Think Twice Finance

Anatomy of a US Regulatory Scam

Here’s the problem. You’ve got regulatory responsibility for a deteriorating collection of obsolete bank holding companies who have been acquiring each other in one fire sale after another for 15 years. Their strategy to become so large that allowing them to fold would destroy your own credibility has been spectacularly successful.

So you have been quietly bailing them out by allowing them to hide their risks under the regulatory skirt. Particularly problematic is that Congress has demanded an end to accounting flim-flam in the wake of Enron. FASB, thinking a new day has dawned, has demanded that you put a stop to the bank’s share of the flim-flam – the now infamous mortgage conduits. What do you do? Well, you study the matter. You release a temporary comment to the effect that the scam may go on while you study. Then you study some more. While studying you extend the time to perpetrate the scam indefinitely.

Here is a related regulatory submission.

www.fdic.gov/news/news/financial/2004/fil4604a.html