By Pam Martens and Russ Martens: June 19, 2015 Yesterday, Mary Jo White was in London to address the International Organization of Securities Commissions (IOSCO). While there, she commented on the U.K.’s new plan to hold senior managers in the finance industry responsible for fraud in their departments. Each senior manager will have a specific delegated responsibility and if fraud occurs in their area, he or she can be terminated and banned for life from the industry if the senior manager had knowledge of the fraud. White called the idea “intriguing.” While White was chatting with her fellow securities regulators in London on this novel idea of actually holding crooked Wall Street bosses accountable, Thomas Hayes was on trial in another section of London over charges that he rigged the benchmark interest rate, Libor, on which interest rates on loans and financial instruments are set around the world. Yesterday, Hayes produced … Continue reading →

By James A. Kidney: June 18, 2015 President Obama has two vacancies to fill on the five-member Securities and Exchange Commission.  One will be a Democrat and the other must be a Republican or independent.  Rather than use these appointments as an opportunity to bring on both real-world experience from finance and open the commissioner ranks beyond Washington and New York, early word is that the likely nominees are from the same old well:  Wall Street lawyers and congressional staffers.  These selections possibly have the virtue of relatively easy confirmation through a recalcitrant Senate, but they are a lost opportunity. Daniel Gallagher, one of two Republican commissioners, is resigning after serving since November 7, 2011. Long-time Democratic Commissioner Luis Aguilar is leaving after serving since July 31, 2008. Their replacements will serve well into the next administration.  They will face continuing issues in the long, drawn-out implementation and enforcement of … Continue reading →

By Pam Martens and Russ Martens: June 17, 2015 After the U.S. government pumped the secret, astronomical sum of more than $13 trillion into Wall Street during the years surrounding the 2008 financial crisis to bail it out of its own greedy and reckless gambles, Wall Street is shamelessly asking for more government handouts in the opinion pages of the New York Times. The woman pitching this pathetic poppycock, Kathryn S. Wylde, was actually on the Board of Directors at the New York Fed during the crisis – the very institution that sluiced the secret $13 trillion into Wall Street’s coffers. If you live outside of New York City, you’ve never heard of the Partnership for New York City. Even if you live inside New York City, unless you’re part of the black tie cocktail circuit, you’ve still never heard of the group. So when the New York Times gave … Continue reading →

By Pam Martens and Russ Martens: June 16, 2015 Earlier this month, Senator Elizabeth Warren was so exasperated with the obstructionist role that Mary Jo White has played at the SEC that she sent her a sternly worded, 13-page letter calling her out on her serial broken promises. Senator Warren highlighted White’s failure to finalize rules requiring disclosure of the ratio of CEO pay to the median worker; her failure to curb the use of waivers for companies that violate securities law; the SEC’s continued practice of settling the vast majority of cases without requiring meaningful admissions of guilt; and White’s repeated recusals related to her prior employment and her husband’s current employment at law firms representing Wall Street. Now, Wall Street On Parade has uncovered a major new area of concern. For more than two years now, SEC Chair Mary Jo White has been aware that the most dangerous … Continue reading →

By Pam Martens and Russ Martens: June 15, 2015 The U.S. Treasury’s Office of Financial Research (OFR), the body created under the Dodd-Frank financial reform legislation to make sure another 2008 epic crash never happened again, quietly released a report last week which not only suggests another 2008-style crash is possible but that regulators will likely be blindsided again. The report, written by Jill Cetina, John McDonough, and Sriram Rajan, reveals that the big Wall Street banks are ginning up their capital measures by engaging in opaque and potentially dangerous “capital relief trades.” To illustrate how dangerous this kind of capital relief arbitrage can be, the report says that JPMorgan’s London Whale trades (which blew a $6.2 billion hole in the insured bank) was a capital relief trade. Here’s the precise language from the report: “JPMorgan Chase & Co.’s losses in the 2012 London Whale case were the result of … Continue reading →

