Wednesday, June 17, 2009

The Grayson-Glass-Steagall Act of 2009 - A Proposal for a Regulatory Overhaul of the Financial
System, or “The Compartmentalization of Decay in Financial Institutions”

by John Bougearel

(*Note: This is my own proposal, and not one that would necessarily be endorsed by Mr. Alan Grayson
down the line. The reason for selecting Mr. Grayson in the title is that as a Congressman he is much closer
to being an advocate for the taxpayer than a proponent for the big banks)

On June 12, Bloomberg News reported that the Federal Reserve is likely to emerge as the most powerful
regulatory agency in the Obama administration’s plan for overhauling financial market oversight. The
plan for the Obama administration has been crafted by Treasury Secretary Tim Geithner and National
Economic Council advisor Larry Summers. On June 9, Treasury Secretary Geithner told the Federal
Reserve Chairman Ben Bernanke that the Obama administration’s regulatory overhaul would call for the
Fed to be “the regulator of firms deemed too big to fail.” And, according to the Obama administration’s
June 17 09 white paper, if any large firm deemed to be too big to fail (TBTF) appears to actually be
failing, the Treasury would be given the power “to appoint a conservator or receiver to stabilize it.”

On Wednesday June 17, Obama declared that the financial crisis “was a failure of the entire system.” This
indictment included not just Wall Street firms but the US Treasury, Federal Reserve and other regulatory
agencies. “An absence of oversight engendered systematic, and systemic, abuse” said Obama. Up through
the first half of 2009, the Office of Thrift Supervision (OTS), Comptroller of the Currency, the Federal
Reserve Board, the FDIC, and state bank regulators have been our bank regulators.

Obama’s proposed regulatory framework overhaul for financial system would eliminate the OTS agency,
but otherwise much of the current regulatory system will be left in place. This led Republican
Representative Scott Garrett of New Jersey and member of the Financial Services committee to voice his
concern that the president’s plan “stays at square one on the big issues. It creates a cycle of more bailouts.
It perpetuates what we’ve had in the past.”

Scott Garrett’s point is valid, given that all state and federal regulatory agencies, with the notable
exception of Sheila Bair’s FDIC, of the financial system have failed the US. Leaving the existing
framework intact and giving even more authority to these agencies, which have already failed us, is
fraught with risks to the US taxpayers.

Just What is Too Big Too Fail?

A legal definition of TBTF still does not exist. The doctrine of TBTF is little more than an article of faith.
The Obama administrations white paper defines TBTF as any firm “whose combination of size, leverage,
and interconnectedness could pose a threat to financial stability if it failed.” The combination of size,
leverage, and interconnectedness is left undefined by the administration. TBTF thus becomes simply a
matter of public trust for the administration. They know a TBTF entity when they see it and it has
something to do with “systemic risk.” For the public, TBTF becomes an article of faith once the
administration has arbitrarily conferred a TBTF status upon an entity.

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 In my estimation, “Too Big to Fail” is a myth that began with the bailout of Continental Illinois in the
mid- 80s and needs to be deconstructed to save the financial system from its own demise. I will go a step
further and uncategorically state that systemic risk in the financial system spreads and deepens precisely
when lawmakers and policymakers confer upon certain financial institutions a “too big to fail” status.
Unfortunately, a deconstruction of the TBTF myth is not on the table amongst legislators as yet. I would
like to see that change, but I am not hopeful.

On June 3rd, I attended Barry Ritholtz’s June Financial Conference at the NYAC. One of the panel
discussions addressed the “Too Big To Fail” topic. This panel discussion was led by Nassim Taleb, author
of the Black Swan, and Florida Democratic Representative Alan Grayson. Mr. Grayson, by the way, is
really to be applauded not only for his investigations into the financial mess that Wall Street created, but
more importantly, for his willingness to participate in Financial Conference panel discussions hosted by
folks like Barry Ritholtz, who are independent and not captured by Wall Street and Capitol Hill.

