All related to the Balanced Budget Act of 1997, who remembers that?
A recent op-ed in the Wapo:
Chairman of Conservatives for Patients' Rights - Richard Scott:
Meaningful health care reform is needed but only achievable if it is rooted in principles that have proven to work. Any plan that does not will collapse on its own with no one group responsible. And whether it was in his remarks to the American Medical Association or in meetings with congressional leaders, President Obama -- so far -- has embraced principles that do not work.
There is no need for a "public option" to compete with private insurance plans. It will simply run insurance companies out of business and create a government-run health care monopoly. The AMA understands this, which is why it has expressed opposition to versions of a public option.
If the president wants to diminish opposition to his plans, he should focus on increasing competition by, for example, allowing consumers to purchase health insurance across state lines, from anywhere in the country, which Americans do right now when purchasing life insurance.
Well isn’t that something? “There is no need for a "public option" to compete with private insurance plans.”
Monday, June 29, 2009
Thursday, June 11, 2009
Leo Wise- PROSECUTOR DID NOT DO HIS JOB
I want to know what Leo Wise's role is in the Heatlhcare Reform of CBO's analysis?
Will it be like this?
November 2002, FBI raided offices in Dublin Ohio at National Century Financial Enterprise.
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
'Ladies and gentlemen, this is a case of staggering fraud,' Leo Wise said. 'It is one of the largest frauds the FBI has ever investigated.
All of Columbia Homecare Group units were at National Century Financial Enterprises, the Largest fraud case the FBI has ever investigated
Remember – Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott.
Richard rainwater was GW Bush’s partner with the Texas Rangers.
Twelve executives were already found guilty.
ONE month before GW Bush leaves office- December 2008 –
The last person to stand trial was James K Happ, the former CFO of Columbia Homecare Group.
James K Happ, 48, is charged with conspiracy, money-laundering conspiracy and three counts of
wire fraud. Also today, a former friend of Happ's testified that, while working at National Century, Happ boasted that he never could be charged with any fraud because he didn't sign anything.
December 2008 - the largest fraud case the FBI has ever investigated-Only one acquittal-
James K Happ - the ex-CFO of Columbia Homecare Group
Jurors stated; "PROSECUTOR DID NOT DO HIS JOB"
Coincidence? Or just rampant fraud beginning with Healthcare fraud but continuing the fraud within the SEC, Bankruptcy Courts and Financial Fraud- all for the sake of profits to the rich and powerful?
Will it be like this?
November 2002, FBI raided offices in Dublin Ohio at National Century Financial Enterprise.
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
'Ladies and gentlemen, this is a case of staggering fraud,' Leo Wise said. 'It is one of the largest frauds the FBI has ever investigated.
All of Columbia Homecare Group units were at National Century Financial Enterprises, the Largest fraud case the FBI has ever investigated
Remember – Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott.
Richard rainwater was GW Bush’s partner with the Texas Rangers.
Twelve executives were already found guilty.
ONE month before GW Bush leaves office- December 2008 –
The last person to stand trial was James K Happ, the former CFO of Columbia Homecare Group.
James K Happ, 48, is charged with conspiracy, money-laundering conspiracy and three counts of
wire fraud. Also today, a former friend of Happ's testified that, while working at National Century, Happ boasted that he never could be charged with any fraud because he didn't sign anything.
December 2008 - the largest fraud case the FBI has ever investigated-Only one acquittal-
James K Happ - the ex-CFO of Columbia Homecare Group
Jurors stated; "PROSECUTOR DID NOT DO HIS JOB"
Coincidence? Or just rampant fraud beginning with Healthcare fraud but continuing the fraud within the SEC, Bankruptcy Courts and Financial Fraud- all for the sake of profits to the rich and powerful?
Thursday, May 28, 2009
Rick Scott- Conservatives for Patients Rights
Thursday, May 28, 2009
HCA International- Conservatives for Patients Rights
Conservatives for Patients' Rights commercial with the Doctor in England?
2008--- HCA International
Welcome to London's leading private hospitals- HCA International
Why we are London's No. 1 private hospital group- HCA International
� More than 3,000 top London and UK specialists in private practice- HCA International
No. 1 private hospital?- HCA International
This is what STUPID AMERICA gets:
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
1997- As part of Richard Scott's severance package from Columbia he was paid $5.13 million and given a five year consulting contract at $950,000 per year.
1997+5 years consulting =2002
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio.
National Century Financial Enterprises
Guess where ALL of Rick Scott’s Columbia homecare units were? National Century Financial Enterprises.
