Daily Archives: August 20, 2012

Wall Street Sets the Rules for Regulators

The current dynamics of the regulatory overhaul is a depressing development. While we’re normally quick  to criticize regulators (and for good reason), we also have to admit that monetary deprivation of such agencies by Republicans, as evidenced by budget cuts for the Commodity Futures Trading Commission, transfer some blame to anti-regulatory forces in Congress. Regulators currently entrusted with the task of policing Wall Street are facing a well-funded, well-connected and politically shrewd beast.

In essence, regulators are not writing the rules for Wall Street. Wall Street is writing the rules for regulators.

A few months ago, for instance, the CFTC was given the power to oversee derivatives and futures markets. At the same time, according to Reuters, Congress plans to cut $25 million (a 12% decrease from a year before) from the CFTC’s budget in a time when it desperately needs more resources to effectively accomplish its new responsibilities.

Read on.

Moody’s, S&P Must Face Fraud Claims In Subprime Suit

Moody’s Corp. (MCO) and Standard & Poor’s lost a bid for dismissal of fraud claims in a suit by investors claiming the companies falsely assigned inflated ratings to notes sold by Morgan Stanley (MS) that were backed by subprime mortgages.

U.S. District Judge Shira Scheindlin yesterday declined a request to throw out fraud claims against the two rating companies and a claim of aiding and abetting fraud against Morgan Stanley. Scheindlin narrowed the suit, dismissing claims by three of the 15 plaintiffs.

Scheindlin also dismissed the investors’ fraud claims against the bank and aiding-and-abetting claims against the rating companies, ruling that it was the rating companies, not Morgan Stanley, that issued the ratings.

The suit was filed in 2008 by institutional investors including Abu Dhabi Commercial Bank, based in the United Arab Emirates, and Washington’s King County, which includes Seattle, in a structured investment vehicle named Cheyne. The investors claim Morgan Stanley pressured the rating companies to give erroneous investment-grade ratings to the notes.

Read on./a>


HARTFORD, Conn. (AP) — Jennifer Garcia stood alone before a judge with a stack of legal papers in her hands, answering questions about her personal life.

She has acted as her own lawyer in state Family Court in a paternity, child support and visitation case on and off for three years, but representing herself in a courtroom full of strangers still makes her nervous.

“Sometimes I get this gut feeling because you never know what the judge is going to say,” said the 23-year-old single mother of two from Hartford.

Garcia is part of a crush of people who are representing themselves in the nation’s civil courts because they can’t afford lawyers, who typically charge $200 to $500 an hour. The boom has overwhelmed courts and sparked new efforts to get attorneys to meet what the American Bar Association says is its professional responsibility to offer free legal services to people in need.

The increase in self-represented parties stems from a recession that has left fewer people able to affordlawyers and created new waves of foreclosure, debt collection and bankruptcy cases, judges and lawyerssay. Judges say self-represented people are slowing down court dockets because they typically don’t know what legal points to argue or what motions to file.

Rest here…

United States: the entire future profits of Fannie Mae and Freddie Mac will go to the State

Translated in English from French newspaper:

The U.S. Treasury Department presented Friday, August 17, amending its draft plan to dismantle mortgage refinancing agencies Fannie Mae and Freddie Mac , according to which the state will recover all of their profits to come .

The ministry said to have signed an agreement with the federal agency funding thehousing (FHFA), the agency that supervises Fannie Mae and Freddie Mac, since these two companies were nationalized in September 2008 to prevent them not collapse under the weight of their commitments.

This agreement, wrote Treasury “accelerate the dismantling of Fannie Mae and Freddie Mac, and will that every dollar of income earned by each of these companies is used for the benefit of taxpayers” . It will also help “ensure the flow of mortgage lending” during the period of transition to a new model of housing finance.

Bank of England deputy governor Paul Tucker warned banks they could collapse ‘before Christmas’

Paul Tucker, the deputy governor of the Bank of England, told an October meeting of the chief executives of Britain’s largest banks that there was a serious chance none of their businesses would survive to the end of the year.

“Gentlemen, you could all be out of business by Christmas,” Mr Tucker said in a stark warning to the bank chiefs, according to three sources present at the meeting.

The revelation of Mr Tucker’s remarkable warning shows the depth of fear among senior officials over the havoc the collapse of the eurozone would wreak on the British financial system.

Mr Tucker is one of the front-runners to replace Sir Mervyn King as Governor of the Bank of England.

Minutes published by the Bank’s Financial Policy Committee in September and December made clear the depth of its concerns, but the explicit warning given to the chief executives shows that officials feared a crisis even greater than that in the wake of the collapse of Lehman Brothers in September 2008. The meeting led directly to the creation of working groups at banks to gauge the potential for a full-scale collapse of the financial system.

Read on.

Cautious Moves on Foreclosures Haunting Obama

WASHINGTON — After inheriting the worst economic downturn since the Great DepressionPresident Obama poured vast amounts of money into efforts to stabilize the financial system, rescue the auto industry and revive the economy.

But he tried to finesse the cleanup of the housing crash, rejecting unpopular proposals for a broad bailout of homeowners facing foreclosure in favor of a limited aid program — and a bet that a recovering economy would take care of the rest.

During his first two years in office, Mr. Obama and his advisers repeatedly affirmed this carefully calibrated strategy, leaving unspent hundreds of billions of dollars that Congress had allocated to buy mortgage loans, even as millions of people lost their homes and the economic recovery stalled somewhere between crisis and prosperity.

Read on.

The thought of the day