Via NYTimes.
What the film didn’t point out, however, is that the crisis has spawned a whole new set of abuses, many of them illegal as well as immoral. And leading political figures are, at long last, showing some outrage. Unfortunately, this outrage is directed, not at banking abuses, but at those trying to hold banks accountable for these abuses.
The immediate flashpoint is a proposed settlement between state attorneys general and the mortgage servicing industry. That settlement is a “shakedown,” says Senator Richard Shelby of Alabama. The money banks would be required to allot to mortgage modification would be “extorted,” declares The Wall Street Journal. And the bankers themselves warn that any action against them would place economic recovery at risk.
First, the proposed settlement only calls for loan modifications that would produce a greater “net present value” than foreclosure — that is, for offering deals that are in the interest of both homeowners and investors. The outrageous truth is that in many cases banks are blocking such mutually beneficial deals, so that they can continue to extract fees. How could ending this highway robbery be bad for the economy?
Second, the biggest obstacle to recovery isn’t the financial condition of major banks, which were bailed out once and are now profiting from the widespread perception that they’ll be bailed out again if anything goes wrong. It is, instead, the overhang of household debt combined with paralysis in the housing market. Getting banks to clear up mortgage debts — instead of stringing families along to extract a few more dollars — would help, not hurt, the economy.
Excerpt via Financial Fraud Law.
Another Big Year for Bribery: Recent interest by the SEC and DOJ in cracking down on foreign corruption has led to a jump in FCPA matters. One-quarter of both large-cap respondents and public company respondents have engaged outside counsel in the past 12 months to assist with a bribery or corruption investigation – up from 17% in last year’s survey. The rate of investigations has been rising across the board: in the past three surveys, Fulbright has asked respondents whether their companies engaged outside counsel to assist with a corruption or bribery investigation in the prior year. In 2008, 7% of all respondents engaged outside counsel for an investigation; in 2009, the rate jumped to 12%; and this year, the rate went up again, to 16%.
Interesting story on whistle-blower Arthur F. Schlobohm IV via The New York Times.
During the period when Mr. Schlobohm helped the F.B.I. to gather evidence, from April through July 2009, at least $16 million flowed into Mr. Cook’s fund — and disappeared. From the time securities regulators first had credible information that he was engaged in a fraud and when the authorities shut down his fund, December 2008 to July 2009, some $35 million flowed into his coffers — funds that afforded Mr. Cook a lifestyle that included an expensive gambling habit, a collection of Fabergé eggs, fancy cars and the construction of a casino in Panama.
“There was a tremendous amount of guilt being there,” watching Mr. Cook lure investors, said Mr. Schlobohm in an interview, the first in which he has spoken publicly about how he helped put Mr. Cook behind bars. “Knowing this was a fraud with the highest degree of certitude, and having to watch people in the process of losing their life savings, was extremely difficult.”
Via FAA Whistleblowers Alliance.
Abstract:
Whistleblowing is a form of organizational dissent that is rarely successful, instead usually leading to disaster for the whistleblower. Organizational theorists seldom have addressed the question of how to improve whistleblowers’ strategies. A useful general perspective for doing this is to conceive of bureaucracies as authoritarian political systems. The concept of political jiu-jitsu, from the theory of nonviolent action, is adapted to organizational contexts and used to assess a range of tactics used by organizational elites against dissidents. The resulting implications for whistleblower strategies are assessed by comparison with standard recommendations offered by experienced whistleblower advisers.
Excerpts via Sonia Jaspal's RiskBoard.
In recent years the challenges mentioned on failure of whistle blowing procedures is that there is no protection against retaliation, socially the individual is ostracized and professionally the individual does not get another job thereby simply reaching a dead end in their careers. However, I think we are unable to see the forest from the trees.
My concern is that the basic premise of whistle blowing – “a person having a moral character to go against authority figures” -is something to be questioned. I am bringing here the various psychological studies conducted which prove that normally a person will not undertake a whistle blowing activity. The percentage of human beings who will have this level of moral development are insignificant.
Excerpts via Forbes.
Dodd-Frank is about to make whistle-blowers filthy rich. That's a mistake.
Sometimes the best intentions make the worst laws. This may be the case with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. A provision of the Act that rewards whistle-blowers who provide the Securities and Exchange Commission ("SEC") with information relating to securities laws violations may present more headaches than viable information for regulators investigating violations.
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Under the Act, the whistle-blower could be a foreign official or foreign agent. If the SEC were required to make a 20 million whistle-blower payment to a foreign official, what would the political ramifications be? Foreign officials may find whistle-blower rewards a source of revenue worthy of reporting on colleagues or agents.
