{"id":23115,"date":"2013-09-20T01:34:15","date_gmt":"2013-09-20T05:34:15","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=23115"},"modified":"2013-09-20T01:34:15","modified_gmt":"2013-09-20T05:34:15","slug":"september-19-2013","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=23115","title":{"rendered":"September 19, 2013"},"content":{"rendered":"

There seems to be a growing feeling that US regulators have gotten completely out of control<\/a>:<\/p>\n

Rather than trying to take a stand on the conspiracy theory, I am raising the fundamental question of the regulatory dysfunctioning of the United States regulatory system.<\/p>\n

The accumulation of fines and legal fees could potentially, more than market movements affect the performance, reputation and future of the US largest bank. Is that the objective? Of course not, even thought the accumulation of recent fines represents almost 10 percent of the bank’s equity.<\/p>\n

The problem is that nobody is in charge of asking that question, and therefore focusing on its answer. Where is the Federal Reserve on this? Absent, since it does not want interfere with other agencies: the usual intra regulatory “territorial respect.” This is the biggest failure of the current regulatory reform: by not rationalizing the number of institutions and by not giving a global leadership to the Federal Reserve who is in charge of the US Systemically Important Financial Institutions, they become the target of every single of the 22 agencies who has some money to ask or some issues to resolve.<\/p>\n

It is urgent to call it off. Fines should be suspended until the Administration comes with a sensible way to deal with failures and misbehavior of financial institutions. Unless they would like to spend billions in lawyers’ fees to answer class actions from SIFI’s shareholders, some form of coordination is needed.<\/p>\n

The US regulatory web has definitely become a systemic risk. Jamie Dimon had actually anticipated it.<\/p><\/blockquote>\n

Jonathan Weil of Bloomberg points out<\/a>:<\/p>\n

One nagging question: Which federal securities laws did JPMorgan admit to violating? The bank didn’t say. It’s as if the lawyers for the SEC and JPMorgan were going out of their way to frustrate any outsider who was trying to read and understand the document’s contents.<\/p>\n

The SEC, which fined JPMorgan $200 million as part of an administrative proceeding, clearly specified which laws it accused JPMorgan of violating. Those included Section 13(a) of the Securities Exchange Act of 1934, which sets requirements for companies’ disclosures to investors.<\/p>\n

Why couldn’t the SEC get JPM to admit exactly what laws it violated? Beats me. The agency should have had the company over a barrel. Once again, the SEC has demonstrated that requiring defendants to admit to violations of specific rules or laws is the third rail of U.S. securities regulation. The SEC simply won’t go there and won’t touch it. Instead, the commission is content to say that JPMorgan agreed to admit “wrongdoing,” which is a spinmeister’s term that has no precise meaning.<\/p><\/blockquote>\n

Matt Levine mocks the FERC fines<\/a>:<\/p>\n

The details are in this marvelously complicated FERC order and settlement agreement,1 but the outlines of the story are simple. FERC built a terrible box, and the box had some buttons that were labeled \u201cpush here for money,\u201d and JPMorgan pushed them and got money. You can understand the category mistake very easily:<\/p>\n