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Why the SEC Won’t Hunt Big Dogs

propublica.org

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Re: Why the SEC Won’t Hunt Big Dogs

#41

Post by burgerbrain »

rhizome wrote: post #39
nobody3141 wrote: post #6

Earlier quoted context omitted.

Quick economics lesson. The money on Wall St doesn't belong to the guys in red braces - it is the pensions of ordinary Americans and the savings of little old ladies. Letting Wall St crash and burn means everybody in America's pension disappears - everybody over 65 is out on the street. Everybody who saved money has lost it. Nobody accepts cash anymore, after all if you put it in the bank it might dissapear. You are…

Letting Wall St crash and burn means everybody in America's pension disappears What are you talking about, where does the money go? Money doesn't just "disappear."

Of course it can. Value can be destroyed just as well as it can be created.

Re: Why the SEC Won’t Hunt Big Dogs

#42

Post by joe_the_user »

anigbrowl wrote: post #37
joe_the_user wrote: post #29

Earlier quoted context omitted.

Hmm, At what point do the claim "they are doing their best" and the claim "clearly they don't have the resources to do anything" collide and explode into burning rubble? I can believe that there are many noble individuals in the Doj who are doing their best. But how can one not call a resource-less investigation a tooth-less investigation if you are talking about intentions of Doj itself ?

DoJ puts in budget requests to Congress, which then grants, modifies, or denies them as it sees fit. Heads of agency have a surprisingly limited amount of budgetary autonomy; they can't just reroute millions of dollars because they think it would be sensible. Check out pages 59-62 of this document to get an idea of amount of begging required for the pissant sum of $2 million bucks: http://www.justice.gov/jmd/2011just…

Someone up the ladder has a "public voice".

It is hard for me to believe that if Eric Holder and/or Barack Obama were loudly saying "Wall Street is getting away because you aren't giving us funding", things would not change.

... I think the "suits some people very well" part is most to the point. It is hard not to imagine that this group includes those at the highest ranks of government.

Re: Why the SEC Won’t Hunt Big Dogs

#43

Post by maurits »

adamtmca wrote: post #10
adamtmca wrote: post #4

I think a big part of the problem is probably talent. A hot shot kid coming out of a C.S./engineering program wants to work at Google or Facebook or a startup, not the federal government. A kid coming out of an econ/math/finance program wants to work for a "big dog" at an investment bank or a PE fund, not some wimpy bureaucrat.

Case in point. Harry Markopolos is a fraud investigator who works for institutional investors "big dogs", not the SEC. He looked at Madoff's returns, the strategy they claimed they were using and took "4 hours" at home to figure out that it was fraud. Here is a choice section of Markopolos's testimony: http://www.youtube.com/watch?v=q1A7LdW0Y_s

Not to ponder into conspiracy theories, but here is another thought. Markopolos wasn't the only one who figured this out. But investing in a pyramid scheme can still be brilliant fun if you get out early enough and enough new victims keep joining.

What world would you rather live in? One in which a not so smart but rather well paid institutional investor puts money (your pension) in a scheme that apparently is a blatant fraught for anybody who cares to actually look at the numbers for more than a sec. Or one in which the rather smart but morally flexible investor saw through it and took a well educated guess how long it would hold up and be profitable?

Re: Why the SEC Won’t Hunt Big Dogs

#44

Post by ajross »

scott_s wrote: post #30
cobrausn wrote: post #9

Earlier quoted context omitted.

IANAE, but this always struck me as... odd. How would the failure of the banking system stop people who really only use it for money storage and purchasing convenience from continuing to use hard currency?

The economy is an interconnected system. If the banking system failed, then no one would be able to make over-night loans. If no one can make over-night loans, then large companies can't get the necessary funds for them to keep their regular operations running. If that doesn't concern you, consider that one of the largest companies in the country is General Electric. In simple terms, a failure of the banking system m…

General Electric doesn't sell electricity...

Re: Why the SEC Won’t Hunt Big Dogs

#45

Post by DougBTX »

rhizome wrote: post #39
nobody3141 wrote: post #6

Earlier quoted context omitted.

Quick economics lesson. The money on Wall St doesn't belong to the guys in red braces - it is the pensions of ordinary Americans and the savings of little old ladies. Letting Wall St crash and burn means everybody in America's pension disappears - everybody over 65 is out on the street. Everybody who saved money has lost it. Nobody accepts cash anymore, after all if you put it in the bank it might dissapear. You are…

Letting Wall St crash and burn means everybody in America's pension disappears What are you talking about, where does the money go? Money doesn't just "disappear."

Simplistically, lets say that pensions and putting money in the Bank are the same thing. So, you put $100 in the Bank. The Bank then uses the $100 to buy a golden chicken; now the Bank has a golden chicken, the farmer has the $100, and the Bank owes you $100. The Bank expects the golden chicken to lay golden eggs, which it can sell. But instead the golden chicken dies, and no-one wants to buy a dead chicken.

Now the Bank has $0, and owes you $100. You can no longer withdraw your money from the bank, it has "disappeared". The farmer has the $100, it still exists, but the Bank has lost it. Saying that it has "disappeared" is a way to shift the blame away from the Bank.