Alan Grayson did attempt to define TBTF at Ritholtz’s financial conference but fell a tad short. Mr.
Grayson took the position however that unlike unicorns, such TBTF institutions do exist. And if TBTF’s
exist, they must be regulated. This is essentially the same position put forth by the Obama administration’s
plan to have the Fed oversee all TBTF firms. “These firms should not be able to escape oversight of their
risky activities by manipulating their legal structure,” the White Paper said. Through higher capital
requirements and stronger regulatory scrutiny “our proposals would compel these firms to internalize the
costs they could impose on society in the event of failure.”

Higher capital requirements (now at 25 to 1 or 4% tangible common equity I believe) would be a

minimum step. Doubling it to 12 to 1 or even 10 to 1 would be helpful. And yes, compelling these firms to
privatize rather than socialize their losses in the event of a financial firm’s failure would also be essential.
However, the latter proposition seemingly contradicts the essence of what is meant by being TBTF.

By definition, TBTF means government guaranteeing, backstopping, and subsidizing these financial
institutions with taxpayer dollars when these firms fail. The government saves TBTF firms precisely
because these parts are deemed to be essential entities to the financial system. Regulating these institutions
therefore entails guaranteeing and subsidizing them with taxpayer dollars as and when needed in a
financial crisis. This socializing of private losses is poppycock thinking.

Compartmentalizing Systemic Risk: The Living Tree System as a New Model for
compartmentalizing Systemic Risk in the Financial System.

„ Before becoming a Commodity Trading Advisor in 1995, I was a certified, licensed arborist. One of the
amazing protective features I learned about tree systems are their ability to compartmentalize “wounds”
and or “decay.” Key to tree systems: they do not heal or save their wounded, diseased or decaying
branches.

Dr. Alex Shigo was the first person to study this phenomenon in trees. This phenomenon in tree systems is
as close to a perfect model on which to build a system for compartmentalizing decay in our financial
institutions. Dr. Shigo called this phenomenon the “Compartmentalization of Decay in Trees” or CODIT.
Borrowing from the CODIT model, we could create a model called the “Compartmentalization of Decay
in Financial Institutions” or CODIFI.

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„ Trees do not heal themselves when parts of their system become wounded, infected, or diseased. Rather
they compartmentalize the damage instead. And, when and where possible, they continue growing around
and over the damage. Compartmentalizing protects the tree system itself against the spread of decay to
other healthy parts of the tree. Trees compartmentalize by sealing off and laying down barrier walls that
prevent decay around the wound from spreading in all four directions, up, down, in and out.

By the same token, we should not expect the mega-large financial institutions with rotting assets on their
balance sheets to heal themselves. They have mortally wounded themselves with the products held both
on and off their balance sheets. To prevent these mortally wounded firms from infecting the rest of the
financial system, these firms need to be ring-fenced and compartmentalized, walled off from the rest of
the financial system for the sake of the financial system itself. This would, by definition put size limits not
just on financial institutions, but also on how much of any one product they can have on either their
balance sheets or off balance sheets. Size and margin limits are imposed upon market participants with
respect to futures products, positions size limits need to be placed on the products held by financial firms.
If they exceed their size and margin limits, compliance and risk management freezes the account and
reduces their balance sheet position to be in accord with regulations.

Under such a regulatory regime the combination of size and leverage would never allow any one financial
institution to become too big to fail. In the words of Nixon’s Treasury Secretary George Shultz discussing
Fannie Mae and Freddie Mac “If they are too big to fail, make them smaller.” Speaking of Secretary
Treasury’s and taxpayer protection, where can taxpayers go to find a George Shultz type now? All the
recommendations and policies from our more recent Secretaries of the Treasury are aimed at subsidizing
the big banks and making them larger.

