Financial Crisis Inquiry Commission

Big Business

FCIC Uses Subpoena Power

By Team at June 1, 2010 - 4:40pm

This is a good sign. The FCIC is using subpoena power.

When Warren Buffett testifies before the Financial Crisis Inquiry Commission next Wednesday, it will be because he was subpoenaed. If you don't know how a subpoena works, this one begins with capital letters, "YOU ARE HEREBY COMMANDED to appear and give testimony."

The subpoena followed a request. It is a good sign that the FCIC is starting to use it's subpoena power. Now, it should use it to uncover more truths about the cause of the worst economic crisis since the Great Depression.

News

FCIC: Ask Cox About His Ponzi Scheme Clients

By Team at May 4, 2010 - 4:34pm

Chris Cox was head of the SEC when the economy came crashing down. And, he's little more than a Wall Street shill:

THE lawyer solemnly told regulators it would be far too costly for a mutual fund to seek appraisals of its assets, and no appraisals were made. When employees of the investment firm suspected something was amiss, they were reassured when a government auditor pored over the books and concluded that all was well.

And so the fraud continued for more than a decade. It later turned out that the assets sold to investors were largely fictitious, and that the supposed auditor, who presented credentials showing she worked for the California Department of Corporations, was in reality an actress hired by the man running the fraud.

The lawyer who argued that it would be a waste of money to require appraisals is about to be inundated with appeals to reduce the cost of regulation. That lawyer was Christopher Cox, who is likely to be confirmed today as chairman of the Securities and Exchange Commission. Mr. Cox did not know he was representing a crook at the time he wrote the letter. It was years later that William Edward Cooper, whose investment firm Mr. Cox was representing, pleaded guilty and was sentenced to 10 years in prison.

Then, there was a 1985 letter on behalf of the fraudsters. This letter speaks to Mr. Cox's disdain for rules to rules and regulations to keep mortgage brokers honest:

It was on Feb. 22, 1985, that Mr. Cox sent his letter to regulators at the California Department of Corporations arguing that any appraisal of the value of mortgages in the proposed fund would be subjective and worthless, and that the expenditure of fund assets for an appraisal ''would unfairly and unreasonably harm the investors' rate of return.''

INSTEAD, Mr. Cox said, regulators and investors should assume that the mortgages were worth their face amount.

Had appraisals been required for the mortgage pools Mr. Cooper had already sold, a fraud that began in 1982 might have ended. Instead it continued until 1994. More than $100 million was stolen from people who had sought safe investments for their individual retirement accounts.

''There were always red flags, but Cooper was a master at deflecting questions,'' said Roger Rauch, who worked for Mr. Cooper for six years, including a stretch as president of the company's brokerage subsidiary. ''The audit,'' Mr. Rauch said in a telephone interview this week, ''was done to alleviate suspicions, not just mine but those of the salespeople.''

The 1990 report by the fake auditor, in reality an actress who spent three weeks apparently reviewing the books, was a masterpiece. It found a few problems but concluded nothing was really wrong. The employees were reassured.

The 1985 letter Mr. Cox sent on behalf of his client also insisted that regulatory standards for the suitability of investments should not apply because the fund was so safe: ''Because all of the trust fund loans are secured and over-collateralized, there is relatively low risk,'' Mr. Cox wrote. It turned out that no investment sold by Mr. Cooper was safe.

As chairman of the S.E.C., Mr. Cox will have to decide whether to seek a weakening of rules stemming from the Sarbanes-Oxley Act that have forced companies to assure their internal controls are adequate. He will hear that the rules are too expensive and are therefore hurting the investors they are supposed to protect.

This is the real Christopher Cox. This story gives an insight into the character of the man who was at the helm of the SEC during the crash. Tomorrow, Chris Cox testifies before the Financial Crisis Inquiry Commission (FCIC). He needs to be asked the tough questions.

News

Chris Cox: A Record of Failure

By Team at April 29, 2010 - 4:39pm

Today, Accountable America's Tom Matzzie praised the news that former SEC Chair Christopher Cox will testify before the Financial Crisis Inquiry Commission (FCIC). Matzzie highlighted Mr. Cox's record of failure and called on the FCIC to hold him accountable. Matzzie:

The truth is that Christopher Cox was ill suited for the post of SEC Chair from the start—like so many other Bush appointees. Cox was ideologically opposed to the type of regulation and oversight the SEC is charged with conducting.

As a member of Congress he raised more than $1,297,9661 from Wall Street, including banks and financial, insurance firms. Did anybody think Cox forgot who was buttering his bread? Or maybe George W. Bush was expecting that he didn’t forget?

Cox’s tenure at the SEC was marked by one trait: no protection for the small investor. Among other things,

The Cox SEC failed to recognize Bernard Madoff’s massive securities fraud despite repeated warnings.

