Category: Finance

So Not a Surprise

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Geithner defended Wall Street and prevented any real consequences for their actions, and now he gets his back end bribe for doing this:

Timothy F. Geithner will join the private equity firm Warburg Pincus as president, the firm announced on Saturday. It would be his first prominent position since leaving office as Treasury secretary this year.

The unusually low-key announcement — made with little fanfare on a Saturday morning — is Mr. Geithner’s first foray into the private sector in 25 years, after serving in the Treasury Department, the International Monetary Fund and the Federal Reserve Bank of New York.

As president of the New York Fed in 2008, Mr. Geithner helped lead the federal government’s response to the financial crisis, including the sale of Bear Stearns and the bailout of the American International Group.

………

Mr. Geithner follows in the path of past Treasury secretaries who, after leaving government, have accepted lucrative Wall Street posts. After leaving the Clinton administration, Robert E. Rubin joined Citigroup. And John W. Snow, a Treasury secretary in the George W. Bush administration, joined the private equity firm Cerberus.

Note that Geithner has never worked as an investment banker or stock broker, and he’s president of a private equity firm.

This is a payment for not rocking the boat, and f%$#ing the average American in the mortgage crisis.

And any future regulator knows that if they do right by the banksters, the banksters can throw them some multimillion dollar crumbs when they leave government service.

It’s Bank Failure Friday!!!

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 My bad, I missed last week, Bank of Jackson County was closed last week.

What’s more it was closed on a Wednesday.  I’ve looked, but there appears to no reason for this rather rare middle of the business week act.

And here they are, ordered, and numbered for the year so far.

  1. Bank of Jackson County, Graceville, FL

Full FDIC list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

What Could Possibly Go Wrong?

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Yes, the folks who gave you complex financial instruments based on mortgage backed securities that nearly destroyed the world, are looking to apply their special genius to the rental market:

You’d think that investors would run away from a new Wall Street innovation as fast as Congress runs away from a good idea.………

Ummmm, no. Wall Street’s primary model is to convince a potential investor is that there is another idiot further down the chain that they sell this crap to.

So, no, I do not think that investors would run away.

………But instead, they’re flocking to the latest product peddled by large banking interests, even though they look almost exactly like the mortgage-backed securities that were a primary driver of the financial crisis. These new securities, backed by rental payments, also have real-world implications for millions of renters, who could end up turning in their monthly checks to Wall Street-based absentee slumlords.

 Over the past couple years, private equity firms and hedge funds have bought up over 200,000 single-family homes, mostly discounted foreclosed properties in communities wrecked by the housing crash, such as Phoenix, Atlanta, Tampa, Sacramento, Los Angeles and Riverside, California. They have spent billions to scoop up these vacant homes at fire-sale prices, renovate them, and rent them out, promising investors double-digit annual returns on the rental revenue. Private equity firms like Blackstone, which owns more than 40,000 single-family homes, think they can build an entirely new asset class out of this scheme, controlling the rental market for single-family homes. The irony is rich: Wall Street created the conditions for millions of foreclosures, then they sweep in to buy up the homes and rent them out, often to the same people they kicked onto the street.

 ………

 Like mortgage-backed securities, the bonds would get sold in tranches, with the senior levels getting rental revenue first, and the junior tranches taking the rest. Rating agencies like Kroll, Morningstar and Moody’s have blessed the deal, presenting the senior tranches with a triple-A rating, essentially labeling it as perfectly safe for investors. You’ll remember that mortgage-backed securities were bestowed triple-A ratings during the housing bubble, and that this spurred massive purchases, fueling demand for more and more home loans to create more securities. You can see the same thing happening in the rental market if these securities catch on. In fact, while the most attractive foreclosed properties have already been snapped up, homebuilders are constructing new properties specifically for single-family rentals. Some analysts are concerned that this gold rush will create a new housing bubble in the communities where Wall Street firms are purchasing homes.

