought to be asking:

(a) Do you favor a return to the system in which ratings agencies could stamp CDOs with a AAA rating without any repercussions if it were demonstrated later that the ratings were the result of a conflict of interest?

(b) Do you favor a system in which some hedge funds are allowed to operate without supervision by the SEC?  Even if they have as much as $50 billion under management?

(c) Do you favor a system in which executive compensation ratios are hidden from employees, shareholders and investors?

(d) Do you agree with the Banking Lobby’s strategy of impeding the drafting and implementation of regulations while contending that any  delay creates uncertainty?


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Filed under banking, Economy, financial regulation, Heller, Obama, Romney

Monday Morning Roundup

##  Is Nevada ready for it’s close up?  Take a look at Nevada Progressive today.   Meanwhile, Senator Dean Heller (R-NV) and Governor Sandoval didn’t seem to want to get anywhere close to the state GOP convention:

“And around the country, Republican officials and the powerful interests that own them worry that their party’s ongoing drift to the Island of Whackadoodledoo could seriously damage their electoral, and hence financial, interests in 2012 and beyond.”  [More From The Gleaner]

While you are at it, and speaking of expunging some of the Whackadoodledoo, take a gander at the NVRDC’s post on same-sex marriage equality. This is one of the better compilations of the current situation you’ll find recently.  No hype, no emotionality, just good old fashioned relevant facts.

## As our Republican Representatives in Congress were voting to shave the national indebtedness by sticking it to working families who need the SNAP program to help with the groceries, the Sin City Siren reports of Nevada’s food insecurity problems,” Unless my eyes are failing me, it looks like the lowest percentage is 8.5%, sadly a real anomaly in our valley (in terms of how low it is), and a high hunger mark of 27.6% (holy crap!). And don’t think that it’s all bad in the valley’s core and cream puff dreams in the suburbs. There’s a 10 to nearly 15% rate in Summerlin zip codes and 11 to 15% range in Henderson. 89109, which is fairly close to center of the valley is 18.3%. The take-away: Hunger doesn’t care where you live.”

##  Hey We’re Number ___! Oh, who cares?  The U.S. is falling behind the rest of the globe in providing health care, and many important measures included in the Affordable Care Act aren’t scheduled to kick in until 2014.

China, after years of underfunding health care, is on track to complete a three-year, $124 billion initiative projected to cover more than 90 percent of the nation’s residents.  Mexico, which a decade ago covered less than half its population, completed an eight-year drive for universal coverage that has dramatically expanded Mexicans’ access to life-saving treatments for diseases such as leukemia and breast cancer.  In Thailand, where the gross domestic product per person is one-fifth that of the United States, just 1 percent of the population lacks health insurance. And in sub-Saharan Africa, Rwanda and Ghana — two of the world’s poorest nations — are working to create networks of insurance plans to cover their citizens.  [WaPo] (emphasis added)

Unfortunately, “American Exceptionalism,” is rapidly coming to mean that everyone EXCEPT Americans can expect basic services from their governments.   Speaking specifically to the ACA, FactCheck finds the Chamber of Commerce advertising on the ACA “misleading.”   Surprised?

## How’s that Austerity Thingie working for you?  Not all that well for German Chancellor Angela Merkel.  “Yesterday was a bitter day, it was a bitter, painful defeat,” Merkel said after results showed the SPD won 39.1 percent against 26.3 percent for the CDU.”  [Reuters] The voters seem annoyed. Additionally, an overly complex system perpetuates mistakes in the Eurozone?  More from Reuters.

## ICYMI:  The Congressional Budget Office has some very pertinent and cogent comments to make on the national debt, among them the following:

“There is no commonly agreed-upon amount of federal debt that is optimal. Higher debt has a number of negative consequences that CBO discusses regularly, but reducing debt or constraining its growth will require some combination of tax increases and spending reductions, and those policy changes can have negative consequences themselves.”

Negative consequences like cutting off the SNAP program and diminishing the automatic economic stabilizer effect maybe?

##  JP Morgan Chase isn’t the only bank having “a problem.”  There’s still some fall out from the GMAC (ALLY) venture into the mortgage market during the Bubble, “Ally’s mortgage unit, called Residential Capital, or ResCap, filed for bankruptcy protection in federal court in Manhattan under a plan that has the support of some of its creditors, although it was still expected to be a drawn-out and litigious process.”  [Reuters]

In view of the mess over at JP Morgan Chase, perhaps this isn’t exactly what we want to be hearing from the CFTC?

The Commodity Futures Trading Commission (CFTC) today voted to propose an Order regarding the effective date for swap regulation.  The Order is a six-month extension from certain provisions of the Commodity Exchange Act that otherwise would have taken effect on July 16, 2011, the general effective date of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act .  Today’s order further narrows the scope of the Order because some rules, for example the further definition of swap dealer and major swap participant, have become effective.

Today, the Commission is extending the effective date for swap regulation until December 31, 2012, or until the Commission’s rules and regulations go into effect, whichever is sooner. The Order proposed today would allow the clearing of agricultural swaps; and remove any reference to the exempt commercial market; and exempt board of trade grandfather relief previously issued by the Commission.   (emphasis added)

How long can the traders’ lobby keep dragging out the regulations?

## Some good news: “The Securities and Exchange Commission today suspended trading in the securities of 379 dormant companies before they could be hijacked by fraudsters and used to harm investors through reverse mergers or pump-and-dump schemes. The trading suspension marks the most companies ever suspended in a single day by the agency as it ramps up its crackdown against fraud involving microcap shell companies that are dormant and delinquent in their public disclosures.”  [SEC]

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Filed under Amodei, Economy, financial regulation, gay issues, Health Care, Heath Insurance, Heck, Heller, Nevada economy, Nevada news, Nevada politics