On March 26, 2015, Eric R. Fischer, Senior Fellow at the Boston...
By Ja-Ho King
By Mark T. Williams
December 5, 2013
Bitcoin is not a futuristic currency but a speculative mania. Greed is pushing prices skyward but fear will quickly bring those same prices crashing back to earth. Investors need to separate the promising technological innovation of digital currency from the Bitcoin Ponzi scheme that will harm those that fail to exit before the bottom falls out.
Bitcoin is another example of “market innovation” that deserves closer scrutiny from the Securities and Exchange Commission. SEC Chairman Mary Jo White has said virtual currency itself may not be considered a “security,” but interest issued or returns gained by it likely would be and therefore subject to regulation. Federal Reserve Chairman Ben Bernanke told Congress that the Fed “does not necessarily have authority to directly supervise or regulate these innovations.” And the Justice Department says Bitcoin is legal, but that doesn’t mean it is adequately market tested, investment safe and ready to be a global currency…
Read the full article at WBUR.org.
From Boston Herald
By Jordan Graham
November 5, 2013
Bitcoin — the digital currency produced by solving complex math problems with computers — has a place on Main Street, according to a local startup founder who is determined to carve that place out.
Jeremy Allaire, founder and CEO of Circle Internet Financial plans to bring the digital currency to businesses and consumers by building software that make payments easy, but also by working with regulators and the public to eliminate any Bitcoin stigma.
“We see the fundamental economic and user benefit of this,” Allaire said at Boston University’s Center for Finance, Law & Policy. “We’re still in the Wild West phase, and hopefully getting beyond that in the next year or two.”
Allaire, who also founded the online video company Brightcove, said the key is giving consumers and merchants a better understanding of Bitcoin…
Read the full article at BostonHerald.com.
Monday, November 4th
1:00PM – 2:30PM
The Boston University Castle
225 Bay State Road
Thursday, November 14th
2:00PM – 4:00PM
Location: Hillel House
213 Bay State Road
Featuring speaker Michael P. Dooley
Sesquicentennial Celebration Sponsored by the Office of the Comptroller of the Currency and the Boston University Center for Finance, Law & Policy
At the height of the Civil War, Congress passed and President Lincoln signed into law acts establishing a national currency, a national banking system, and the Office of the Comptroller of the Currency to oversee the new system.
As part of the commemoration of the OCC’s 150 years, the agency and the Boston University Center for Finance, Law & Policy co-sponsored a conference in Boston on March 31, 2014. The conference, “Building on 150 Years: The Future of National Banking,” focused on the impact of recent experience on the banking and regulatory landscapes, and how that experience may affect the future of the U.S. and global banking systems.
This all-day conference featured an outstanding roster of speakers from the banking, academic, and regulatory worlds, including Comptroller of the Currency Thomas Curry, former FDIC chairperson Sheila Bair, current president and CEO of the Financial Services Roundtable Tim Pawlenty, and former Senator Chris Dodd and former Congressman Barney Frank, who discussed the landmark legislation that bears their names.
For detailed information, please go to the event main website by clicking here.
Banking LLM graduates reunite in Boston at the International Bar Association.
From left to right: Alzbeta (Betty) Kalnova (2013), Manav Raheja (2009), Sam Mirkin (2006), Professor Cornelius Hurley, Constance Delzant (2008), Andrea Messuti (2009), and Jan Ryu Koo (2013).
From Corporate Counsel
By Cornelius Hurley
October 3, 2013
On Thursday, former General Electric Company senior vice president-general counsel Ben Heineman Jr. posted an essay to the Harvard Business Review blog network, “Too Big to Manage: JP Morgan and the Mega Banks.”In it, he looks at the recent history of regulatory and legal issues faced by large banks in the U.S. and asks, “Are these huge major financial institutions not just too big to fail, their leaders ‘too big to jail’ (as some critics charge), but also ‘too big to manage’?”
CorpCounsel.com reached out to Boston University professor Cornelius (Con) Hurley for his thoughts on Heineman’s essay. Hurley’s response follows:
Almost every sentient being, from Federal Reserve chairman Ben Bernanke and Treasury Secretary Jack Lew to the man and woman on the street, recognizes that the too-big-to-fail problem persists. The essence of the TBTF business model is to impose the risk of a firm’s failure on society.
What kind of a business “culture” does JPMorgan Chase & Co. CEO Jamie Dimon want to create that depends upon this risk transference for the firm’s success? Is it a culture where the rewards of success flow to managers and shareholders while the losses are borne by the taxpayers—and haven’t we been down this road before with Fannie Mae and Freddie Mac?
Before we get to Ben Heineman Jr.’s admirable “prevent, detect, and respond” approach, we should be asking a very basic question: Can we tolerate firms that pose such enormous negative externalities to the financial system to exist in their current form? I think you know my answer.
Luckily, the General Accountability Office (GAO) is currently at work on a report that will document the advantages of being TBTF. Of course, the principal benefit is lower funding costs, a la Fannie and Freddie. It appears that immunity from criminal laws is another.
Upon the release of the GAO report, due early next year, look for Mr. Dimon and his hired guns to protest, “Yes, but look how heavily regulated we are and the cost of our shiny new ‘prevent, detect, and response’ systems.”
Don’t listen to them.
Messrs. Dimon, Blankfein, Gorman, et al., need to understand that they’re not doing anyone any favors by adopting these new safeguards. They are merely making a small down payment on the havoc their unmanageable firms are going to wreak on the economy the next time—and there will be a next time—one of them crashes.
Read the full article at Law.com.
By Mark T. Williams
September 29, 2013
The willingness of JPMorgan’s board and shareholders to keep Jamie Dimon at the helm has become increasingly costly. Recent multibillion dollar legal settlements and the prospects of more civil and criminal actions ahead, underscore a big bank ‘gone bad.’ ‘These mounting shareholder expenses also reopen the debate of whether Dimon is an asset or a liability.
