The focus on Bank Regulation & Bank Regulators. From Matt Taibbi & Michael Lewis to Senator Warren.
It has not been a good month for Wall Street.
On February 4th, Michael Lewis came out with guns blazing against Greg Smith’s “Why I left Goldman Sachs”. Branding Mr. Smith as tone deaf, self serving and narcissistic is something that would have really tickled Goldman on any other day in February. Unfortunately Lewis didn’t stop at Greg Smith or his supposedly tell all tale. It’s what he said in his closing lines at the New Republic that really turned them pink on Wall Street.
“Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system. In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.)”
If Mr. Lewis’s reference to public lynching and Wall Street in the same sentence wasn’t enough, on February 14th Matt Taibbi at Rolling Stone delivered a somewhat unexpected valentine’s day note of love to Gangster Bankers. A piece that sprinkled vitriol in generous and equal measures on banks on Wall Street as well as their regulators.
Thankfully Mr. Taibbi adoration was only limited to HSBC, UBS, the FSA, the Federal Reserve, the Justice department and the OCC. But that didn’t stop him from writing off a 1.9 billion dollar fine as only five weeks of penance for more than two decades of crime with criminal intent. Murderers, Torturers, Drug dealers, Russian Mafia, Money Launderers and Bankers. Even though he didn’t go as far as Lewis, his choice of words said it all. They belong together, hang them all high.
A reporter at the UBS presser pointed out to Breuer that UBS had already been busted in 2009 in a major tax-evasion case, and asked a sensible question. “This is a bank that has broken the law before,” the reporter said. “So why not be tougher?”
“I don’t know what tougher means,” answered the assistant attorney general.
Generally the weekend would have brought an end to this round of shame and scandal in the family. But February 15th Senator Warren (MA) decided to follow up on Matt Taibbi’s questions in her Senate hearing. (Still investigating to see if Senator Warren is an avid Rolling Stone or Matt Taibbi follower or both)
She asked an entire panel of banking regulators representing half a dozen alphabets when was the last time they took a bank all the way to trial, rather than settlement. When they pointed out the wisdom of settlement, she respectfully repeated Matt Tiabbi’s question again. Does too big to fail, means too big to jail?
In other news we were inspired by this real time docudrama to make our own contribution to this mess. Nothing as interesting or biting as Tiabbi and Lewis or Senator Warren, just a short and sweet note on the futile love affair of Bank Regulators with Capital Adequacy Ratios. Trouble’s coming, we warn you.
It has been a sad month for bankers and regulators (but fantastic entertainment otherwise).
May the next bank that decides to wander be warned that this time regulators may decide to make an example out of them; only if they are small enough to jail.