Tag Archives: Neil Barofsky

Neil Barofsky For The S.E.C.

By Simon Johnson

There are two fundamentally different views regarding modern Wall Street. The first is that the financial sector has been terribly and unjustly put upon in recent years – regulated into the ground and treated with repeated disrespect, including by the White House.

There was, for example, an impressive amount of whining this week when no one from a big bank was invited to a high-profile meeting with the president on fiscal issues. As the people holding strongly to this view run large financial institutions and have effective public relations teams, this has become an important part of the conventional or establishment wisdom, repeated without question in some parts of the media.

The second view is that the powerful people who run global megabanks have lost all sense of perspective – including failing to realize that they have more access to people at the top of our political power structures than any other sector has ever had. Anyone who doubts this view – or wonders exactly how the revolving door among politics, lobbying and banking works – should read Jeff Connaughton’s account, “The Payoff: Why Wall Street Always Wins” (which I have written about in more detail before). Mr. Connaughton is most gripping when he describes the failure of law enforcement around securities issues, including issues with both the Department of Justice and the Securities and Exchange Commission. Continue reading

Tim Geithner: Never Again, Until The Next Time

By Simon Johnson

In a column now running on Bloomberg, I review the new Inspector General report on what exactly happened during the “Citi Bailout Weekend” of late November 2008.

The big question lurking in the background is how acutely we face a problem of Too Big To Fail (TBTF) today, i.e., the perception in the credit markets that very big banks will be supported in a crisis, therefore enabling these banks to borrow more cheaply during a boom – and thus enabling them to become larger and increasing their debt relative to equity (leverage).

According to the report, Treasury Secretary Tim Geithner now completely backs away from claims that the Dodd-Frank reform legislation ended TBTF. 

Standard and Poor’s appears to be on the right track with their latest revised Bank Ratings methodology – presuming that “potential government support” is, going forward, always available to megabanks.  This is exactly the conclusion of 13 Bankers.  We should worry greatly about the implications.

To read the full column, click here, or cut and paste this address: http://www.bloomberg.com/news/2011-01-18/-citi-weekend-shows-too-big-to-fail-endures-commentary-by-simon-johnson.html