3
Banks still playing with numbers
James Cayne, former chairman and CEO of Bear Stearns, is sworn in prior to testifying before the Financial Crisis Inquiry Commission on Capitol Hill May 5, 2010 in Washington, D.C.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Kai Ryssdal: The commission that's investigating the financial crisis fired up the barbecue today and thoroughly grilled some former executives of Bear Stearns. The immediate topic at hand was how banks sometimes play fast and loose with the numbers on their quarterly reports. Bear Stearns did it, then had to be rescued by the Fed and JPMorgan, as you remember. And banks are still doing it.
Marketplace's Nancy Marshall Genzer explains.
NANCY MARSHALL GENZER: It's known as window dressing. Various accounting tricks that help banks gussy up their balance sheets for their quarterly reports.
Former Bear Stearns CEO James Cayne wasn't anxious to discuss window dressing at today's hearing.
JAMES CAYNE: I don't agree with the word window dressing. Window dressing connotes skullduggery, and we frown on that.
Skullduggery or not, some big banks are still doing it. Some favor a technique Lehman Brothers perfected before it blew up. You sell your riskiest investments at the end of a quarter. That wipes them off your quarterly report. Then you quickly buy them back. Is it legal?
Douglas Elliott is a former investment banker now at the Brookings Institution.
DOUGLAS ELLIOTT: It's sometimes a thin line between putting on makeup and putting on a disguise. You can't always tell when that line is being crossed.
What you're doing is hiding risky transactions from shareholders.
John Coffee teaches corporate law at Columbia University. He says banks are tempted to fudge because investors will pummel them if their quarterly reports come up short.
JOHN COFFEE: If you know the market is looking at you, then I think you are under pressure to play games.
The Securities and Exchange Commission is looking into window dressing.
Jim Coffman is a former assistant director of SEC enforcement. He says the banks need more than a public scolding.
JIM COFFMAN: Sue the banks. Sue the institutions that engage in these practices and charge them with fraud.
The SEC will have to determine whether the banks have violated any federal regulations, and whether new rules are needed.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
Being from Houston, my point of reference is Enron, perhaps a canary in the coal mine. I don't think the issue is hiding "risky transactions"; it is hiding the debt and liabilities that is generated from those transactions. Lehman's trick was akin to the Nigerian Barge deals that Enron did with Merill. These are all problems emanating from an asset-based accounting system gone amok. Just because I have a house that if I sold today would get me $100k doesn't mean I have $100k in the bank, but that is how we allow corporations to account. Strangely, small businesses can do no such thing, and must always do cash flow accounting, pure and simple.
Needless to say, if Andrew Fastow and Jeff Skilling went to jail for it, I don't see why the CFOs and CEOs of Wall Street's finest can't go to jail for it.
Wednesday, April 5, 2010
Optimizing FreedomÂ
What do Republican obstructionist, extremist tactics, like the infamous "NO",  Fox News, Sarah Palin, Rush Limbaugh, and 'the mob effect' characteristic of dangerous fringe groups, like those behind the Oklahoma bombing, have in common?  Think about it!  Are they weapons of mass destruction?
Last week I heard a respected, author discuss concern about fringe groups violently 'acting out', incited by corporate greed, and Republican obstructionism. A wise woman recently suggested these times, are contextually reminiscent of Hitler inciting people, to choose evil.Â
Are financial institutions, insurance companies, oil companies, gluttonously profitable by cheating, harming citizens, raping the earth, empowered by poor regulation, and special entitlements destroying America? Â
Are Republicans,  Palin and Limbaugh, and some democrats, by attempting to undermine progressive change, betraying our nation, and inciting extremist violence?Â
The SEC suing banks, charging them with fraud, is an inspired idea. Suing them is just, justified, ethical and moral. America's claim to morality, is diluted by allowing the business world to run amuck, with no substantive, enforced regulations. Â
Too many lawmakers seem mind controlled by lobbyists, with no regard for all the people.  Banks and Wall Street, caused people from every socioeconomic level, loss, pain and suffering. The poor, and the struggling declining middle class, are harmed most.
Even Warren Buffet, and most profitable corporations lobby for special treatment, while the rest of us are supposed to take 'fat cat' blame, and learn to survive with depression.
The banks spent a significant portion of their bail out money to lobby lawmakers to maintain the status quo, and to attempt to clean up their deserved filthy reputations. The banks 'flipped the bird' at lending to individuals and small business.
Â
Robert Reich wisely proposed sensible regulation on Market Place today. Regulating reasonable profit for financial institutions, helping them climb out of, and stay out gutter, makes sense.
Â
Do you think allowing the power media, to confuse the masses, promulgating ignorant propaganda, potentially inciting extremist violence and crime, is wrong? Is it possible that power lobbyist influence lawmakers to pass bad legislation, increasing the probability for civil unrest?
Â
Media claiming to be 'fair and balanced' news should be held to their claims, or shut down like 'predatory lenders'. Unfortunately, not everyone thinks of the evil human cartoon show 'Fox News', as a dangerous parody of distorted viewpoints.  Networks like 'Fox News', pretending their danger inciting propaganda is real news, especially in these dangerous times, seems criminal.  Â
All news media owe the nation a commitment to the highest standards of journalist reporting.
Entertainment whether comedy or drama is a wonderful function of media.
Freedom of speech is the key component of our precious free society. Previous law makers for logical reasons have exercised wisdom in regulating some free speech. Why do we have laws about not yelling "fire" in crowded buildings? Â Why is it unlawful to joke about bombs in an airport?Â
The degree financial institutions are essential to our economy suggest they should be utilities, masterfully regulated for the GOOD of ALL PEOPLE!  Financial institutions must be held to highest ethical standards, regulated to serve all the people, instead of fat cat executives, wealthy shareholders, and law makers on the take. Companies too big to fail are just too big, too self serving, and too deep in too many law makers pockets. The too big financial companies need to be rationally partitioned to serve all people.
Insurance companies, ideally would be universal serving all people with quality. Health Reform, is the next best thing, and a beginning. Why are Republicans and others afraid of utilizing some of the wealth, to provide quality universal health care, is it so terrible to be kind and humane?
Why does the nation still considered by many the world leader afraid of making the best education and training possible, available, and accessible to all citizens?Â
The "stall and block" tactics by republicans, is an abuse of our legislative system, anti-american and treasonous in this era of war and economic reconstruction. Washington lawmakers, are obliged by duty, to do their best to serve all people. Republicans and other illogical obstructionists, hide behind  serving constituents. Obstructionist, riot inciting Republicans, are unethical and don't seem to recall their duty  to serve the entire nation.
Transparent  repetitive media announcements, reporting the names of the obstructionist lawmakers, 'stalling and blocking', causing our nation more unnecessary harm is essential.
Humans are the most dangerous animals on the planet. One way to redeem ourselves is ethical use of self reflection. All people, especially law makers and power titans, have a duty to utilize ethical self reflection to facilitate quality change.  Too little reflection about consequences, about what works, and what doesn't, by law makers, especially republicans, is leading to America's version of the 'Fall of Rome'. People are suffering unnecessarily, due to lack of self, and legislative, reflection. There is either a pandemic of brain dysfunction in Washington, or our law makers are merely greedy, and self serving, like 'fat cats' murdering quality life for the too many Americans, and world citizens.Â
There is not a single reason profitable business has to be evil. Research, common sense, and real time examples like Google, validate the reliability of humane profitable business models. If we do not utilize this crisis, as opportunity for creating ethical business paradigms, greed will continue to dominate and destroy.
GG, PhD
