Once again, our illustrious Securities and Exchange Commission acts on what I call a feel good agenda. By feel good agenda, I mean it takes an action to make the public believe they are doing something worthwhile when in fact the action is rather meaningless.
SEC to Ban Asset-Backed Bets
The Securities and Exchange Commission (SEC) proposed on Monday that financial institutions either underwriting or sponsoring asset-backed securities (ABS) be restricted from making profits out of the losses of investors for one year. The SEC proposal is in the interest of investors who were losing their hard earned money due to the ABS originators’ bets on bundled financial products.Our illustrious SEC after hearing the accusations made against Goldman Sachs - as indicated in the paragraph I highlighted above - has decided to ban such questionable activities for just one year. In other words, they are actually condoning these actions by allowing them to continue after a one year waiting period. The hope, I believe, is that the general public will by then have forgotten the ill gained profits of institutions such as Goldman Sachs and Paulson & Co.
Earlier this year, U.S. Senate investigators raised issues accusing Goldman Sachs (GS - Analyst Report) of earning profits from clients' losses on complex financial products sold by them. Goldman used to create and market a collateralized debt obligation known as ABACUS 2007-AC1, hiding from investors the fact that the underlying securities were selected by hedge fund Paulson & Co, which was betting against them. However, Goldman settled the SEC accusation for $550 million. (emphasis added)
The latest proposal by SEC is expected to address the cases like Goldman’s by outlawing third parties from selecting underlying securities of an ABS.
But why not? Our Too Big To Fail, To Big To Prosecute institutions need merely pay a relatively small fine for their wrong and often illegal activities. WHAT A COUNTRY!
According to some industry executives, the strict restrictions imposed by the SEC could hamper the recovery of the securitization market (emphasis added). However, we think it’s more important to significantly rationalize the risky activities taken by financial institutions that went on to become the key culprits of the latest meltdown. Also, as the restrictions will not be applicable when a firm is hedging its risk or acting as a market-maker, the impact on the recovery of securitization market will be mild.I am wondering who the industry executives are that can say that a one year moratorium on a very questionable activity that should be banned permanently, is a strict restriction imposed by the SEC?
View this story in its entirety on Zachs...click here
A somewhat more detailed version of this story can be found from Reuters via The Huffington Post...click here
Just more evidence that we have a government gone wild. A government that cares not for its people only its very large corporate citizens - some of whom have actually left the country (I speak of Halliburton - the larges private contractor in Iraq and Afghanistan now a Dubai company while still being paid billions by our government. Also remember that our former V.P. of the United States was their CEO before being nominated to run for VP with George W. But that is another story in itself).
Understand that this is still a proposal and nothing that has been put into effect. Again, to qualify for feel good reports the SEC is almost obligated to publicize this. I am willing to bet it never goes into effect and that this proposal as with many investigations by the SEC will simply be brushed under that large cover up rug.