The Regulators Made Me Do It: Seven And A Half Things To Know

07/18/2012 07:52 am ET
  • Mark Gongloff Managing Editor, Business and Tech, The Huffington Post

Thing One: Are My Methods Unsound? See, this right here is exactly why Jamie Dimon worries that financial regulations will destroy America.

Most of the customer money that has disappeared from Peregrine Financial Group has been spent to keep up regulatory capital and to pay regulatory fees and fines, according to a Wall Street Journal reading of previously undisclosed portions of the epic suicide note left by PFG founder and Colonel Kurtz enthusiast Russell Wasendorf Sr. See, it was the regulators that made him do it!

Of course, the note says Wasendorf also spent some of the missing $215 million (or more? We're still not talking at all about the money sent to a JPMorgan account for some reason?) on PFG's headquarters/cult compound in Iowa. But most of it was on regulation, because regulators hate America. "I have to say I don't feel bad about deceiving the regulators," the WSJ says his suicide note says. "They made the decision to be my enemy."

Jamie Dimon knows the feeling. Then again, the Commodity Futures Trading Commission and National Futures Association that were supposedly always hassling Wasendorf overlooked for years the fraudulent scheme that the note claims started way back in 1993. They couldn't have been all that hard on him.

Thing Two: True Libors: Speaking of hapless regulators, Federal Reserve Chairman Ben Bernanke sputtered and buck-passed his way through questions about the Fed's laissez-faire approach to Libor manipulation at a Senate Banking Committee hearing yesterday. It was all the responsibility of those British people, he protested constantly. "We're doin' all we can here," he said, in his best Jerry Lundegaard impression. But his counterpart on the other side of the Pond, Mervyn "Magoo" King, protested that the New York Fed hadn't told him a thing about any Libor manipulation. All regulators being questioned yesterday solemnly agreed that Libor, a key interest rate affecting borrowers and derivatives investors throughout the world, was hopelessly flawed. Hey, somebody should do something about that, they all concurred.

Thing Three: You Should HSBC Us Now: In another awkward Senate hearing yesterday, HSBC officials said they had cleaned up the bank's act to make it less friendly to Mexican drug lords, Saudi terrorists and such. The bank's compliance officer even walked the plank. Senators were not buying it.

Thing Four: Meanwhile, In The Economy: Almost overlooked in Bernanke's testimony yesterday was just how badly he thinks the U.S. economy stinks and is going to stink for a long, long time. Despite this widespread stinkery, Bernanke only barely hinted at offering any further monetary stimulus, and didn't even much bother to press Congress to get moving on any fiscal stimulus. It's too hot for heavy lifting, apparently.

Thing Five: The States We're In: Even if and when the economy stops sucking (2015, here we come!), U.S. states are going to remain in fiscal crisis, according to a study by the State Budget Task Force, co-chaired by Paul Volcker. The New York Times writes: "The fiscal crisis for states will persist long after the economy rebounds as they confront rising health care costs, underfunded pensions, ignored infrastructure needs, eroding revenues and expected federal budget cuts..."

Thing Six: Squeezing The Squid: It's getting so you almost feel sorry for the Vampire Squid. Almost: Goldman Sachs reported an 11 percent drop in quarterly profit and said hundreds of people could be laid off in a new round of cost-cutting. The Wall Street Journal writes: "Shrinking pay and cutting staff will go only so far in helping Goldman steel itself against a triple whammy of lackluster business conditions, the global economic rut and regulatory headwinds."

Thing Seven: On Your Marks: Germany hasn't left the euro yet -- though it's probably tempted -- but many German shoppers and retailers are still using the old deutsche mark, the Wall Street Journal writes: "Unlike neighbors such as Italy and France, which let their liras and francs officially expire over the past year, Germany never set a deadline for exchanging its old money for euros. So, if they decide to accept marks, retailers and other businesses can still exchange them at German central bank branches."

Thing Seven And One Half: The Weird Turn Pro: Happy birthday, Hunter S. Thompson (1937-2005).

Now Arriving By Email: If you'd like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing.

Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Housing Starts for June

2:00 p.m. ET: Fed's Beige Book for June

Corporate Earnings:

Before Market Open:

Bank of America


BNY Mellon


PNC Financial

US Bancorp

After Market Close:

American Express



Yum! Brands

Heard On The Tweets:

@pdacosta: What Bernanke did not answer: Why did the Fed try to keep a lid on Libor problems rather than informing the public?

@BCAppelbaum: To summarize, the official Fed position on LIBOR is: Wow, the British really screwed that up. They should have taken our advice.

@HAL9000_: Marissa Mayer is the new CEO of Yahoo. I still used Google to find out who she is.

@carney: I never cared how Romney made his money or where it was until he showed he was willing to risk so much to keep it secret.

@steve_hawkes: HSBC money laundering, Barclays Libor fiddling, RBS systems creaking - Lloyds must be, er, worrying

@spencetimes: #HSBC not alone in turning blind eye to illicit money. Last year, FSA found widespread disregard of money laundering rules among UK banks

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja