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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

#51

Post by [deleted] »

guelo wrote: post #40
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.

There are plenty of "hot shot" CS and engineering kids working at the NSA, CIA and a bunch of other agencies, also at all the defense contractors. It's just a matter of funding. Funding for certain financial cops has been cut on purpose.

[deleted]

Re: Why the SEC Won’t Hunt Big Dogs

#52

Post by FJim »

anigbrowl wrote: post #2

A few of my in-laws are working night and day, literally, to meet the legal document production requirements for a DoJ investigation of a Large Financial Institution which must remain nameless for ethical reasons. The DoJ is doing it's best to investigate Wall Street as aggressively as it can, but their electronic discovery team's annual budget is on the order of $20 million, which is peanuts when an investigation ca…

Again I raise the possibility that laws were not broken. There may have been instances of fraud, but its more than likely that the mess was largely the result of of groupthink and really bad decisions made in good faith.

Re: Why the SEC Won’t Hunt Big Dogs

#53

Post by sanderjd »

adamtmca wrote: post #21
raganwald wrote: post #20

Earlier quoted context omitted.

Reading further, it may have more to do with corruption and/or apathy than inability. I doubt they couldn’t find first base in Fenway park, they simply didn’t want to go looking for trouble. https://en.wikipedia.org/wiki/Harry_Markopolos

Probably also true - I think a lot of sec prosecutors end up in defence positions later. That said, I just can't see how they could ever attract or develop the financial minds required to keep up with wall street.

This ignores the non-financial side of employment decisions. I, for one, would hate to be an investment banker right now, because pretty much everyone I care about would lose nearly all their respect for me. This effect seems to be weaker than money, but it does exist.

Re: Why the SEC Won’t Hunt Big Dogs

#54

Post by anigbrowl »

FJim wrote: post #52
anigbrowl wrote: post #2

A few of my in-laws are working night and day, literally, to meet the legal document production requirements for a DoJ investigation of a Large Financial Institution which must remain nameless for ethical reasons. The DoJ is doing it's best to investigate Wall Street as aggressively as it can, but their electronic discovery team's annual budget is on the order of $20 million, which is peanuts when an investigation ca…

Again I raise the possibility that laws were not broken. There may have been instances of fraud, but its more than likely that the mess was largely the result of of groupthink and really bad decisions made in good faith.

Oh I could certainly agree with that. I forget who said 'never ascribe to mmalice what can be adequately explained by stupidity,' but I've found it an excellent yardstick to judge politics by. As far as investigations go, I am not expecting a big showdown at the OK corral. I am just sick of this meme that it's all one big cozy and corrupt club. There are plenty of people in both the private and public sector who are dedicated to the idea of conducting financial business with both legal and ethical integrity.

Securities litigation is slow because it is complex; additionally, there are sound economic reasons why it is often better to settle for the certainty of large fines than waste time and money on uncertain litigation. It's not as if scores of corporate officers went to prison following the crash of 1929 either. Bad policy often ends up as its own punishment.

Re: Why the SEC Won’t Hunt Big Dogs

#55

Post by burgerbrain »

rhizome wrote: post #48
DougBTX wrote: post #45

Earlier quoted context omitted.

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.

http://en.wikipedia.org/wiki/Zero–sum_game#Economics

Re: Why the SEC Won’t Hunt Big Dogs

#56

Post by cedlimed »

yummyfajitas wrote: post #49
spot wrote: post #35

Earlier quoted context omitted.

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.

I think nobody and spot may have been referring to pension funds as well, seeing that many pension funds did have the AAA rated CDOs in their portfolios.

Re: Why the SEC Won’t Hunt Big Dogs

#57

Post by adamtmca »

sanderjd wrote: post #53
adamtmca wrote: post #21

Earlier quoted context omitted.

Probably also true - I think a lot of sec prosecutors end up in defence positions later. That said, I just can't see how they could ever attract or develop the financial minds required to keep up with wall street.

