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Dear Mr. - :

I thought you might be interested to know that, earlier today, the Senate Permanent Subcommittee on Investigations, which I chair, held the first in a series of four hearings aimed at unraveling the causes and consequences of the recent financial crisis.

The crisis was not an act of nature; it was a man-made economic assault that cost millions of jobs, evaporated billions of dollars in retirement savings and put our nation in the worst economic tailspin since the Great Depression.

Extreme greed was the driving force of the crisis. And, it will happen again unless we change the rules.

Our hearings are based on a year-long bipartisan investigation conducted by the Subcommittee. The first hearing focused on the role of high risk loans, using Washington Mutual Bank as a case history. It showed how the bank originated and sold hundreds of billions of dollars in high risk loans to Wall Street in return for big fees, dumping toxic mortgages into the U.S. financial system like polluters dumping poison in a river.

The next three hearings will look at the role of regulators, credit rating agencies, and investment banks in contributing to the financial crisis. The Subcommittee will present additional case histories to examine each stage of the assault.

The goals of the hearings are threefold: to construct a public record of the facts to deepen public understanding of what happened and to hold some of the perpetrators accountable; to inform the current legislative debate about the need for financial reform; and to provide a foundation for building better defenses to protect Main Street from the excesses of Wall Street.

My opening statement from this morning’s hearing goes into more detail and is available at [http://www.levin.senate.gov/newsroom/rel.....]

Sincerely,
Carl Levin

If you would prefer not to receive future email updates, you can unsubscribe by
clicking [http://levin.senate.gov/contact/.]

I was unaware that a Senator from Michigan was on a committee relevant to this forum. Any thoughts on whether and|or how to respond to this message?

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Any thoughts on whether and|or how to respond to this message?

I would start by pointing out that his assertion: "Extreme greed was the driving force of the crisis. And, it will happen again unless we change the rules." is fallacious.
More accurate would be: Extreme fraud was the driving force of the crisis. And, it will happen again unless we enforce the rules already on the books by prosecuting said fraud.

Agree with Fatso, but I would be sure to additionally point out that there are documented examples of the regulatory agencies not just overlooking fraudulent behavior, but actively participating and assisting in the fraud in the institutions they were supposed to be regulating. (Cite as a specific example the one pointed out by Karl about the regulator involved in changing the dates of certain financial transactions at an institution.)

Fatso & Peterm +10.

Look, greed is not illegal. An investigation that starts from the premise that some people were too greedy is a false premise. It's not only a false premise, it throws the whole effort into a completely ridiculous dimension. Suppose you get 5 or 50 miles down in the road in your "greed" investigation. What are you going to determine? That the ratings agencies were just a little too greedy, but Fannie Mae's exec compensation committee wasn't all that greedy, but Goldman Sachs was super greedy while JPM's trading department was only nominally greedy. Huh? WTF?

This is why I believe this current effort to create some new form or regime of regulation is without question a pure charade. It is an absurdity to imagine that senators or congresspeople will comprehend derivatives after a 4 hour meeting comprised of highly limited 5 minute question sessions with high level VP's of GS or JPM. It's just stupid. It's yet again another false assumption, that congresspeople are smarter than everyone else. It just isn't so. The bankers' lobbyists, on instructions from the bank lawyuers, are the ones who are going to be writing the guts of this new legislation, and there will be holes left for the bankers to escape the next time, just like there were this time.

The issue is that the regulators had plenty of stuff to work on, they were simply captured by the banking interests. There haven't been any prosecutions of the transgressions to date. Meanwhile, no FDIC seizure to date has resulted in anything better than a 85%-of-face liquidation; most have cleared 75% and some have cleared 50% or less. You see any effort at clawback? This was brazen and ongoing looting by the bank execs and willful blindness by the FDIC. Yet there have been zero prosecutions. Indeed, if you watch the Bill Black series of videos, you'll see that some of the most egregious incompetents from the S&L fiasco were re-appointed to the regulatory panels again, as reward for....what, their "experience"? There aren't going to be any "or elses" in these new regs. The problem has been regulatory capture and the deliberate failure to prosecute crimes that are already in violation of existing black letter law. But no congressional panel is going to discuss regulatory capture, so the whole affair is useless. It's just a dog and pony show by Chris Dodd tomake it look like he is doing something. You can place good money on this bet: There will be no discussion of regulatory capture. They will not utter one single phrase that describes the actual causal forces that created this thing.

"Fatso & Peterm +10."

I add +10 to Gamma and Burya as well!

Senator Carl Levin is from my state of Michigan, and I have been trying to start some correspondence with him, but did not get this letter yet.

I agree that enforcing existing laws should have prevented the existing crisis, particularly Glass Steagal. I understand that the reason given for repe al of Glass Steagal was to allow our institutions to "compete" in a Globalized Financial Market Arena.

I am also aware of an issue arising which is VERY important to members of this Forum. To wit: the bill for transaction taxes on derivatives and stocks.
Today's update:
http://www.bloomberg.com/apps/news?pid=2....

"some new form or regime of regulation is without question a pure charade", says Gamma. The real issue is who gets the "revenue" or the Dough Re Me.

So what I propose is to write, or "lobby" to Carl Levin, who I hope will listen to me since I live in Michigan. I will send him letters concerning the following ideas, and hope others will also. I need help researching where I read all these issues, but I know they are out there being discussed. I hope the other Senators will in turn listen to him. Maybe we could spam, er.., petition him a little...

A quarter percent tax on the base value of stock transactions is considered by many people too large for retail traders. Exempting large trading institutions from the tax is unfair. It places the burden on the little traders to create the "revenue".

I noticed that reducing the rate on futures to .02% in today's update is a move in the right direction. (URL above)

Genesis just posted that Senator Lincoln is sponsoring the Transparency and Accountability Act of 2010. I see a connection here, since in order to collect this tax, the $600 TRILLION swaps market referred to in that bill must be "Accountable". Placing these derivatives into the regulated exchanges may anger the "greedy", but leveling the playing field to encompass all derivatives with no "special interest exclusions" for having to pay the tax will simplify the cost of collecting it. The tax would be "progressive" regarding high frequency traders (risk-tolerant speculators), and collect enough revenue to allow the percentage charge against equities and their derivatives to be lowered to a uniform small rate applied to ALL transactions instead of the egregious half percent round trip tax levied even on losing trades of stocks and options of "more than $100,000 value".

Let's see.... .01%, or about a buck per $10K value transacted is a buck a 'pip', isn't it? It is comparable to what TradeStation charges for trading ETFs. I can't see charging even that little (or much) being acceptable to the retail trading industry! Who is being greedy here?

But charging less, say, .004%, or 40 cents a "pip", or around 50 cents per 100 shares of an ETF or stock, or 50 cents a 'tick' for an E-mini index futures contract might fly. When the total derivatives market grows to just $2000 Trillion in a few years (about double or triple), if it continues to grow at the current growth rate, that should add up to about half a $Trillion per year total tax revenue. Almost a half-TARP a year!

Heck, doesn't the US govt. kick around 40 cents per 100 shares transacted back to designated market makers already? Or did I mess up on my arithmetic? That would be, for a $100 per share ETF, unleveraged, $10,000 value transacted for 100 shares, at $.004 per share rebate, 40 cents, or .004%. For that, TradeStation charges a retail trader $2.00 commission round trip.

http://www.sec.gov/rules/sro/nasdaq/2007....


Let's not forget the additional revenue from Income Tax on the profitable side of all trades. If $600 Trillions of annual trades are never accounted for, how can they be subject to declaration of Profit Income for tax purposes? How much would the Government collect for THAT? You do that math, I am not a tax expert.