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Citigroup pays to settle subprime claims

Dick Taffe — Thu, 29 Jul 2010 20:37:41 +0000

Without admitting guilt, Citigroup will pay $75 million to settle federal civil claims that it failed to disclose vast holdings of subprime mortgage investments that crippled the bank during the financial crisis. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Federal Reserve Board of Governors, says it’s pretty thin gruel for the government to take back $75 million from a bank in which it alaready owns a controlling interest since bailing it out.

“More meaningful from a policy perspective would be the clawing back of the obscene sums paid to the likes of Robert Rubin for his negligent oversight of the institution.”

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

Lobbying the financial reform act

Dick Taffe — Wed, 28 Jul 2010 15:52:38 +0000

Intense lobbying is under way over the Dodd-Frank financial regulatory reform act, with federal agencies needing to fill in the details of at least 243 financial rules and conduct 67 studies before implementing the most sweeping such law since the 1930s. Political science Professor Graham Wilson, author of “Business and Politics,” says citizens should be concerned that the interest-group system is massively biased towards representing business interests.

“The regulations that give shape to laws are always crucial. In this case, the massive complexity and detail involved makes the regulations all the more important — and in this process the voices for consumer and taxpayer interests will be few in number compared with those for the financial industry.”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

Financial regulatory reform passed

Dick Taffe — Thu, 15 Jul 2010 21:01:28 +0000

With the Senate finally passing the complex financial regulatory reform law and sending it to President Obama for his signature, the work now turns to the hundreds of regulations and dozens of studies which must be completed to implement the most sweeping financial reform since the Great Depression. But while regulators work on all of that, says Political science Professor Graham Wilson, others will be watching how it all plays out politically for Obama and his embattled Democrats.

“Combined with health care and the stimulus, this gives Obama a notable legislative record. But unless he and the Democrats can do a better job of explaining to the American people what their plan is for economic recovery, this record won’t be noticed outside the Beltway.”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

SCOTUS on the “honest services” law

Dick Taffe — Thu, 24 Jun 2010 19:41:40 +0000

The Supreme Court restricted a favorite tool for pursuing corrupt politicians and self-dealing corporate chiefs, ruling that the law that makes it a crime to deprive the public or one’s employer of the “intangible right of honest services” can only be used where they could prove defendants accepted bribes or kickbacks. It means, for instance, that Enron ex-CEO Jeff Skilling’s conviction on the “honest services” law is thrown out – but not the other charges he was convicted of. Law Professor Elizabeth Nowicki, both a former SEC attorney and Wall Street lawyer, says the opinion finally gives some insight into newly appointed Justice Sonia Sotomayor’s view on business fraud.

“Surprisingly, she sided with the justices who struck down the ‘honest services’ doctrine for vindicating cases of overt fraud. This is a troubling blow for those who care about protecting investors and business integrity.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

BP faces Congress

Dick Taffe — Tue, 15 Jun 2010 16:16:56 +0000

It’s all BP all the time in Washington this week. After President Obama addresses the nation Wednesday on the BP oil spill situation, company executives on Thursday face a Congressional hearing on the matter. Visiting law Professor Elizabeth Nowicki, both a former SEC and Wall Street attorney, says BP CEO Tony Hayward would be well-served to remember what empirical research shows about the economic value of apologies.

“My advice to Hayward is to remember what behavioral research has shown: Corporations with senior management who willing and sincerely apologize are (a) less likely to get sued and (b) more likely to settle inevitable lawsuits more cheaply.”

Meantime, political science Prof. Graham Wilson, author of “Business and Politics,” wonders when other companies involved in the Deepwater Horizon disaster and its aftermath will be put in the spotlight that thus far has swamped BP.

