Financial Regulatory Forum

from The Great Debate:

SEC’s case against Goldman highlights need for Wall Street reform

-- Ed Mierzwinski is the longtime consumer program director of U.S. PIRG, the federation of state Public Interest Research Groups. U.S. PIRG is a founding member of Americans for Financial Reform, an unprecedented coalition of over 250 labor, senior, civil rights, community and consumer organizations. --

Over 18 months ago, U.S. taxpayers bailed out the reckless Wall Street banks. Yet, despite widespread and overwhelmingly public support for Wall Street reform and dramatic House action in December, efforts to move a Wall Street bill through the Senate have been stalled for months by a phalanx of powerful Wall Street lobbyists. While we cannot count them out, because they’ve increased their lobby and campaign spending as we move toward the endgame, Banking Committee Chairman Chris Dodd’s (D-CT) coup in moving a strong bill closer to floor action gave us some wind in our sails.

Then, several events last week put an even bigger whirlwind behind our reform efforts.

The biggest was that on Friday the SEC filed fraud charges against Wall Street's high-flying Goldman Sachs and its bond salesman Fabrice Tourre. The SEC alleged that they had made "material misstatements and omissions in connection with a synthetic collateralized debt obligation marketed to investors" and that these CDOs (a type of derivative) had contributed to the enormity of the financial crisis. The SEC’s claim, if proven, essentially will translate to this: Goldman stacked the decks against investors. Fabrice Tourre (who is known as Fab) even sent one email (SEC complaint paragraph 18) that said:

"The whole building is about to collapse anytime now… Only potential survivor, the fabulous Fab... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”"

Goldman sharply raised political, lobby spending

WASHINGTON, April 21 (Reuters) – Goldman Sachs Group Inc aggressively increased political campaign donations and lobby spending in Congress in early 2010, as the financial reform debate gathered momentum, according to newly released official documents.

Records show the embattled Wall Street firm nearly doubling its spending on Washington lobbyists to $1.2 million during the first quarter of 2010, as the focus of the reform debate shifted to legislation proposed by Senate Banking Committee Chairman Christopher Dodd.

The bank spent $670,000 on lobbying during the same period a year ago, according to Senate disclosure records. The data does not show how much lobby money Goldman spent specifically on financial reform.

Top Republican senator, White House clash on financial reform

McConnell says 'No'

McConnell says 'No'

   By Kevin Drawbaugh
   WASHINGTON, April 13 (Reuters) – The White House said “yes we can” on financial regulatory reform on Tuesday, while the top Republican in the U.S. Senate said “no we won’t.” (more…)

US’s Wolin defends fight for financial overhaul

USA/   WASHINGTON, April 12 (Reuters) – The Obama administration will resist any efforts to weaken a “comprehensive and strong” change to the way the U.S. financial system is regulated that lawmakers are now debating, Deputy Treasury Secretary Neal Wolin said on Monday. (more…)

Meeting on CDS market helps shape EU derivatives law – regulator

BRUSSELS, March 5 (Reuters) – The European Union’s executive body said a meeting on Friday with supervisors and investment industry officials has helped shape a planned law on derivatives due later in the year.

The meeting was held amid pressure from France, Germany and Luxembourg to crack down on what they see as hedge funds using credit default swaps to push Greek government bonds and the euro lower.

“It was a useful meeting and it will feed into preparation for rules on derivatives that we will propose in the Summer,” a spokeswoman for EU Internal Market Commissioner, Michel Barnier, said.

U.S. market regulators eye clearinghouse governance – CFTC’s Gensler

By Christopher Doering

WASHINGTON, March 1 (Reuters) – Congress should give U.S. securities and futures regulators the authority to ensure clearinghouses are protected against conflicts of interest, the chairman of the Commodity Futures Trading Commission said on Monday.

Gary Gensler outlined his vision for clearinghouses as two U.S. Senate committees work to finalize financial regulatory reform bills that will include new oversight for over-the-counter derivatives.

“Open governance would ensure that clearinghouses are not governed by parties that might have a conflict of interest or financial stake in particular transactions,” Gensler said in remarks prepared for the Institute of International Bankers.

New Zealand aims to align tax rates, boost capital markets

WELLINGTON, Feb 18 (Reuters) – New Zealand wants to align tax rates paid by company, individual and trusts to improve the country’s economic performance and is also looking at policies to boost its capital markets, government ministers said on Thursday.

Finance Minister Bill English said his government’s medium-term goal was to have company, trust and top personal rates at the same level, but was looking to see if such a move was affordable and fair.

“Our early advice is that aligning the trust and top personal tax rates is the most important issue,” he told a business group, adding that substantial gains could be made from this with the company tax rate not too far below.

South Africa to implement financial services reforms

  CAPE TOWN, Feb 17 (Reuters) – South Africa will implement financial regulatory reforms in line with G-20 recommendations, including better management of foreign risk exposure of banks and institutional investors, the National Treasury said on Wednesday.

“As of March 2010, South African banks will be able to acquire direct and indirect foreign exposure of up to 25 percent of their total liabilities (excluding equity), covering all foreign exposure but excluding FDI (foreign direct investment).

“The initial limit of 40 percent has been adjusted downwards in light of recent international developments,” the Treasury said in its 2010 Budget Review.

Consumer watchdog debate threatens U.S. financial reform

    By Kevin Drawbaugh

  WASHINGTON, Feb 12 (Reuters) – A  fight over how sharp to make the teeth of a new U.S. watchdog for financial consumers threatened on Friday to derail progress toward tighter bank and capital market regulation, amid much posturing on both sides.

Democrats want an independent agency that can clamp down hard on abusive mortgages and credit cards, but Republicans and bank lobbyists want a tamer beast that won’t threaten profits too much and that answers to a higher master.

The Obama administration’s proposal to create a U.S. Consumer Financial Protection Agency (CFPA) has emerged as the main impediment to bipartisan agreement on financial regulation reform, one of the White House’s major priorities for 2010.

Republican Gregg sees common ground in U.S. Senate on financial regulation

 WASHINGTON, Feb 12 (Reuters) – The top Republican on the U.S. Senate Budget Committee said on Friday there is common ground with Democrats on financial regulation legislation but the White House stance on consumer protection remains an obstacle.

“There’s a lot of common ground here. This really isn’t a partisan issue. This is an extremely complex exercise in getting governance right and the only really big philosophical difference here is how you protect consumers,” Senator Judd Gregg said in an interview with CNBC.

Judd was speaking a day after Senate Banking Committee Chairman Christopher Dodd, a Democrat, said he was discussing legislation with Senator Bob Corker, a first-term Republican member of the panel.