How Wall Street Made A Muppet Of The SEC, Mary Schapiro And Dodd Frank

September 5, 2012
By Tyler Durden

That the SEC is the most incompetent, corrupt, irrelevant and captured organization "serving" the US public is known by everyone. And while the details of the SEC's glaring lack of capacity to do anything to restore investor confidence in the capital markets, which has become a casino used exclusively by Wall Street to defraud any retail investor still stupid enough to play (which lately a moot point as there have been no material retail inflows into mutual funds in over three years), are scattered, courtesy of Bloomberg we now have the best summary of just how the utterly clueless SEC is a muppet plaything of Wall Street, and together with it, the "grand regulation" that was supposed to keep Wall Street in check, is nothing but what Wall Street demand it to be, and forced the SEC, way over its head on regulation, to accept every change, that the very banks that are supposed to be regulated, demands as part of Dodd-Frank reforms. In short: everything we know about Wall Street 'regulation' has been a farce, and a lie, exclusively thanks to corruption rampant at the now documentedly incompetent Securities And Exchange Commission.

Bloomberg has the smoking gun.

It had been two days since U.S. lawmakers negotiated all night to finish rules that would reshape the business of Wall Street. The 20-hour session left legislators, aides, lobbyists and regulators exhausted. Almost no one had a grip on all the details.
Then Annette Nazareth stepped in. That Sunday morning, she e-mailed a dozen Securities and Exchange Commission officials about the bill that would become the 2,300-page Dodd-Frank Act.

Who is Annette Nazareth?

Nazareth, herself a former SEC commissioner, represents the biggest banks and securities firms as a partner in the Washington office of Davis Polk & Wardwell LLP. She attached an annotated copy of the measure to her June 27, 2010, e-mail, marking changes made during the wee hours. It could be an invaluable tool for an agency hard-pressed to analyze the bill on a tight deadline.

Nazareth was the good Wall Street funded Samaritan that stepped into bail out the SEC in its moment of need.

"In case you would find it helpful," Nazareth wrote to the group, many of them ex-colleagues.
Two hours later, SEC Chairman Mary Schapiro responded: "Thanks. We have our work cut out for us."

And who is Davis Polk:

With Nazareth on board, Davis Polk was hired as outside counsel on Dodd-Frank by the six largest U.S. banks and the Securities Industry and Financial Markets Association, the Wall Street trade group, according to the law firm's website. The firm also performed work for foreign lenders including Credit Suisse Group AG (CS) and Deutsche Bank AG.

As for Dodd Frank it needs no introduction: it is the Wall Street sponsored abortion that assures nothing has changed on the TBTF front, that banks can do whatever they wish, and that the SEC is powerless to intervene even when necessary. As Elliott management said, Dodd Frank is the one piece of legislation that has assured the Lehman failure was merely an appetizer to the main course when massively undercatpitalized banks will be tumbling like dominoes in a centrally-planned world.

How did Bloomberg get its information:

Nazareth's e-mails to Schapiro and then-SEC General Counsel and Senior Policy Director David Becker, obtained through a Freedom of Information Act request filed by Bloomberg News, demonstrate how lobbyists and lawyers draw on bonds they formed in government service to gain access for clients, and how they work to maintain those ties.

Everyone knows about the SEC's revolving door policy where former SEC workers go to Wall Street to aid and abet their clients to skirt the law, and avoid SEC entangements. It is rare however to see a double revolving door participant such as Nazareth:

Officials routinely leave federal agencies, Congress and the White House to work for the industries they once supervised. While that path is well-trod and legal -- with some time restrictions -- it still provokes handwringing in Washington. Nazareth's communications provide an inside look at what happens when the revolving door spins.
Nazareth, 56, declined to discuss specific e-mails. She said that people like herself who have worked for both sides are valuable because they can "better translate to their clients" what the SEC is trying to achieve.
"It's unfortunate where we are in an environment now where everybody thinks that is nefarious," Nazareth said.
Nazareth added that she "absolutely" doesn't get favorable treatment.
"I am not batting a thousand, let's put it that way," she said. "And I respect that"

And here we get to the meat of things: Wall Street, via Davis Polk, and its "liason" lawyer, manipulated everyone like docile little muppets.

Nazareth and her colleagues at Davis Polk played a central role as the financial industry shaped its Dodd-Frank priorities, helping write more than 80 comment letters to regulators. The firm's clients, including Sifma, JPMorgan Chase & Co. (JPM) and Bank of America Corp., targeted rules such as the so-called Volcker ban on proprietary trading, arguing it could create excessive burdens on banks, choke off business and hurt the economy.
The Volcker rule has yet to be completed, along with other key Dodd-Frank components such as swap-trading and mortgage regulations, meaning the success of the banking pushback won't be fully measured until next year at the earliest.
In May, Nazareth was named as the top woman lawyer in financial regulation at the Americas Women in Business Law awards in New York. Public disclosures from the SEC also underline her clout. In 2009 and 2010, she attended 11 meetings with Schapiro -- twice as many as any single competitor in the law and lobbying business -- according to the chairman's appointment calendar. Since Dodd-Frank was enacted, Nazareth has taken executives from firms including Goldman Sachs Group Inc. (GS) and Credit Suisse to the SEC, agency memos show.

