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Old 03-24-2010, 02:26 PM   #61
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Yes, the SEC can be staffed with people who decide that enforcing regulations are best ignored or slowed down to a bare trickle.
It's not even that. The SEC enforcement unit is staffed with junior lawyers, who can learn and try to enforce the regulations, but who don't understand the methods used to evade regulations. They could really use folks who understand statistical analysis (what Markopolos used to spot Madoff) and related quant disciplines. They currently have no positions for quants on staff.

A quant would be handy for spotting things that are unlikely to occur in the real world, for more in-depth investigation by the SEC enforcers. The IRS uses a strategy something like this for picking audit candidates, looking for improbable numbers in tax returns.
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Old 03-24-2010, 02:40 PM   #62
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It's not even that. The SEC enforcement unit is staffed with junior lawyers, who can learn and try to enforce the regulations, but who don't understand the methods used to evade regulations. They could really use folks who understand statistical analysis (what Markopolos used to spot Madoff) and related quant disciplines. They currently have no positions for quants on staff.

A quant would be handy for spotting things that are unlikely to occur in the real world, for more in-depth investigation by the SEC enforcers. The IRS uses a strategy something like this for picking audit candidates, looking for improbable numbers in tax returns.
That may be true to some extent, but that wasn't the problem during Cox's tenure. The problem then was that the process was changed whereby Cox required enforcement lawyers to obtain the consent of commissioners before moving to resolve major cases. This really slowed things down.
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Demoralized staff members had been watering down proposed settlements in enforcement cases out of fear that the commission would reject them.
http://www.nytimes.com/2009/02/23/bu...3schapiro.html

The SEC has been much more effective in the past. It depends on each administration and SEC head.

Audrey
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Old 03-24-2010, 05:14 PM   #63
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Funny how that works. You start with an ideological view that regulation is universally bad. You then systematically implement that view by deregulating the system through legislation where you can and elsewhere by lax oversight and enforcement. And then when things fall apart you point to the regulatory failures you enabled as proof that the government is incompetent and then use that claim of incompetence to advocate . . . even less regulation.
That would be a good theory except that their have been systemic failures by the SEC for at least as long as I have been investing (1982) and probably well before that. This covers both Republican and Democrat administrations and various attitudes toward deregulation. I suspect Paquette is right the staffing of the SEC by lawyers instead of investment guys is part of the problem. I certainly wouldn't argue that Cox was particularly bad and the SEC failed spectacularly this last decade.

I think that US stock exchanges have enjoyed a good reputation as fair place to do business has at least as much to do with transparency of US financial reporting as SEC enforcement. The FASB (a private organization) require a level of disclosure on quarterly and annually, which is AFAIK more detailed than any other country.

I am not against regulation or regulatory agency. For instance I think the FDIC does a good job. I am against saying XYZ happened and concluding therefore we need more laws to prevent it from happening in the future. I think we generally need more effective regulation not just more.
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Old 03-24-2010, 05:27 PM   #64
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That would be a good theory except that their have been systemic failures by the SEC for at least as long as I have been investing (1982)
And over that time we've have one party control the executive branch for 20 out of the last 30 years. All during a time when the conventional wisdom was "less is more" when it comes to government involvement in the private sector.

Well this is what "less" eventually looks like.
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Old 03-24-2010, 08:30 PM   #65
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And over that time we've have one party control the executive branch for 20 out of the last 30 years. All during a time when the conventional wisdom was "less is more" when it comes to government involvement in the private sector.

Well this is what "less" eventually looks like.
Fascinating reading regarding separation of powers under the US Constitution:
http://en.wikipedia.org/wiki/Separation_of_powers#United_States:_three_branches

Review the duties of the legislative branch (especially the first item listed ) and the executive branch a little more carefully. Overlay those responsibilities and the partisan timeline against your favorite failures; you might be surprised by who was supposed to be minding the store.
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Old 03-24-2010, 08:45 PM   #66
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Fascinating reading regarding separation of powers under the US Constitution:
Did you happen to notice who appoints the head of regulatory bodies? Lets start with the Federal Reserve, the SEC, the FDIC, and the CCC. I'll give you one guess and it isn't the Senate, the House, or the Judiciary.