“It will be interesting to see if the American companies involved, such as Transocean and Haliburton, are also asked to set aside funds [for clean-up]. Only eight of the people on the rig when the well failed were employed by BP.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu; or Graham Wilson, 617-353-2540, gkwilson@bu.edu

Dell settling Intel claims

Dick Taffe — Fri, 11 Jun 2010 21:03:14 +0000

Dell is in settlement talks with the Securities and Exchange Commission to resolve allegations that its founder/CEO Michael Dell engaged in financial irregularities related to Dell’s dealings with chip-maker Intel — with no admission of guilt or bar of Dell from service as an officer or a public company. Visiting law Professor Elizabeth Nowicki, a former SEC and Wall Street attorney, says it indicates the SEC is focused on bigger issues and might be willing to defer in the Dell matter to a similar lawsuit filed by New York’s attorney general.

“The SEC can only vigorously fight so many battles at a given time.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

Congress eyes credit-rating agencies

Dick Taffe — Wed, 02 Jun 2010 21:00:54 +0000

The Congressionally sponsored bipartisan Financial Crisis Inquiry Commission now has cast its eyes on the credit-rating agencies and the impact they may have had on the Great Crash of 2008. Law Professor Elizabeth Nowicki, a veteran attorney from both Wall Street and the Securities and Exchange Commission, says the agencies are both hopelessly plagued by conflicts and in a position to undermine the very stability of the capital markets.

Nowicki: “Today’s hearings, then, will serve only as a political tool to emphasize the need for a dramatic response to the financial crisis.”

Meantime, School of Management master lecturer Mark Williams, a former Federal Reserve Bank examiner and author of “Uncontrolled Risk” about the fall of Lehman Brothers, says that while the rating agencies weren’t the main cause of the credit crisis, but they left the gate open and let the market and its participants behave in a more destructive manner.

Williams: “Meaningful financial reform will require that rating firms devise compensation plans that reward for high rating standards and provide penalties for intentional ratings manipulation.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu; or Mark Williams, 617-358-2789, williams@bu.edu

SEC moves to avoid “flash crash”

Dick Taffe — Wed, 26 May 2010 20:30:17 +0000

In an effort to avoid a repeat of the May 6th “flash crash” when computerized trading markets tumbled out of control, the Securities and Exchange Commission has voted unanimously to require audit trails to cover all trading orders from start to finish. Visiting Law Professor Elizabeth Nowicki, a former SEC and Wall Street attorney, says the proposal to allow the SEC constant, real-time access to that information to better monitor the markets is a great idea in support of investor protection — but it won’t fix everything.

“The reality is that this sort of information aggregation system is not a panacea, and, given how fast and sophisticated today’s trading markets are, it is unrealistic to expect that the SEC can ever truly be a real-time market regulator. Investors simply cannot expect that of the SEC.”

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu

GOP changing tone on financial reform

Dick Taffe — Wed, 21 Apr 2010 17:23:08 +0000

On the heels of the SEC suing Goldman Sachs for fraud, key Senate Republicans are easing up on earlier harsh criticism of financial regulatory reform bills offered by the Democrats. Political science Professor Graham Wilson, author of “Only in America? American Politics in Comparative Perspective,” says the shift makes political sense.

“The political costs of being seen to block reforming the financial system that almost wrecked us could be very high. In fact, it is a tribute to the bizarre nature of the U.S. Senate that two years after the crisis that harmed millions around the world struck it is still a challenge to get any reforms enacted.”

Contact Graham Wilson, 617-353-2540, gkwilson@bu.edu

SEC charges Goldman with fraud

Dick Taffe — Fri, 16 Apr 2010 18:59:43 +0000

The SEC alleges Goldman Sachs defrauded investors by marketing an investment backed by sub-prime loans without telling them that a big hedge fund was on the other side betting that it would fail — which it did. Law Professors Cornelius Hurley, a former counsel to the Fed Board of Governors, and Elizabeth Nowicki, a former SEC attorney, say the case is stunning.

Hurley: ”Beyond the Goldman vice president charged in the complaint, how endemic to Goldman were these practices? Beyond Goldman, how endemic to this opaque industry, were these egregious practices?”

Nowicki: ”Goldman had the obligation to be candid with the market. This is the antithesis of honorable conduct. No wonder most of Main Street is disgusted with most of Wall Street.”

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

Contact Elizabeth Nowicki, 518-867-5355, enowicki@bu.edu