„ More amazingly about trees, the outer barrier is so strong that many trees continue to grow healthy outer
cambium layers despite a hollow, decayed interior. By proxy, our financial system should be able to
continue to maintain its overall health and grow in spite of any one wounded branch. By walling off
mortally wounded firms and their toxic waste from the rest of the financial system, the rest of the financial
system itself should be able to function healthily and continue growing, despite the presence of decayed
and hollowed out entities such as AIG Citigroup, and Bank of America. With proper
compartmentalization, AIG would never have been allowed to become the slush fund of taxpayer monies
that it has since Hank Paulson rescued the company from bankruptcy. That such a mechanism to
compartmentalize is not in place more than a year after the failure of Bear Stearns is appalling.

Pruning and Branch Collars

„ Pruning. Decaying branches in our financial system need to be pruned from the trunk of the financial
system. In tree systems, every branch attachment to the tree trunk has what is called a “branch collar.”
These branch collars work effectively as a tree’s defense system when a branch has decayed or otherwise
been wounded. Branch collars prevent the decay from spreading into the rest of the tree system. Without
branch collars, the decay from a wounded branch could infect and spread into the rest of the tree system.

Likewise, effective branch collars need to be in place for every branch within our financial system.
Without them, the toxic decay on the balance sheets of our failed financial institutions can spread
throughout the rest of the financial system and kill it. Decaying branches in our financial system must be
carefully pruned from the financial system. The role of branch collars is similar to “ring-fencing”

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functions. To date, branch collar functions in our financial system have largely been relegated to the FDIC
and Blackrock for both large and small financial institutions. The authorities of the FDIC, given their key
role and function to act as branch collars within the tree system, need to be expanded within our financial
system ~ and not the Federal Reserve as proposed by the Obama administration.

Criticism of the Federal Reserve’s Role as Regulator During the Financial Crisis

On June 5 2009 at the house budget committee Ohio Democratic House Rep Marcy Kaptur questioned
Bernanke on why they were involved in the deemed to be TBTF AIG firm. Bernanke answered that “the
Fed is involved very unwillingly in AIG because there is no good ‘system’ for addressing the failures of a
major financial institution.” AIG failed in Sept 2008, six months after Bear Stearns failed in March 2008.
Even six months after the failure of Bear Stearns in March 2008 made clear the need to create a “system”
for addressing the decay of a major financial institution, no such system was implemented and in place
when the decay spread to AIG and Lehman in September 2008.

And even nine months after the failure of LEH and AIG, in June 2009, Bernanke informs us that there is
still no “system” in place to compartmentalize the decay of a major financial institution from infecting the
rest of the financial system. I have to ask if there is a reason there is no such system or branch collar in
place yet? Is this feet-dragging or is this induced by some implicit regulatory TBTF design? I suspect, at
the very least, the Fed’s primary function to lend as freely as possible in a financial crisis would be in
conflict with its secondary role as regulator in a financial crisis. I will leave it to others to discern, but to
me, these dual roles may be akin to mixing oil and water, they just don’t blend well, in spite of the Obama
administrations proposal in June 2009 to expand the regulatory role of the Fed.

I am quite skeptical of Treasury Secretary Tim Geithner’s desire to give the Fed even more “regulatory
authority” to deal with major financial institutions that are deemed “too big to fail.” This is particularly so
given the Fed and U.S. Treasury’s clear failure to create and implement a “branch collar” or ring-fencing
system for resolving a decayed financial institution this late in the game.

However, and fortunately for taxpayers, Congress may not be so willing to expand the Fed’s regulatory
authorities. According to Chris Whalen, “despite the proposal from the Obama Administration to give the
Fed more power as a regulator, we see increasing signs that the Congress will reject that path and perhaps
even reduce the power of the mismanaged, politically compromised central bank. There are few votes in
the US Senate, at least, to support any expansion of the Fed's powers.”

In fact, according to Bloomberg News, Treasury Secretary Geithner has had to defend the Obama
administration’s proposal to expand the Federal Reserves regulatory authority on June 18 2009 as he
“repeated questions from senators who cited previous regulatory failures at the Fed and potential conflicts
with its monetary-policy duties.”