 ………

 But securitizing rental revenue is beset with unknowns. The rating agency Fitch underscored many of these concerns when they justified their opposition to rating the Blackstone bond.

So, this sh%$ is so toxic that even the massively corrupt ratings agencies won’t touch it.

The consequences for 14 million single-family renters in America could be worse. Fears that Wall Street firms would try to trim costs by ignoring maintenance and upkeep have so far been realized. As Ben Hallman at The Huffington Post recently detailed, Wall Street-owned rental homes are riddled with mechanical and plumbing problems. The firms basically freshened up foreclosed properties with a coat of paint and rented them out, ignoring serious deficiencies like broken toilets and even vermin infestations. And predictably, the landlords are impossible to reach to get repairs done. “I’ve been renting homes for 15 years and I’ve never had a landlord be this ridiculous about getting stuff repaired,” said one renter of Invitation Homes, Blackstone’s single-family rental subsidiary.

 ………

 Plus there’s the concern that securitization of rental payments will lead to the same kind of risky, illegal practices we saw with securitization of mortgages. Nobody should welcome a return of innovations like CDOs (where the riskiest tranches get sliced up and repackaged as “safe” securities) or adjustable payments (what if renters were sold “teaser” rates on their monthly payments that reset to prices they couldn’t afford?). And nobody wants to think about the strong-arm tactics that would be applied to force payments out of tenants, regardless of the circumstances. This is a rerun, and the first movie ended rather badly.

We know how the banks handled managing mortgages.  They sucked.  They screwed it up even when all they needed to do was sit back and collect the money.

Their response to tenants demanding that their homes be maintained will be a hearty f%$# you, followed by an aggressive use of bribes political donations so that they can continue to extract rents completely without consequence.

If this sort of bribery worked in DC to emasculate financial regulations, it will work on Teaneck New Jersey zoning board.

Rinse, lather, repeat.

Whiskey Tango Foxtrot?!?!? The IMF is calling for Taxing the Rich?!?!?!

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I’m not joking. The IMF actually suggesting that countries need to tax the rich in order to reduce deficits and improve economies:

Tax the rich and better target the multinationals: The IMF has set off shockwaves this week in Washington by suggesting countries fight budget deficits by raising taxes.

 Tucked inside a report on public debt, the new tack was mostly eclipsed by worries about the US budget crisis, but did not escape the notice of experts and nongovernmental organizations (NGOs).

 “We had to read it twice to be sure we had really understood it,” said Nicolas Mombrial, the head of Oxfam in Washington. “It’s rare that IMF proposals are so surprising.”

 Guardian of financial orthodoxy, the International Monetary Fund, which is holding its annual meetings with the World Bank this week in the US capital, typically calls for nations in difficulty to slash public spending to reduce their deficits.

 But in its Fiscal Monitor report, subtitled “Taxing Times”, the Fund advanced the idea of taxing the highest-income people and their assets to reinforce the legitimacy of spending cuts and fight against growing income inequalities.

 “Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s.

 According to IMF estimates, taxing the rich even at the same rates during the 1980s would reap fiscal revenues equal to 0.25 percent of economic output in the developed countries.

 “The gain could in some cases, such as that of the United States, be more significant,” around 1.5 percent of gross domestic product, said the IMF report, which also singled out deficient taxation of multinational companies.

I did not expect that the IMF would suggest this before pigs ……… Well, you know.

I guess they have been following the purchase levels of pitchforks and torches, and have become concerned.

Now if only they start supporting a Tobin Tax on financial transactions.

What a Surprise, the New York Bank of the Federal Reserve is Completely Captured by the Vampire Squid*

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Case in point, we have a bank examiner fired by the NY Fed because she refused to ignore the law to help Goldman Sachs:

In the spring of 2012, a senior examiner with the Federal Reserve Bank of New York determined that Goldman Sachs had a problem.