The joke is when you realise that the farmer isn't a farmer, he is an investment banker. And he got a $100 bonus. And he actually works for the Bank.

Re: Why the SEC Won’t Hunt Big Dogs

#46

Post by anigbrowl »

joe_the_user wrote: post #42
anigbrowl wrote: post #37

Earlier quoted context omitted.

DoJ puts in budget requests to Congress, which then grants, modifies, or denies them as it sees fit. Heads of agency have a surprisingly limited amount of budgetary autonomy; they can't just reroute millions of dollars because they think it would be sensible. Check out pages 59-62 of this document to get an idea of amount of begging required for the pissant sum of $2 million bucks: http://www.justice.gov/jmd/2011just…

Someone up the ladder has a "public voice". It is hard for me to believe that if Eric Holder and/or Barack Obama were loudly saying "Wall Street is getting away because you aren't giving us funding", things would not change. ... I think the "suits some people very well" part is most to the point. It is hard not to imagine that this group includes those at the highest ranks of government.

Oh come on. Every time Obama says the word 'regulate' someone in the Republican party says it's a 'jobs killer.' [EDIT: 8 out of 10 #is wrong; ooops] 6 out of 8 of the GOP presidential candidates claim they'd slash funding for the courts, with Newt Gingrich saying he'd just ignore Supreme Court rulings completely if he disagreed with them. Sure, that's just big talk designed to get cheap news coverage, but surely you've noticed there's a bit of a political stalemate in DC right now.

Edit to add reference: http://www.justiceatstake.org/newsroom/press_releases.cfm/ca...

No, I don't make this stuff up.

Re: Why the SEC Won’t Hunt Big Dogs

#47

Post by T_S_ »

The crisis was fueled by people showing up and doing their jobs. Think about that.

The hunt for the criminals is a waste of time. People were acting aggressive, not criminal--with notable exceptions that could happen in any era. In fact, finding scapegoats will make the problem worse. It leaves the system intact and fools everybody into believing the problem is fixed.

Credit and risk has always been a problem of information. In this era we have more tools than ever to manage them. However the rules require a major rethink to get the right information circulating.

Now, if you believe it is a systems problem, what's the solution? Here's one: Transparency. Not the SEC's version of quarterly accounting quibbles. Just tell me the the end-of-day positions of every "large" participant. 20 years ago that would be too much information to process. Now it would be no problem. Lots of little agencies could process the information.

The impact would be enormous. The informational advantages of large institutions and so-called speculators would simply disappear. Nobody would be able to grow to be too big to fail, simply because they would have a harder time trading. If you are starting to feel sorry for banks having to supply this type of formerly proprietary information, just remember, they have the corresponding information on you and you don't complain.

Re: Why the SEC Won’t Hunt Big Dogs

#48

Post by rhizome »

DougBTX wrote: post #45
rhizome wrote: post #39

Earlier quoted context omitted.

Letting Wall St crash and burn means everybody in America's pension disappears What are you talking about, where does the money go? Money doesn't just "disappear."

Simplistically, lets say that pensions and putting money in the Bank are the same thing. So, you put $100 in the Bank. The Bank then uses the $100 to buy a golden chicken; now the Bank has a golden chicken, the farmer has the $100, and the Bank owes you $100. The Bank expects the golden chicken to lay golden eggs, which it can sell. But instead the golden chicken dies, and no-one wants to buy a dead chicken. Now the…

...and that's where the money went.

Re: Why the SEC Won’t Hunt Big Dogs

#49

Post by yummyfajitas »

spot wrote: post #35
randomdata wrote: post #24

Earlier quoted context omitted.

Letting Wall St crash and burn means everybody in America's pension disappears - everybody over 65 is out on the street. Everybody who saved money has lost it. Was that not well understood beforehand? I'm Canadian, but our government will only certify certain investments. Everything else comes with the understanding that all of your money could be gone tomorrow. As such, we plan for such occasions. It is an expectati…

Here in America that certification is done by "the market" (S&P and Moody's). They gave the CDOs AAA ratings. Of course the fact that they were paid by the same companies that were submitting the CDOs didn't effect their judgement whatsoever. Except they found the emails where they said "go easy on these guys otherwise we lose their business". Oh you mean they made the ratings up? Yea. But that's legal, since the rat…

You are very confused. Randomdata is describing the certification of banking deposits. In the US, this is done by the FDIC, a government corporation.

Re: Why the SEC Won’t Hunt Big Dogs

#50

Post by FJim »

seanalltogether wrote: post #18
nobody3141 wrote: post #6

Earlier quoted context omitted.

Quick economics lesson. The money on Wall St doesn't belong to the guys in red braces - it is the pensions of ordinary Americans and the savings of little old ladies. Letting Wall St crash and burn means everybody in America's pension disappears - everybody over 65 is out on the street. Everybody who saved money has lost it. Nobody accepts cash anymore, after all if you put it in the bank it might dissapear. You are…

And the reason the government won't seriously prosecute wall st is because these firms are holding the investment money for all these politicians.

There is the possibility that despite the populist rancor, no actual laws were broken.
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