Largest fraud case the FBI has ever investigated-one acquittal- James K Happ, the ex-CFO of Columbia Homecare Group, Inc.
Jurors stated; "PROSECUTOR DID NOT DO HIS JOB"�hmm
Leo Wise , now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
"Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated. (Leo Wise )
The ONLY acquittal; James K Happ--the CFO of Columbia Homecare Group.
Leo Wise , (now at the ethics CBO) stated "Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated.
Then- low and behold: December 18, 2008 The ONLY acquittal; James K Happ!...belief that federal prosecutors had not done their job, the juror said.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Richard Rainwater, ex-partner of GW Bush with the Rangers
Leo Wise, now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio
"This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America," said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
Richard Scott -- sometimes called "the Bill Gates of health care" -- quit as chairman of Columbia/HCA Healthcare Corp. amid a massive federal investigation into the Medicare billing, physician recruiting and home-care practices of the nation's largest for-profit health care company.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Rainwater also owned a large stake in Magellan Health Care which controls Charter Medical. Magellan, run by Darla Moore, is the largest network of psychiatric hospitals in the country. They are becoming more and more involved in obtaining government money for services formerly not covered as health care, according to Fortune Magazine.
1997 - Columbia/HCA Healthcare Corp. - the nation's largest for-profit health care company
HCA International- Conservatives for Patients Rights
Conservatives for Patients' Rights commercial with the Doctor in England?
2008--- HCA International
Welcome to London's leading private hospitals- HCA International
Why we are London's No. 1 private hospital group- HCA International
� More than 3,000 top London and UK specialists in private practice- HCA International
No. 1 private hospital?- HCA International
This is what STUPID AMERICA gets:
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
1997- As part of Richard Scott's severance package from Columbia he was paid $5.13 million and given a five year consulting contract at $950,000 per year.
1997+5 years consulting =2002
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio.
National Century Financial Enterprises
Guess where ALL of Rick Scott’s Columbia homecare units were? National Century Financial Enterprises.
Largest fraud case the FBI has ever investigated-one acquittal- James K Happ, the ex-CFO of Columbia Homecare Group, Inc.
Jurors stated; "PROSECUTOR DID NOT DO HIS JOB"�hmm
Leo Wise , now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
"Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated. (Leo Wise )
The ONLY acquittal; James K Happ--the CFO of Columbia Homecare Group.
Leo Wise , (now at the ethics CBO) stated "Ladies and gentlemen, this is a case of staggering fraud," 'It is one of the largest frauds the FBI has ever investigated.
Then- low and behold: December 18, 2008 The ONLY acquittal; James K Happ!...belief that federal prosecutors had not done their job, the juror said.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Richard Rainwater, ex-partner of GW Bush with the Rangers
Leo Wise, now at the ethics CBO ---jurors stated 'PROSECUTOR DID NOT DO HIS JOB'
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio
"This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America," said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
Richard Scott -- sometimes called "the Bill Gates of health care" -- quit as chairman of Columbia/HCA Healthcare Corp. amid a massive federal investigation into the Medicare billing, physician recruiting and home-care practices of the nation's largest for-profit health care company.
Columbia/HCA is a partnership of financier Richard Rainwater of Ft. Worth and lawyer Richard Scott. Scott was recently terminated by Darla Moore, the wife of Richard Rainwater.
Rainwater also owned a large stake in Magellan Health Care which controls Charter Medical. Magellan, run by Darla Moore, is the largest network of psychiatric hospitals in the country. They are becoming more and more involved in obtaining government money for services formerly not covered as health care, according to Fortune Magazine.
1997 - Columbia/HCA Healthcare Corp. - the nation's largest for-profit health care company
Monday, May 4, 2009
Bigger than Enron...what about the Tennessee Largest Bankruptcy
Tennessee's Largest Bankruptcy in 1999 held most of NCFE so called purchases.
What about the bankruptcy fraud for the case filed July 29, 1999 in Memphis Bankruptcy Court? All the NCFE Debtor in Posession finance tool used to hide Columbia Homecare Group?
The court room full of lawyers cried FRAUD- the judge forbade the 'F' word in her court.
National Century victims awaiting repayment
Sunday, May 3, 2009 3:22 AM
By John Futty
THE COLUMBUS DISPATCH
When National Century Financial Enterprises collapsed into fraud-fueled bankruptcy, few investors were hit as hard as those in Arizona.