Under a Fed mandate, the investment banking behemoth was expected to have a company-wide policy to address conflicts of interest in how its phalanxes of dealmakers handled clients. Although Goldman had a patchwork of policies, the examiner concluded that they fell short of the Fed’s requirements.

That finding by the examiner, Carmen Segarra, potentially had serious implications for Goldman, which was already under fire for advising clients on both sides of several multibillion-dollar deals and allegedly putting the bank’s own interests above those of its customers. It could have led to closer scrutiny of Goldman by regulators or changes to its business practices.

Before she could formalize her findings, Segarra said, the senior New York Fed official who oversees Goldman pressured her to change them. When she refused, Segarra said she was called to a meeting where her bosses told her they no longer trusted her judgment. Her phone was confiscated, and security officers marched her out of the Fed’s fortress-like building in lower Manhattan, just 7 months after being hired.

“They wanted me to falsify my findings,” Segarra said in a recent interview, “and when I wouldn’t, they fired me.”

Today, Segarra filed a wrongful termination lawsuit against the New York Fed in federal court in Manhattan seeking reinstatement and damages. The case provides a detailed look at a key aspect of the post-2008 financial reforms: The work of Fed bank examiners sent to scrutinize the nation’s “Too Big to Fail” institutions.

Segarra does not allege that Goldman was involved in the Fed’s decision to fire her, and I’m inclined to agree.

The nature of regulatory capture is that the regulators do the bidding of those that they regulate without being asked.

The question is how we fix this.

*Alas, I cannot claim credit for the bon mot describing Goldman Sachs as a, “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” This was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.

Proving, Once Again, that Barack Obama can be Trusted to Do the Right Thing, If He Has No Alternative

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He is going to nominate Janet Yellen to the next Chairman of the Federal Reserve:

President Barack Obama will nominate Janet Yellen as chairman of the Federal Reserve, which would put the world’s most powerful central bank in the hands of a key architect of its unprecedented stimulus program and the first female leader in its 100-year history.

Obama will announce the nomination at 3 p.m. today in Washington, a White House official said in an e-mailed statement. Yellen, 67, would succeed Ben S. Bernanke, whose term expires on Jan. 31.

Obama turned to Yellen, vice chairman of the Fed since 2010, after the other leading candidate, former Treasury secretary and White House economic adviser Lawrence Summers, withdrew from consideration amid mounting opposition from Democrats on the Senate Banking Committee.

“She’s an excellent choice, and I believe she’ll be confirmed by a wide margin,” Charles Schumer of New York, the Senate’s No. 3 Democrat, said in a statement. Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, pledged to work “to move her nomination forward in a timely manner,” saying her depth of experience is unmatched.

U.S. index futures climbed, signaling stocks may rebound from the biggest loss since August, and Treasuries rose after the announcement. Standard & Poor’s 500 Index futures added 0.3 percent as of 11:03 a.m. in London, after the U.S. benchmark gauge lost more than 2 percent over the past two days. Five-year Treasury yields fell two basis points.

He REALLY wanted Larry Summers, so I don’t expect to see much expenditure of political capital if the Republicans decide to hold up the process.

That being said, I think that the major difference between her and either Bernanke or Summers will be on the regulatory end of things, not the monetary policy end of things.

There is only so far that you can push a string.

Even as Obama and Holder Refuse to Go After the Banksters, the Judges are Getting Cross

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Well, about 99% of the population have wondered why no banksters have been criminally prosecuted, and now, judges are beginning to wonder as well:

Last week, for the first time since the financial crisis, the government faced off in court against a major bank over lending practices during the mortgage mania. Lawyers for the Justice Department contend that Countrywide Financial, a unit of Bank of America, misrepresented the quality of mortgages it sold to Fannie Mae and Freddie Mac, the taxpayer-owned mortgage finance giants, starting in 2007. Fannie and Freddie incurred gross losses of $850 million on the defective loans and net losses of $131 million, the government said.