Banking Committee Chairman Christopher Dodd and the senior Republican Richard Shelby both said they
were concerned that the Fed system, with its diffuse structure of district banks, would be ineffective in
watching over companies deemed too big to fail. The administration’s regulatory proposal “represents a
grossly inflated view of the Fed’s expertise,” said Shelby, of Alabama. Dodd quoted one critic’s view that
giving the central bank more power was like awarding a son a “bigger, faster car right after he crashed the
family station wagon.” The analogy is weak, but the criticism has merit. Regulating the financial industry

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is a privilege. The Federal Reserves license to regulate the financial industry should be suspended, given
their failure to observe and enforce the regulatory rules of the road both before and during this crisis. .

The TBTF Doctrine Leads to Misappropriation of US Taxpayer Funds

Additionally, the US Governments doctrine of TBTF will almost always lead to a misappropriation and
misallocation of taxpayer dollars.

The Fed is not the only regulatory body that has failed the taxpayer in this financial crisis. So too, has the
US government. Take for instance, the recent disclosure on June 9 2009 that the US taxpayer is getting
stuck with the bill to pay for Anthony Mozilo’s legal defense fees for fraud and insider trading. From
ZeroHedge’s Tyler Durden: “Taxpayers must feel privileged that their hard earned cash is getting
funneled back into the US of A so that it, in turn, can give it to Ken Lewis” who can then give it to
Mozilo’s defense attorneys. Mozilo’s legal defense amounts to only a few million bucks, but it is still
taxpayer money footing the bill and constitutes a misuse and misappropriation of taxpayer dollars. If any
one has any doubt as to the misappropriation of taxpayer dollars, let us digress a moment and consider a
little background on the Mozilo fraud case.

SEC Charges Ex-Countrywide CEO with Fraud

From the AP on June 4, 2009 · The government’s Securities and Exchange Commission's (SEC) is
charging Angelo Mozilo, former CEO of mortgage lender Countrywide Financial Corp. with civil fraud.
The SEC case also accuses Mozilo of illegal insider trading, an agency spokesman said Thursday.

Mozilo denied any wrongdoing. The SEC's scrutiny of Mozilo's stock sales began in the fall of 2007 with
an informal inquiry. Mozilo sold about $130 million in Countrywide stock in the first half of 2007 through
a prearranged 10b5-1 trading plan. These plans allow company insider to set up a program in advance for
such transactions and proceed with them even if he or she comes into possession of significant nonpublic
information (another loophole to close).

Here is how Countrywide’s CEO Anthony Mozilo answered questions from the analysts on his July 25,
2007, conference call …

…We are experiencing home price depreciation almost like never before with the exception of the Great
Depression… I ask myself all the time as CEO…what should I have known and when should I have
known it and what should I have done about it…? …as I try to walk through what happened here, and
[wonder whether] a lot of this [could] have been foreseen…as I do reflect on it, nobody saw this coming.
S&P and Moody’s didn’t see it coming…Bear Stearns certainly didn’t see it coming, Merrill Lynch didn’t
see it coming, nobody saw this coming…It would have been an insight that only a superior spirit could
have had at the time.”

Mozilo had the prescience of mind to sell his CFC stock as things began to collapse for the subprime
lender but months later introspectively queried “what should I have known, and what should I have done
about it.” This was disingenuous to investors and analysts on the conference call.

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The beauty of Mozilo’s fraud goes far beyond $130 million in insider trading in 2007. In January 2008, he
also sold his insolvent company to Ken Lewis, who graciously bought CFC’s toxic assets just before the
company went bankrupt. Avoiding bankruptcy allowed Mozilo to reap in an $83 golden parachute for the
sale and exit of CFC. After buying CFC in Jan 2008, Lewis said he would like the 69-year-old Mozilo to
stay with Countrywide until the merger closes, after which "I would guess he would want to go have some
fun." Clearly, Mozilo has the necessary funds for his legal defense from his insider selling and golden
parachute, so a TBTF taxpayer subsidized bank such as BAC should not be footing it.

