Tagged: Congress

Goldman executives questioned

July 1st, 2010 in Banks 0 comments

Financial Crisis Inquiry ComissionThe Congressionally appointed Financial Crisis Inquiry Commission exploring the 2008 crash questioned executives from Goldman Sachs, the world’s most profitable bank, about how much it makes trading derivatives — those complex financial bets that helped bring down the economy.  Goldman Chief Financial Officer David Viniar said they had no way of determining its derivatives data separately from trading in cash securities. But Mark Williams, a former Federal Reserve bank examiner who teaches finance in the School of Management and is author of “Uncontrolled Risk” about the fall of Lehman Brothers, says he doesn’t buy it.

“For Goldman’s CFO to go before the Financial Crisis Inquiry Commission and claim he doesn’t know what Goldman makes in derivatives trading is the equivalent of a major league pitcher not knowing his ERA.  Such a claim is shocking given how lucrative and central derivatives trading is to Goldman’s core business model.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

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Wall Street reform bill threatened

June 29th, 2010 in Banks 0 comments

Sen. Robert ByrdThe death of U.S. Senator Robert Byrd (r.) is threatening to delay passage of the sweeping Wall Street regulatory reform legislation until mid-July after it had been on track for House and Senate votes this week.  Law Professor Cornelius Hurley, a former counsel to the Federal Reserve Board of Governors and now director of the Morin Center for Banking and Financial Law, says the proposed legislation has been so weakened in compromise efforts to garner enough votes to pass it in the Senate that it might be worth starting over.

“Its demise would have at least two significant benefits: first, it would allow the next Congress to develop a more robust bill, particularly with respect to systemic risk; and, second, it would enable global regulators to press the ‘reset button’ on international harmonization efforts, a vision apparently abandoned by this Congress and this Administration.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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Financial regulatory bill agreed on

June 25th, 2010 in Law 0 comments

buy & sell keysHouse and Senate conferees finally worked out a compromise bill aimed at reshaping financial regulations to avoid another Crash of ’08, with a final vote set for next week and President Obama expected to sign it by July 4th.  As expected: many winners and losers.  One controversial provision gives the SEC authority to require stockbrokers to protect their clients’ interest when recommending investments, potentially subjecting brokers to the same fiduciary duty as financial advisers.  Law Professor Tamar Frankel, author of “Trust and Honesty: America’s Business Culture at a Crossroad” and authority on securities law, says it’s about time.

“It offers a chance and a challenge for the SEC to become the leader that it used to be from the 1940s until about 1980.  It is a chance to bring about a far more reliable financial system and to refocus on productivity rather than betting.”

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

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Deadline for financial regulatory reform

June 24th, 2010 in Banks 0 comments

bank genericCongress is down to its self-imposed deadline to come up with a financial regulatory reform bill, leaving some of the most controversial provisions — like how to deal with the trading of derivatives — to the final hours.  Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says that a Congress that couldn’t bring itself to enact meaningful reform legislation during the height of the financial crisis now seems to be panicking to pass what he sees as deeply flawed bill.

“Having lost the moment to make bold changes, the legislative process has become all about the November elections and very little about sound public policy.  Congress may well meet today’s deadline, but we won’t be the better for it.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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BP CEO hit at Congressional hearing

June 17th, 2010 in Energy 0 comments

BP CEO Tony HaywardMembers of Congress came down hard on BP CEO Tony Hayward (r.) as he testified about the Deepwater Horizon oil spill.  But political science Professor Graham Wilson, author of “Business and Politics,” wondered why the spotlight over American’s worst-ever spill hasn’t shone on Transocean, BP’s partner in the Gulf of Mexico oil rig that exploded in April.

“How did Transocean get off the hook so easily?  Aren’t they people who were drilling the well with MMS approval and weren’t they ones saying the rig was needed to quickly to drill another well?”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

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Arizona fighting the 14th Amendment

June 16th, 2010 in Law 0 comments

Arizona welcome signOn the heels of passing a controversial law involving screening illegal immigrants, the Arizona legislature is considering a bill that would deny citizenship to children of illegal immigrants, despite the 14th Amendment to the U.S. Constitution that specifically grants naturalized citizenship to such children.  Law Professor Susan Akram, an authority on immigration law, says getting such a law into constitutionally shape would mean having to amend the U.S. Constitution — which requires a two-thirds majority of both houses and approval by three-quarters of the states.

