The Economist 22 of June article describing Deloitte's bruising from the Standard Chartered money laundering scandal is another instance of reliance on the fee payer to self report to the regulator. It is clear that it doesn't work. It's so bad that the paying client, Standard Chartered, was advised by the auditor, Deloitte, of possible avenues of avoidance using Deloitte clients as examples.
I am the Lawsky
Tuesday, June 25, 2013
Monday, June 3, 2013
Harvey Pitt's Cato Presentation
The Death of Corporate Reputation: How Integrity Has Been Destroyed on Wall Street
Harvey Pitts observation that the rules have to be written by economist and not lawyers is not clear enough to reduce the pages and pages of a Dodd Frank, for example. Listening to an NPR presentation years ago where everyone from a low level mortgage broker up to Morgan Stanley, the final receiver and issuer of the mortgage backed security knew that it was all crap. But since they had convinced Moody's to issue a high rating for the package of vile excrement it got sold at a big profit and Morgan looked for more.
It appeared that Wall Street was purposefully pissing into their own soup and then slurping it up themselves convinced that since it was profitable it must be good. The trouble was that everyone booked the profit immediately without a clawback from the market if it went wrong. Regulations's that require just a check list without the participant's skin in the game are sure to be gamed. On the other hand a simply constructed regulation that requires the bank issuing the mortgage to to retain 10% of the asset and 100% of the first loss and the Wall Street Bank issuing the mortgage backed security to retain a further 10% per cent and again 100% of the instrument's first loss during it's thirty year term will have more effect than ten thousand pages of regulation written by lawyers because the incentive would be to keep the crap out and not to look for more to book.
Harvey Pitts observation that the rules have to be written by economist and not lawyers is not clear enough to reduce the pages and pages of a Dodd Frank, for example. Listening to an NPR presentation years ago where everyone from a low level mortgage broker up to Morgan Stanley, the final receiver and issuer of the mortgage backed security knew that it was all crap. But since they had convinced Moody's to issue a high rating for the package of vile excrement it got sold at a big profit and Morgan looked for more.
It appeared that Wall Street was purposefully pissing into their own soup and then slurping it up themselves convinced that since it was profitable it must be good. The trouble was that everyone booked the profit immediately without a clawback from the market if it went wrong. Regulations's that require just a check list without the participant's skin in the game are sure to be gamed. On the other hand a simply constructed regulation that requires the bank issuing the mortgage to to retain 10% of the asset and 100% of the first loss and the Wall Street Bank issuing the mortgage backed security to retain a further 10% per cent and again 100% of the instrument's first loss during it's thirty year term will have more effect than ten thousand pages of regulation written by lawyers because the incentive would be to keep the crap out and not to look for more to book.
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