Obama’s revolving door--FINRA and SEC

I've written about Mary Shapiro before. There is no hope for change when the fox guards the henhouse. We'll continue to have the Bernie Madoff and "Sir" Allen Stanford scandals and ponzi schemes.

"Markopolos and the subcommittee members devoted much time to laying out the multitudinous and egregious failures of the SEC with respect to Madoff. During the questioning, Markopolos was asked his opinion of another regulatory entity that is supposed to be overseeing and policing the activities of a segment of the financial services industry—broker/dealers. This one is called the Financial Industry Regulatory Authority (FINRA). It is a non-governmental organization run by the broker/dealers (think: fox watching the henhouse), empowered by the U.S. Congress to do so. Its powers include arbitrating disputes between customers and their broker-dealer members, since aggrieved customers are not usually permitted access to the courts. Supposedly, the U.S. Congress oversees FINRA activities.

Now, Markopolos was asked to compare the SEC and FINRA. His answer was short and pithy: the SEC is incompetent; FINRA is corrupt.

President Obama had appointed one Mary Shaprio to be the new head of the SEC, replacing the clueless Christopher Cox. I also knew that Mary Shapiro's previous job was head of FINRA, where she was paid approximately $3 million per year, plus another $5-$25 million reward for her FINRA exit. So, we have here the chief of a corrupt regulatory body, being appointed to clean house at an incompetent regulatory body. She was unanimously confirmed by the U.S. Senate." Bob Gilbert quoted at Maggie’s Notebook

Just one big happy company trading in favors

According to Bloomberg:

"Goldman Sachs Group Inc., which got $10 billion and debt guarantees from the U.S. government in October, expects to pay $14 million in taxes worldwide for 2008 compared with $6 billion in 2007.

The company’s effective income tax rate dropped to 1 percent from 34.1 percent, New York-based Goldman Sachs said today in a statement. The firm reported a $2.3 billion profit for the year after paying $10.9 billion in employee compensation and benefits."

Ho, Ho, Ho. Merry Christmas. So we taxpayers, many of whom are now applying for unemployment checks or standing in a line of 937 for 10 jobs waiting tables, passed the hat for Goldman Sachs Christmas bonuses, which I'm sure were part of "compensation and benefits." Were no guidelines written into this give away package? The $18 billion bonus fund was set aside in 2007. Why didn't they use their own money for the bailout?

Couldn't Congress see this coming? Their own stimulus package so they can pay the mortgage on the multi-million dollar home and the 3rd Mercedes lease. Normally, I don't worry myself about bonuses, perks and salaries--unless I've loaned the company money or own stock in it. And I think I'm now an owner and should have a say in this one. What do you think?

Henry Paulson, the architect of these bailouts, and currently king of the world, is a former employee of Goldman Sachs and a partner with Al Gore in the next great ponzi scheme, cap and trade, a multi-million dollar business called, Generation Investment Management (GIM).

Al Gore might have invented the internet and a new religion, but he's not smart like Hank in money matters. GIM is part of the major carbon-credit trading firms that currently exist: the U.S. Chicago Climate Exchange (CCX) and the Carbon Neutral Company (CNC) in Great Britain. The CCX, is a regulated exchange whose members are committed to cutting their emissions (all the big players are in it--Ted Turner, Kofi Annan, Gore's former chief of staff, Peter Knight, Canadian industrialist Maurice Strong). It is the only cap-and-trade system in North America for six greenhouse gases. Last September, Goldman Sachs bought 10% of CCX shares for $23 million. CCX owns half the ECX (European Climate Exchange), so Goldman Sachs has a stake there as well. See how neatly this works--and it is so bi-partisan, Republicans, Democrats, Americans, Canadians, Brits, Socialists and little 3rd world U.N. tyrants all working together, singing Kum-ba-ya around a non-polluting campfire.

Another former Goldman employee--18 years--is Obama's choice for a "sweeping overhaul" of the Commodity Futures Trading Commission, Gary Gensler. He probably had his cap set (no pun intended) on the SEC but has lost out the Mary Schapiro, head of FINRA, which was asleep at the switch in catching Bernie Madoff.

When Paulson was appointed in 2006 apparently two things on his side (to assure confirmation) was that 1) like most Goldman Sach CEOs he was "insanely wealthy", and 2) a committed environmentalist. Something for everyone.

For information on CCX, ECX, GIM, Hank and Al, see here, and here.

No bailout needed here for the abused client

Considering that SEC and FINRA moved not at all against Bernie Madoff despite their huge budgets and staff, despite tips he was running a ponzi scheme, I certainly stopped to ponder the justice of this rule violation for an architect:

Rule 2.104 Code of Ethics for architects states:

“Members shall not engage in conduct involving fraud or wanton disregard of the rights of others.”

The Complainant and his wife retained Mr. Alexieff to design and prepare construction documents for an addition to their house. During the time that the project was being designed and constructed, Mr. Alexieff failed to renew his architectural license in the state where he practiced and where the project was located.

