Inmates Redesign The Asylum- Barney Frank & Chris Dodd's Bogus New Financial Regulatory Vision

I recently wrote this post discussing the stealth approach that House and Senate Democrats are taking with their financial sector regulatory "reform" bills.

What I didn't adequately touch on in that piece is the very perverse prospect of two of the major architects of the recent US financial services sector's crisis claiming to be capable of redesigning regulatory and related elements to prevent future occurrences of such problems.

Let's recall the facts. Barney Frank personally drove Fannie Mae and Freddie Mac to purchase higher proportions of option ARM, low-doc, no-doc and, generally, poorer-quality mortgages from the private sector. Chris Dodd and fellow Democratic Senator and Finance Committee member Kent Conrad both accepted sweetheart loans from Countrywide, Angelo Mozillo's mortgage finance company, while failing to adequately supervise and rein in the growth of poor quality, often improperly documented mortgage loans. Both also failed to act on Bush administration concerns regarding the explosive growth of Fannie Mae and Freddie Mac through guarantees of bonds backed by the poor quality loans.

Oh, and, by the way, Barney Frank, to my knowledge, has never addressed the contetion that a person with whom he was romantically involved was a lobbyist involved with Fannie Mae. I'm sure it's irrelevant.

Now, these Congressional worthies would have us believe that, having been instrumental in wrecking the residential finance sector and, by extension, the entire US finance sector, they are in a position to tell us how to organize, supervise and regulate the sector in the future to avoid similar calamities.

Nothing could be further from the truth. In fact, they overlook the rather simpler, more obvious solution, i.e., fewer government guarantees and less inept regulation.

If Fed, FDIC, OCC and other regulators had done their job in the first place, Frank's and Dodd's judgemental errors and political favoritism would have been stopped in their tracks. Unfortunately, our vast, overmanned and overly-complicated bank regulatory system failed in its primary mission.

Shouldn't that have triggered a more cold-eyed look at how the current players failed in their regulatory oversight jobs, rather than simply layering on more and more complicated rules, classifications and regulations?

How many people believe that, if someone failed to do their job in the first place, the right solution is to give them increased responsibilities and hope for a better outcome next time around?

Well, evidently, at least two- Frank and Dodd.

Wonderboy's Financial Plumber

As I discussed a wide range of topics, some business in nature, others political, with my friend B yesterday at lunch, the subject of tax cheat and Treasury Secretary Tim Geithner came up.

I lamented Geithner's wet noodle posture while "negotiating" with Goldman Sachs et. al. over paying them the full value due them from AIG for credit derivatives.

B mentioned conversations he has had with Fed officials who know Geithner. They characterized him as an operations guy. That is, a guy who knew how to run the financial plumbing of the Fed, meaning its various money transfer systems and such.

But nobody ever accused Geithner of being able to fill, let alone even shine, Paul Volcker's shoes. Volcker, you may recall, headed the New York Fed, before being chosen to become probably the most effective chairman of our central bank in its history.

Judging from his stumbles and misfires this year, it looks like my friend's information is correct. Geithner got fleeced by Wall Street CEOs, and, for that dismal performance, was rewarded with the job of Treasury Secretary.

No wonder we still have no sensible financial leadership in Washington.

Stealth Passage of the Barney Frank's Financial Regulation Bill

Yesterday morning on CNBC, I heard Wisconsin Republican Representative Paul Ryan remark that Barney Frank had rammed his bloated, misguided bill on financial sector regulatory reform through the House.

It's another one of those huge bills with so many hidden details and bad ideas that few Congressmen probably even know what they passed. It's sure to have loads of unintended consequences.

For example, certain large financial institutions will qualify for treatment as 'too big to fail,' and be subject to a federal government commission to determine if it is in danger of insolvency, and if it should be saved.

Funny, but I always thought that was up to creditors. Or, if it's a bank, perhaps the FDIC.

But some shadowy federal government panel?

What happened to bankruptcy as the normal process for those companies which get into too much financial trouble?

Ryan opined that this bill will abet "crony capitalism." That is, large, bloated financial service firms will make use of the revolving door between industry and government to insulate themselves from failure and buy government accommodation. The smaller banks, Ryan noted, will be hurt because they have to play by the rules without such connections.

You can bet that nowhere in this legislation did Frank allow his own culpability in driving Fannie Mae and Freddie Mac to securitize more questionable mortgage loans to be addressed and, for the future, prevented.

Instead, we will have a bewildering new set of rules for credit provision. Some will put onerous new demands on companies that simply want, as a by-product of their main business, to allow customers to buy using credit.

As Ryan indicated, by using health care as the big distraction, the Congressional Democrats are stealthily redesigning yet another sector of the US economy.

How The Media Lies About Glenn Beck

Barbara Walters selected Glenn Beck for one of her 10 most fascinating people of 2009. Here's the clip from her program last week.

Beck noted on a program later in the week that even Walters wrongly accused him of inciting violence. See for yourself.

See her at 4:20 in the clip say, in a slightly shocked voice,

"Glenn Beck is somebody who incites people to violence?"

In that later program, Beck implored anyone to provide evidence that he ever incited anyone to violence.

No one, to my knowledge, has done so yet.

Certainly Walters had no evidence. So much for unbiased, responsible major media coverage, eh?

Harry Reid's Twisted Logic

Perhaps this week the nation has seen why Harry Reid will probably be leaving the Senate next year after an electoral defeat.



That's right. Democratic Senate majority leader equates speaking out against his health care bill with having been for slavery.

Never mind that Reid, nor his ally, Baucus, steadfastly stiff-armed Republican ideas and amendments to their bills.

