Can We Trust Government to Get Regulation Right?

This morning on Larry Mantle's Air Talk Show on KPCC I had a back and forth with the American Bankers Association on the problem with credit card users having their rates jacked way up even when they don't miss their payments.  The Bankers' lawyer says the bait and switch tactics will all be fixed by 2010 with new federal regulations.  Consumers cannot wait til 2010,  not in this economy. And even then you have to question whether government regulators can get it right after watching Sunday night's 60 Minutes story on how the SEC knew about Madoff's scam as early as May 2000, but looked away.

The 60 Minutes segment, "The Man Who Knew," was produced by my brother Andy, and it shows how the SEC ignored the financial analyst who warned the regulators about Bernie Madoff's $50 billion fraud nine years ago.  The segment raises fundamental questions about how the Obama administration will do better at making regulation work. 

Financial analyst Harry Markopolos proved statistically that because Madoff's record was so good it was like a baseball batter hitting 960. it's such a perfect batting average it had to be a fraud. The whistleblower dug and kept blowing the whistle, unable to find anyone who had ever traded with Madoff because his investment fund never made trades. Still, the SEC ignored evidence that Markopolos said was 100% conclusive by 2005.  He also said that major Wall Street firms knew and did not invest with Madoff, but wouldn't blow the whistle.  Obama should listen carefully to Markopolos's reason why: "People in glass houses don't throw stones and self regulation on Wall Street doesn't work." 

President Obama's SEC and entire regulatory structure needs to be far better. He should hire Markopolos on as a consultant to show how to rebuild what is an embarrassment of an agency and, in too many other corners, of a regulatory structure. For inspiration, the president should listen to Madoff, in his own words, explain back when he was on top how it was impossible to fool the SEC: www.cbsnews.com/stories/2009/02/27/60minutes/main4833667.shtml

 

Comments

[research]

When the Conservatives govern,

Government is always bad.

Stop electing people who shout that governmnet is always bad.

[Birdman]

For the most part they had it right, that was before Regan came along and dismantled the whole system. So I guess the answer would be yes. We still have the party of NO that will negotiate in bad faith to change the potential laws to remove the teeth, and pretty much keep us where we are at. Care to have any peanut butter cookies? How about flying Alaska Air ya know they never did pay that million dollar fine for circumventing maintenance procedures, How about those Air traffic controllers overworked much?

[Wood-Harp]

"Consumers cannot wait til 2010, not in this economy." No doubt. The credit card companies were given a gaping window before any of the new regulations would take effect. Then, they were politely asked to refrain from gouging their customers in the interim. Isn't that like asking the founder of the most successful PayDay Loan company (seen on national commercials promoting his predatory bait as if it derives from the utmost honor and professionalism) to just come forward and admit how he really feels about his prey?
http://seaclearly.wordpress.com/predatory-practices-from-the-credit-card-industry

[KillTheMessenger]

The best credit card regulator, by far, is Mr. Scissors. Use him early and often.

:-)

[Kassandra]

Everyone need s to read Hamsher's action statement over at FDL and call your Congresscritters if they're on the "New Democrat" list. They are giving away the farm to banks again headed by Ellen Tauscher. They seem to be actually to the RIGHT of the blue Dogs, if you can believe.

"ACTION: Tell New Dems to Stop Paying Former Bank Lobbyists With Your Tax Dollars
By: Jane Hamsher Wednesday March 4, 2009 9:40 am

CQ Politics says that "Democratic Reps. Jim Matheson of Utah and Gabrielle Giffords of Arizona have joined a quiet revolt in the House that could slow some of President Obama's fast-moving priorities­." This, we are told, is because "The two are among 49 Democrats from congressional districts that backed Republican Sen. John McCain's 2008 presidential race and whose support for the Democratic majority's progressive agenda is increasingly not assured."

http://firedoglake.com/2009/03/04/new-dems-walking-to-the-right-of-blue-dogs/

Everyone needs to keep an eye on this or the bank Cramdown is going to happen to homeowners instead of the predatory lenders.

[Sundialsvc4]

There was a book that described the current "credit default swap" fraud more than twenty years ago. Its author thought it would be a sizzling expose. I understand that a reprint is in the works.

Meanwhile, Jamie ... "high crime is REAL crime, and it is everywhere­." Do we need more proof of this? Quite obviously not.

The SEC ... which is made up of human beings too ... has been in-the-pocket for dozens of years. We need say nothing further about other Commissions, nor of the Congress itself.

More than anything else, I think that "We the People" need to make it loud-and-clear known that we have extremely high standards of professional conduct that we will collectively insist that every member of any legislature, anywhere, must meet. "You do the crime, buddy, and you'll do the time. Right here, right now, and with absolute certainty. No more of this pasty, self-shielding 'off the table' crap." We can't afford crime ... most especially not high crime.

"High Crimes" or "misdemean­ors." Take your pick. Either way, "You're Out!"

I think that this ought to come right down from the words of the Chief Executive himself. But simply as a statement of the obvious; of a self-evident truth.

[RevBookburn]

It is high time that regulation begins for those who have destroyed the economy. The banks, Countrywide, and the entire zoo that has caused such devastation should be strictly regulated.­.so of like all citizens who ever collected miniscule checks from unemployment or disability. Rev. Bookburn - Radio Volta

[FalconerHK]

Of course Obama should hire people like Markopolos (along with Krugman, Siglitz, etc.), but he won't, because the ruling class would rather see its proven shills and protectors running interference instead (yes, Obama cabinet and advisors, I'm referring to you).

Geithner? Goldman. Bernanke? Goldman. Summers should be drop-kicked for past performance alone. None of these people care about anything aside from their shadow bank masters and will protect them at all costs to secure their (self)righteous place in Wall St. boardrooms once their cabinet stints are ended.

If it isn't obvious by now, we're totally screwed.

[Kassandra]

The Repubs are revolitng (well, everyone knows THAT) against Steel. We should revolt against Summers and Geithner.

[leftLibertarian]

The governments needs to show some accountability and start mass arrests of executives from financial firms like AIG and Citi.

[FrankMonachello]

The only answer in a democracy is if our elected officials were elected with a mandate to carry out the law of the land then "Yes, we must trust them to regulate or, if they don't, we throw them out of office."

The last election illustrated that principle very clearly and, as voters, we much stand vigilant to ensure the Obama Administration carries out this mandate or, if they don't, we have an obligation to throw them out of office in the next election.

Vigilance between elections is the hard part. Picking out a regular day each year or each quarter to send a letter to our Congressman asking for evidence that the Executive branch is in fact carrying out certain policies is one practical way to exercise this vigilance between elections.

It's why they call our precious system "participatory" and "representative" democracy; we need STAY engaged and the results will follow.

[Sundialsvc4]

He's been on the job all of six weeks. And I think that the present Executive team definitely has a lot of wisdom and determination. But they've also got the most difficult job in the world -- herding more than six hundred wildcats, a great many of whom (not all...) are thoroughly corrupted criminals.

Yes, they must all be held to the fire. Governing is not supposed to be "your ticket to the good-life for yourself alone."