In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.
The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender...
Fabrice Tourre comes across as an arrogant investment banker in the Securities and Exchange Commission lawsuit against him and his employer Goldman Sachs Group Inc.
But personal emails released by Goldman /quotes/comstock/13*!gs/quotes/nls/gs (GS 151.93, -5.47, -3.48%) this weekend show Tourre struggling with "ethical questions" as he sold complex mortgage-related securities that he worried were suspect.
The SEC charged Goldman with securities fraud on April 16, alleging the investment bank didn't tell investors in a collateralized debt obligation that hedge fund firm Paulson & Co. helped structure the deal and was betting against it. Goldman and Paulson have denied wrongdoing. Read about the charges.
The SEC also charged Tourre, an executive director in Structured Products Group Trading, with securities fraud, alleging he was mainly responsible for the CDO, known as ABACUS 2007-AC1. Pamela Chepiga, an attorney for Tourre, declined to comment.
In the suit, the SEC quoted a January 2007 email that Tourre sent to a friend.
"More and more leverage in the system, The whole building is about to collapse anytime now...Only potential survivor, the fabulous Fab[rice Tourre]...
WASHINGTON (MarketWatch) -- As the 2008 financial crisis was developing, top Securities and Exchange Commission employees and contractors were using government computers on official time to view pornography, according to an SEC inspector general.
The SEC's inspector general found that 33 employees or contractors violated commission rules and policies by viewing porn, according to a memo obtained Friday by MarketWatch. The investigation was requested by Sen. Charles Grassley, R-Iowa.
The memo reported incidents by year:
*
2010: 3 so far *
2009: 10 *
2008: 16 *
2007: 2 *
2006: 1 *
2005: 1
The 33 employees cited in the memo represent less than 1% of the SEC's approximately 4,000 employees. Of those employees, 17 were senior officials whose salaries ranged from $100,000 to $222,000, according to the memo. It isn't clear if the employees discussed in the memo were involved in oversight matters related to the financial crisis.
According to the memo, a regional office supervisory staff accountant admitted he frequently viewed pornography at work on his SEC computer for about a year and accessed pornography on his SEC-issued laptop computer while on official government travel.
Another regional office supervisory staff accountant admitted that he used an SEC assigned computer to access Websites containing pornography and other sexually explicit material during work hours fairly frequently, sometimes twice a day, according to the memo.
Another regional office staff accountant received 16,000 access denials for Internet websites classified by the SEC's Internet filter as "Sex" or "porn" in a one-month period. "In addition, the hard drive of this employee's SEC laptop contained numerous sexually suggestive and inappropriate images," the memo said.
A senior attorney at the SEC's headquarters in Washington admitted accessing Internet port so frequently that, according to the memo, on some days, he spent eight hours accessing Internet porn.
"In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office," the memo said.
Rep. Darrell Issa , R-Calif., the Ranking Member of the House Committee on Oversight and Government Reform, said he was disturbed by the findings.
"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," he said in a statement. "This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority. Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."
Ronald D. Orol is a MarketWatch reporter, based in Washington.
I know you'll all be comforted, as I was Wednesday, by the public vote of confidence from Steve Schwartzman, chief executive of private equity giant Blackstone Group, when he said that his firm would continue to do business with Goldman Sachs and that he's never had a shred of doubt about the investment bank's ethical character.
So let me get this straight. Goldman Sachs is now relying on the character reference of a Wall Street sharpie who notoriously snookered investors into buying non-controlling shares of a private equity firm at the very moment when a credit-induced takeover bubble was about to burst...
President Obama challenged some of the nation’s most influential bankers on Thursday to call off their “battalions of financial industry lobbyists” and embrace a new regulatory structure meant to avert another economic crisis.
Speaking in the bankers’ backyard, at the Cooper Union in Manhattan, Mr. Obama castigated a “failure of responsibility” by Wall Street for having led to the financial crisis of 2008, and he pressed his case for what he called “a common-sense, reasonable, non-ideological” system of tighter regulation to prevent any recurrence. He took issue with the claim that his proposal would institutionalize the idea of future bailouts of huge banks.
“That may make for a good sound bite, but it’s not factually accurate,” Mr. Obama said. “It is not true. In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts...
The court-appointed examiner who dissected the Lehman Brothers bankruptcy is expected to criticize the Securities and Exchange Commission on Tuesday for its decision to “stand by idly” as the investment bank veered toward collapse.
The S.E.C. knew that Lehman did not have adequate liquidity and had exceeded its own limits on risk-taking but in essence did nothing, the examiner, Anton R. Valukas, will say in testimony released in advance by the House Financial Services Committee.
One of the most damning findings in Mr. Valukas’s 2,209-page report last month — that Lehman used accounting gimmicks to hide the extent of its indebtedness — was not known to the S.E.C. He wrote: “I saw nothing in my investigation to suggest that the S.E.C. asked even the most fundamental questions that might have uncovered this practice early on, before Lehman escalated it to a $50 billion issue.” ...
Apr 16, 2010 U.S. government accuses Goldman Sachs of fraud A Wall Street bombshell: The SEC takes the investment bank to court, just as debate over financial reform heats up By Andrew Leonard
The vampire squid is under attack! How it will end is anybody's guess, but for now, the first line of the Security and Exchange Commission's complaint against Goldman Sachs accusing the investment bank of securities fraud must sound like sweet sweet music to anyone who has long been outraged by the Wall Street machinations at the heart of the financial crisis.