Besides are you arguing that we haven't been deregulating for the past 30 years? Or are you arguing that deregulation was something that Democratic congress members forced on hapless Republic presidents?
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Old 03-24-2010, 08:52 PM   #67
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Did you happen to notice who appoints the head of regulatory bodies? Lets start with the Federal Reserve, the SEC, the FDIC, and the CCC.
...who enforce laws passed by the legislative branch, who like to hold sensational hearings and rat out malfeasance whenever it finds them and presents a media opportunity.....

Obviously were are polar opposites on what we want from our government. Agree to disagree going forward?
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Old 03-24-2010, 08:55 PM   #68
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...who enforce laws passed by the legislative branch, who like to hold sensational hearings and rat out malfeasance whenever it finds them and presents a media opportunity.....

Obviously were are polar opposites on what we want from our government. Agree to disagree going forward?
Certainly agree to disagree.

But I'm still curious . . . who's responsible for deregulation? You seem to want to lay it off on a presumably Democratic Congress. That's not how I remember history unfolding.
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Old 03-24-2010, 09:17 PM   #69
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Any chance we could stop the partisan blame-game and discuss the OP's questions, which I think have merit?

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Would you support "real" financial reform?

But what would real financial reform look like?

And how would it effect aging retirees like us?

Would transparency and effective oversight have beneficial results in time to help us out? Or are we (from a purely self interested point of view) better off letting the Street keep gambling with our futures until we can quietly move on to our final rewards?
Thanks - ERD50
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Old 03-25-2010, 09:13 AM   #70
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Moderators, feel free to close this thread also...........
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Old 03-25-2010, 09:16 AM   #71
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And over that time we've have one party control the executive branch for 20 out of the last 30 years. All during a time when the conventional wisdom was "less is more" when it comes to government involvement in the private sector.

Well this is what "less" eventually looks like.
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Old 03-25-2010, 09:55 AM   #72
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Any chance we could stop the partisan blame-game and discuss the OP's questions, which I think have merit
here's a start

1) Much higher capital requirements for financial institutions
2) All institutions that effectively lend money (including non-bank institutions, like hedge funds and captive finance co's) would be subject to banking regulations and reserve requirements
3) Lenders of all kinds would have to retain a certain amount of net exposure to their loans.
4) Penalty or tax for derivative transactions not cleared through an exchange
5) Anti-trust type authority to break up institutions deemed too big and risky to succeed
6) FDIC type resolution authority for all companies that are subject to banking regulation (see point 2)
7) Unlimited personal liability for CEO's, directors and senior management of financial institutions that require a government bailout

That's a good start.
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Old 03-25-2010, 10:01 AM   #73
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here's a start

1) Much higher capital requirements for financial institutions
2) All institutions that effectively lend money (including non-bank institutions, like hedge funds) would be subject to banking regulations and reserve requirements
3) Lenders of all kinds would have to retain a certain amount of net exposure to their loans.
4) Penalty or tax for derivative transactions not cleared through an exchange
5) Anti-trust type authority to break up institutions deemed too big and risky to succeed
6) FDIC type resolution authority for all companies that are subject to banking regulation (see point 2)
7) Unlimited personal liability for CEO's, directors and senior management of financial institutions that require a government bailout

That's a good start.
Number 5 is funny to me.......didn't work well for Standard Oil or Ma Bell................
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Old 03-25-2010, 10:03 AM   #74
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Number 5 is funny to me.......didn't work well for Standard Oil or Ma Bell................
Yup, number 5 is weak and has all kinds of potential problems. It is also probably unnecessary if all of the other stuff is implemented, especially #7.
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Old 03-25-2010, 10:21 AM   #75
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Yup, number 5 is weak and has all kinds of potential problems. It is also probably unnecessary if all of the other stuff is implemented, especially #7.
Number 7 would be unneccesary if there were NO govt bailouts.

I don't buy that the financial markets were hours away from insolvency in September of 2008............talk about a bunch of hooey..........

TARP worked well. JP Morgan was forced by the Treasury to take $25 billion in TARP even though they said they didn't need it. They have paid it all back with interest and are out of TARP. How about that stimulus program? Let's see, JP Morgan buys WAMU for $1.9 billion in 2008, because jamie Dimon is a buddy of the Treasury. Now, under the stimulus plan, he files for a $1.4 billion tax credit, which he'll probably get most but not all of. SO he ends up with what was a top 6 bank in the US for less than a billion dollars. Maybe Buffett should ask Jamie which companies to buy.........

Until Congress writes better legislation, smart guys like Jamie will use it as a whipping stick on Congress..........
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Old 03-25-2010, 10:29 AM   #76
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Let me help . . .

