On Demand
Street Rules
Tuesday, September 23, 2008
Michael Oxley, former Congressman (R-OH 4th) and co-sponsor of the Sarbanes-Oxley law, of counsel at Baker Hostetler, and Vice Chairman of NASDAQ discusses the bailout and other financial news.
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What have the criticisms of SOX, since its inception, shown you about the role of regulation, and about this administration?
Should these insights relate to this crisis for the financial services establishment?
Also, can you comment on the current state of capitalism in the US?
Lastly, is this an embarrassing moment for proselytizers of free trade --- especially those who link capitalism with democracy?
short selling has gotten vilified -- including by cuomo --
do you agree that short sellers are the problem or is it a case of shooting the messenger?
Brian:
Over the last week, I have heard "expert" commentary on this show wherein the opinions range from "This bailout is a good idea" to "This bailout is a great idea". I know your job is ultimately to reinforce the status quo and encourage investment, but couldn't you try a little harder to at least pretend other options and opinions exist? What, for example, does Thatcherite economist and philosopher John Gray think of this? What does Naomi Klein think of this?
Our money could have been used to care for sick loved ones, it could have payed for education. The exact same people who said we didn't have money for those things now want even more of our money. Don't you have a responsibility to cover this aspect?
I am very frustrated with your handling of this topic.
Didn't Bear Sterns, and Lehman, AIG, etc have to comply with SOX - how did they fail is so?
there are so many foreign investors, paying mortgage holders, and other natural supports to our system that did not exist in 1929.
is this bailout really necessary to anybody but the moneymen stalking the penthouse-o-sphere of Manhattan?
The Treasury secretary Paulson is screaming for a blank check to bailout banks in order to avoid financial Armageddon. The media is not questioning anything and trust him on his words.
Now, let's replace Treasury by Defense, Paulson by Rumsfeld, bailout banks by invade Iraq, and financial by WMD:
The Defense secretary Rumsfeld is screaming for a blank check to invade Iraq in order to avoid WMD Armageddon. The media is not questioning anything and trust him on his words.
Humm....
I recall Agent Starling's statement to Hannibal Lechter in 'Sience of the Lambs' - QUID PRO QUO, DOCTOR. Besides the platitude that we're on the verge of meltdown and we need to do what Paulson says, what's in it for the taxpayyer?
I keep on hearing that the fundamental problem is that housing prices aren't stabilizing. Why doesn't the government strike at the heart of this by providing low-interest fixed rate mortgages to home buyers who normally wouldn't be able to buy homes (especially). Yes, this sounds like more sub-prime stuff that got us in trouble in the first place, but if their incomes are verified and the monthly fees remain low...
Along that line, the government could just straight up buy houses for families. It's not liek they don't do stuff like that (low income housing) oftentimes anyway.
PRIVATE EQUITY
HEDGE FUNDS
How will these be affected
Bravo(-a?) KC [3]. yeah what about it Brian how about Naomi Klein?
Why is a Ponzi scheme invented by billionaires innovative risk taking while a Ponzi scheme by some regular joe a crime?
The congressional add-ons to the 2-page administration bill fall into 2 categories: firstly, creating or enhancing government accountability (e.g., reporting requirements), and secondly, expanding the relief to other parties to the economy (e.g., mortgage relief for homeowners). Then there is the question of acountability for initial actors, AKA the guys who created the mess, e.g., no golden parachutes. On this count, should the companies whose debt is socialized be required to change the top 2 levels of management & the boards that guided the corporate ships onto the shoals?
Whose risk are we talking about? These people gave use the risk and are still taking the rewards. It's obscene.
One might argue that Mr. Oxley is in part RESPONSIBLE for the mess we are in: his "reforms" meant that investors and analysts on Wall street were prohibited from getting critical information from these investment banking firms about their risks.
While the "blank check" aspect concerns me, it is the power of Sec. 8, the non-reviewable "Doctrine of Infallibility" part that REALLY scares me. Why is this necessary?
This looks like an attempt to control the national budget, in the event of Obama winning the election in Nov. and/or the Dems controlling both houses with a possible veto-proof margin.
Risk taking coupled with massive over leveraging is the problem. It's one thing to risk billions of dollars, it's another to risk billions of dollars that are leveraged 20 or 30 to one.
Paulson has an abysmal track record to date. If Mr. Oxley can't admit this, what reason do we have to take him seriously on any other point?
An oversight board that's non-corruptible!
The larger issue is to stop continued foreclosure. With-out it we will never end this financial crisis. At the moment it’s nearly impossible to get a mortgage.
The Mortgage problem is just a symptom of the debt packaging problem. What is the estimate of damages for other CDS's? Shouldn't we know that first, so we don't have to give more money...
What about auditors, forensic accountants/economists looking directly at each of the financial institutions responsible for this disaster? Let's tease apart exactly what happened inside these institutions. And let's look at how closely connected Paulson has remained to these firms since he left Goldman.