But I digress. The main point about the government’s TBTF doctrine is that state and federal agencies can
never effectively “regulate” or provide oversight to institutions deemed to be TBTF. Institutions deemed
TBTF will always be subsidized, guaranteed and backstopped by the taxpayer above all other
considerations no matter what wrong-doing or excessive risk-taking these TBTF are involved in. In short,
they become regulated not to succeed but in order not to fail.

TBTF and Effective Regulation Can Not Co-exist: It is a Non-Sequitur

As long as the doctrine of TBTF is upheld by the US government, then it can never effectively “compel
these firms to internalize the costs they could impose on society in the event of failure.” If a financial
institution is deemed too big to fail, compulsion to eat its own losses as it is failing. This is a non-sequitur.

Under the TBTF doctrine, the government will first do everything in its power to subsidize, guarantee and
backstop these institutions before ever compelling them to do anything else ~ such as actually fail. The
very act of subsidizing these entities precludes ring-fencing, compartmentalizing and branch collaring
theses institutions. Subsidizing these entities spreads “risk” throughout the financial system and prolongs
the threat they pose. TBTF policies supersede compelling these firms to “internalize costs” any losses they
might incur from their activities. That is, compelling these financial firms to privatize their losses is a non-
sequitur. It does not follow. To privatize a loss is generally a conflict of interest with the TBTF doctrine
when that said institution is in crisis.

The Glass-Steagall Act of 1933 Eliminated Certain Conflicts of Interest

In the last major banking crisis, lawmakers passed legislature called the Glass-Steagall Act. This bill,
which passed on 16 June 1933, separated bank types according to their business (commercial and
investment banking), and it founded the Federal Deposit Insurance Corporation for insuring bank deposits.
The Glass-Steagall Act erected Chinese Walls between commercial “depository” banks that took in
deposits and lent money and investment banks involved in riskier securities activities. The Chinese Wall
which led to a separation of commercial and investment banks eliminated many conflicts of interests and
provided many safeguards for depositors at commercial banks.

The US government repealed Glass-Steagall in 1999. One of the reasons for repealing Glass-Steagall and
de-regulating the financial industry was the proposition put forth by Greenspan, Rubin and others that
banks could self-regulate themselves. That is, they would never take on excessive risks that could be
deemed “self-destructive.” It would be contrary to nature. Yes, the logic of that proposition seemed sound
at the time. But we forgot about the TBTF doctrine which initially gained traction and credence with the
rescue of Continental Illinois, even though it was not so named at the time.

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TBTF institutions carry an implicit guaranteed and backstop of the US government. TBTF institutions can
and may self-destruct if they take on excessive risks that prove to be ill-fated. And this is precisely what
these deregulated TBTF institutions did in this past decade. Now, our government wants to re-regulate the
financial industry. This is all well and good, but to be effective regulators of the financial industry, I will
argue that we have to dispose of the TBTF doctrine. A great Chinese wall must go up between the big
banks and the US government in order to be effective and to protect taxpayers.

Government and big banks should not be on such friendly terms. The government’s dialectical
relationship to big banks should be slightly antagonistic if these financial institutions are to properly serve
their function as financial intermediaries and not exceed their roles in society. All individual financial
entities need to be branch-collared from the rest of the financial system. Never again should banks be so
tightly wound and interwoven that, if one financial institution fails, a chain reaction domino effect takes
place. Well-designed, branch-collaring policies could effectively unwind some of those tight relationships
that lead to systemic risks.

If any financial institutions take on ill-fated excessive risks in the future, they must be pruned from the rest
of the financial system as quickly as possible. In fact, while attending Barry Ritholtz’s June 3rd financial
conference, this same point was made by Nassim Taleb.

Consolidating the Financial Industry

Unfortunately, Josh Rosner, who also attended Barry’s financial conference mentioned in passing that
Goldman Sachs top lawyer said the financial system is quickly being reconstituted as it existed just before
the financial crisis began. This should come as no surprise to market participants following the financial
crisis. However, one unintended and unfortunate material difference of reconstituting the financial system
going forward is that the number of institutions within the financial system will shrink considerably. The
financial industry is being consolidated into fewer banks. Assets of failed institutions are falling into the
hands of the larger TBTF entities still standing and not to small to medium sized banks that never got into
trouble to begin with. This consolidation only makes the TBTF entities even bigger TBTF’s, and thereby
further increases the vulnerability of the financial system.