Bank of America disagrees. Its lawyers say that Countrywide did not defraud Fannie or Freddie.

This case is undoubtedly big, but it is only one of many mortgage-related matters inching through the judicial system. And what is notable about some of the lower-profile matters is the tone and tack that federal judges are taking in their rulings. District court judges are not generally known as flamethrowers, but some seem to be losing patience with the banks.

For decades leading up to the foreclosure debacle, plaintiffs’ lawyers say, judges generally took the side of lenders when borrowers came to court complaining of problematic lending or predatory loan servicing. Many judges still do. But some are getting tough, perhaps having seen too many examples of dubious bank behavior.

“Maybe the judges are tired of the diet of baloney sandwiches the banks have been feeding them,” said April Charney, a foreclosure defense lawyer who for years represented troubled borrowers at Jacksonville Area Legal Aid in Florida. She is now in private practice.

Two recent rulings — one in New York involving Bank of America and one in Massachusetts involving Wells Fargo — serve as examples. In the Wells Fargo case, a ruling on Sept. 17 by Judge William G. Young of Federal District Court was especially stinging. In it, he required Wells Fargo to provide him with a corporate resolution signed by its president and a majority of its board stating that they stand behind the conduct of the bank’s lawyers in the case.

The case involved a borrower named Joseph Henning who fell behind on his mortgage, which he received from Wachovia, an entity later absorbed by Wells Fargo. In a suit filed against Wells Fargo in May 2009, Mr. Henning contended that the loan was predatory.

Judge Young agreed with the bank’s argument that federal laws pre-empted the state-law remedies Mr. Henning was seeking. But he did so reluctantly, calling it a win based “on a technicality.”

Then he chastised the bank. “The disconnect between Wells Fargo’s publicly advertised face and its actual litigation conduct here could not be more extreme,” the judge wrote. “A quick visit to Wells Fargo’s Web site confirms that it vigorously promotes itself as consumer-friendly,” he continued, “a far cry from the hard-nosed win-at-any-cost stance it has adopted here.”

If Wells Fargo does not supply the corporate resolution within 30 days of the ruling, the case will go to a jury trial, the judge said.

It is notable that there is no right to jury trial here, and Wells Fargo does not want to place their fate in the hands of ordinary people who are likely to understand how

Even if prosecutors are unwilling to hold the banksters to task, it appears that some judges are no longer willing do deal with the sh%$ that banksters are trying to peddle as Shinola.

Matt Taibbi Nails it Again

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This time, he’s writing about how Wall Street is robbing ordinary working people’s retirement:

In the final months of 2011, almost two years before the city of Detroit would shock America by declaring bankruptcy in the face of what it claimed were insurmountable pension costs, the state of Rhode Island took bold action to avert what it called its own looming pension crisis. Led by its newly elected treasurer, Gina Raimondo – an ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist – the state declared war on public pensions, ramming through an ingenious new law slashing benefits of state employees with a speed and ferocity seldom before seen by any local government.

………

Nor did anyone know that part of Raimondo’s strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb’s Third Point Capital was given $66 million, Ken Garschina’s Mason Capital got $64 million and $70 million went to Paul Singer’s Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 “Urban Innovator” of the year.

The state’s workers, in other words, were being forced to subsidize their own political disenfranchisement, coughing up at least $200 million to members of a group that had supported anti-labor laws. Later, when Edward Siedle, a former SEC lawyer, asked Raimondo in a column for Forbes.com how much the state was paying in fees to these hedge funds, she first claimed she didn’t know. Raimondo later told the Providence Journal she was contractually obliged to defer to hedge funds on the release of “proprietary” information, which immediately prompted a letter in protest from a series of freaked-out interest groups. Under pressure, the state later released some fee information, but the information was originally kept hidden, even from the workers themselves. “When I asked, I was basically hammered,” says Marcia Reback, a former sixth-grade schoolteacher and retired Providence Teachers Union president who serves as the lone union rep on Rhode Island’s nine-member State Investment Commission. “I couldn’t get any information about the actual costs.”

