Dodd-Frank Fail?

May 23, 2012 | Filed under Culture Of Corruption,Wall Street | Posted by

Two weeks ago, JP Morgan Chase announced a $2 billion writedown of its investment balance sheets due to risky derivatives trades gone wrong.

And last Friday, the most eagerly anticipated tech IPO in a decade, Facebook, failed to thrive and closed just under its opening price of $38 a share.  Technical glitches on its opening day resulted in a “locked market” for many investors as their buy and sell orders could not be executed.  The following Monday (May 21) NASDAQ announced the possibility of monetary compensation for losses that investors may have suffered due to being locked out of the market on Friday.  This announcement created a near-run as investors dumped millions of shares of Facebook in order to qualify.   As of the close of business Tuesday May 22, Facebook sat at $31 a share, a loss of  18%.  Angry investors and baffled financial experts are now looking at how financial giant Morgan Stanley handled the valuation of shares in the days leading up to the IPO.

I have a question: wasn’t the Dodd-Frank Wall Street reform bill supposed to prevent these kinds of things, especially with respect to derivatives trading?  And come to think of it, how was MF Global able to raid investor equity accounts in order to cover its short term debts, thereby losing hundreds of millions of dollars worth of investor’s money last year?  I thought we “fixed” Wall Street.  I guess I was wrong.

Yet another signature accomplishment of the Obama Administration ends up being relatively worthless.  Why am I not surprised.

 

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Posted by on May 23, 2012.
Filed under Culture Of Corruption, Wall Street.


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  • Par4Course

    One harm of Dodd-Frank and similar legislation is that it gives us a false sense of well being.  Bernie Madoff’s thievery was a success in large part because many of his investors thought the SEC and other government agencies could prevent anyone from pulling a Ponzi scheme.  WRONG!  The JP Morgan Chase loss will just stimulate the call for new regulations.  To the extent they have any effect, it will be to stifle innovation and risk taking, to the benefit of established firms and the detriment of their competitors.

    • http://pulse.yahoo.com/_425GVKQCLFZMQYYENR7CJBRDVA jb

      That’s an argument for more enforcement, not less. The “innovation” in financial markets was credit default swaps – which are what actually took out the world’s economy. With the help of the derivatives – which still aren’t regulated, so Morgan Chase rode them to fail some more.

  • jim_m

    As to the MF Global issue, it is just one more evidence that the dems do don’t believe that the laws are intended to ever be enforced against themselves or their supporters.

    And does anyone really think that an obama run SEC will investigate valuation fraud charges against an IPO that made two of his most visible supporters multi-billionaires?  If there is anything we have learned in the last 3.5 years it is that this administration can be bought.

    • http://pulse.yahoo.com/_425GVKQCLFZMQYYENR7CJBRDVA jb

      If you are saying that we need more and stronger financial regulation, and less influence of big money in politics, I am for once in absolute agreement with you.

      Do you think that Romney or the GOP are less amenable to big money influence? If so, why?

  • Hank_M

    Dodd-Frank is nothing more than historical cover for two of the people most responsible for the economic meltdown of 2008.
     

    • http://pulse.yahoo.com/_425GVKQCLFZMQYYENR7CJBRDVA jb

      Bill Clinton and the congressmen who repealed Glass-Steagal are quite a bit more than two people.

  • ackwired

    There will be no meaningful regulation as long as the financial industry can give unlimited money to politicians.  Dodd-Frank ended up being 849 pages after the financial lobbyists wrote in all of the exemptions and exceptions that the industry wanted.  This is at least a full order of magnitude larger than Depression era efforts.  The simple fact is that the wall street banks own the politicians (both R’s and D’s) and they can get whatever they want from them.

    • herddog505

      Not that I disagree with you, but HERE’S a thought:

      Fix it to where there really isn’t anything that the bankers CAN get from the politicos.

      I think that this sort of thing is laid out in a dusty old document somewhere…

      About the only thing that I can see in the Constitution that MIGHT give the feds any authority over the banking and financial system is the fact that it really is interstate (often international) commerce that MIGHT be beyond the scope of a state / local court to deal with.

      • ackwired

        What they seem to want from the politicians is permission to steal and commit fraud.  Basically they are just demanding the right to do anything to help their bottom line without any interference.  I think your are right about interstate commerce.

        • SCSIwuzzy

          Given that these are the privileges of the ruling class, they will never surrender them.

          • ackwired

            Quite so!  They must be taken away from them.

          • herddog505

            By whom?

            Answer: a shiny-new privileged class.

          • ackwired

            “A small group of thoughtful people could change the world.  Indeed, it’s the only thing that ever has.”Margaret Mead

  • GarandFan

    Yep, “Most honest, most open, most transparent administration, evah!”  And HHS just gave a $20 million ObamaCare ad campaign to an outfit run by a 2008 Obama campaign supporter.

  • http://pulse.yahoo.com/_WYVLG7IQ5LN55DGCSGJI4OG334 Doc

    Frank was contacted for comment, unfortunately he had his mouth full at the moment and could not respond