“Although Arizona’s effort to restrict the guarantees or benefits of birthright citizenship is by no means the first effort of its kind — and not likely to be the last — it has a very slim chance of passing constitutional muster.”

Contact Susan Akram, 617-358-3060, smakram@bu.edu

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The FDIC's deposit-insurance limit

June 16th, 2010 in Banks 0 comments

FDIC sealCongressional negotiators working out difference between the House and Senate financial reform bills are hammering out compromises right and left.  One would permanently (and retroactively to January 2008) move from $100,000 to $250,000 the deposit insurance on individual bank accounts.  Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, doesn’t think the raised limit is a good idea.

“Permanently raising the federal deposit insurance ceiling from $100,000 to $250,000 when the Federal Deposit Insurance Fund is over $20 billion in the red is irresponsible. By raising taxpayer-funded deposit insurance coverage … it seems the [banking] lobbyists’ messages are getting through loud and clear.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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BP faces Congress

June 15th, 2010 in Uncategorized 0 comments

BP logo with spillIt’s all BP all the time in Washington this week.  After President Obama addresses the nation Wednesday on the BP oil spill situation, company executives on Thursday face a Congressional hearing on the matter.  Visiting law Professor Elizabeth Nowicki, both a former SEC and Wall Street attorney, says BP CEO Tony Hayward would be well-served to remember what empirical research shows about the economic value of apologies.

“My advice to Hayward is to remember what behavioral research has shown:  Corporations with senior management who willing and sincerely apologize are (a) less likely to get sued and (b) more likely to settle inevitable lawsuits more cheaply.”

Meantime, political science Prof. Graham Wilson, author of “Business and Politics,” wonders when other companies involved in the Deepwater Horizon disaster and its aftermath will be put in the spotlight that thus far has swamped BP.

“It will be interesting to see if the American companies involved, such as Transocean and Haliburton, are also asked to set aside funds [for clean-up].  Only eight of the people on the rig when the well failed were employed by BP.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu; or Graham Wilson, 617-353-2540, gkwilson@bu.edu

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Tax hikes for investment partnerships

June 9th, 2010 in Law 0 comments

U.S. moneyA long fight over how the federal government taxes investment partnerships is ending as Senate Democrats now plan to more than double taxes on private-equity, hedge-fund and certain real-estate managers.  It would no longer let people running such partnerships pay the lower capital-gains taxes on what were basically wages.  The tax hike on “carried interest” expected to raise $14.5 billion over 10 years.  Law Professor Daniel Berman, director of the Graduate Tax Program and both a Treasury and Congressional tax counsel, says that any such compensation from investment performance is still fundamentally pay for services rendered.

“It is common to reinvest after-tax compensation for capital gains.  But when the amounts subject to investment risk were awarded in exchange for services but have not yet been recognized as taxable income, those amounts should be taxed as compensation when paid.”

Contact Daniel Berman, 617-353-3105, bermand@bu.edu

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Financial regulatory reform crunch time

May 24th, 2010 in Banks 0 comments

U.S. Capitol buildingCapitol Hill negotiators from the House and Senate committees dealing with financial regulatory reform are getting down to the details of working out differences between the bills passed in respective chambers, with Democrats holding the majority votes in both.  Former Federal Reserve Bank examiner Mark Williams, who teaches finance in the School of Management and is author of “Uncontrolled Risk” about the fall of Lehman Brothers, says the Fed simply isn’t equipped to take on any new oversight role over banks — as the Senate bill dictates.

“At the Fed, bank examiners continue to be underpaid, lack advanced training in the ways of Wall Street, and are saddled with risk-measurement systems that lag the Street.”

Contact  Mark Williams, 617-358-2789, williams@bu.edu

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