This is the third act in an improbable triple-f%$#ing of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.

Read the rest.

Not enough bullets.

Someone Else Calling for a Postal Savings Bank

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Just like I did a few months ago.

It’s Senator Bernie Sanders and Represantative of Pete Defazio:

The Postal Service Modernization Bills brought by Peter DeFazio and Bernie Sanders, on the other hand, would allow the post office to recapitalize itself by diversifying its range of services to meet unmet public needs.

 Needs that the post office might diversify into include (1) funding the rebuilding of our crumbling national infrastructure; (2) servicing the massive market of the “unbanked” and “underbanked” who lack access to basic banking services; and (3) providing a safe place to save our money, in the face of Wall Street’s new “bail in” policies for confiscating depositor funds. All these needs could be met at a stroke by some simple legislation authorizing the post office to revive the banking services it efficiently performed in the past.

I don’t think that it’s going to happen.

Wall Street owns Congress, and Wall Street does not want an alternative.

Why High Frequency Sucks Part 86

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Some high frequency traders in Chicago made a lot of money by having 7 milliseconds advance notice of the recent Fed decision:

In the wake of an unusual trading pattern after the Federal Reserve’s decision to continue economic stimulus last week, Fed officials have contacted certain news organizations to discuss rules and procedures for the central bank’s advance release of sensitive information, CNBC has learned.

On Sept. 18, the Federal Reserve shocked the financial world with its decision not to scale back its level of support to the economy as most market participants expected.

Financial markets reacted at the speed of light, pushing stocks dramatically higher in just moments. But it looks like the speed of light just wasn’t fast enough for some traders.

Some traders in Chicago appear to have had access to the Fed’s decision before anyone else in the Windy City. According to trading data reviewed by CNBC, they began buying in Chicago-traded assets just before others in that city could possibly have been aware of the Fed’s decision. By one estimate, as much as $600 million in assets changed hands in the milliseconds before most other traders in Chicago could learn of the Fed’s September surprise-a sharp contrast to the very low volume of trading ahead of the Fed’s decision.

………

The precise timing of the release is crucial because information can only travel as fast as the speed of light-a physical reality first laid out by Albert Einstein. Information-like a Fed decision-released in Washington takes as much as 7 milliseconds to travel to Chicago, where futures and other assets are traded. And because high-speed trading firms are now able to execute trades at the millisecond level, there is a brief window of time in which information can be publicly available in Washington but is still traveling to Chicago, where computers won’t receive it until milliseconds later.

Thanks to modern technology, that window is long enough for some to profit if they know which direction the market is about to go and can place millisecond-level trades accordingly. None of this trading would typically involve a human being-it takes slow-moving humans about 300 milliseconds just to blink an eye, making them much too slow to react to news at the millisecond level. Instead, high-speed data feeds are plugged directly to algorithmic trading computers, which in turn analyze the news as it comes in and execute pre-programed trading strategies.

What apparently happened is that a reporter who was given the information ahead of time, the Federal Reserve does this in a locked room (really) under sequester.

The reporters can prepare their reports, but they cannot release any information before 2:00 pm.

Someone cracked the system, and used the speed of light to gain a competitive edge.

The bitch is, I am not sure that this was illegal.

Whoever did this did not act on non-public information, it had been released publicly at 2:00pm EDT, which is when they traded, they simply beat the information going down the wires .

It should be illegal, and I’d love to see someone prosecute these motherf%$#ers.

It’s Bank Failure Friday!!!

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I missed stuff over the past month, my bad.

And here they are, ordered, and numbered for the year so far.