More than 100 of the state's agencies and communities were in an investment pool that held notes worth $131 million in the Dublin-based health-care finance company. Chandler, Ariz., a suburb of Phoenix, took the largest individual hit, losing $13 million.
"There was shock, there was disbelief," said Nachie Marquez, a spokeswoman for the city. "It's taxpayer funds. You put your trust in an investment pool and you think it's safe."
The Arizona investors were among hundreds of institutional victims across the U.S. whose losses totaled $2.38 billion -- the largest known fraud case in the country involving a private company.
The government is "aggressively working" to recover the money from the founders and executives of National Century. They were ordered to pay restitution after they were convicted in federal court in Columbus of conspiracy, securities fraud, mail fraud and money laundering, said Assistant U.S. Attorney Doug Squires.
Last week, U.S. District Judge Algenon L. Marbley issued an order requiring National Century co-founder Lance K. Poulsen, considered the architect of the scheme, and his co-conspirators to forfeit $1.7 billion in assets, the amount prosecutors say represents the proceeds of the conspiracy.
But attorneys for the victims say they are more likely to recover the most significant amounts through lawsuits filed against financial institutions that allegedly are liable for the fraud.
"While we appreciate the government's efforts to squeeze money out of the individual criminal defendants," the financial institutions named in the civil litigation "are able to pay much more than any of these folks have," said Scott Humphries of Houston-based Gibbs & Bruns. The law firm represents investors who lost a total of $1.6 billion.
Investors filed a flurry of lawsuits against National Century, its executives and its financial advisers after the company filed for bankruptcy in 2002. The suits, involving hundreds of plaintiffs in five states, were combined in 2003 and assigned to one federal judge in Columbus.
JPMorgan Chase, a trustee for National Century funds, agreed to pay $425 million to settle its portion of the lawsuit in February 2006, according to an annual report it filed with the Securities and Exchange Commission.
The plaintiffs said JPMorgan Chase was negligent in allowing National Century to make fraudulent transfers among its accounts and for not detecting or revealing the illegal activity to investors.
Settlement money and insurance coverage helped the city of Chandler recoup some of its losses, Marquez said.
"We've recovered about 40 cents on the dollar for our clients," Humphries said.
Civil litigation continues against Credit Suisse, the investment bank that issued National Century's bonds.
Meanwhile, the U.S. attorney's office has collected $2.3 million so far from the criminal defendants, said Fred Alverson, an office spokesman.
The total includes $396,178 that federal agents seized in March from the bank account of Rebecca S. Parrett, a National Century executive who has been a fugitive since shortly after her conviction in March 2008.
The money recovered from the defendants was delivered to the federal clerk's office but has not been distributed to any victims, Alverson said.
National Century purchased the accounts receivable from hospitals, clinics and nursing homes using money obtained by selling asset-backed notes to institutional investors.
Evidence in the criminal trials showed that the company executives diverted money to support their lavish lifestyles and made unsecured loans to the health-care providers, leading to the company's collapse.
The bankruptcy process had begun in 2002 when the FBI obtained a warrant to search the company's Dublin headquarters. Agents collected more than 2,000 boxes of documents and computer files that formed the basis for an investigation involving the FBI, the Internal Revenue Service, U.S. postal inspectors and Immigration and Customs Enforcement.
Institutional investors, which included police and firefighter pension funds, churches, labor unions, cities and counties, and insurance companies, were led to believe the company's bonds were among the safest investments available.
The business model presented to investors was solid but never followed by the company, Squires said.
"(Company executives) did not dip their toes in the pool of fraud, they jumped in from Day One," he said. "From the first investor report, it was fraudulent."
The assets of the conspirators were researched by the federal probation office, but the information is not public record. Defense attorneys have said their clients' assets largely were exhausted while fighting the criminal charges.
Squires said the U.S. attorney's office will attempt to get "every available penny" from those convicted by seizing bank accounts, pensions, 401(k)s and property.
jfutty@dispatch.com
--------------------------------------------------------------------------------
On the Web • Watch a video of Assistant U.S. Attorney Doug Squires at Dispatch.com/video. For complete coverage of the National Century case, visit Dispatch.com/metro.
What about the bankruptcy fraud for the case filed July 29, 1999 in Memphis Bankruptcy Court? All the NCFE Debtor in Posession finance tool used to hide Columbia Homecare Group?
The court room full of lawyers cried FRAUD- the judge forbade the 'F' word in her court.