According to Institutional Risk Analyst Chris Whalen, the banking industry as a whole is still
deteriorating. “At the current rate of deterioration,’ says Whalen, ‘we could see one in four US banks
merged or resolved through the cycle. That suggests that over 2,000 institutions, large and small, will be
resolved. Put that into context with the FDIC's "official" dead pool of 300 or so institutions and that gives
you a tangible measure for how much "spin" might live within the official version of the problems facing
the US banking industry….

And on the subject of TARP subsidized banks, Whalen adds: “If our estimates for loss rates by US banks
prove correct, many of the TARP banks repaying capital now may be forced to come back to Washington
seeking more help in Q4 2009 or in 2010. And the large banks not repaying the TARP money bear a
stigma that may cause regulators and bankers serious problems as the year wears on.”

Setting stigma’s aside, the banking industry is undergoing a great consolidation in 2009-10 with many of
the failed banks winding up in the hands of the large banks deemed too big to fail. This is precisely the
type of outcome America should seek to avoid. Large banks need to become less big, not become even

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bigger. Banks that fail and wind up in FDIC receivership should find their assets being redistributed to the
well-managed banks that never wound up in the trouble the riskier TBTF banks got themselves into. Not
only does this reward the wrong institutions, it increases the risks associated with interconnectedness,
largeness and oligopolies. Noting that the Obama administrations regulatory reform plan “fails to fix
what’s broken, Barry Ritholtz recommends that if banks are too big to fail, force them to become smaller
by limiting “the size of the behemoths to 5% or even 2% of total US deposits [and] break up the biggest
banks.” Ritholtz’s proposal is outstanding. As it stands now, the Obama administrations plan for
regulatory overhaul, as outlined in their white paper thus far, does little more than preserve sacred cows.

My proposal is to introduce a bill that would allow the government and mid to smaller-sized banks push
back on this TBTF doctrine. The bill would eliminate the TBTF doctrine altogether and simultaneously
erect Chinese Walls between the government and big banks, as well as big banks from the rest of the
financial system using something akin to branch collars. I am dubbing this bill the Grayson-Glass-Steagall
Act of 2009 ~ as Mr. Grayson is more closely aligned with the interests of the taxpayers than the financial
firms deemed too big to fail. Besides, a name must be given to all bills.

Clearly, such a bill would eliminate the TBTF doctrine and conflicts of interests between the US
government and all firms deemed too big to fail. Eliminating the Obama administrations TBTF doctrine
from their proposed regulatory overhaul for the financial system would be eminently good for the
taxpayers. Such a bill would also signal a shift amongst lawmakers like Alan Grayson towards becoming
advocates for the taxpayers. The Grayson-Glass-Steagall Act of 2009 does have a certain ring to it,
doesn’t it? So, maybe Mr. Grayson and other lawmakers could get behind it!

The Obama administration’s white paper calling for a regulatory overhaul of our financial system “marks
the beginning of what promises to be a political battle that’s likely to alter the administration plan, with
some lawmakers opposing any expansion of the Fed’s power.” For the sake of the taxpayers, let us hope
the final regulatory overhaul of the financial system does not wind up endorsing the TBTF doctrine.

There is such a thing as resource constraints and the cost of “keeping the doors of these zombies [TBTF
institutions] open will consume all of the discretionary cash flow that Washington thinks is
available…Waive “bye-bye” to health care reform Mr. President, if we are going to feed all of these
zombies in 2010” says Chris Whalen. Hopefully, before it is too late, Obama will in time recognize that
the TBTF doctrine leaves the economy unnecessarily exposed to a huge black hole.