This ignores the non-financial side of employment decisions. I, for one, would hate to be an investment banker right now, because pretty much everyone I care about would lose nearly all their respect for me. This effect seems to be weaker than money, but it does exist.

It's interesting that you say that.

I was actually primarily referring to the non-financial side of the employment decision which I would argue is huge. That's why I said "they want to work for big dogs rather than wimpy bureaucrats" instead of pointing out that the SEC could never pay them as well as BMO or GS.

Setting aside whether you think this to be true the perception among undergrads headed into finance is that investment banks offer work environments which are high intensity, committed to excellence, meritocratic and so on. To them the idea of being involved in some sort of paper shuffling bureaucracy is really repulsive.

The truth is there are still lots of people who don't hear that their buddy got a job at GS and immediately think they are some sort of a scumbag.

I haven't responded to the comment below about the CIA but I think that rather than proving the point that its all about the SEC being underfunded it actually shows how culture/ perceived importance of the work/ mission/ impressing your friends etc etc can totally outweigh an organizations ability to pay when it comes to attracting talent (Wimpy bureaucrat certainly isn't the first thing that comes to my mind when someone says the CIA or the NSA). The CIA's entry level economic analyst positions top out at 90k which is where most entry level IB positions start, yet the CIA still manages to attract some of the United States' best and brightest econ/math/finance graduates.

Re: Why the SEC Won’t Hunt Big Dogs

#58

Post by adamtmca »

guelo wrote: post #40
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.

There are plenty of "hot shot" CS and engineering kids working at the NSA, CIA and a bunch of other agencies, also at all the defense contractors. It's just a matter of funding. Funding for certain financial cops has been cut on purpose.

See my response to sanderjd above.

No one ever thinks wimpy bureaucrat when they hear CIA or NSA. They think security clearance, report to the president etc. Thats definitely part of the reason why the CIA can pay relatively low starting salaries for economic and financial analysts (I checked) and still compete with the banks for high quality talent.

Re: Why the SEC Won’t Hunt Big Dogs

#59

Post by olefoo »

FJim wrote: post #50
seanalltogether wrote: post #18

Earlier quoted context omitted.

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.

We already know that this is not the case; vide: Robosigning, the pushing of no-doc loans, the very existence of NINJA loans and the collusion of CDO packagers and the ratings agencies that has been amply documented.

The fact that not only have there not been high-profile prosecutions of the executives who created the conditions under which their employees engaged in systematic fraud; but the USDOJ has been actively coercing state AG's into agreeing to a thoroughgoing amnesty that will absolve most of the major players of any criminal liability. And pray tell, why would these bankers be demanding immunity from prosecution if they were not fearful that a serious investigation into their behaviour would find them guilty of, at the very least, criminal negligence if not outright fraud?

And that, my friend, is the point where you have to accept that the system is in fact broken; and that the checks and balances have been short-circuited; that the system is out of control and that we are fiscal flotsam on the tide of events from here on out.

Re: Why the SEC Won’t Hunt Big Dogs

#60

Post by donaldc »

FJim wrote: post #52
anigbrowl wrote: post #2

A few of my in-laws are working night and day, literally, to meet the legal document production requirements for a DoJ investigation of a Large Financial Institution which must remain nameless for ethical reasons. The DoJ is doing it's best to investigate Wall Street as aggressively as it can, but their electronic discovery team's annual budget is on the order of $20 million, which is peanuts when an investigation ca…

Again I raise the possibility that laws were not broken. There may have been instances of fraud, but its more than likely that the mess was largely the result of of groupthink and really bad decisions made in good faith.

its more than likely that the mess was largely the result of of groupthink and really bad decisions made in good faith.

More like bad (but probably legal, and probably profitable) decisions made in bad faith. Anyone with half a brain could see that housing prices would not continue increasing indefinitely. But all the incentives in the industry were to make loans that were likely to head into default.

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