When I was a banker working on "problems loans" I worked under the premise that bankruptcy courts were courts of equity rather than courts of law. This was a throwback to the founding of our unique country in part be indentured servants. As courts of equity, bankruptcy judges were able to alter or cancel contracts and did so most notably in the Continental Airlines case.
Why then should a bankruptcy court now be forbidden from doing the same in the case of a mortgage which was clearly drafted with no sense of equity when written.
Without that threat of equity in a bankruptcy court, the public is subject to the whims of over zealous lenders. It keeps honest lenders honest.
so what's in this for the true americans -- the patriots -- who carefully saved for the day the big spenders tapped out? this day?
can the sober minority now somehow be exempt from the group that bought $250k homes for $750K?
So, the problem according to Oxley is the "outdated" regulatory infrastructure set up in the 1930s, NOT the fact that Glass-Steagall and other elements of that regulatory framework have been systematically dismantled in the name of "creative risk taking."
This is complete BS.
We are facing a sustained disaster of unknowable proportions. The problems with our entire economic "system" are structural and not amenable to tactical solutions like the proposed bailouts.
Wake up!
The American material standard of living is absolutely unsustainable at current levels. Our economy is based on consumption by the masses. If the masses have job losses and stagnant wages, then there is no demand for our products and services. No demand means further wage stagnation and job loss. This means more defaults on loans (not just homes, but student loans and automobiles as well). Healthcare, housing and education costs will continue to increase much faster than wages.
We are facing a world of hurt folks. We can't afford for "experts" to propose band-aids and then get back to watching American Idol.
The government under Alan Greenspan's Fed leadership was not a government... it was a tool of the same corporations who are now going bankrupt. So to blame to Government is ridiculous. Blame the lobbyists and the corporations for manipulating our government to their greed and hubris.
Wow, he totally ducked my comment pretending to be disconnected!
I see accountability as the issue. I am amazed that everyone has sidestepped the issue of banks issuing mortgages, making that crucial decision whether to issue that loan or not, and then abrogating all responsibility by be able to sell them on the open market and wiping your hands of the crucial decision you made.
If Cox had reformed wall street and we suffered a slow down in business (as opposed to this major recession) he would have been burnt at the stake. Hind sight is 20/20.
Michael Lewis for Bloomberg news:
http://www.financialpost.com/analysis/story.html?id=796601
pull quote:
"Still, for some time now, he's [David Einhorn] been standing up in front of large audiences, announcing that he was short Lehman Brothers stock, and then explaining in great detail its dubious accounting practices. The SEC responded by demanding to see his firm's e-mail, hinting darkly that he was part of some conspiracy to drive Lehman Brothers out of business, and generally making him feel that he'd pay a price for telling the truth."
McCain's right on this one; Cox is worse than useless.
Wake me up when Levitt outlines regulation of hedge funds and shadowy private equity firms like his Carlyle Group!
A friend, who is an investment banker, tells me that, when the history of the current finacial situation is written, this period will be revealed as the "Cuban Missile Crisis of Finance." He maintains that the public still does not know how dire the current situation is.
i'm surprised how distanced these men pretended to be from the problems, both in terms of benefits and responsibility for the mess.
don't be scared of them brian, anything but.
Two comments -- 1 on the numbers and a 2nd on the substance
1) Forget the $2300 number. I gave that to Obama for the primaries and again for the General. Then, last month I wrote a check to the DNC for $28,500 for them to use "as they wish") (but the check was made out to the "Obama Victory Fund" and then $37,000 to the "Committee for Change" which will channel the money to swing-state Dem parties. Hence I gave $70,100 and so did my wife. $140,200 between us. In other words the $2300 limit has almost no impact -- only the $70,000 limit per person (to ALL campaigns) has an impact.
2) I am under no illusion that I can influence Obama -- nor do I WANT to. I gave him money because I prefer his policy stances. I suspect the same is true for all the other Wall Street "fat cats" giving to BOTH candidates. When Employees of a single firm give $6 million to one candidate and $5 million to the other (and we're talking scores of employees at each firm) the notion that they are coordinating with each other to INFLUENCE things in a particular way is absurd. These are simply wealthy people who are voting with their pocket books as well as (later) with their voting machines.
I agree that anybody should be able to give as much money as they want but the donor must be declosed within 12 hours.
It is my opinion that Paulson's proposal to buy non-performing mortgage debt must be amended to prevent banks and companies from being made 100% whole. There has to be a penalty to the financial system which his proposal minimizes substantialy.
Paulson does not want the government to take equity positions in troubled banks as the price for a bail-out, while actually encourageing banks to forclose residential mortgages, destroying any hope for preserving the home-owners equity.
Paulson's plan actualy encourages banks to foreclose.
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