Manipulating the SEC was not enough, Wall Street also had its tentacles at the CFTC, best known for such humiliations as MF Global and Peregrine Financial:

Nazareth has also attended meetings at the Federal Reserve and represents clients at the Commodity Futures Trading Commission, where she has met with Chairman Gary Gensler among other officials, according to public disclosures.
Lynn Turner, a former SEC chief accountant who is critical of the banks' agenda, said that Nazareth is "at the top of that list of influential attorneys" who have access to regulators as former SEC officials.
John Nester, an SEC spokesman, said those who used to work at the commission don't get special access to the chairman. Schapiro "knows a lot of people in government, law, academia and consumer advocacy" and it's not surprising that she e-mails and meets with some of them, he said.
"In the end, whether she or anyone in the agency agrees with a particular viewpoint or a specific request depends on whether it furthers the mission of the agency," Nester said.

Nazareth's M.O. is well known to those who have worked on Wall Street - hollow empathy and pandering, just to gain the trust, allowing full out manipulation to ensue:

In her e-mails, Nazareth blended the personal and professional. For instance, she sympathized with Schapiro over a "frustrating" New York Times article in one message, and in another offered to sell the SEC a Davis Polk Web product "at an appropriate government rate."
The overlap was sometimes evident in Nazareth's salutations, which varied from "Dear SEC friends" and "Dear Mary and David" to "Hello All." On March 10, 2010, for example, she wrote to "Chairman Schapiro" asking if she'd take a meeting with Credit Suisse "to discuss the SEC's concept release on equity market structure." After Schapiro agreed, Nazareth wrote back: "Fantastic, Mary!"
Schapiro answered the e-mails in a business-like way. The more numerous exchanges between Nazareth and Becker, who are friends, display an easy banter and a familiarity developed over the years.
Becker, now a partner at the Cleary Gottlieb Steen & Hamilton LLP law firm in Washington, declined to comment for this story. His biography on the firm's website says he was "intimately involved" in financial regulatory reform at the SEC and "served a central role in the commission's efforts to implement the Dodd-Frank Act."
Early in the Dodd-Frank debate, in November 2009, Nazareth forwarded a summary of a Senate proposal to Becker, who noted that the actual text ran to 1,100 pages. "More nap time for me," he wrote.
That prompted Nazareth to ask, "Yea, but what about me? No rest for the outside counsel."

There is much more in the full Bloomberg expose which is merely the latest nail in the coffin of the manipulated, coopted farce known as the SEC, which probably more than anything, is the reason why investors have now shunned the centrally planned capital marekts entirely. That Mary Schapiro is still employed as the SEC's head after years and years of abysmal decisions, of policy failures, of having done nothing to restore confidence in the market is, quite simply, a joke. This latest narrative will merely confirm it.

Sadly, in this banana republic which employs such banana agencies as the SEC to do the bidding of the banana elite that matters: not democrats, not republicans, but Wall Street's banks full of money (most of it from the trillions in 2008/9 taxpayer funded bailouts), nothing will ever change, until the next and final crash wipes out everything with it and forces the system to start afresh. Only by eliminating the status quo, its insidious tentacles, and the enture existing generation of corrupt, criminal, co-opted regulators, can there be a chance to restore some semblance of fair and efficient markets.

Until then, enjoy the farce of the broken Wall Street casino until trading volumes finally hit zero. It won't be long. At that point it will be too late.

Source.

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Madoff's case bigger, but Stanford's messier

	December 13, 2011 By Loren Steffy From the beginning, the collapse of R. Allen Stanford's financial empire was unlike other financial scandals, and the aftermath of his alleged $7 billion
Bernard Madoff vs Allen Stanford.
fraud has been messier than normal for investors in such cases. Bernard Madoff, after all, orchestrated a Ponzi scheme almost 10 times bigger than the one Stanford is accused of running, yet Madoff pleaded guilty and is serving a lifetime prison sentence. A receiver (Irving Picard) has recovered billions that is being distributed to investors, and an insurance pool funded by the brokerage industry is covering at least some of the additional losses. Not so in the Stanford case. Investors are likely to recover almost nothing from the receiver Ralph Janvey, and on Monday, the Securities and Exchange Commission sued the industry insurance fund, the Securities Investor Protection Corp., which since June has refused the SEC's order to pay. Stanford Financial was an SIPC member, and it slapped the fund's logo on its investment offerings. While the SIPC doesn't provide blanket insurance - it only protects against securities that are lost or stolen in brokerage failures, not losses on the value of investments - it was happy to allow Stanford to use its name to foster a false aura of security. It now argues that those same investors don't deserve coverage because Stanford brokers were peddling certificates of deposits issued by Stanford's Caribbean bank. But investors I've spoken with said their money went through, and perhaps never left, Stanford's brokerage with the SIPC seal on the door. The distinction between the Stanford and Madoff cases is most stark in how investors have been treated by the organizations that are supposed to protect them. Madoff was, after all, a Wall Street insider who catered to other well-connected financiers and movie stars. The SIPC agreed to cover their losses. Kevin Bacon, it seems, will have a lesser degree of separation from his wealth than the average Stanford investor. Similarly, when MF Global, a commodities trader run by the former U.S. senator and Goldman Sachs honcho Jon Corzine, tanked on bad investments in European markets, the SIPC rushed in to repay some of the losses for the firm's wealthy hedge fund clients. Stanford's investors for the most part are more pedestrian. They were well-off but not wealthy. Most invested for retirement, and while much was made of the ridiculous interest rates promised on Stanford CDs, investors said what attracted them most was the safety. They were looking for a shelter from turbulent markets, and CDs, Stanford brokers told them, were a safe move. Many didn't go to Stanford, Stanford came to them. The firm built its brokerage by recruiting investment advisers from other firms who brought clients with them. Seduced by the green marble desktops and cherry-wood interiors, they knowingly or not lured into Stanford's web clients with whom they'd built up trust over many years. Stanford's investors also were hurt by bad timing. Their plight came just months after Madoff dominated the national news, and it was overshadowed by a mounting recession, looming bank failures and government bailouts. And so, amid national disinterest and regulatory foot-dragging, Stanford investors have become the alleged victims of a forgotten fraud. It's not surprising, then, that their fate depends on the unprecedented legal action by the SEC against the SIPC. For three years, they've had to fight just for a chance to grab the safety net that was thrown to investors in other scandals.