The Federal Reserve Act of 1913
The Glass-Steagall Act of 1932
The Banking Act of 1933
The Banking Act of 1935

But lets not forget . . .

Depository Institutions Deregulation and Monetary Control Act of 1980
Depository Institutions Act of 1982 (allowed S&L's to engage in more risky behavior - Ooops)
Glass-Stegall repeal 1999
And let's not forget:
The Commodities Futures Modernization Act of 2000 created the Enron loophole, exempting electronic energy trading from regulation. It also exempted Credit Default Swaps from regulation.
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Old 03-25-2010, 10:31 AM   #77
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I don't buy that the financial markets were hours away from insolvency in September of 2008............talk about a bunch of hooey..........
You are deeply, deeply, wrong in this case. The entire lending system was shutting down. It wasn't just TARP, but about 8 different Federal programs that prevented the entire system from collapsing. I know there is no way to convince you of this, and it is impossible to prove what "would have happened" had the government not intervened, but it would have been really, really, really bad.

Here's a partial list of what the government did following Lehman's failure . . .

1) Temporary Money Market Fund Guarantee Program - stopped the run on money market funds
2) Commercial Paper Funding Facility - provides a liquidity backstop to A-1/P-1 commercial paper and allowed non-financial companies to roll maturity CP
3) Money Market Investor Funding Facility - facilitates the sale of money market instruments in the secondary market
4) Temporary Liquidity Guarantee Program - prevented a liquidity crisis across the banking sector by allowing them to issue FDIC insured bonds
5) Capital Purchase Program - Injected capital into financial institutions

Without these and other programs, the financial system was toast.
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Old 03-25-2010, 10:37 AM   #78
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You are deeply, deeply, wrong in this case. The entire lending system was shutting down. It wasn't just TARP, but about 8 different Federal programs that prevented the entire system from collapsing. I know there is no way to convince you of this, and it is impossible to prove what "would have happened" had the government not intervened, but it would have been really, really, really bad.
You know this, how?
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Old 03-25-2010, 10:38 AM   #79
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You know this, how?
Because I worked on a credit trading floor at one of the "too big to fail banks" at the time and I saw the system shutting down. It was really, really, really bad.
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Old 03-25-2010, 10:43 AM   #80
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here's a start

1) Much higher capital requirements for financial institutions
2) All institutions that effectively lend money (including non-bank institutions, like hedge funds and captive finance co's) would be subject to banking regulations and reserve requirements
3) Lenders of all kinds would have to retain a certain amount of net exposure to their loans.
4) Penalty or tax for derivative transactions not cleared through an exchange
5) Anti-trust type authority to break up institutions deemed too big and risky to succeed
6) FDIC type resolution authority for all companies that are subject to banking regulation (see point 2)
7) Unlimited personal liability for CEO's, directors and senior management of financial institutions that require a government bailout

That's a good start.

I will go point by point... with a few questions...

1) Agree... but how high? And what is 'capital'? And what happens if they go below that 'high' level? If you make it to high, then people will not get a good enough return on their investment and the economy will suffer.

2) Disagree... I would have all who take deposits are subject to banking regs. If someone wants to lend money, let them. If they go out of business it would not affect the economy as much as someone who held $1 trillion in deposits that the gov must cover.

3) Disagree... Again, if you are stupid enought to buy a bad loan, then you should suffer the losses. I am not saying that you can not go back and try and get something if they lied to you about the loan, but if they told the truth it would be fine. Also, this would create a huge problem for all the companies who sell things and need the capital (think of almost any furniture store, gym with their three year contract etc. )

4) This I do not care that much about... but if you did not allow 'banks' to do them, then who cares.

5) Disagree.. Breaking up someone just because they have done things 'better' is not something I agree with... if you have good regulations and don't let them get into these risky businesses they should be fine. Also look at one of my earlier posts... this does not address AIG, and the car companies... unless you say they are 'financial institutions'... I don't...

6) Agree.. but see my #2

7) Will never happen. I can see doing this to senior managers, but not the board. Also, you would be hard pressed to get people to be on a board if they could not get insurance to cover them... If I were a billionaire, there is no way I would risk my personal wealth on someone else's mistakes... and if you read what happened to AIG, it was a very small group of people who were either duped, stupid, greedy etc.... or all of them combined... there was no way anyone on the board knew what was down there...
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