Below the Fold: Regulation. What is it Good For?in Below the Fold
A wrap-up of stories and posts you might have missed or overlooked -- the ones below the fold.
Never mind that JPMorgan lost, by some estimates, $30 billion dollars due to bad bets or that the Facebook IPO cost investors millions, "when internal analysts learned that Facebook's numbers were going to be worse than expected, the company and its bankers didn't tell everyone, but just 'selectively disclosed' information to a small group of 'preferred investors," according to Matt Taibbi, of Rolling Stone. It is business as usual on Wall Street and of no concern to us, the unwashed masses. Meanwhile, JPMorgan CEO, Jamie Dimon is out and about again, railing against regulation.
This isn't the first time Dimon's complained about too much regulation. Here's Huffington Post Hunter Stuart's "Jamie Dimon Really, Really Hates Financial Regulation" mashup. Dimon has called regulation anti-American, anti-business, an attack on work ethic and successful people. He's even gone so far as to call public criticism of bankers "a form of discrimination." All this from a guy who has to sit in the back of the limo, drink from his own fountain, and makes his money betting with other people's pensions, savings, and retirement funds.
Dimon, who also sits on the board at the New York Federal Reserve, whining about regulation can't seriously be seen as anything more than a spectacle put on by a gifted actor.
The regulation put in place back in 2010 - all 2,300 pages of it has already been dismantled by lobbyists and looks like a teetering Jenga tower before the last block gets pulled.
A New York Times article, "Bank Regulators Under Scrutiny in JPMorgan Loss," examines "embedded regulators" and whether they are effective or could have prevented the losses JPMorgan suffered.
Roughly 40 examiners from the Federal Reserve Bank of New York and 70 staff members from the Office of the Comptroller of the Currency are embedded in the nation's largest bank. They are typically assigned to the departments undertaking the greatest risks, like the structured products trading desk. Even as the chief investment office swelled in size and made increasingly large bets, regulators did not put any examiners in the unit's offices in London or New York, according to current and former regulators who spoke only on condition of anonymity.
Bill Black, a former SEC regulator, writing over at Naked Capitalism, goes into a deeper examination of the Times' article. "Embedded examiners do not work." Black writes, "They get too close to the bank officers and employees. In the regulatory ranks we called this 'marrying the natives.'"
Making the point that the financial industry has become too complex for most to understand, or that the reporters were simply over their heads taking on this story, Black says:
It is not clear that the reporters understand that the paragraph contradicts itself. It states, as if it were an indisputable fact, that the CIO is a "Treasury unit" and such "units hedge risk and invest extra money on hand." The next sentence contradicts the first. It admits that the CIO actually made "large bets" and "recorded $5 billion in profit." It gambled on derivatives rather than hedged. It may have won these bets in the first three years.
Any regulation put in place is window dressing and, for the most part, irrelevant without regulators in place who will actually enforce that regulation and people in Congress who won't help bank lobbyists chip away at that regulation.
This piece, The Democrats Who Protect JP Morgan's Incompetent Regulator, by Matt Stoller, a fellow at the Roosevelt Institute, paints a pretty bleak picture of Congress flagrantly defending incompetent regulators and voting against the public interest.
Last month, I reported on two amendments put forward in the House Financial Services Committee which would substantially limit the undemocratic power of the Federal Reserve and the national bank regulator, the Office of the Comptroller of the Currency. They would subject these agencies to the regular appropriations process, meaning that Congress could cut off their funds if there were policy disagreements. Right now, the OCC gets its money from banks and the Fed prints its own budget (nice work if you can get it). The amendment put forward to bring the OCC into line with democracy was offered by Rep. Brad Miller, and it lost by a vote of 22-35. The Fed amendment lost by a vote of 24-33. What's interesting, though, is that while Barney's amendment on the Fed lost in a straight party line vote, Miller's OCC amendment would have won if the seven Democrats who voted against it had voted for it.
Even JPMorgan's own internal "regulation" and oversight is a joke. In "JPMorgan Gave Risk Oversight to Museum Head With AIG Role" over at Bloomberg, we learn that Ellen Futter, who sits on the committee responsible for overseeing risks at JPMorgan is the head of the American Museum of Natural History - hardly a position that would merit overseeing financial transactions more complicated than ticket sales.
In fact, her resume could read something like this (from the same article):
Futter headed the audit committee of Bristol-Myers, a New York-based drugmaker, during an accounting scandal that began in 1999 and that the company settled for $300 million to avoid criminal prosecution. She also served on AIG's compliance and governance committees, resigning in July 2008 before the insurer took a $182.3 billion bailout from the U.S. government.
No wonder JPMorgan hired her. The article is definitely worth the read and at the very least, good for a laugh. Here's the link again.
Finally, don't miss Vermont Senator Bernie Sanders on the Ed Show (MSNBC) with a cameo by equally frustrated and disgusted Barney Frank.
Let me just say again what many people will not be happy to hear. Wall Street is extraordinarily powerful. Congress doesn`t regulate them. The big banks regulate what Congress does.