THE FINTAG NEWSLETTER
@ Thu 05 February 2009 : GMT

FINTAG COMMENT

Bashing the SEC.

Yesterday I was accused of being goofy (by some junior Morgan Stanley investment civil servant) and at the same time told I was the funniest person on the planet (by someone I need to get to know better ;) ). So let us get back to business. The testimony of Harry Markopolos before the US House of Representatives is some of the funniest reading. Its all about Madoff but more importantly the goofy buffoons who were supposed to be regulating the man. Let us look at a small piece of this:

Biff Number 1:
"New York and Washington also have sizeable analysts societies but rarely does anyone see SEC staff attending these educational events and we all know it isn't because the SEC has no need for greater industry knowledge. Either the SEC is anti-intellectual and intentionally maintaining staff uneducated about the capital markets or it is merely being ignorant.

In either case, not to budget for it's staff's education is indefensible in the 21st century.

SEC employees are knowledge workers, not unthinking, replaceable cogs and deserve to have the required educational resources available to them to do their jobs.

To further illustrate the anti-intellectual bias of the SEC, consider what the SEC staff has printed on their business cards. If you're expecting to see Certified Public Accountant, Certified Financial Planner, Certified Fraud Examiner, Certified Internal Auditor, Financial Risk Manager, Chartered Financial Analyst, Chartered Alternative Investment Analyst, or some other sort of highly sought after professional designation, you will be sorely disappointed.

For some unfathomable reason, most of the very few credentialed SEC staffers do not have their professional designations printed on their business cards."

So what sort of people do the SEC hire?

Biff Number 2:
"To properly regulate the finance industry, the SEC needs to hire people who know how to take apart complex financial instruments and put them back together again. If an SEC staffer doesn't know derivatives math, portfolio construction math, arbitrage pricing theory, the Capital Asset Pricing Model, both normal and non-normal statistics, financial statement analysis, balance sheet metrics, or performance presentation formulas then they shouldn't be hired other than to fill administrative or clerical positions.

For instance, a person I know rather well in the Boston office, with over 10 years of industry experience, a double major under-graduate degree in economics and math from an Ivy League school, with an MBA degree and a Chartered Financial Analysts designation wanted to leave her job as a senior analyst at a large mutual fund company in order to have another child. She wanted out of the rat race where 60 hour work weeks were both common and expected so she applied for a job with the SEC.

During her interview she was told that she was
1) overqualified with too much industry experience,
2) over educated and
3) that she wouldn't be happy inspecting paperwork and would likely quit in frustration so the SEC didn't plan on offering her the job.

This is deeply problematic as it underscores the lack of a proper recruitment policy to equip the SEC with appropriate personnel for the work with which it is mandated and the expertise expected in order to appropriately monitor our financial institutions and their numerous transactions. The SEC apparently is only interested in administrative verification, to ensure compliance with existing (outdated) securities laws. Is it any wonder, given the current SEC staff, that major financial felonies go unpunished while minor paperwork transgressions are flagged for attention?"

Biff Number 3:
"More recently, the SEC watched quietly but did nothing to prevent the train wreck as the nation's five largest domestic investment banks either failed like Lehman, were rescued by government forced acquisitions like Bear Stearns and Merrill Lynch, or became bank holding companies in order to survive like Goldman Sachs and Morgan Stanley. And today, no investor knows what the bank's balance sheets look like because the SEC is refusing to enforce transparency rules.

When the industry you purported to regulate implodes and the nation's financial system is frozen, then it is safe to say that you've failed as a regulator. It is also safe to say that the SEC has lost the nation's confidence. The Executive Branch and Congress are faced with the following critical question - do we disband the SEC, merge it out of existence, or fix it?"

markopolos020409 (pdf)

I have seen some beatings but this is pretty brutal.

So what about Madoff? Is the man being tortured to confess who his partners in crime were, or is he locked away to prevent harm coming his way. A plea bargain surely to protect his family? Was he really the latest James Bond villian ready to money launder the world or just a compulsive obsessive desk jockey who got a bit carried away with his fax machine?

All will be revealed in time.

So with the lovely Erin taking time out, the UK ready to drop rates again (why bother it hasn't worked so far) and 500 million Americans losing jobs, this eclectic news lucky dip should appeal to all expect Disney lovin' Morgan Stanley analysts [Editor: You really do need help.]

'BAD BANK' VERSUS 'INSURANCE WRAP'

big barryFintag says
Whatever. It is just an entity. What next? Discussions on the type of branding? A Marketing plan? A funky website? Just do it.



bloomberg says " Asset Guarantees Gain Momentum in U.S. Bank Talks "

HARRY MARKOPOLOS ATTACKS SEC FOR 'FINANCIAL ILLITERACY'

telegraphFintag says
So now the SEC has been beaten up it needs to rebrand and start again. So where is Obama? Oh he is still learning how to read his scripts. Fixing the SEC is an absolute must. Do what the UK did and merge all the regulators into a super regulator, write a 10 foot high manual and collect that data.

JAPAN IS IN THE THROES OF DEEP RECESSION WITH A PUBLIC DEBT AT 180% OF GDP

finfactsFintag says
And people are still buying the yen? This is quite extraordinary. Who next? Not the UK surely ...

Oops news:
world net daily says " Pelosi: '500 million Americans' losing jobs "

AIMA CALLS FOR GLOBAL RESPONSE TO ISSUES TOUCHING HEDGE FUNDS

hedge funds reviewFintag says
I like being touched all over. Good grief, I didn't realise Baker was CEO of AIMA. He owes me money ...

EX-LEHMAN CFO CALLAN TAKES LEAVE FROM CREDIT SUISSE

yahooFintag says
Perhaps Dick wants her to be in the same Cell, eh? [Editor: Uh?]. I hope she is OK as she kept a grumpy Finbar's heart beat going for the early part of last year.Anything I can do to help ...

FOR SALE: THE BRITISH HIGH STREET

independentFintag says
Icelanders. It had to happen and it has happened. I am sure Mr Green will be snapping the cherries at bargain prices.

FURTHER CUT IN UK RATES EXPECTED

bbcFintag says
Why? I hope the ECB puts up rates and kills of sterling. These are goofy rates. Mickey mouse rates.

GOLDMAN POSTPONES, MOVES HEDGE FUND CONFERENCE

finalternativesFintag says
I won't be going then. Spoil sports. To protest I shall be sending a fruit basket to their head office.

MADOFF 'FEEDER' FUNDS TO BE NAMED

financial timesFintag says
As we know there are many investors refusing to acknowledge they had any exposure. I wonder why? Still, I do know one 1 feeder fund that will be on the list. Based in Switzerland.

U.S. HOUSING SLUMP HAS 'JUST BEGUN,' SAYS FORECASTER TALBOTT

bloombergFintag says
Here we go again. Houses are for living in not investments. They are illiquid assets, risky and have a high volatility.

JAPANESE STAR FUND MANAGER AVOIDS JAIL TIME

lankaFintag says
Another bad apple that gives us good apples a bad name.

DID MADOFF'S FEEDER FUND SHOP FOR FRIENDLY AUDITS?

cnnFintag says
Of course he did. We all do it. Our advisors make money from us and if they disagree we sack them (prime brokers, administrators, accountants, lawyers et al). Why work with tossers?