Why we need regulatory cops on the beat – and why they make bankers cringe

If firms that defrauded their customers gained a competitive advantage over their honest rivals private market discipline became perverse and drove honest firms into bankruptcy.

The CEOs that lead accounting control frauds create intensely criminogenic environments by shaping perverse incentives that maximize such Gresham’s dynamics among their own officers – by basing executive compensation largely on short-term reported (fictional) income. They create perverse incentives among loan officers, “independent” professionals, and other firms (e.g., loan brokers) by hiring, firing, promoting, praising, and making wealthy those that will create and “bless” their fraudulent accounting practices. The art is to suborn – not defeat – “controls” by perverting them into allies

The U.S. Banking Crisis Has a Long Way to Go

The banking has not reached the halfway point, maybe not even the midpoint of the first quarter. The FDIC has recorded 307 bank failures. The total could reach 1,800 – 3,

Elizabeth Warren: GMAC did not pose a systemic risk

So why did we rescue this institution with a massive bailout? Elizabeth Warren, who chairs the Congressional Oversight panel of the TARP program, doesn’t understand any more than taxpayers do. This is another example of the malinvestment and zombie finance which bailouts have fostered. Here’s a question for you: if GMAC was a U.S. auto

Make Markets Be Markets: The Report

This is the second in a series of posts about ideas for financial reform generated by the “Make Markets Be Markets” conference I attended yesterday in New York City on 3 Mar 2010. Below is a compilation of all the ideas for financial reform presented by the group of financial professionals. It includes presentations by

News from around the web: 2009-12-18

Strategic Default interfluidity » Strategic default and the duty to shareholders Luxury-Home Owners in U.S. Use Short Sales as Defaults Rise – Bloomberg.com    interfluidity » Strategic default: a soldier’s perspective The Mess That Greenspan Made: Is it conditioning, morality, or naïveté? Debtor’s Dilemma: Pay the Mortgage or Walk Away – WSJ.com Morgan Stanley to Give

Video: Elizabeth Warren says R.I.P. to TARP

Hat Tip Tim Iacono

Non-Financial news from around the web: 2009-12-05

Tiger Woods said to pay his wife millions to stick by him — DailyFinance China ‘wants to set up factories in Africa’ | World news | guardian.co.uk (Check out the photo in this post – obviously used to show environmental effects of production.) CNN Political Ticker: All politics, all the time Blog Archive – CNN

News from around the web: 2009-10-24

US Treasuries: "Risk free" for How Long? – Megan McArdle This is the widely-believed default canard. Latin America nations defaulted because of foreign currency debt. Japan issue debt in their own currency. They cannot default. Hello? CRE Refinance Pressure to Continue for Months : HousingWire Peak middle of net decade South-South Trade Tensions – Crisis

Links: 2009-10-23

The Problem is Not TBTF, but TDTR – Yves Smith TDTR means Too Difficult to Resolve Economist’s View: "The Death-Defying Dollar" Long-term weakness but no collapse. Paul Krugman – The Chinese Disconnect – NYTimes.com This is going to be a tough nut to crack. The US can’t be seen telling the Chinese publicly to revalue.

Elizabeth Warren: “The big banks always get what they want”

Elizabeth Warren, chair of the Congressional Oversight Panel, is certainly looks to be fighting the good fight. At the conclusion of the Buttonwood Gathering in New York on Fixing Finance, she met with Tech Ticker’s Aaron Task and gave him quite an ear full. Listen to what she has to say about the way the

Warren: The middle class “became the turkey at the thanksgiving dinner"

Below is a YouTube clip featuring Elizabeth Warren, the chair of Congress’ oversight panel of TARP (the Troubled Asset relief Program), the bailout started by Hank Paulson and passed by Congress.  In it she talks about her fears regarding the lack of real regulatory reform in the world of finance and how this is setting

News from around the web: 2009-09-04

Putting the ‘change’ back in “change you can believe in”: The two faces of Barack Obama – Marshall Auerback Is this the Warren Christopher Presidency writ large? Roosevelt Institute Braintruster Marshall Auerback argues that the divide-and-compromise approach is dead-wrong for Obama. Blog You! – Barry Ritholtz This is a video clip I sent Barry. I