As the nation’s largest bank, JPMorgan has morphed into an overly aggressive hedge fund disguised as a FDIC-insured commercial bank. Rapidly, the King of Wall Street is looking more like all the other bank CEOs who chased risky profits at the expense of market integrity, trust and honesty.
As chairman and CEO since 2005, Dimon must be held accountable for both good and bad things that have happened at JPMorgan. In 2011, he won the moniker of highest paid banker on Wall Street, earning $23 million. But during his reign, the sheer scope and size of the bank’s misdeeds have become mindboggling.
Risky practices include the full gambit — questionable mortgage practices, the $6 billion “London Whale” trading scandal, bribery of Chinese officials, shoddy debt collection practices, the Libor-fixing probe, violations of the federal mortgage insurance program, charging credit-card customers for services never received, manipulation of western electricity markets, compliance weaknesses in money laundering controls, a settlement relating to client money taken by MF Global, and a potential damaging link to financial psychopath Bernie Madoff.
Remarkably, despite these wrongdoings, Dimon has remained immovable. This is in stark contrast to Bob Diamond, the former CEO of rival Barclays who was fired last year for far lesser transgressions. Even as late as the May 2013 annual shareholders meeting, it appeared Dimon gained immunity as he was allowed to retain his dual — but conflicted — role as both chairman and CEO.
Now things are different. The current regulatory feeding frenzy coupled with mounting multibillion dollar fines are the game changers.
Since 2010, JPMorgan has paid out a staggering $17 billion in legal settlements. Estimated fines this year could top $15 billion or 10 percent of the bank’s tangible capital. Important regulatory trust has also been broken as JPMorgan intentionally hid those “London Whale” trading losses from its primary regulator and berated the Office of the Comptroller of the Currency (OCC) as stupid. Meantime, Dimon has remained outspoken in his attacks against Dodd-Frank legislation designed to help keep big banks in check.
Increasingly, government regulators — including the Securities and Exchange Commission, the U.S. Attorney General, and the Federal Reserve — are gaining a louder voice as they push for historic settlements, tougher criminal prosecution and restored trust in the market. Yet since the crisis of 2008, JPMorgan has grown bigger, more powerful and apparently more unmanageable, even for a supposedly capable CEO. With economic stability returning, it is an opportune time to break up this too-big-to-fail bank into smaller, less risky, and more manageable pieces.
Historically, Dimon hid behind stock performance to validate his existence. In the past few months, this cover has disappeared as JPMorgan stock has lagged peers and is down about 10 percent from its 52-week high. After six years the stock trades only near where it did in pre-crisis 2007. Regulators are losing confidence in Jamie Dimon. In July 2012 the OCC also dealt a blow to bank credibility, downgrading management to a “3” or a “needs improvement” rating — a weak designation far below what a bank of JPMorgan’s stature should allow.
Crisis-era acquisitions of Bear Stearns and Washington Mutual have proved disastrous while billion-dollar settlements and the threat of future criminal actions only reignite debate of whether shareholders are being protected or harmed. Independent of shareholder action, board members have a clear fiduciary duty to ensure the best interests of shareholders. Accumulating regulatory actions are a wakeup call, providing JPMorgan’s board members with a billion more reasons why they need to rethink who occupies the corner office.
Firing Jamie Dimon would be just what the market needs and part of a healthy cleansing process. A properly functioning capital market should reward bank CEOs who create value — and punish those that destroy it. Market-pricing signals only get distorted if underperforming CEOs are allowed to stay entrenched. I’ll bet that if Dimon is replaced, JPMorgan stock will rally. Until then, regulators will continue to extract their pound of flesh, upping the stakes for CEO change.
(About the Author: Williams, a former Federal Reserve Bank examiner who teaches risk-management at Boston University School of Management, is author of “Uncontrolled Risk” about the rise and fall of Lehman Brothers.)
Read the full article at CommPro.biz.
Perspectives on Human Security and Development
Thursday, October 10th
10:00Am – 11:30AM
Location: Hotel Commonwealth
500 Commonwealth Avenue
Featuring Keynote Speaker Dr. Atiur Rahman, Governor of the Bangladesh Bank. More
From American Banker
By Cornelius Hurley
September 24, 2013
Lost in the retrospectives about the failure of Lehman Brothers five years ago is the very hopeful fact that the Government Accountability Office now is studying the “too big to fail” subsidy. It undertook this critical analysis at the behest of Sens. David Vitter (R-La.) and Sherrod Brown (D-Ohio) and a unanimous vote of the U.S. Senate.
The GAO’s much anticipated report is to be delivered in two parts. The first, a backgrounder, is expected in the next few weeks. Part two, the more meaningful report, will be issued next year. We must be sure GAO’s calculations are accurate to fully account for the taxpayer-funded advantages the major banks enjoy. Some have referred to that subsidy as “the ongoing bailout” of the TBTF banks.
Specifically, the investigative arm of Congress is examining whether banks with more than $500 billion in assets can raise funds more cheaply than smaller institutions due largely to the major banks’ distorted credit ratings attributable to the taxpayers making unsecured creditors of those banks whole in times of financial stress. Notwithstanding the good intentions of the Dodd-Frank Act, the “too-big-to-fail” dilemma lives on and along with it the rich benefits of being TBTF.
What makes the GAO study so important is that it goes to the very heart of how we understand our “too-big-to-fail” problem and its effect on our financial markets. We need to clearly analyze how the markets price in that competitive advantage so we can better understand what to do about it. That means that the GAO should be using the right data to fully account for this taxpayer-funded benefit. More