The National Ethics Council ruled that Mr. Alexieff violated Rule 2.104 of the Code of Ethics by performing architectural services for the Complainant, including signing and sealing architectural drawings, without a valid architectural license. The Council concluded that the Complainant had a right to expect that the architect he retained was licensed and would maintain a current license throughout the duration of the project. The lapse in Mr. Alexieff’s architectural license was in wanton disregard of the Complainant’s rights because it created a high degree of risk that the Complainant would be adversely affected.

The Council imposed the penalty of a three-year suspension of membership on Mr. Alexieff. AIArchitect This Week, Dec. 19

He doesn't renew his license and gets a 3 year suspension of membership. Bernie must have dotted all the i's and crossed his t's in order to fool both the outgoing Cox (SEC) and incoming Schapiro (FINRA to SEC). Reminds me of the Democrats here in Ohio dumping on former Gov. Taft for a golf game, then appointing a bunch of crooks under Strickland, like the "plumbers" and Dann.

FINRA, Madoff, and Obama's SEC choice

"Mary Schapiro, Barack Obama's choice to lead the Securities and Exchange Commission, previously appointed one of Bernard Madoff's sons to a regulatory body that oversees US securities firms.

It has emerged that in 2001, Ms Schapiro, now the chief executive of the Financial Industry Regulatory Authority (FINRA), employed Mark Madoff to serve on the board of the National Adjudicatory Council - the division that reviews disciplinary decisions made by FINRA.

Last week, Mark and his brother, Andrew, were understood to have approached the authorities after their father apparently confessed to orchestrating a $US50 billion ($70.9 billion) securities fraud.

Bernard Madoff is under house arrest in his $US7 million Manhattan apartment and will be electronically tagged after he failed to secure further signatories to guarantee his $US10 million bail.

Both sons have emphatically denied any involvement in what could be the biggest fraud perpetrated by an individual.

However, the link with Mark may prove controversial for Ms Schapiro and the US president-elect, who has moved fast to replace Christopher Cox, the current head of the SEC.

The watchdog has already come under fire for failing to detect Mr Madoff's activities." Story link here, here, here, here and here.

In my opinion, her useless, ineffective term with FINRA who couldn't catch a thief if they stumbled over him unconscious, is a far more damning recommendation than her appointment of Madoff the Lesser. Makes no difference if she was in like flinn with Reagan and Bush and Clinton. She's much too tainted. FINRA and SEC both have to clean up the family tree and get rid of the incest.

Let's see. Obama's got a Secretary of State with huge financial obligations to the Saudis through her husband's library and foundation. He's got a Chief of Staff with fingerprints all over the Blagojevich appointment scandal. He's got a Secretary of Education that helped Bill Ayers with the Annenberg connection in the failing Chicago schools. Those three he knew about. This one probably caught him off guard. Gary Gensler who spent 18 years at Goldman Sachs, the ones who got a jump start on the bail outs in 2007, was under something in Treasury, he appointed to head Commodities Futures Trading Commission.

Sure is lots of hope and change coming our way folks.

All in the Family

Today a friend was explaining to me an educator's theory (I've forgotten her name) of class and education:

the lower and working class families tend to live for today, without saving a lot, or looking ahead, and they hold their family members very close and rely on family;

the middle class and upper middle class are more goal oriented, they save, they encourage their children to take risks and achieve, and they are less bonded emotionally to their kids and immediate family;

the upper class and extremely wealthy live on past loyalties and connections, and they also hold their values, family and wealth very close.

Watching the Madoff ponzi scheme meltdown and his family ties I think she's on to something. Madoff's niece married a SEC employee, and Walter Noel (Fairfield Greenwich Fund with close ties to Madoff) has 4 or 5 sons-in-laws in the business and they have involved banks and clients for billions around the world--Spain, Brazil, Switzerland, etc.

"The Securities and Exchange Commission plans to probe the relationship between the niece of financier Bernard L. Madoff and a former official at the agency, according to a report in The Wall Street Journal on Wednesday. The probe comes on the heels of an admission by SEC Chairman Christopher Cox that the agency was aware of numerous red flags raised over Bernard L. Madoff Investment Securities LLC, the focus of an alleged $50 billion Ponzi scheme." Market Watch

"In 2002, Vanity Fair dispatched the photographer Bruce Weber to shoot a lavish spread of Mr. Noel’s wife and their five grown daughters at his home in Connecticut (“Golden in Greenwich,” read the headline). That was followed, in 2005, by a Town and Country story on the Noel family’s tropical retreat in Mustique." NYT

Makes you wonder if the glossies will be the next victim of the meltdown, because they follow all the socialites and charity balls. Some charities are closing their doors, and the wealthy aren't answering their phones. In today's WSJ, Holman W. Jenkins, Jr. asked, "When has the SEC ever found a fraud except by reading about it in the newspaper.?" These allegations surfaced in the late 90s, but the SEC never recommended any action. Sort of reminds me of the banking committees in Congress, aka The Barney and Chris Dog and Pony Show. They didn't think there was any problem in the Fannie and Fred housing schemes to back loans to people who couldn't possibly pay it back. Jenkins also suggested that the government, when Madoff makes bail which is tough since the people who could help him are his victims, he be put in charge of Social Security, an even bigger ponzi scheme.

Chart of Madoff losses