On Foxes Guarding the Banking Hen House

Apparently our cousins across the pond (well my cousins at least) have their own problems around foxes guarding regulatory hen houses, and government officials living in glass houses:

(From the WSJ): "LONDON -- A Parliamentary committee examining the banking crisis claimed its first victim Wednesday, as the deputy chairman of the U.K.'s financial watchdog agency stepped down amid allegations he silenced the risk director at one of the UK's troubled banks several years ago.

Sir James Crosby, deputy chairman of the Financial Services Authority, had been the chief executive of HBOS PLC during the tenure of Paul Moore, who was head of regulatory risk at the bank. Mr. Moore claims his warnings that the bank was growing too rapidly went unheeded and resulted in his dismissal in 2005.

Mr. Moore's allegations surfaced prominently on Tuesday during the first of two hearings before the Parliamentary Select Committee that is scrutinizing the banking crisis. By mid-day Wednesday, Sir James -- an adviser to Prime Minister Gordon Brown -- had submitted his resignation after an onslaught of negative publicity."

Reading this I can't help but to fantasize about a world where Barney Frank and his ilk are forced to resign from Congress, due to the hypocrisy of heaping derision on the CEOs of major banks when they're responsible for similar behavior related to their oversight of the mortgage GSEs.

But perhaps I'm asking for too much.

But perhaps the more important point is that many people in economic policy positions are in fact co-conspirators in terms of having helped create the economic crisis, how can we expect things to improve until we get all of the Sr. James Crosbys, Barney Franks, et al of the world out of policy making positions?

You can read more here, and read the FSA statement on the HBOS situation here.

Sources:

The Wall St. Journal: "Under Fire, a Top U.K. Watchdog Quits Post" -- Sara Schaefer Munoz, February 12, 2009.

Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.

Comments

[investfarm]

The FBI is targetting 38 major firms for fraud "directly related to the current economic crisis," according to a top FBI official, and ultimately the number could rise into the hundreds. "These are companies, businesses that everybody knows about," said John Pistole, the FBI's Deputy Director.

He described the investigations as "large, complex," and similar to the Enron investigation. On other occasions, federal officials have fingered Lehman Brothers, American International Group, Countrywide Financial, and Fannie Mae and Freddie Mac as under criminal investigation.

Several criminal cases are underway against firms involved in the $700 billion Troubled Asset Relief Program (TARP), testified the Special Inspector General for the TARP program, Neil Barofsky, who added that he is working closely with other agencies, the New York State Attorney General, Andrew Cuomo.

Senate Judiciary Committee Chairman Patrick Leahy, who chaired yesterday's hearing on corporate fraud, told the witnesses that "I want to see people prosecuted," adding, "I want to see people who have committed such fraud and the havoc it's caused to this country -- frankly, I want to see them go to jail."

2009 Feb 13 06:14 AM

[Kafkaesque]

And go to jail, they will Investfarm. These DOJ, FBI investigations take eons to concisely construct winnable cases and the politiking involved is greater than that which we are watching on CNBC and CSPAN right now; lotsa back room deal-making for sure. My guess is that by the time we see any real indictments and resulting punishment being rendered, this horrible situation will have mostly faded into history.........4-5 years.

2009 Feb 13 09:49 AM