Source.

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S.E.C. Files Were Illegally Destroyed, Lawyer Says

August 17, 2011
By EDWARD WYATT

An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators.

The destroyed files comprise records of at least 9,000 preliminary inquiries into matters involving notorious individuals like Bernard L. Madoff, as well as several major Wall Street firms that later were the subject of scrutiny after the 2008 financial crisis, including Goldman Sachs, Lehman Brothers, Citigroup and Bank of America.

The S.E.C. is the very agency that is charged with making sure that Wall Street firms retain records of their own activities, and has brought numerous enforcement cases against firms for failing to do so.

The agency's records were routinely destroyed under an S.E.C. policy, since changed, that called for the disposal of records of a preliminary inquiry that was closed if it did not get upgraded to a formal investigation, according to Congressional records and people involved in inquiries into the matter. The agency believes that both the original policy and the new rules comply with federal document-retention laws.

John Nester, an S.E.C. spokesman, said that while the agency was not required to retain all documents, it changed its policy last year regarding destruction of files for "matters under investigation," the category of initial inquiry by the S.E.C.'s enforcement division that is the subject of the current scrutiny.

Changes were made to the S.E.C. policy after questions about the document destruction were raised in early 2010 by Darcy Flynn. Mr. Flynn, an employee of the S.E.C.'s enforcement division for 13 years, began a new job in January 2010 helping to manage the disposition of records for the division. Mr. Flynn, who continues to work at the S.E.C., has sought protection under federal whistle-blower laws.

The document disposal, which was first reported by Rolling Stone magazine on Wednesday, is the subject of inquiries by the Senate Judiciary Committee; the National Archives and Records Administration, which oversees laws governing federal agency records; and the inspector general of the S.E.C., according to the records and to people involved in the investigations.

In addition to whether the document disposal violated federal laws about government records, officials are concerned that the S.E.C. policy might have hindered later investigations into the same people or companies or covered up wrongdoing.

"These records may contain critical information that could be extremely useful in piecing together complex cases, even if not immediately pursued," Senator Charles E. Grassley, an Iowa Republican who is the ranking member on the Senate Judiciary Committee, wrote in a letter to the S.E.C. on Wednesday.

Mr. Nester declined to comment on Mr. Grassley's letter or on a letter to Mr. Grassley from a lawyer for Mr. Flynn that laid out the allegations in detail.

H. David Kotz, the S.E.C. inspector general, said that he was investigating the issue and hoped to complete a report by the end of September. A spokesman for the National Archives did not respond to requests for comment late Wednesday afternoon.

The National Archives wrote to the S.E.C. last year, saying that it "appears that there has been an unauthorized disposal of federal records," and asked for further information, according to Mr. Flynn's chronology.

Mr. Flynn said that S.E.C. officials discussed whether to lie about the document destruction because they might be open to criminal liability. Unlawful and willful destruction of federal records is punishable by up to three years in prison.

The S.E.C. replied to the National Archives in a letter, saying that it was "not aware of any specific instances of the destruction of records" that should have been retained. It added that it "cannot say with certainty that no such documents have been destroyed over the past seventeen years."

The letter from Mr. Flynn's lawyer said that the old document destruction policy gave S.E.C. officials assurance that if they closed an inquiry without upgrading it to a formal investigation, there would be no record of their actions.

It is common for S.E.C. employees to leave the agency for the private sector and then begin representing clients before the agency. Mr. Flynn contends that the practice increases the likelihood that S.E.C. investigators could do undetected favors for former colleagues and their clients by quashing investigations.

Whether that revolving door led to the closing of an investigation in 2001 involving Deutsche Bank and the destruction of the files is part of the investigation by the S.E.C.'s inspector general.

Source.

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