(Source: goffgough)
When things get tough, lawmakers get creative. Faced with predictions that sea levels in the coastal areas of North Carolina will rise by a meter in the next century, legislators are considering bold action: making those predictions illegal. A bill being circulated in the Tarheel state would…
What if Europe and the US converged on a set of economic policies that brought out the worst in both – European fiscal austerity combined with a declining share of total income going to workers? Given political realities on both sides of the Atlantic, it is entirely possible.
All of this is important background for the speech given in Denver on April 13 by S.E.C. commissioner Gallagher. The commissioner was trying to explain the S.E.C.’s thought process in how it decides to allocate its relatively meager resources. The key thing, Gallagher explained, was to make sure that when you send Enforcement staff on a case, you should make sure there’s actually crime there to fight:
It is critically important that our enforcement program be extremely efficient… Recognizing that it is unrealistic to imagine we will ever achieve a one-to-one correspondence between incidents of misfeasance and SEC Enforcement staff, we’d better plan to do everything we can to increase our hit-rate per investigation opened, and should commit our staff resources carefully, which is to say, consciously.
Sounds reasonable, although this does also sound a little odd; how is securing a good “hit rate” in finding crime a problem in an era where even an $11 billion robbery isn’t high enough in the in-box to warrant a criminal investigation? For most of the last ten years, you could walk into any major bank in America and find whole departments committed to the practice of writing false, robosigned affidavits. We’re not talking about crime that is hidden in a line item, or has to be deduced by checking and re-checking the numbers of dozens of accounts: we’re talking about groups of flesh-and-blood human beings, sitting there in plain view with huge stacks of folders on their desks, openly committing fraud and perjury. Walk in any direction in lower Manhattan with a badge, you’re going to hit a fraud case whether you want to or not.
But fine, Gallagher’s point is taken: when you commit resources, you want to make sure you get hits. So what’s the solution? He goes on, cheerfully employing a jockish metaphor:
Experience teaches us, for example, that fraud tends to proliferate in smaller entities that may lack highly developed compliance programs. It also means thinking carefully about what we might, borrowing again from the world of sports, call “shot selection.” It can be tempting to tangle with prominent institutions. But chasing headlines and solving problems are two different things. The question is what will do most good – where our focus should be. And the record seems to suggest that we can do most to protect smaller, unsophisticated investors by focusing more attention on smaller entities…
Just so we’re clear about what we’re talking about here: the S.E.C., rather than go after serial violators like Bank of America and Chase, proposes that the best place to find crime is in small-cap companies, because that’s where fraud “proliferates.”
In the last year or so I’ve heard from several attorneys who represent smaller clients who tell me they’re flabbergasted, watching the S.E.C. give the Chases, Goldmans, and Citigroups free ride after free ride while their pockmarked little clients at fledgling public companies get served the whole regulatory meal for minor disclosure violations – even cases that simply involve bad paperwork, where money isn’t even stolen. If you’re a little tech startup and there’s a $100,000 problem in your books, you can expect the full Princess Bride torture machine treatment, with multiple agents assigned to your case, serious criminal penalties, asset seizures, etc.
Want an example of the S.E.C.’s idea of “shot selection”? Every year, a parade of itty-bitty failed public companies lets their paperwork lapse. Dead little companies sitting in the bureaucratic atmosphere doing nothing at all are a major threat to national security, of course, so the S.E.C. flies in to the rescue and feverishly revokes their registrations.
These actions are called “12(j) registration revocations,” and the beauty of them, from the S.E.C.’s point of view, is that it can list each one of those revocations as a separate enforcement action, when it goes before Congress at the end of every year to brag about all the good work it’s done.
Therefore toward the end of every calendar year, you’ll see a rush of these 12(j) revocations. In 2011, about one out of every six S.E.C. enforcement actions – 121 out of 735 – involved these delinquent filings. In the stats they submit to Congress, they list these cases right next to things like market manipulation, insider trading, and financial fraud. “The S.E.C. Enforcement staff takes 10 minutes and shoots a zombie company in the head and then has the guts to call it enforcement,” is how one attorney put it to me.
(Source: ronmarks)
There are only two countries that have child poverty rates over 20% in the developed world: Romania and the United States.
The first step toward public ownership is recognizing that it is not the radical departure most imagine it to be. Two of the most cost-effective health providers in the United States—one a far-reaching insurance system, Medicare; the other a direct hands-on healthcare delivery system, the Veterans Administration—are run by the government. So, too, the largest pension manager in the country is a public entity: the Social Security Administration.
The US Postal Service, which employs 645,000 men and women, is another public enterprise that is generally regarded as well run by most experts—despite the recession, a reduction in the volume of mail because of electronic communications and a highly unusual 2006 Congressional requirement that the USPS pre-fund its pension benefits for the next seventy-five years. Recent cost-saving proposals for closing many small-town post offices and reducing services have triggered a popular backlash against the possible loss of an institution the public still values.
Another public enterprise, the Tennessee Valley Authority (TVA), is one of the largest energy companies in the nation. In fact, more than 25 percent of electricity in the United States is supplied by local public utilities and cooperatives. And, of course, though corporate influence has distorted a potentially powerful opportunity, the government owns timber, mineral, oil and other resources on public land covering almost 30 percent of the nation’s territory.
Public enterprises do not spend large amounts on advertising or brokers’ fees to sell their products. They do not add a profit margin to every service they provide or article they sell. Nor do they pay exorbitant executive salaries. The Medicare administrator made a base salary of approximately $170,000 in 2010. Stephen Hemsley, CEO of UnitedHealth Group, made a base salary of $1.3 million and received $101.96 million in compensation that same year. Because of added expenses like these (along with many other irrationalities), our private healthcare system costs the nation up to twice the share of GDP spent on equal or better care in many other countries—a large-scale “inefficiency” that wastes perhaps a trillion dollars a year! When conservative defenders of private corporations focus on internal efficiency alone, they ignore (or deliberately obscure) not only the demonstrated truth that corporate financial institutions have the power to force the nation to lose trillions of dollars in economic output, but also that our extraordinarily wasteful healthcare system costs twice as much as that of other nations.
(Source: azspot)
