What role did the government play in setting the price for JP Morgan Chase’s acquisition of Bear Stearns? The big story in today’s Wall Street Journal indicates that regulators may have misled lawmakers on this question.
Treasury Secretary Hank Paulson’s “blueprint” for revamping the financial regulatory system is already coming under fire from powerful agency heads. As early as Friday, even before the details of the plan were widely-known, the plan was lambasted by John Reich, the director of the Office of Thrift Supervision, which oversees the savings and loan industry. Immediately after Paulson’s speech this morning, Commodity Futures Trading Commission big shot Bart Chilton released a colorful and blisteringly critical statement describing the plan as “moving boxes around in Washington DC.”
Paulson’s plan would combine the Securities and Exchange Commission, which regulates equities and debt markets, with the Commodity Futures Trading Commission, which that regulates the exchanges trading commodities and financial futures. The two commissions have very different regulatory approaches, with the SEC favoring direct regulation and a rules-based approach and the CFTC favoring a principles based approach that relies heavily on self-regulation by commodities and futures exchanges. SEC head Chris Cox has been described as being disposed to supporting the plan.
After the jump, we delve into the dirty, metaphor-strewn past of the CFTC commissioner.
1. Too much with the birds. Everyone knows HP is an environment/animal lover, that fact has been shoved down our throats time a-plenty (“Even though his handshake could break all of your fingers, Hank Paulson is a gentle giant who can often be found talking to wood nymphs and catching butterflies” “When you think Hank Paulson, think furry animals, but not in the way you’d think of Lenny and that mouse who met that unfortunate fate” “Hank Paulson loves animals so much that when he engages in bestiality, he doesn’t call it “fucking,” he calls it “making love.”) We get it– Hank + Animals, Birds Especially = A Match Made In Heaven, If Only Because They Often Mistake Him For A Tree And He Just Doesn’t Say Anything. Are birds an integral part of the story? Yes. Paulson has been offered a job as anchor on a new syndicated news services called Bird News Network (BNN), with Laura Bush as a possible co-host. Does that make it okay? No.
2. It contains a painful reminder of that time Paulson SCREWED Jon Corzine. (“Paulson is such an avid birder that he sometimes puts it first on his agenda. For example, he went on a bird-watching expedition in Brazil instead of attending the crucial New York Stock Exchange board meeting during which former head Dick Grasso’s controversial pay package was quietly slipped through. Upon Paulson’s return from the expedition, he loudly led the charge to oust Grasso.” Wonder if Paulson took a similarly-themed journey just before he changed the username and password on JSC’s office computer back in ’98.)
3. I don’t know, that graphic? And the fact that it’s HAUNTING? How ’bout that? Yeah, I just have two issues.
A Perch For Hank [NYP]
There were 116 financial restatements in corporate public filings in 1997. Almost ten years later (2006), that number has grown over 15 fold to 1,876. Hank Paulson wants to know why. Paulson has ordered a Treasury study of restatements, their predominant causes, and effect on investors that will be headed by former SEC chairman Arthur Levitt and former SEC chief accountant Donald Nicolaisen.
The main reason restatements are thought to have increased so dramatically in number is because of tougher accounting oversight, and the fact that accounting firms have become increasingly aggressive in the face of so much exposure to litigation. Projected recommendations of the study include reducing the liability of public accountants and diluting the auditing industry so that it isn’t as dominated by the same few firms.
A restatement explosion seems an odd justification for a major deregulatory push. This would assume that companies are not using dodgy accounting tricks to mask true performance and that financial restatements are somehow onerous to companies that misstate financials in the first place. One would think that tougher accounting rigor in audits followed by a spike in restatements is a sign that a lot of violations were going unnoticed, not that accouting firms are creating unnecessary restatements through nit-picking.
Treasury Targets Financial Fixes [Wall Street Journal]
The signs of the approaching summer are everywhere. DealBreaker is hiring summer interns. The recruiting departments at all the Wall Street banks are in a frenzy preparing for their own summer interns. We’re gearing up for our coverage of the follies of those same summer interns. Colleges and business schools are lining up commencement speakers.
The first big entry in this last category is Hank Paulson, who has been grabbed by Dartmouth. Paulson was an English major who graduated from Dartmouth with the class of 1968. Hank will be receiving an honorary degree at the ceremony. The college says it invited Hank because of his financial success and record of public service. We’re sure the fund-raising office had nothing to do with his selection.
Tuck’s ceremony will be graced by the presence of Harold W. “Terry” McGraw III, Chairman, President and CEO of the McGraw-Hill Companies. Do those kids up in Hanover know how to party of what. Terry is an animal, we hear.*
* Yeah. No. Not really. Not at all.
Treasury secretary to be Dartmouth commencement speaker [Boston Globe]
Reuters reports that Hank Paulson “inadvertently failed to disclose” a mutual fund with less than $15,000 in value last year, prior to taking over as Secretary of the Treasury. Brookly McLaughlin, a spokeswoman for the treasury claims that the error was “an oversight.” Let this be a lesson to you all: if you want to distract reporters from various corrupt misdeeds, hire a spokeswoman named “Brookly McLaughlin.” (Why do you think Carney’s got a spokesperson named Manhatta on retainer?)
Treasury’s Paulson omitted small fund holding [Reuters]
I’m starting to get what you’re saying about these damn jabronis. Viva la hybrids!