By Pam Martens and Russ Martens: June 11, 2015 New York University, which has been rocked by revelations of providing multi-million dollar residences, forgivable mortgages, and sweet-deal, in-house financing for luxurious vacation homes to an elite group of staff and faculty, is now linked to the Hillary and Bill Clinton cash-by-the-truckload scandal. According to an analysis by the Washington Post, since leaving the White House in January 2001, Bill Clinton was paid $104.9 million for speaking fees through January 2013 when Hillary stepped down as Secretary of State. In addition, their nonprofit, the Clinton Foundation, has reported over $2 billion in donations from corporations and foreign governments around the world. In May, Hillary released a new financial disclosure form in conjunction with her candidacy for President. That form covered the period from January 2014 through May of this year, showing that the Clintons earned an additional $25 million for speeches. … Continue reading →

By Pam Martens and Russ Martens: June 10, 2015 On Monday, Richard Berner worried aloud at the Brookings Institution about what’s troubling the smartest guys in the room about today’s markets. Berner is the Director of the Office of Financial Research (OFR) at the Treasury Department. That’s the agency created under the Dodd-Frank financial reform legislation to, according to their web site, “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose,” and, ideally, provide the analysis to the folks sitting on the Financial Stability Oversight Council in time to prevent another 2008-style financial collapse on Wall Street. Two notable concerns stood out in Berner’s talk. First was a concern about liquidity in bond markets evaporating rapidly for reasons they don’t yet “sufficiently understand.” Berner explained: “…liquidity appears to have become increasingly brittle, even … Continue reading →

By Pam Martens and Russ Martens: June 9, 2015 Those complaining that Senator Elizabeth Warren went too far in her complaints against Mary Jo White’s leadership at the Securities and Exchange Commission obviously didn’t see yesterday’s Federal court decision coming. It now appears that Senator Warren would have had good grounds to also charge Mary Jo White with replicating the judicial practices of King George III – against whom the Declaration of Independence was drafted. U.S. District Court Judge, Leigh Martin May, ruled yesterday in Atlanta that the SEC’s system of selecting in-house judges to hear and decide SEC cases brought against individuals charged with securities violations was “likely unconstitutional.” The Judge imposed a preliminary injunction in an SEC insider-trading case until she issues her final decision in the matter. During the tenure of Mary Jo White at the SEC, the agency has increasingly used its own in-house judges to … Continue reading →

By Pam Martens and Russ Martens: June 8, 2015 The chickens are coming home to roost in the campaign of the quintessential Wall Street Democrat, Hillary Clinton. The mountains of cash sluiced into the Clinton pockets and their Foundation together with Hillary’s destruction of emails from her stint as Secretary of State caught up with her last week in two devastating polls showing that a majority of Americans don’t think she is trustworthy. As cynical as we’ve become as a nation, surely a requirement to occupy the highest office in the land should include the belief by your fellow Americans that one is trustworthy. On June 2, a CNN/ORC poll was released showing that 57 percent of those polled, up from 49 percent in March, say Hillary is not honest and trustworthy. The same day, the Washington Post published the findings from a poll conducted by itself and ABC, summarizing … Continue reading →

By Pam Martens and Russ Martens: June 4, 2015 Maybe we’re thinking about today’s stock market all wrong. As the largest corporations in America take on more and more debt to buy back their own shares and boost dividends to dress up their earnings and attract more investors, the stock market is looking more and more like a bond market in drag as equity. Bonds are backed by debt of the company; common stock represents equity in the business operations. But the business operations are now taking a backseat to the binge of stock buybacks. Jody Lurie, a credit analyst at Janney Montgomery Scott was quoted at Bloomberg News this week with this observation on the buyback phenomenon: “Companies have said, ‘We don’t have an ability to grow organically, so we can distract shareholders instead. When they buy back shares, all it does is optically make earnings per share look … Continue reading →