  1. The Community’s Bank, Bridgeport, CT (on September 13)
  2. First National Bank also operating as The National Bank of El Paso, Edinburg, TX (on September 13)

Full FDIC list

And here are the credit union closings:

  1. Craftsman Credit Union, Detroit, MI (on September 6)

Full NCUA list

So, here is the graph pr0n with last years numbers for comparison (FDIC only):

Must Read

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It’s a PDF, and it’s 22 pages, but John Quiggen of the University of Queensland makes the fascinating point that the great financial centers of the world, primarily New York, London, Paris, and Tokyo, exist because the concentration of the financial industry facilitates corruption and cronyism of the managing class:

Recent developments in the global system of cities present a curious paradox. With the cost of communications declining almost to zero and substantial, though less dramatic reductions in transport costs, there is now little technical requirement for most kinds of production to be undertaken in any particular location, or for elements of production chains to be located close to each other. This fact has had dramatic consequences for the organisation of manufacturing industry. Simple production chains involving the import of raw materials, usually from developing countries, for processing in a specialised centre, have been replaced by far more complex structures.

Yet, in important respects, the dominance of a small number of ‘global cities’has never been greater. In this paper, it is argued that the dominance of global cities reflects a desire for clustering on the part of finance sector professionals and corporate executives. It seems likely that such clustering provides private benefits by enhancing the value of personal contacts, but reduces the efficiency and profitability of the corporate sector

 ………

 These concerns are even more pronounced in relation to personal networks connecting financial enterprises with their clients. It is reasonable to assume that such personal networks facilitate the development of business relationships between the firms in question, leading to flows of payments on services based on relationships of personal trust and shared interests, rather than on formal and transparent contractual relationships.

Such a system is commonly referred to as ‘relationship capitalism’ or, more pejoratively as ‘crony capitalism’. In general, it is viewed favourably during booms, when the disregard of process tends to facilitate rapid generation of wealth, and less favourably during recessions when the exchange of personal favours and the evasion of formal controls tends to be reclassified (often retrospectively) as corrupt.

Basically, if you are in an environment where you can run into a potential co-conspirator at a restaurant, or at a party, where small talk can allow you to tease out a deal that will benefit you, and your friend, but not your clients without the sort of transaction trail that you would see with phone calls, and emails, etc.

Essentially, it turns out that centralized financial district are a particularly criminogenic environment in terms of control fraud.

A few casual conversations at a party with, for example, a stock analyst, and that IPO you are pumping up, or the stock price of the company in which your stock options have just vested, and Ka-Ching, there you are with a vacation home in the Hamptons, a yacht, and a Ferrari.

Things that Make You Shout out in Glee

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Larry Summers is not going to be Chairman of the Federal Reserve:

Lawrence H. Summers, one of President Obama’s closest economic confidants and a former Treasury secretary, has withdrawn his name from consideration for the position of chairman of the Federal Reserve amid rising opposition from Mr. Obama’s own Democratic allies on Capitol Hill.

In a statement released by the White House on Sunday afternoon, Mr. Obama said he had accepted the decision by his friend even as he praised him for helping to rescue the country from economic disaster early in the president’s term.

“Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today,” Mr. Obama said in the statement.

He added: “I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future.”

Mr. Summers appeared to have been the White House’s favored candidate to succeed Ben S. Bernanke as chairman of the Fed, though Mr. Obama had repeatedly said he had not yet made a decision between Mr. Summers, Janet L. Yellen, who is a vice chairwoman of the Fed, or someone else.

But Mr. Summers’s reputation for being brusque, his comments about women’s natural aptitude in mathematics and science, and his decisions on financial regulatory matters in the Clinton and Obama administrations had made him a controversial choice.

Three Senate Democrats on the Banking Committee had come out against Mr. Summers’s nomination, meaning that the White House might have had to barter for as many as three Republican votes for him even to pass out of committee.

It ain’t 3, it’s 4, Elizabeth Warren, Sherrod Brown, Jeff Merkley, and Jon Tester, who announced his opposition on Friday.

