BU Now » Finance

Dealing with TBTF institutions

Dick Taffe — Wed, 27 Jan 2010 17:28:13 +0000

President Obama has proposed taxing banks that have benefited from TARP bailouts and restricting banking trading activities so depositor funds are not put at risk. In a Boston Globe op-ed, Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, says it would be more effective to make too-big-to-fail institutions return every dollar of the subsidy they get by being able to borrow funds at a lower rate than less complex institutions.

“We must remind ourselves and Obama that the subsidy comes out of taxpayers’ pockets.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Protect taxpayers from TBTF firms

Dick Taffe — Mon, 25 Jan 2010 14:33:50 +0000

In the wake of the great financial crisis/bailout of 2009, it’s in the U.S. taxpayers’ interest to again separate the “financial markets industry” from the “financial services industry.” In a Reuters commentary, former deputy Comptroller of the Currency Robert Bench, now a senior fellow at the BU School of Law’s Morin Center for Banking and Financial Law, says now is the time for Congress to create an industry financed “Systemic Resolution Fund” as insurance against failures at those “too-big-to-fail” financial instutions.

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Volker’s return to influence

Dick Taffe — Fri, 22 Jan 2010 14:31:14 +0000

Paul Volker appears to be regaining influence in Washington as President Obama enbraces the former Federal Reserve chairman’s plan to keep banks from engaging in risky investment speculation. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says it’s about time.

“Obama’s listening to Paul Volcker is long overdue. This is a hopeful sign of sounder proposals to come from the Administration on financial and economic matters.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Wall Street’s record compensation

Dick Taffe — Fri, 15 Jan 2010 17:06:43 +0000

Despite fury over Wall Street’s pay culture, major banks and securities firms are headed toward a record compensation total of around $145 billion for 2009 when all the numbers are out. Economics Professor Laurence Kotlikoff, a senior economist in the Reagan administration whose new book, “Jimmy Stewart is Dead,” about the banking industry, will be published next month, says the idea of taxing Wall Steet now is a “transparent joke.”

“Wall Street is continuing to play craps with the taxpayers’ chips and to lay the ground for a financial earthquake of even greater magnitude than we’ve just experienced.”

Contact Laurence Kotlikoff, 617-353-4002, kotlikoff@bu.edu

SEC revamping enforcement arm

Dick Taffe — Thu, 14 Jan 2010 22:37:21 +0000

The Securities and Exchange Commission is upgrading itself, creating specialized units within its enforcement arm and offering financial-insider informants immunity from prosecution. Law Professor Elizabeth Nowicki, a veteran of both the SEC and Wall Street, says the immunity for witnesses can help insure investors that the market is still relative safe.

“Offering immunity to a securities fraud participant in exchange for testimony is a small price to pay for the ability to bring down major fraud schemes that would otherwise be hard to prove.”

Contact Elizabeth Nowicki, 617-353-2807, enowicki@bu.edu

Wall Street CEOs ‘splain the crisis

Dick Taffe — Thu, 14 Jan 2010 22:01:24 +0000

CEOs of four big Wall Street Banks were summoned to Washington to explain to the new Financial Crisis Inquiry Commission what role their institutions played in the Crash of ’08. At one point, Goldman Sachs’ CEO Lloyd Blankfein got blasted for likening some of the crisis to a hurricane or similar acts of God. Law Professor Tamar Frankel, an authority on securities law and author of “Trust and Honesty: America’s Business Culture at a Crossroad,” says it all about risk.

“Goldman’s CEO noted that management ‘manages’ risk – risk to shareholders, employees, communities, and the country. It’s time management joined the risk takers and took the risk of its own actions.”

Contact Tamar Frankel, 617-353-7737, tfrankel@bu.edu

Obama proposes bank tax

Dick Taffe — Thu, 14 Jan 2010 17:18:27 +0000

To recoup taxpayer losses fom the Wall Street bailout, President Obama is proposing taxing about 50 big banks and major financial institutions for at least the next decade. Former deputy Comptroller of the Currency Robert Bench, now a senior fellow at the BU Law School’s Morin Center for Banking and Financial Law, says payback is needed, but it should be separated from Treasury funds.

“The scheme should be an industry financed process, not a tax-code process. We want to separate the taxpayer as much as possible by keeping the resolution fund separate and distinct from general Treasury monies.”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

FDIC seeks to rein in banker’s pay

Dick Taffe — Wed, 13 Jan 2010 19:10:13 +0000

Despite opposition from other banking agencies, the FDIC wants to penalize banks for compensation packages that are based on bankers taking too much risk. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, says it’s too bad the FDIC is unwilling to work with other U.S. and international regulators to find a rational approach to bank-compensation practices.

“At a time of financial crisis such as we are experiencing, it is more important than ever that the regulatory agencies coordinate major policy initiatives. The FDIC apparently disagrees and would prefer to blaze its own trail.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

AIG backlash heats up

Dick Taffe — Thu, 24 Dec 2009 16:40:02 +0000

The heat continues to increase on insurance giant AIG, which got $182 billion in taxpayer bailouts yet gave out $165 million in bonuses. New York Senator Chuck Schumer says President Obama’s pay czar should be given the power to recover the “outrageous” bonuses. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, says taxpayers also must be concerned about AIG’s ability to unravel and the complex debt obligations that led to the financial meltdown.

“Refusing to pay back ’08 bonuses, and maneuvering for ’09 payouts, gives us little confidence that their efforts at unwinding the complex products they created will be done in the best interests of the company’s taxpayer-shareholders. Why should we be trusting the same AIG folks that created these products to drive the hard bargain with counterparties to AIG? Where is Elizabeth Warren and her TARP oversight white hat when needed?”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

AIG breaks bonuses promises

Dick Taffe — Wed, 23 Dec 2009 15:37:46 +0000

Insurance giant AIG, bailed out by taxpayers to the tune of $180 billion, had promised to return $45 million of the $165 million in bonuses it paid despite the bailout. But most of that remains unpaid, the Washington Post reports. Former Federal Reserve Bank examiner Mark T. Williams, who teaches finance at BU’s School of Management and whose book “Uncontrolled Risk” about the fall of Lehman Brothers will soon be published, says AIG is just greedy.

“If these executives do not want to honor their obligation to refund bonuses, then the government should impose an AIG bonus tax to have these funds returned. At minimum, the government needs to remind AIG executives who they are now owned by.”

Contact Mark T. Williams, 617-358-2789, williams@bu.edu