Why I (Belatedly) Blew the Whistle on the SEC’s Failure to Properly Investigate Goldman Sachs

By James A. Kidney The New Yorker and Pro Publica websites today posted an article by Pro Publica’s Jesse Eisinger about the de minimis investigation by the Securities and Exchange Commission into the conduct of Goldman Sachs in the sale of derivatives based on mortgage-backed securities during the run-up to the Great Recession of 2008.  The details of the SEC’s failure to aggressively pursue Goldman in the particular investigation, Abacus, and its refusal to investigate fully misconduct by Goldman and other “Too Big to Fail” banks, stands not only as a historic misstep by the SEC and its Division of Enforcement, but undermines the claim that the Obama Administration has been “tough on Wall Street.”  The Pro Publica version contains links to a few of the documents I provided. No one in authority who was involved in the Goldman investigation ever gave me an explanation for why the effort was so slight. … Read more of this post . . .

Why Hillary?

    By James A. Kidney            We can blame Hillary Clinton and the Democratic Establishment for the fact that Clinton’s only opponent for the Democratic presidential nomination is a 74-year-old Democratic Socialist instead of a younger liberal such as Elizabeth Warren.  Clinton (or, better, the Clintons) and her allies, of whom there are many among the Democratic elite, discouraged others in the party from running, either specifically and directly (“It’s Hillary’s turn.”) or more indirectly (“Hillary is the only one with the financial support to win against the GOP oligarchy.”)  Plus, of course, “There is a special place in Hell for women who don’t support women.” Coronation for Hillary.  Attractive alternatives were never heard from, much less nurtured for the future. But nobody thought about Bernie Sanders. As we predicted (Jan. 20 post, “The Week of the Long Knives”), the Democratic Establishment clubs dropped on … Read more of this post . . .

The Democrats:  McGovern Redux?  Really?

By James A. Kidney

bigger fly swatter cartoon

The “top stories” section of The New York Times online this morning featured news articles about “Bill Clinton Unleashes a Stinging Attack on Sanders” and another about Madeline Albright and Gloria Steinem criticizing women who support Bernie Sanders rather than Hillary Clinton.  All three essentially called female Sanders supporters traitors to their gender – “Aunt Thomasina” rather than “Uncle Tom.”

Bill Clinton also blamed Sanders for internet trolls who, according to Clinton, used vicious, sexist language in online comments directed to female columnists and others, male and female, supporting his wife.  This raises a question:  Has Bill Clinton ever looked at internet comments before?  Does he understand that internet trolls are mostly folks holed up in their basements with no friends?  They are not manning the computers at presidential candidate headquarters.  Those folks instead are sending out bothersome emails about the virtues and pressing financial needs of their own candidates.  Well, Bill has his own server as well as servants, so maybe he doesn’t see email spam.

The cause of these attacks is that young voting-age females in New Hampshire are polling overwhelmingly for the old guy and Clinton is getting desperate in the state.  Young and even middle-aged women don’t seem attracted to the Hillary Clinton drumbeat that, no matter how cozy she is with Wall Street and the Robert Rubin crowd, she is a proud standard-bearer for every self-identified racial and sexual group on the planet demanding its rights — except those who are male, straight and white.

Here is an excerpt from her opening statement at the debate with Sanders last week in which she barely recognized the importance of economic issues and jumped to race and gender, which Sanders has not made a focus of his campaign:

“Yes, of course, the economy has not been working for most Americans. Yes, of course, we have special interests that are unfortunately doing too much to rig the game.But there’s also the continuing challenges of racism, of sexism, of discrimination against the LGBT community, of the way that we treat people as opposed to how we want to be treated.”

[Let’s make it clear that either Sanders or Clinton would be head-and-shoulders better than any Republican running for president.  This was proved conclusively at last week’s Democratic candidate debate – the first in which it was just Sanders and Clinton, head-to-head. It was mostly a mature, thoughtful discussion of issues, with much agreement. Backers of either candidate would be stubbornly wrong-headed to stay home on election day if the other person was nominated instead.]

A key issue in the Democratic race is electability.  It always is for both parties. That is where the attacks on Sanders by Clinton supporters are most pronounced and effective.  The second, and as effective, attack on Sanders is for lack of foreign policy chops. There is merit to the second claim,

Read more of this post . . .The Democrats:  McGovern Redux?  Really?

Meaningless “Debates” Over Nothing — Else the GOP’s Sponsors Would Be Exposed

By James A. Kidney

America is in serious trouble.  It is breaking apart at the seams.  There is no consensus between the progressives and the conservatives on nearly any issue.  Although the blue states contain more voters of a progressive or liberal bent than conservatives, and constitute a plurality of the population, the constitutional structure of the Senate insures that the red states, with an average of 80 people per square mile, will be able to block legislation favored by blue states, with five times the population per square mile and squarely different issues at stake.  But no one will debate these issues.