  • Cox failed to enforce accounting standards. The SEC had authority over the financial statements over all public companies and can set its own accounting standards if needed.
  • Cox failed to supervise the rating agencies. The Credit Rating Agency Reform Act of 2006 gives the SEC the right to suspend or revoke the license of any rating agency. The SEC was their only regulator.
  • Cox declined to protect the SEC’s authority by appealing a court ruling regarding hedge funds—sending a clear signal that the SEC wasn’t going to be very active during his tenure.
  • Cox didn’t move quickly to appropriately curb short sellers early in the crisis.
    Cox did nothing about Credit Default Swaps—only making remarks after it was clear they posed a massive threat.
  • Cox was reassuring the public about Bear Stearns only days before its dramatic collapse yet the agency had failed to adequately supervise Bear and limit risk, according to an Inspector General’s report. At the time, it was reported that Cox failed to attend meetings and phone calls regarding the failing firm.
  • The Government Accountability Office (GAO) repeated that Cox’s SEC slowed, hindered and hobbled investigations and enforcement, noting that, Cox’s policies, “contributed to an adversarial relationship between enforcement and the Commission.”
  • Cox cut transparency inside the SEC—barring enforcement personnel at the SEC from more than 40 percent of the meetings considering sanctions or legal actions.
  • Cox undercut morale deeply at the SEC. At one point in his tenure the Bush Treasury Department proposed abolishing the SEC—Cox failed to quickly protest the idea leaving many to think he supported it.

Cox has a lot to account for in front of the Financial Crisis Inquiry Commission. It will be a hearing worth watching.

We encourage FCIC Commissioners to challenge Mr. Cox for his many failures.

News

Chris Cox, Hank Paulson to Testify Before FCIC

By Team at April 29, 2010 - 2:22pm

Victory! Two of President George W. Bush's top financial officers are set to take questions from the Financial Crisis Inquiry Commission. Former SEC head Chris Cox will get grilled for his many failures holding Wall Street accountable on Wednesday, May 5th. And, Bush's Treasury Secretary Hank Paulson will testify on the bailout boondoggle on Thursday, May 6th. Here's the full schedule:

Day One – Wednesday, May 5

Session 1: Investment Banks and the Shadow Banking System

Paul Friedman, former Chief Operating Officer of Fixed Income
Bear Stearns

Samuel Molinaro, Jr., former Chief Financial Officer and Chief Operating Officer
Bear Stearns

Warren Spector, former President and Co-Chief Operating Officer
Bear Stearns

Session 2: Investment Banks and the Shadow Banking System

James E. Cayne, former Chairman and Chief Executive Officer
Bear Stearns

Alan D. Schwartz, former Chief Executive Officer
Bear Stearns

Session 3: SEC Regulation of Investment Banks

Charles Christopher Cox, former Chairman
U.S. Securities and Exchange Commission

William H. Donaldson, former Chairman
U.S. Securities and Exchange Commission

H. David Kotz, Inspector General
U.S. Securities and Exchange Commission

Erik R. Sirri, former Director Division of Trading & Markets
U.S. Securities and Exchange Commission

Day Two – Thursday, May 6

Session 1: Perspective on the Shadow Banking System

Henry M. Paulson, Jr., former Secretary
U.S. Department of the Treasury

Session 2: Perspective on the Shadow Banking System

Timothy F. Geithner, Secretary, U.S. Department of the Treasury; former President,
Federal Reserve Bank of New York

Session 3: Institutions Participating in the Shadow Banking System

Michael A. Neal, Vice Chairman, GE and Chairman and Chief Executive Officer
GE Capital

Mark S. Barber, Vice President and Assistant Treasurer
GE Capital

Paul A. McCulley, Managing Director
PIMCO

Steven R. Meier, Chief Investment Officer
State Street

Big Business

Goldman Lobbyists Targeting FCIC

By Team at April 29, 2010 - 1:32pm

The mandate of the Financial Crisis Inquiry Commission (FCIC) is to discover the root causes of the financial crisis. It's a bipartisan commission that should be free of political intervention. Goldman Sachs disagrees. It's hired a team of lobbyists and stepped up it's advocacy in Washington to put pressure on the FCIC. This gem was buried deep in today's Washington Post:

Until a few years ago, Goldman Sachs operated a sleepy lobby shop in the nation's capital.

But now, faced with fraud charges, investigations, a firestorm of criticism and a regulatory overhaul bill that could seriously damage its profitability, the venerable Wall Street firm is assembling a team of veteran lobbyists, well-connected former Hill staffers and top public relations strategists to confront what is arguably the most traumatic moment in its 140-year history...

Together, the team is plowing forward with a more aggressive lobbying and public relations campaign, one aimed at making sure that when the history books are written, Goldman's side of the story is told. One focus will be the Financial Crisis Inquiry Commission, the independent group set up by Congress which is putting together a massive report on the causes of the financial collapse.

The FCIC must not let lobbyists from Goldman Sachs rewrite history. The FCIC has a mandate and that mandate should be fulfilled free of influence from corrupt Wall Street banksters.

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