The final regulatory overhaul of the financial system might also follow a few prescripts laid out by the
Governor of the Bank of England Mervyn King on June 17, 2009. King, like Ritholtz, wants to restrict the
ultimate size of banks “Banks should not be allowed to grow so large that they were deemed to big to
fail,” according to the TimesOnline. In fact, King went so far to argue that banks should have a final
resolution plan detailing how they will be wound down in the event that they fail: “Making a will should
be as much a part of good housekeeping for banks as it is for the rest of us,” Mr King said.

Also, according to the TimesOnline, Mr. King said profound changes to financial regulation must be
made. While the Bank of England was granted enhanced regulatory authorities back in February 2009,
King was not sure how the Bank would use its enhanced authority because its new tools were limited to
giving warnings that were likely to be ignored: “The Bank finds itself in a position like that of a church
whose congregation attends weddings and burials but ignores the sermons in between.” The Bank of

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England’s enhanced authority comes with no regulatory teeth. This is a clear warning to the Obama
administrations proposal to give more authority to the Federal Reserve or other existing regulatory
agencies that have failed us. Hopefully, Congress will pay heed to King’s warning when crafting the final
regulatory overhaul.

A major snafu of all financial regulatory agencies is their enforcement capacity or lack of regulatory teeth
and political will. The LA Times report on June 17 2009 reminds us of how the OTS failed to regulate
Downey Savings and Loan. The OTS began warning Downey management in 2002 about its option-
ARMS. The 71 page inspector general report posted on the Treasury Department’s website on June 16
2009 found that despite the warnings “OTS examiners did not require Downey to limit concentrations in
higher-risk loan products. We believe that in light of the OTS’s repeated expressions of concern and
management’s unresponsiveness to those concerns, OTS should have been more forceful, at least by 2005,
to limit such concentrations," the report said.

King also suggested that investment banks might have to be separated from retail banks, along the lines of
the Glass-Steagall Act of 1933: “It is not sensible to allow large banks to combine high street retail
banking with risky investment banking or funding strategies, and then provide an implicit state guarantee
against failure.”

Marcy Kaptur and Paul Ryan Grill Federal Reserve Chairman Ben Bernanke 06-04-09
http://www.youtube.com/watch?v=eteiCoYvKF0

Tree Compartmentalization: CODIT-Compartmentalization of Decay in Trees

http://74.125.95.132/search?q=cache:zFrQtEVOrO4J:www.nr.edu/treecare/docs/codit.ppt+trees+compartmentalize&cd=1&hl=
en&ct=clnk&gl=us&client=firefox-a

SEC Charges Mozilo With Fraud, Insider Trading http://www.npr.org/templates/story/story.php?storyId=104994027

Riding the Storm Out http://financialfuturesanalysis.com/

Bank Of America To Pay Mozilo's Insider Trading Legal Fees

http://zerohedge.blogspot.com/2009/06/bank-of-america-to-pay-mozilos-insider.html

Geithner Said to Tell Bernanke Fed Gains Most in Rules Overhaul

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiXYMtYIk7_A

Too Big to Fail, or Succeed http://online.wsj.com/article/SB124528373595925623.html

Q1 2009 Bank Ratings Update and GM, GMAC Bank Join the Zombie Dance Party
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=363

Larry Summers is Confident; Joe Mason on Skin in the Game for Securitization
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=366

Fair Deals and Bad Dealers: CDS, Regulatory Reform and Other Tales from Washington
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=365

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Geithner Defends Plan to Give Fed Stepped-Up Powers (Update1)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2iN7uSC6T9s

Obama Reform Plan Fails to Fix Whats Broken

http://www.ritholtz.com/blog/2009/06/obama-reform-plan-fails-to-fix-whats-broken/

Too Big To Succeed ... http://www.ritholtz.com/blog/2009/01/too-big-to-succeed/

Mervyn King presses his case to limit size of banks

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6523514.ece

Report: Lax oversight allowed Downey Savings' loan binge

http://latimesblogs.latimes.com/money_co/2009/06/federal-regulators-responded-inadequately-from-2005-on-as-
billions-of-dollars-in-high-risk-mortgages-piled-up-at-weakly-manag.html

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