Summers withdrew his name because he cannot be confirmed.

Let’s be clear here:  the American People won.

Obama desperately wanted to nominate Summers, despite the crescendo of opposition.

The Best that Can Be Expected………

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I guess it was inevitable that former TARP Inspector General Neil Barofsky would have to find work.

Considering his background, taking a position in a large white shoe law firm tied in with finance was very likely and Jenner & Block appears to be much less evil than many of their competitors:

Neil Barofsky, the former prosecutor who brought transparency and accountability to the federal government’s 2008 bank bailout program as its first special inspector general, has joined Jenner & Block, a law firm based in Chicago, as a partner.

Mr. Barofsky, who was appointed by George W. Bush to oversee the $700 billion Troubled Asset Relief Program in late 2008, was a Washington outsider whose periodic reports on the program questioned Treasury officials’ claims of its effectiveness. He and his office drew criticism at times from those officials, as a result.

Mr. Barofsky left his post in 2011 to teach at New York University’s law school. He also wrote “Bailout,” a scathing account of his time in Washington that highlighted the problem of regulators who he said were for the most part captured by the institutions they were supposed to police.

In an interview, Mr. Barofsky said that joining Jenner & Block was a natural next step because the firm specialized in helping government agencies and major corporations with in-depth investigations of problematic practices. Such investigations, he said, are similar to the work he did at TARP. In addition, unlike many other large law firms, Jenner & Block represents clients bringing suits against large financial institutions.

“I can bring my experience investigating large financial institutions and complex financial transactions to a place that doesn’t just do defense work in this area,” Mr. Barofsky said. “This is an opportunity in private practice to help improve governance and have a truth-seeking role.”

Well, we’ll see how this goes, and he has done a real service in reporting on the corruption of the TARP as IG, and in his book about the experience, Bailout, which has probably earned him the undying enmity of Timothy Geithner, Eric Holder, and Barack Obama, and he deserves a lot of credit and a not inconsiderable payday, for that.

The Only Two Things You Need to Know About Larry Summers as Fed Chair

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Item 1: He’s controversial because he is such a horrifically bad choice:

The Washington Post’s Neil Irwin looked this morning at what he sees as the many reasons the upcoming nomination of a new Federal Reserve chair became a circus, unlike past low-controversy nominations.

………

But among Neil’s four factors, only one really matters at the margin: The White House appears poised to make a demonstrably bad choice for Fed Chair.

If Larry Summers withdrew himself from consideration, or the White House announced that it isn’t going to pick him, the circus tents would pack up and we could all go home. The Fed Chair race would become uncontroversial and boring again, Business Insider’s existence notwithstanding.

People oppose Summers for all sorts of reasons, but here are my two.

One is that while we don’t know exactly where he (or Janet Yellen) would lead on monetary policy, I suspect Summers shares the White House’s unhealthy lean toward tight money. It’s particularly hard to figure out what Summers would do since he’s not actually a monetary policy scholar.

The other is that I fear Summers would squander the comity and collaboration that make the Federal Reserve Board work, since he’s had a tendency to do that at other institutions he’s been tapped to lead.

Item 2: Wall Street, which has spent millions cultivating him, appears to be terrified at the prospect of Summers as Fed Chair:

The spreading expectation that President Obama will name Lawrence H. Summers to lead the Federal Reserve Board appears to be working against the central bank’s efforts to stimulate the economy.

The jitters even have some analysts betting that a Summers nomination could lead to slower economic growth, less job creation and higher interest rates than if the president named Janet L. Yellen, the Fed’s vice chairwoman.

Businesses raising money and people buying homes and cars all have faced higher interest rates in recent months as the Fed’s campaign to suppress borrowing costs has faltered. The rise in rates reflects optimism that the economy is gaining strength, and an expectation that the Fed will begin to pull back later this year. But a wide range of financial analysts also see evidence of a Summers effect.