The Commission brings this securities fraud action against Goldman, Sachs & Co. ("GS&Co") and a GS&Co employee, Fabrice Tourre ("Tourre"), for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation ("CDO") GS&Co structured and marketed to investors.
The New York Times' Gretchen Morgenson and Louise Story scooped the rest of the business press with news of the SEC action, which launches perhaps the most dramatic confrontation between the U.S. government and an American corporation since Bill Clinton's Justice Department brought an antirust suit against Microsoft. The details of the complaint are complex, but the heart of the story is very simple.
According to the SEC complaint, in early 2007, at the request of John Paulson, a prominent hedge fund trader, Goldman Sachs created a security -- called Abacus 2007 AC-1 -- built from underlying mortgage-backed securities that Paulson had cherry-picked as most likely to blow up. While Goldman Sachs then turned around and sold the security to its own clients, Paulson and Goldman bought credit default insurance on the underlying mortgage bonds. Paulson and Goldman cashed in, while Goldman's clients lost millions. At no time did Goldman divulge Paulson's involvement to its clients...
APRIL 14, 2010 Wall Street Journal Former WaMu CEO Blames Wall Street 'Club' Senators Begin Hearings as Regulators Remain Reluctant to Detail Their Handling of Collapse By JOHN D. MCKINNON And DAN FITZPATRICK
WASHINGTON—Former Washington Mutual Inc. Chief Executive Kerry Killinger scoffed at lawmakers who blamed him for the largest bank failure in U.S. history, accusing regulators of helping only financial institutions deemed "too clubby to fail."
The 60-year-old Mr. Killinger's defiant, two-hour testimony at Tuesday's hearing by the Senate Permanent Subcommittee on Investigations was marked by confrontations with lawmakers who claimed he repeatedly ignored warnings that the overinflated real-estate bubble was about to burst. But the former CEO held his ground, insisting the Seattle thrift's seizure in September 2008 could have been avoided if regulators had offered the same help given to other battered banks, including capital infusions.
"For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious," Mr. Killinger said. "For those outside the club, the penalty was severe." A spokesman at the Office of Thrift Supervision, the federal agency that seized Washington Mutual, declined to comment on Mr. Killinger's testimony.
Mr. Killinger's comments were a contrast to the low profile he has kept since the collapse. He shuttles between homes in Palm Desert, Calif., and a gated community in Seattle, and has avoided public events and new business ventures, according to people familiar with the situation.
He was forced to break his silence by the Democratic-led Senate subcommittee, which is trying to build momentum for pending financial-overhaul legislation...
The effort to reform the banking system isn't over yet -- lobbyists are still lobbying, Congress is still debating and banks are still grousing. Commentator Mike Konczal says the financial services industry can call it a day.
Kai Ryssdal: House Financial Services Committee Chairman Barney Frank struck a blow against Washington's revolving door today. He publicly blasted a former staff member who quit to go work for the derivatives industry. Frank said nobody who's on his staff now can even talk to the guy.
Before he went to work for Frank, by the way, the guy lobbied on Capitol Hill for the Bond Market Association. Point being that despite the financial crisis, the financial lobbying industry's doing just fine.
So well, in fact, that commentator Mike Konczal says given the way the various reform bills are shaping up, their lobbying work is done.
Mike Konczal: The financial industry poured $500 million into lobbying lawmakers on the new financial reform bill. And it was money well spent.
They derailed President Obama's idea of an independent agency to protect consumers from abusive financial products.
Instead, a bureau at the Federal Reserve is supposed to protect consumers. By definition, these regulators worry more about banks than about families. And a separate council of bank regulators will be able to veto whatever that bureau does.
This law doesn't limit the size of the largest banks or the types of risks they can take. Instead, that's left to reluctant regulators who won't want to take away the punch bowl while the party's going.
President Obama wanted to adopt something called the Volcker rule. Banks would have to stop taking the sorts of risks that almost toppled our system. And bank size would be capped against GDP. But that's not in the bill.
Instead regulators are supposed to study the proposal, and then vote on it. These are the same Fed regulators that let banks take all kinds of risks in the first place. So, there's no need to fear any real structural changes to the financial markets.
As far as dismantling a failed bank, the industry will have to pay $50 billion into an SOS fund. But there's no way that kind of money will cover the real costs. And just how regulators would unwind a major bank is untested.
That just emboldens the banks to keep taking financial risks while figuring taxpayers will pick up the tab.
This legislation doesn't do the very thing it was supposed to: prevent another financial meltdown that takes us down with it. There's only one clear winner here and that's the financial services industry. So their lobbyists can just say, eh, and go home.
Bankers don't seem to be feeling any remorse for triggering the biggest financial crisis since the Depression and then getting bailed out by the government. They're not going to take it anymore! Well, they might take more money, but they're not going to put up with regulations and limits on their bonuses.
Fed up with name-calling and increased restrictions from the Obama administration, bankers are shifting financial support to Democratic opponents in the Republican party.
Bank officials say Wall Street is sending a message: “The expectation in Washington is that ‘We can kick you around, and you are still going to give us money,’ ” one top official at a major Wall Street firm tells the Times.
...this year Chase’s political action committee is sending the Democrats a pointed message. While it has contributed to some individual Democrats and state organizations, it has rebuffed solicitations from the national Democratic House and Senate campaign committees. Instead, it gave $30,000 to their Republican counterparts...
