The Associated Press reported today the following:
WASHINGTON (AP) — Arthur Levitt, the one-time chairman of the Securities and Exchange Commission, blamed his former agency Thursday for failures he said helped cause the financial meltdown.
A resource-strapped SEC allowed confusion and reckless risk-taking to dominate financial markets, Levitt, who led the agency from 1993 to 2001, told the Senate Banking Committee.
"As the markets grew larger and more complex — in scope and in products offered — the commission failed to keep pace. As the markets needed more transparency, the SEC allowed opacity to reign. As an overheated market needed a strong referee to rein in dangerously risky behavior, the commission too often remained on the sidelines," Levitt said.
His testimony came at a hearing on the roots of the economic crisis.
The SEC says the agency's enforcement staff levels are higher now, and the commission has taken many more enforcement actions, than was the case in the 1990s.
An SEC spokesman said he had no direct comment on Levitt's testimony, but noted that as chairman, Levitt hadn't sought the kind of regulations that he's now faulting the SEC for failing to impose.
Indeed, Levitt acknowledged that in 1998, he opposed imposing rules on a type of obscure and extremely complicated financial instrument — known as credit default swaps — that are increasingly being blamed for igniting the crisis. He instead called at the time for establishing a clearing facility to keep better track of the swaps, but didn't seek to mandate one.
"I wish that I had probed further. I wish that I had asked for swaps and derivatives to be given the transparency," Levitt said.
In the thick of the meltdown last month, current SEC Chairman Christopher Cox called for the swaps to be regulated as part of a broader financial overhaul Congress plans to tackle next year.
Sen. Chris Dodd, D-Conn., the panel chairman, blamed unscrupulous lending practices for the meltdown, saying the tactics "will be remembered as the financial crime of the century."
He said regulators "willfully ignored the abuses taking place on their beat."
This would be a laugh, but nobody's laughing. Dodd investigating the mortgage mess is like a robber being put in charge of investigating the robbery. Christopher Dodd, Barney Frank, Maxine Waters and other Democrats are responsible for this economic mess. They fought more regulations on Fannie Mae and Freddie Mac and disregarded Republican warnings of impending disaster. Dodd should look in the mirror.
On October 10, the Wall Street Journal wrote:
The Connecticut Senator has been out front denouncing the "companies that form the foundation of our financial markets," for "their insatiable appetite for risk." He has also decried "reckless, careless and sometimes unscrupulous actors in the mortgage lending industry" and he has proclaimed that "American taxpayers deserve to know how we arrived at this moment." To that end, we propose he take the stand -- under oath.
Former Countrywide Financial loan officer Robert Feinberg says Mr. Dodd knowingly saved thousands of dollars on his refinancing of two properties in 2003 as part of a special program the California mortgage company had for the influential. He also says he has internal company documents that prove Mr. Dodd knew he was getting preferential treatment as a friend of Angelo Mozilo, Countrywide's then-CEO.
That a "Friends of Angelo" program existed is not in dispute. It was crucial to the boom that Countrywide enjoyed before its fortunes turned. While most of the company was aggressively lending to risky borrowers and off-loading those mortgages in bulk to Fannie Mae and Freddie Mac, Mr. Feinberg's department was charged with making sure those who could influence Fannie and Freddie's appetite for risk were sufficiently buttered up. As a Banking Committee bigshot, Mr. Dodd was perfectly placed to be buttered.
In response to the charge that he knew he was getting favors, Mr. Dodd at first issued a strong denial: "This suggestion is outrageous and contrary to my entire career in public service. When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment. Just like millions of other Americans, we shopped around and received competitive rates." Less than a week later he acknowledged he was part of Countrywide's VIP program but claimed he thought it was "more of a courtesy."
Mr. Feinberg, who oversaw "Friends of Angelo" from 2000 to 2004, begs to differ. He told us that as the loan officer in charge he was supposed to make sure that the "VIP" clients knew at every step of the process that they were getting a special deal because they were "Friends of Angelo."
"People are referred into that department as 'very important people.' You're told that your loan is priced from Angelo. As the 'Friends of Angelo department,' [the department] has to give them a sense of importance and explain the reduction of fees and the rate as a result of being a 'Friend of Angelo,'" he says. According to a report by Dan Golden in Condé Nast Portfolio in August, other VIPs included Senator Kent Conrad. Mr. Golden reported that "Countrywide also offered special discounts to congressional staffers involved in housing issues."
As to Mr. Dodd, Mr. Feinberg says he spoke to the Senator once or twice and mostly to his wife and that like other FOAs Mr. Dodd got "a float down," which means that even after he had a preferred rate, when the prevailing rate dropped just before the closing, his rate was reduced again. Regular borrowers would pay extra for a last-minute adjustment, but not FOAs. "They were aware of it because they were notified and when they went to the closing they would see it," Mr. Feinberg says, adding that he "always let people in the program know that they were getting a very good deal because they were 'Friends of Angelo.'" All of this matters because Mr. Dodd was one of those encouraging Fan and Fred to plunge into "affordable housing" loans made by companies like Countrywide.
One indicator of his influence is the $165,400 in campaign contributions -- more than to any other politician -- that Fan and Fred have given him since 1989, according to the Center for Responsive Politics. These contributions are legal. But favors like those Mr. Dodd is alleged to have received may not be. Mr. Feinberg says he went public with his story because when he heard Senator Dodd on TV talking about predatory lending, he felt it was "hypocritical" and he says, "I just thought, 'This is wrong.'"
Mr. Dodd hasn't yet released his copies of the mortgage documents, though he promised to do so more than two months ago. His office told us this week they'd get back to us on that. Meanwhile, presumably the Justice Department can have Mr. Feinberg's Countrywide documents, if it's interested.
Dodd has much to answer for on Countrywide, Fannie Mae and Freddie Mac. His sweetheart deal with Countrywide amounts to kick-backs.
As Jonah Goldberg wrote in National Review Online:
The biggest dose of poison entered the financial bloodstream through Washington. And some people warned us. In 2005, Fannie Mae revealed it overstated earnings by $10.6 billion and that it didn’t really know what was going on. The Bush administration pushed for reforms, but those efforts were rebuffed by Congress, with Democrats Barney Frank and Christopher Dodd taking point, because Fannie and Freddie have spent millions in campaign contributions.
In 2005, McCain sponsored legislation to thwart what he later called “the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.”
Obama, the Senate’s second-greatest recipient of donations from Fannie and Freddie after Dodd, did nothing.
Meanwhile, Raines, the head of a government-supported institution, made $52 million of his $90 million compensation package thanks in part to fraudulent earnings statements.
But, ah yes, the greedy criminals responsible for this mess must be somewhere on Wall Street.
Senator, if you really want to find the criminals responsible for this mess, the best place to find them is on Capitol Hill.
No comments:
Post a Comment