Later On

A blog written for those whose interests more or less match mine.

Public shaming is not going to work: they must fire the guy

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And fire him they should: note the emphasized passage below. Pam Martens and Russ Martens report in Wall Street on Parade:

Last Friday, the Senate Subcommittee on Financial Institutions and Consumer Protection, chaired by Sherrod Brown, effectively put William Dudley, President of the Federal Reserve Bank of New York, in stocks in the village square and engaged in a rather brilliant style of public shaming. With each well-formed question posed by the panel, Dudley’s jaded leadership of a hubristic regulator came into ever sharper focus.

There were a number of elephants in the room during the lengthy session that were only briefly touched upon but deserve greater scrutiny by the press. First, Congress knew that the New York Fed was a failed, crony regulator during the lead up to the financial collapse in 2008, but it granted it an even greater supervisory role under the Dodd-Frank financial reform legislation in 2010. This Congress has also failed to engage in public shaming of President Obama for brazenly ignoring the Dodd-Frank’s statutory mandate that calls for him to appoint, subject to Senate confirmation, a Vice Chairman for Supervision at the Federal Reserve Board of Governors, who could have shaped and monitored a more credible policing role for the New York Fed.

Senator Sherrod Brown Questions the New York Fed President During Senate Hearing , Novemer 21, 2014

Section 1108 of Dodd-Frank requires: “The Vice Chairman for Supervision shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board, and shall oversee the supervision and regulation of such firms.” President Obama was required to nominate this individual once the Dodd-Frank Wall Street Reform and Consumer Protection Act became effective; that was July 21, 2010 – more than four years ago. The President has simply ignored this provision of the law – no doubt to the extreme satisfaction of Wall Street.

The final elephant is that as a result of giving a failed regulator enhanced power and failing to appoint a person to a leadership role in supervision, the U.S. Senate has effectively become Wall Street’s cop on the beat, doing the job the New York Fed’s cronyism prevents it from doing.

The last point was buttressed by the fact that simultaneous with this hearing, Senator Carl Levin’s Permanent Subcommittee on Investigations was holding its second day of hearings on how Wall Street, under the nose of the New York Fed, has massively and secretly gobbled up a huge swath of the nation’s physical commodities, like oil and aluminum, creating cost spikes for the consumer and industrial users while also placing huge trading bets on commodity prices.

Levin’s subcommittee, in place of the New York Fed, has also had to conduct exhaustive investigations into JPMorgan’s London Whale trading scandal, where the bank lost over $6.2 billion of depositors funds; HSBC’s money laundering; Credit Suisse’s tax evasion scam; and various other Wall Street abuses.

Senator Jeff Merkley touched on this aspect after Dudley had the audacity to imply in his opening remarks that the concept of “too big to jail” had been consigned to history “when Credit Suisse and BNP Paribas pleaded guilty to criminal charges.”

Senator Merkley asked Dudley how many names of the individuals who engaged in the tax evasion scam deployed by Credit Suisse were turned over to authorities. Dudley said he didn’t know. Merkley asked how many Americans who created those secret tax evasion accounts with Credit Suisse were prosecuted. Dudley said he didn’t know. Merkley asked how many of the hundreds of Credit Suisse employees that set up these sham accounts were indicted. Dudley said he didn’t know. Merkley said the answer to all of these questions was “none.”

Merkley went on to say that the Credit Suisse guilty plea to criminal charges came about not because of any advance information provided by the New York Fed or any investigation undertaken by the New York Fed, but because of the work of Senator Levin’s subcommittee.

Showing deep frustration, Senator Merkley said: “You’re the regulator; why did it take the U.S. Senate committee to find out those facts.” Dudley responded: “I don’t know the answer to that.” [The sonofabitch doesn’t know much, does he? Certainly nothing about his job. – LG]

Senator Elizabeth Warren drilled down to just how Dudley sees his role as a regulator. In an enlightening exchange, . . .

Continue reading.

Written by LeisureGuy

24 November 2014 at 2:54 pm

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