Many investors expected that Ms. Yellen would be nominated to replace Ben S. Bernanke as head of the central bank, a choice that would have sent a clear message of continuity. Instead, investors are now trying to anticipate how Mr. Summers might change the Fed.

The unease is the product of a little information and a lot of speculation. Mr. Summers, a Harvard University economist who served for two years as Mr. Obama’s primary economic adviser, has said little about monetary policy in recent years. Investors are left parsing a handful of comments in which he has expressed some doubts on the benefits and concern about the consequences of the Fed’s policies.

“People don’t know what Larry might do,” said Mohamed El-Erian, chief executive of Pimco, the giant bond fund manager. “There’s a lack of a lot of information on Larry’s views. We don’t have enough information to make an assessment, just some second- and thirdhand accounts.”

Wall Street owns Larry Summers, but they don’t want him to be Fed Chair.

The only thing to argue for him is cronyism and corruption.  Seriously.

If Obama nominates him, I am calling both of my Senators bring up his role in Andrei Schleifer’s corruption in the market reforms in Russia.

Whiskey Tango Foxtrot????

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The NASDAQ exchange shut down for 3 hours today:

The United States stock market showed again on Thursday that it remained vulnerable to technological breakdowns even as regulators and market operators work to keep up with trading that is increasingly electronic and driven by speed.

The latest trouble shut down trading on the Nasdaq market and its more than 3,000 stocks — including some of the most popular among investors, like Apple and Google — for more than three hours Thursday afternoon.

The disruption on the nation’s second-largest stock market, after the New York Stock Exchange, reverberated up and down Wall Street, affecting other markets as investors cautiously stepped back. Brokers scrambling to trade elsewhere discovered that they could not complete trades while in the dark about prices on Nasdaq.

“It is everybody — nobody can trade,” Manoj Narang, the chief executive of Tradeworx, said during the afternoon. “I’ve never seen anything like this.”

Some expressed relief that the problems came in August, typically a slow time for Wall Street.

“We didn’t lose any money on the shutdown, but we also made very little money today,” said the chief executive of one Wall Street firm, who asked not to be named.

Nasdaq officials said the halt was prompted by a problem with the data system that disseminates prices and that its cause had been “identified and addressed.”

I’m thinking that high frequency algorithmic trading is somehow tied into all of this.

The fact that this occurred a day after Goldman Sachs reported a major loss from a programming error for such a program further buttresses my suspicion.

This is a Breath of Fresh Air………

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The SEC just settled with a hedge fund that misused funds and manipulated markets, and in addition to a fine, and a 5 year ban for the principal, they got an explicit admission of wrongdoing:

Wall Street’s regulator sent a message on Monday that it was now taking a more aggressive stance on securities settlements as it extracted its first admission of wrongdoing under a new policy.

The regulator, the Securities and Exchange Commission, said that the hedge fund manager Philip A. Falcone had agreed to admit wrongdoing and to be banned from the securities industry for at least five years to settle market manipulation accusations. As part of the settlement, he and his fund, Harbinger Capital Partners, must also pay more than $18 million.

The deal comes a month after the commission had in a rare move overruled its own enforcement staff to reject a settlement struck with Mr. Falcone and Harbinger.

That original agreement had called for a two-year ban from raising new capital and no admission of wrongdoing. It also did not include an injunction against committing fraud in the future — language common to nearly every single securities settlement.

The original settlement terms had irritated the S.E.C.’s new chairwoman, Mary Jo White, people briefed on the matter said, and frustrated many others within the agency who saw that deal as too lax.

The new, tougher terms reflect a wider policy change that Ms. White outlined this year, aiming to shift the burden of admission of guilt onto the defendant, overturning a longstanding policy of allowing defendants to “neither admit nor deny” wrongdoing.

If this is a start of a trend, then this is a big deal.

I hope that this is not just political atmospherics.