Regulators Are The Real Systemic Risk And We Should've Executed Dick Fuld

The Business Insider ^ | 9-17-2010 | Courtney Comstock

[blam]

Overheard On Hedge Fund Radio: Regulators Are The Real Systemic Risk And We Should've Executed Dick Fuld

Courtney Comstock
Sep. 17, 2010, 6:06 PM

An anonymous hedge fund manager has a weekly radio show called the N@ked Short Club (4 pm Monday nights on Resonance FM). We like to listen in and see what they're saying.

This week, the host had a particularly raucous bunch of guest speakers on his show this week.

Like Richard Watkins, the CEO of Liability Solutions, who joked that Dick Fuld didn't nearly get what was coming to him:

In the old days, if a bank went bust, they would have executed him. I think we should go back to that. We should have executed Dick Fuld. Apparently the room of guests erupted in head-nods (we spoke to the host). Ridiculous. But other parts of the show are more serious.

Later, Mike Gasior, the CFO of AFS and an ex-Lehman guy, blamed regulators for filling the FinReg bill with fluff:

"The Volcker Rule is gone, it's not watered down." "CDS are still allowed. And as much as there is a business purpose for CDS, it's really not that useful, and it used to be illegal." And for making him want to vomit.

"It almost makes me want to vomit as an American that these financial regulations they just passed are the biggest thing they've done since 1930s. They've done nothing since then except repeal the laws that were put in place in the 1930s." We zeroed in on this part of the conversation because FinReg, though it already passed this summer, is still a hot topic as banks are now in the middle of implementing its new rules into their daily routines.

Gasior clearly thinks the new rules provide

[snip]

[whitedog57]

I beg to differ. I have read FINREG.

It allows regulators (aka, the Obama Administration) to CHOOSE who is a threat and who isn’t. No hard rules.

So, if Bank A plays ball with the O-Adm, they get a pass. Bank B gets shut down if they don’t play ball.

Bet that CRA lending is at the source of all of this.

[blam]

"Bet that CRA lending is at the source of all of this."

CRA = Community Reinvestment Act

[griswold3]

Read my tagline.
Need to end regulatory capture.

[Attention Surplus Disorder]

I confess, I haven't read FINREG. I believe I am familiar with its main points and deliberate weaknesses.

Still, the very idea that our corrupt, dilettante regulators can, in a series of 5 minutes interviews with the smartest guys in the financial world come to some understanding of their world, their cunning, and their ruthlessness (which is extreme capitalism, perhaps even rapacious capitalism, but capitalism nonetheless) is not only absurd on its face, it is a repetitive farce played out for public consumption. It is a total sham, an act.

Of course, the very idea that Dodd and Frank, practically the chief architects and in Dodd’s case, beneficiary of the current crisis, are credited with the authorship of this bill, is ironic enough.

But “investigation through interview” is not how these bills are constructed. They are built using language supplied by the regulatees! Who can and do afford the highest priced NY financial lawyers to skillfully construct plenty of back doors and exceptions and carveouts for themselves.

Even if there were no such carveouts, there is no enforcement of financial regulations in the first place! With the exception of Madoff and Stamford, the number of execs who have faced any serious consequences for his/her/their actions over the past 2 years can be counted on two hands, maybe one.

There is no “shall” .. “or else” language in these rules. Yes, there is “shall” but there is never a consequence for those who do not “shall”. Sheila Bair is supposed to close these troubled little banks practically THE MINUTE they fall below regulatory capital limits. And yet, 125 banks have been seized by the FDIC in 2010, and their assets are universally found to be short of book values by between 20 and 50%. All these smallish banksters benefited mightily via fraud and are just being allowed to walk. In contrast, during the S&L crisis of the late 80’s and early 90’s, over 1,000 S&L execs did HARD TIME.

Even this latest guy from IBM: 6 months.

Bill Black, one of the chief prosecutors from the S&L era, has a number of videos on YouTube, and speaks in clear, concise language. I highly reco looking for and viewing them. Just search for “Bill Black” or “William Black”.