Tuesday night’s Republican debate will contain no real surprises of substance, only the possibility of a second gop debate cartoongaffe here or there which probably will be treated by the GOP “base” as a one-finger salute to the political leadership.  It doesn’t really matter if each WSJ/Fox News panelist is a model of Edward R. Murrow or Chris Rock (there have been both in the past).  Good questioners grounded in facts will still lack the tools of corporal punishment required to make the candidates actually answer good questions.  There oughta’ be a law at least permitting a cream pie in the face to candidates who just run to their prepared text or “answer” by attacking the questioner.  Still, one hopes for better questions, so that at least those not part of the brainwashed base can more easily defend them in the inevitable finger-pointing aftermath of Wednesday morning.

In any event, the Big Lie is the foundation of the Republican Party philosophy, whether expressed by outliers such as Ted Cruz or Establishment figures such as Jeb Bush.  That lie is that Business, including or especially Big Business, will be the nation’s savior if only Government would get out of the way and taxes were cut for everyone, but especially the wealthy.  It is imperative to the GOP that the Lie not be exposed or even recognized as such.

Let’s see how just the events of the last couple of weeks have tended to show what happens when we rely on businessmen to be responsible for the future of the Republic.

  • Pfizer Pharmaceutical, best known for the drugs Lipitor, Viagra and Zoloft, and non-prescription products Advil, Centrum and ChapStick, is trying for a third time to merge with a nominally “foreign” corporation, Allergan, to take advantage of Ireland’s corporate tax breaks. News of the proposed acquisition of Allergen for this purpose came on the heels of Pfizer’s announcement that third quarter 2015 revenues increased 4 percent on a standalone basis and totaled $12.1 billion, including a recent acquisition.  Net income was $2.1 billion, or 17 percent of revenue.  R&D expenses for the quarter were $1.7 billion, or 14 percent of total revenue. In other words, Pfizer is hugely profitable but still spends less on R&D than it receives in net revenue. But Pfizer is a leader in crying how unfairly it is taxed.  The company estimated that its effective tax rate on adjusted income for 2015 would be “approximately 25%.”  This is well under the top corporate tax rate of 35 percent in the U.S., but far less than the 12 percent Pfizer would pay in Ireland.  According to Americans for Tax Fairness, Pfizer paid no U.S. income taxes from 2010 to 2012 while earning $43 billion worldwide.  Instead, it received $2.2 billion in federal tax refunds. For some reason, Pfizer believes federal tax treatment is still unfair.

Read more of this post . . .Meaningless “Debates” Over Nothing — Else the GOP’s Sponsors Would Be Exposed

How About Some New SEC Commissioners Outside Wall Street and Washington?

By James A. Kidney

(This commentary was originally published in Wall Street on Parade on June 18, 2015 and has been updated.)

Wonk Warning: If you are not interested in securities law enforcement, skip this. It’s pretty wonkish.

The Wall Street Journal carries an interview with outgoing SEC Commissioner Dan Gallagher in its Sept. 5 weekend edition. It prompts reflection on the types of persons who should fill his vacancy and one other on the SEC. How about some diversity, President Obama? And I’m not talking about race.

Outgoing SEC Comm Dan Gallagher
Dan Gallagher

Of the two vacancies to fill on the five-member Securities and Exchange Commission, one must be a Democrat and the other must be a Republican or independent.  Rather than use these appointments as an opportunity to bring on both real-world experience from finance and open the commissioner ranks beyond Washington and New York, early word is that the likely nominees are from the same old well:  Wall Street lawyers and congressional staffers.  These selections possibly have the virtue of relatively easy confirmation through a recalcitrant Senate, but they are a lost opportunity.

Read more of this post . . .How About Some New SEC Commissioners Outside Wall Street and Washington?

A Necessary Corrective for the SEC?

By James A. Kidney

(This article originally was posted by Wall Street on Parade in December 2015)

          Most of the highlights of my 25-year career as a trial attorney at the Securities and Exchange Commission involve the half dozen or more insider trading cases I tried before juries. I was lead counsel in the very first jury trial the SEC ever brought – an insider trading case in Seattle in 1989. I prevailed on behalf of the SEC in every one of my insider trading trials.

I wish I could say these victories achieved something important for securities enforcement. I doubt that they did. Those cases tried against other than true corporate insiders were largely a waste of government (and my) time. As were the far more numerous such cases which settled without trial, sometimes for substantial sums by any standard, and sometimes by such small sums they were substantial only to the middle class sap who acted on a stock tip and had the misfortune to be persecuted by the SEC.

Read more of this post . . .A Necessary Corrective for the SEC?

%d bloggers like this: