The Curator » Capitol Hill

“Incontrovertible Evidence” Of A Securities Earthquake [INTERVIEW]

Michelle — Thu, 30 Oct 2008 20:14:35 +0000

Roger Kubarych

Economist Roger Kubarych and author Richard Whalen discuss the warning signs missed (and dismissed) by Wall Street and Washington in the months leading to the credit crisis, beginning with the February 2007 collapse of New Century Financial. (Institutional Risk Analytics)

Geanakoplos/Koniak: Mortgage Justice Is Blind [OPINION]

Michelle — Thu, 30 Oct 2008 11:26:10 +0000

Yale economist John Geanakoplos and lawyer Susan Koniak suggest that if the U.S. wants to avoid a tsunami of home foreclosures, then Congress must transfer the rights to restructure mortgages from security holders back to community-based, government-appointed trustees. (NYT)

Senate Dems Eye Committee Chairs, Lieberman Likely Loser

Dale — Wed, 29 Oct 2008 22:06:40 +0000

Banking on victories this election and other changes, top Senate Democrats are already sizing up which plum committees they want to chair. (The Hill) Joe Lieberman is likely to be stripped of his Homeland Security assignment, though not expunged from the party for supporting John McCain.

Daniel Akaka (Hawaii) may fill Lieberman’s chairmanship. Nonagenarian Robert Byrd (W.V.) is likely to be honorably moved off Appropriations, to be replaced by Daniel Inouye (Hawaii), as Patrick Leahy has indicated a desire to stay on at Judiciary to oversee anticipated Supreme Court nominations. Christopher Dodd might fill Joe Biden’s role in the Foreign Relations Committee, though he might also stay on at Banking, or move to the Health, Education, Labor and Pension committee should Ted Kennedy’s health fail. If Dodd moves from Banking, Jack Reed (R.I.) might replace him, as Tim Johnson (S.D.) is still recuperating from his stroke in 2006.

Other assignments being spoken of include Jack Rockefeller (W.V.) for Commerce, Dianne Feinstein (Cal.) for Select Intelligence, Charles Schumer (N.Y.) for Rules and Administration, and Patty Murray (Wash.) for Veterans’ Affairs.

Paterson: States Need Financial Rescue Package, Too

Michelle — Wed, 29 Oct 2008 16:52:53 +0000

New York Governor David Paterson asked Congress Wednesday to provide state governments with a financial rescue package similar to the one it approved for the banking industry, arguing that the financial turmoil is threatening New York’s economy in ways far more severe than the 9/11 attacks. (NYT)

Other lawmakers including Governor Mark Sanford of South Carolina shot down stimulus proposals for cities and states, decrying the notion of pushing the government’s fiscal year deficit past $1 trillion.

Sources: (NYT, CNNMoney)

Glaeser: There Will Be Blood [OPINION]

Michelle — Tue, 28 Oct 2008 21:00:01 +0000

Harvard economist Edward Glaeser argues that while private actors overwhelmingly contributed to the financial crisis, some government interventions such as home mortgage interest deduction helped to make the crisis worse. Going forward, he cautions against putting the entire financial system in a regulatory straightjacket. (Economix)

Congress Asks Banks To Justify $108B In Pay, Bonuses

Michelle — Tue, 28 Oct 2008 20:21:57 +0000

The House Committee on Oversight and Government Reform sent a letter Tuesday to nine top Wall Street banks demanding justification for the estimated $108 billion in employee compensation and bonuses they have doled out since the start of 2008. (Bloomberg)

Chairman Henry Waxman (D-CA) sent letters to Citigroup, Goldman Sachs, Bank of America, Bank of New York Mellon, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo. He cited speculation that year-end bonuses will be “significantly enhanced” by the U.S. Treasury’s planned $125 billion capital injection into the banks.

By signing onto the U.S. Treasury’s recapitalization plan, each of the nine banks agreed to limit salaries for their top five executives. However, salary restrictions were not placed on rank-and-file investment bankers.

Overall, while Wall Street consultants forecast compensation for investment bankers and traders will fall 40% this year amid the financial crisis, compensation could have fallen as much as 70% if the U.S. government did not step in to assist the banks.

Sources: (Bloomberg, Time)

Congress Mulls Special Panel For Financial Regulations

Indu — Mon, 27 Oct 2008 14:49:57 +0000

Congressional leaders are considering setting up a special bipartisan panel to overhaul the financial-services regulations next year. They hope that a single panel will cut through the turf wars that often come with industry overhauls. (WSJ)

Chrysler, GM Explore TARP Aid For Merger

Michelle — Mon, 27 Oct 2008 04:37:21 +0000

U.S. lawmakers are considering using the $700 billion Troubled Asset Relief Program to buy troubled auto loans from General Motors and Chrysler’s financing arms, GMAC and Chrysler Financial, so that Chrysler’s owner Cerberus can redirect capital towards a potential cost-saving merger. (WSJ)

Dinallo Calls CDS Bets “Legalized Gambling” [VIDEO]

Michelle — Mon, 27 Oct 2008 01:51:43 +0000

New York Insurance Superintendent Eric Dinallo said Sunday that the multi-trillion credit default swap market at the heart of the financial meltdown is “legalized gambling,” condoned unanimously by Congress in an obscure 2000 bill that overturned state “bucket shop” laws and removed derivatives from the purview of federal oversight. (60 Minutes)

Dodd: Bush Should Nominate His Successor’s Treasury Chief

Indu — Sat, 25 Oct 2008 14:12:42 +0000

Senate Banking Committee Chair Christopher Dodd (D-Conn.) said President George W. Bush should nominate his successor’s Treasury secretary in order to facilitate a “seamless transition” during the financial crisis. (Bloomberg)

FDIC’s Bair Suggests Guarantees for Loans

Michelle — Thu, 23 Oct 2008 15:37:32 +0000

Federal Deposit Insurance Corp. Chairman Sheila Bair told the Senate Banking Committee Thursday that the government should provide loan guarantees and other financial incentives for banks that are willing to restructure troubled loans into more-affordable mortgages. (WSJ)

In Reversal, Greenspan Advocates Tighter Regulation

Michelle — Thu, 23 Oct 2008 10:54:22 +0000

Former Federal Reserve Chairman Alan Greenspan conceded Thursday in remarks to Congress that tighter regulation of financial firms is necessary amid the current crisis. In recent weeks, he has received criticism for opposing regulation during his tenure at the central bank. (Bloomberg)

Testifying before the House Committee on Oversight and Government Reform with Securities and Exchange Commission Chairman Christopher Cox and former Treasury Secretary John Snow, Greenspan said that financial markets are currently engulfed in a “once-in-a-century credit tsunami.”

“As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitizers retain a meaningful part of the securities they issue,” Greenspan said.

He acknowledged he was “partially” wrong to oppose regulation of derivatives, opaque securities which many blame for exacerbating the crisis.

Sources:

Greenspan Concedes To `Flaw’ In His Market Ideology (Bloomberg)

Live Blog: Greenspan, Snow and Cox On The Hill (NYT)

Alan Greenspan Testimony (CNBC Video)

‘I Made a Mistake,’ Admits Greenspan (FT)

Senate Dems Subpoena AG Mukasey

Indu — Wed, 22 Oct 2008 19:09:51 +0000

Senate Democrats subpoenaed Attorney General Michael Mukasey to testify about the legal advice provided by the Justice Department to the White House on detention and interrogation policies since the 9/11 attacks. (CQ)

AIG Halts Lobbying Under Congressional Pressure

Michelle — Mon, 20 Oct 2008 17:59:45 +0000

American International Group said Monday it will suspend its lobbying activities while it conducts an overall expense review. The decision comes days after lawmakers warned the insurer not to use its $85 billion government loan to fight tougher mortgage-industry regulations. (WSJ)

Lawmakers Choose To Let Deficit Rise

Indu — Mon, 20 Oct 2008 13:17:12 +0000

A consensus has emerged among Congressional lawmakers to pay for the cost of repairing the financial system by borrowing money rather than increasing taxes or cutting spending. (NYT) The head of the bipartisan, fiscally-responsible Committee for a Responsible Federal Budget, acknowledges: “Right now would not be the time to balance the budget.”