Nor that many voters simply want more reasonable, reasoned, considered reform that is genuinely bipartisan.

No, to simpleton Harry Reid, if you are not backing his style of health care reform, then you're no better than someone who backed slavery.

So much for free speech and debate in America. Try that, and a Democratic Senator will accuse you of supporting slavery.

No wonder he's trailing both GOP candidates for his seat in next year's election.

Regarding Carly Fiorina & Lucent: Another Vintage Article

My prior post on this topic already attracted two comments.



"As a former HP person who worked mostly with AT&T and Lucent around the time of Carly's hiring by HP, I have heard a lot about this from many former Bell System people.

First of all, at the time I was told that Carly was quite likely about to be fired by Lucent. I was also told by numerous people - some of whom worked very closely with Carly - that she was "cooking the books" and had been caught."



"I really wish there was more solid evidence of Carly's knowledge and involvement in this scandal."

Searching on Nina Aversano, the key whistleblower in the case, I located this Fortune article from the period. The piece, by respected writer Carol Loomis, dates from a few years after the scandal- 2003, to be exact.

In it, she wrote,


"It is now 2 1/2 years later, and no one has donned stripes or even been indicted. Until the Aversano-Plunkett news came along, no one had even seemed about to be nailed by the SEC, which, though it cannot bring criminal charges against wrongdoers, can make their lives miserable with civil sanctions, such as forever barring them from big jobs in public companies. Even the matter of Aversano the Whistleblower has vaporized, culminating early this year in a settlement with deeply secret terms.

Meanwhile, Lucent's stock has been destroyed. From the peak of $258 billion, hit in December 1999, the company's market value has calamitously gone to $15.6 billion. (Included in that figure is $6.8 billion of current value for two companies that Lucent recently spun off, Avaya and Agere Systems.) And to people like Lucent's erstwhile chairman, Henry Schacht, that anemic $15.6 billion figure, reflecting a $2.13 share price for Lucent, looks almost thrilling: The company's shares got down to roughly a quarter of that in 2002."

In effect, Loomis notes that nobody really was ever held accountable for the fraud. Further, Lucent as much as admitted guilt by settling with Aversano, but on terms so strict that nobody's ever going to hear from her exactly what happened. Nor, one suspects, ever see the evidence, probably in the form of emails and memos, which Aversano held over Lucent's head.

One can muse about the potential for her to escape the terms, now that Lucent disappeared into Alcatel. But I wouldn't hold my breath, were I pursuing the truth behind this story.

For the purposes of this and the prior linked post, the question of Carly Fiorina's involvement in the scandal, these paragraphs in Loomis' article are germane,

"Chronologically, except for skullduggery not yet uncovered, the first move was Aversano's. Now 58, Aversano was a longtime Bell employee whom McGinn in May 2000 had made president of North American sales to the "service provider" companies--including the regional Bells and their many upstart competitors. In that important job, in this company that has been way above average in putting women into high-ranking spots, Aversano reported to executive vice president Patricia Russo.

Aversano, says a former Lucent financial executive, was a hard-charger who reminded him of still another woman, Carly Fiorina, who'd left Lucent in 1999 to become CEO of Hewlett-Packard. After Aversano was promoted, she oversaw about 3,000 people bringing in 25% of Lucent's revenues. Counting 100,000 options given her in early 2000, Lucent figured her pay for the year, so Aversano testified, at a handsome $4.5 million."

Loomis' timeline is what makes the second reader's comment remain true. Because Fiorina was technically out of Lucent and safely at HP when this story actually broke, it's always been assumed, I guess, that she was innocent.

Yet, from comments I've heard from a person who was on the scene before Carly beat it out of Dodge, so to speak, I believe that the entire sales mis-statement game was already underway before Aversano was promoted. The other reader's comments suggest similar sentiments from other Lucent employees at the time of the events.

But it's precisely because Fiorina was gone by 2000, and so much attention was paid to the Aversano-McGinn fracas, and the subsequent settlement sealed records, that any compelling evidence of her involvement would have to be unearthed as a result of concerted efforts.

Since this is about politics, what I'm saying is that any of Fiorina's rivals for the California Senate seat would probably have to do their own digging. They'd need to interview former Lucent employees to learn who was doing what, when, and then go find them to ascertain, independently, if there were any reason to implicate Fiorina in the earliest stages of the sales forecasting and reporting scandal.

Given the timeframe of this story being a decade ago, it's unlikely that more of the truth will ever be revealed, unless it happens during this Senate campaign. Absent that, it will probably recede into the past, forever undisturbed again.

Mindless Desire For Any Health Care Bill

I was watching Bill O'Reilly's program on Monday evening when I saw something that horrified me.

He had been a guest on ABC's Good Morning America program. A woman named Robin Roberts interviewed him, using an exercise in which she asked O'Reilly to grade Wonderboy's performance on various dimensions.

When she asked him about health care, and Bill understandably and correctly gave a "D," Roberts reacted in shock. Here's the video of what happens next.



O'Reilly kept focusing on the bill's incomprehensibility, length, and lack of clarity. He even asked Roberts if she understood it.

That didn't deter the hostess from continuing to simply declare, in knee-jerk liberal fashion, that getting a health care bill would be an historic accomplishment.

The woman is so stupid that she couldn't understand that what you pass is more important that passing anything under a particular name.

It evidently was beyond her feeble mental ability to understand that simply calling something a health care reform bill doesn't mean it's any good for America.

This is one of the best examples of liberal media bias and infatuation with Wonderboy that you're ever likely to see.