The securities and exchange commission tells what went wrong

Discussion in 'Current Events' started by Truthmatters, Oct 10, 2008.

  1. Truthmatters
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    Press Release: Chairman Cox Announces End of Consolidated Supervised Entities Program; 2008-230; Sept. 26, 2008


    Chairman Cox made the following statement:

    The last six months have made it abundantly clear that voluntary regulation does not work. When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns.

    Because of the lack of explicit statutory authority for the Commission to require these investment bank holding companies to report their capital, maintain liquidity, or submit to leverage requirements, the Commission in 2004 created a voluntary program, the Consolidated Supervised Entities program, in an effort to fill this regulatory gap.

    As I have reported to the Congress multiple times in recent months, the CSE program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate of the CSE program, and weakened its effectiveness.

    The Inspector General of the SEC today released a report on the CSE program's supervision of Bear Stearns, and that report validates and echoes the concerns I have expressed to Congress. The report's major findings are ultimately derivative of the lack of specific legal authority for the SEC or any other agency to act as the regulator of these large investment bank holding companies.

    With each of the major investment banks that had been part of the CSE program being reconstituted within a bank holding company, they will all be subject to statutory supervision by the Federal Reserve. Under the Bank Holding Company Act, the Federal Reserve has robust statutory authority to impose and enforce supervisory requirements on those entities. Thus, there is not currently a regulatory gap in this area.

    The CSE program within the Division of Trading and Markets will now be ending.

    Under the Memorandum of Understanding between the SEC and the Federal Reserve that was executed in July of this year, we will continue to work closely with the Fed, but focused even more clearly on our statutory obligation to regulate the broker-dealer subsidiaries of the banking conglomerates. The information from the bank holding company level that the SEC will continue to receive under the MOU will strengthen our ability to protect the customers of the broker-dealers and the integrity of the broker-dealer firms.

    The Inspector General's office also made 26 specific recommendations to improve the CSE program, which are comprehensive and worthy of support. Although the CSE program is ending, we will look closely at the applicability of those recommendations to other areas of the Commission's work and move to aggressively implement them.

    As we learned from the CSE experience, it is critical that Congress ensure there are no similar major gaps in our regulatory framework. Unfortunately, as I reported to Congress this week, a massive hole remains: the approximately $60 trillion credit default swap (CDS) market, which is regulated by no agency of government. Neither the SEC nor any regulator has authority even to require minimum disclosure. I urge Congress to take swift action to address this.

    Finally, I would like to commend the extraordinary efforts of the SEC's diligent staff, who for so many months have been working around the clock in the current market turmoil. Their dedication and commitment in behalf of investors and the American people are unequaled.
     
  2. Truthmatters
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    When Congress passed the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies, like Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns.

    Because of the lack of explicit statutory authority for the Commission to require these investment bank holding companies to report their capital, maintain liquidity, or submit to leverage requirements, the Commission in 2004 created a voluntary program, the Consolidated Supervised Entities program, in an effort to fill this regulatory gap.

    As I have reported to the Congress multiple times in recent months, the CSE program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate of the CSE program, and weakened its effectiveness.



    Anyone who thinks these people dont know what they are talking about is a fool.
     
  3. Truthmatters
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    You can bet this will get ignored by the clones for McCrusty
     
  4. Truthmatters
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    Told you they wouldnt.

    they cant refute these facts can they?
     
  5. Andrew2382
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    Andrew2382 Gold Member

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    Interesting.

    The bills were introduced in the U.S. Senate by Phil Gramm (R-Texas) and in the U.S. House of Representatives by Jim Leach (R-Iowa). The bills passed the Senate on a 54-44 vote along party lines (53 Republicans and one Democrat in favor; 44 Democrats opposed).[1] After adopting Democratic proposals for negotiations with the Senate, the House passed the bill on an uncounted voice vote. The bill then moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the Community Reinvestment Act and address certain privacy concerns.[2] On November 4, the final bill resolving the differences was passed by the Senate 90-8 [3] and by the House 362-57.[4] This "veto-proof" legislation was signed into law by President Bill Clinton on November 12, 1999.[



    In 1999 the Congress enacted and President Clinton signed into law the Gramm-Leach-Bliley Act, also known as the "Financial Services Modernization Act," which repealed the part of the Glass-Steagall Act prohibiting a bank from offering a full range of investment, commercial banking, and insurance services. The bill was killed in 1998 because Senator Phil Gramm wanted the bill to expand the number of banks which no longer would be covered by the CRA. He also demanded full disclosure of any financial deals which community groups had with banks, accusing such groups of "extortion." In 1999 Senators Christopher Dodd and Charles E. Schumer broke another deadlock by forcing a compromise between Gramm and the Clinton administration which wanted to prevent banks from expanding into insurance or securities unless they were compliant with the CRA. In the final compromise, the CRA would cover bank expansions into new lines of business, community groups would have to disclose certain kinds of financial deals with banks, and smaller banks would be reviewed less frequently for CRA compliance.[29][30][31] On signing the Gramm-Leach-Bliley Act, President Clinton said that it, "establishes the principles that, as we expand the powers of banks, we will expand the reach of the [Community Reinvestment] Act".[32]

    What do you know, the CRA sneaks it's ugly head into everything that you guys say fucked up the economy.
     
  6. CrimsonWhite
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    :clap2:
     
  7. Truthmatters
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    Hurrah you answered very good.

    Now what was the part Phil Gramm wanted?

    The part where they deregulated the industry to allow it to own different sectors of the lending industy.

    They had been held seperately since the Glass Stegal law which ws implimented to prevent another great depression.

    It kept the sector from owning the process of packaging the loans for resale.

    After the law passed the industry would package larger and larger %s of sub prime off with other securities and sell them to unsuspecting markets like say Europe.

    You do realize that the majority of sub primes were written by entities who were not effected by CRA laws right?


    Also you are ignoring the part where the SEC says its own lack of oversite ( bush appointee in charge) on the industry.

    They allowed them to police themselves and it was a total failure. It was a deregulators dream. The industry just had to pretend to watch its self.
     
  8. Truthmatters
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    Oh yeah I forgot to mention that the Republicans had 6 years of completet control fo the whole government to be able to fix the gaps and holes which caused this and all they did was fight the states who individually tried to fix it in their own states.


    So much for states rigths huh guys?
     
  9. Andrew2382
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    You're right. The republicans never tried to regulate the housing industry.

    You are correct


    /facepalm
     
  10. Truthmatters
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    They had complete control for six years. They did not have to TRY all they had to do was DO!
     

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