Professor Elam

Financial Reform Bill

Monday Apr 26, 2010

Rick Santelli on CNB C suggested months ago that derivatives should be put on the exchanges so that everyone could see what they are worth, who issues them, ie, real transparency, real rules. This is one of the provisions of the Financial Reform Bill.

The NY Times, courtesy of the Senate, has released lots of damning e mails indicating Goldman profited from betting against their own clients. Lesson, be careful what you put in an e mail...

But, will anyone at Goldman really suffer, even have to give back a bonus, I doubt it. 

Your XXX Tax Dollars at Work

Sat  April 24, 2010

While Wall Street melted in 2008 and President Obama announced more financial reform just yesterday, what were the Jack Bauer watchdogs up to at the SEC?  You will recall that the SEC sets the budget for the PCAOB, guardian of the accounting rules of the game these days. Well you might think what with Bernie Madoff, FNM, FRE, the housing bubble, Lehman, Bear Stearns, they would be rather busy, well maybe not. 

It seems the SEC Inspector General has found 33 SEC staffers in the $99-200K + salary range were, yes, looking for as Mark Steyn put it yesterday, looking for Debbie Does Wall Street. An investigation reveals the 33 were surfing XXX sites and downloading accordingly. Remarkably, several have resigned or have been asked to be re assigned, presumably they will join well, never mind, let's  just guess where those talents might best be used. 

AS I recall Barack was going to make government cool again, he can start with the SEC.  All of these individuals who would use a govt computer in this manner should be discharged for sheer stupidity, how could such a person ever be expected to find a determined financial fraudster if they themselves are this naive. 

Auditor Update

April 21 2010

Audit fees zoomed after SARBOX passed, no longer. Now fee competition is back. I was surprised to read this CFO article that a firm was considering switching a second year after the first switch just to see if they could get yet a lower audit fee. So much for client loyalty, now the audit has become a necessary commodity again, like electricity. 

Accountants got into trouble bidding on audits in the 1990s, soon standards grew lax, and well, you can see what happened. This is also a chance for the second tier firms, like Alex Grant, to get a new foothold. An interesting read, highly recommended. 

Financial Reform Bill

Wed april 21 2010

No one ever titled a bill

Whoops we really goofed up and should have done this sooner, 

such legislation is always couched in terms like

Technical Corrections Act

Financial Reform Act

to make it sound like congress is not just covering up their past lack of oversight which of course is exactly what they are doing

In this case the 1300 page bill is much more in line with the Admin desire to control every aspect of the economy and your life, there is nothing in the bill about FNM or FRE, the two giants that caused much of this, nor is there anything about the involvement of the govt in urging people who could not afford houses to buy them and for the govt to insure that debt, no accountability as usual

But here is a summary of the bill

Money Never Sleeps

Tuesday April 20 2010

You may have heard that Wall St II Money Never Sleeps is now in delayed release until Sept 24. 

Perhaps the plot of Wall St II was not deemed audacious enough to keep the attention of the audience, given what is playing out in real life with Goldman, consider, let's create this plot for a fictional Wall St Firm....

firm has advisers to every president

firm lies to clients and bets against them

firm gives a million dollars  in political donations to president to be

firm's shenanigans cause near financial ruin

firm runs to white house and demands to be rescued

firm is rescued and showered with money not to mention FDIC insurance

firm uses money to run market up, record bonuses from trading with OPM other peoples' money, having obtained the money on the theory that otherwise the firm would go broke

then president in a fit of theatrical consternation, is stunned to learn that there is 'gambling in this place', ( a famous line from the movie Casablanca for our younger readers)  having pocketed the political donations already, wink, nod to Blankenfein

president files a lawsuit, big annoucement on tv

even the president's own SEC is dubious, 3-2 vote to file suit

firm denies wrongdoing

market rallies

I mean satirizing reality is getting tougher and tougher...who would believe fiction like this?

First Let's repeal the 16th Amendment

Tuesday April 20 2010

The 16th Amendment allowed the income tax to be passed. The fact that the Constitution had to be amended to allow this is all you really need to know, it was a bad idea in 1776, it is a bad idea now. 

George Will like Walter Williams points out that we do not need both an income and a Value Added Tax VAT. We need to repeal the income tax first. That of course will not happen. The income tax gives politicians too much power in the ability to dispense favors to those that shower them with campaign money. We will certainly become a socialized Europe of we have both the VAT and the income tax. 

Bond Movie on Hold, MGM Toast?

Tuesday April 20, 2010

MGM teeters on bankruptcy. This is the studio that where the Bond movies, one of the most successful long running movie franchises in history, have been filmed. But the producers long to move to Fox or Sony, so the next sequel has been delayed. 

 I don't care for the way the producers have tried to make Bond an action hero, he is not and the last film as a disaster in my opinion, as well as its awkward title. As usual, go back and read the some of the original Fleming books. The first two films, Dr. No and From Russia with Love were pretty close to the original idea. Then the producers went for gadgets and locations rather than characters and plot. 

But our story here, bankruptcy casts a wide net, even netting Bond. 

994,795 Reasons Nothing Happens to Goldman

Tuesday April 20, 2010

This list shows that Goldman PAC contributed $994,795 to the Obama campaign. Also note the usual suspects of Morgan and CIti on the list. Here is the big picture. Wall Street helped get Barack into office. He is surrounded by former Goldman employees as advisors. He wants a financial regulation bill passed to make it appear he is tough on Wall Street. In fact the bill puts enforcement in the hands of the FED, a very bad idea. Goldman was allowed to become and FDIC insured bank during the financial crisis, it still is. Goldman was able to use TARP money to run the market up, reap big profits, pay bonuses, the same ones the public is angry about. 

So the lawsuit, passed 3-2 at the SEC, makes it appear for campaign purposes that the Administration is 'going after' Wall Street. Goldman claims its innocence, it has hired A former Clinton lawyer used during the impeachment threats. After the fall elections, Goldman signs a consent decree neither admitting nor denying guilt and pays a fine. The fine is peanuts compared to how much it has made. Business continues as usual, Goldman is still in the White House. 

SEC on Goldman Fraud, Maybe Not...

Tuesday April 20

Turns out the SEC voted 3-2 on whether to prosecute Goldman, another party line vote. This is hardly the stuff of real ethics. The rules should be clear, ethics in financial dealings should not be a value judgement. 

Steve Jobs Urges Californians to Donate Organs

Tuesday April 20, 2010

One of the emerging ethical issues of our time is organ donation. Here is an interesting story on how Steve Jobs induced the state of CA to become pro active in this endeavor. The truth of the matter is that organs need to be harvested quickly when someone dies. The most occurring incident is fatal vehicle accidents. At present one could volunteer to become an organ donor when renewing a driver license but no one is pushing it. They are now. 

Hopefully this is an idea that will catch on in other states.