National Century victims awaiting repayment
Sunday, May 3, 2009 3:22 AM
By John Futty
THE COLUMBUS DISPATCH
When National Century Financial Enterprises collapsed into fraud-fueled bankruptcy, few investors were hit as hard as those in Arizona.
More than 100 of the state's agencies and communities were in an investment pool that held notes worth $131 million in the Dublin-based health-care finance company. Chandler, Ariz., a suburb of Phoenix, took the largest individual hit, losing $13 million.
"There was shock, there was disbelief," said Nachie Marquez, a spokeswoman for the city. "It's taxpayer funds. You put your trust in an investment pool and you think it's safe."
The Arizona investors were among hundreds of institutional victims across the U.S. whose losses totaled $2.38 billion -- the largest known fraud case in the country involving a private company.
The government is "aggressively working" to recover the money from the founders and executives of National Century. They were ordered to pay restitution after they were convicted in federal court in Columbus of conspiracy, securities fraud, mail fraud and money laundering, said Assistant U.S. Attorney Doug Squires.
Last week, U.S. District Judge Algenon L. Marbley issued an order requiring National Century co-founder Lance K. Poulsen, considered the architect of the scheme, and his co-conspirators to forfeit $1.7 billion in assets, the amount prosecutors say represents the proceeds of the conspiracy.
But attorneys for the victims say they are more likely to recover the most significant amounts through lawsuits filed against financial institutions that allegedly are liable for the fraud.
"While we appreciate the government's efforts to squeeze money out of the individual criminal defendants," the financial institutions named in the civil litigation "are able to pay much more than any of these folks have," said Scott Humphries of Houston-based Gibbs & Bruns. The law firm represents investors who lost a total of $1.6 billion.
Investors filed a flurry of lawsuits against National Century, its executives and its financial advisers after the company filed for bankruptcy in 2002. The suits, involving hundreds of plaintiffs in five states, were combined in 2003 and assigned to one federal judge in Columbus.
JPMorgan Chase, a trustee for National Century funds, agreed to pay $425 million to settle its portion of the lawsuit in February 2006, according to an annual report it filed with the Securities and Exchange Commission.
The plaintiffs said JPMorgan Chase was negligent in allowing National Century to make fraudulent transfers among its accounts and for not detecting or revealing the illegal activity to investors.
Settlement money and insurance coverage helped the city of Chandler recoup some of its losses, Marquez said.
"We've recovered about 40 cents on the dollar for our clients," Humphries said.
Civil litigation continues against Credit Suisse, the investment bank that issued National Century's bonds.
Meanwhile, the U.S. attorney's office has collected $2.3 million so far from the criminal defendants, said Fred Alverson, an office spokesman.
The total includes $396,178 that federal agents seized in March from the bank account of Rebecca S. Parrett, a National Century executive who has been a fugitive since shortly after her conviction in March 2008.
The money recovered from the defendants was delivered to the federal clerk's office but has not been distributed to any victims, Alverson said.
National Century purchased the accounts receivable from hospitals, clinics and nursing homes using money obtained by selling asset-backed notes to institutional investors.
Evidence in the criminal trials showed that the company executives diverted money to support their lavish lifestyles and made unsecured loans to the health-care providers, leading to the company's collapse.
The bankruptcy process had begun in 2002 when the FBI obtained a warrant to search the company's Dublin headquarters. Agents collected more than 2,000 boxes of documents and computer files that formed the basis for an investigation involving the FBI, the Internal Revenue Service, U.S. postal inspectors and Immigration and Customs Enforcement.
Institutional investors, which included police and firefighter pension funds, churches, labor unions, cities and counties, and insurance companies, were led to believe the company's bonds were among the safest investments available.
The business model presented to investors was solid but never followed by the company, Squires said.
"(Company executives) did not dip their toes in the pool of fraud, they jumped in from Day One," he said. "From the first investor report, it was fraudulent."
The assets of the conspirators were researched by the federal probation office, but the information is not public record. Defense attorneys have said their clients' assets largely were exhausted while fighting the criminal charges.
Squires said the U.S. attorney's office will attempt to get "every available penny" from those convicted by seizing bank accounts, pensions, 401(k)s and property.
jfutty@dispatch.com
--------------------------------------------------------------------------------
On the Web • Watch a video of Assistant U.S. Attorney Doug Squires at Dispatch.com/video. For complete coverage of the National Century case, visit Dispatch.com/metro.
Tuesday, April 28, 2009
PAUL B. FARRELL
20 reasons new megabubble pops in 2011
Greed blinded us to subprime meltdown, it'll blind us next time too
By Paul B. Farrell, MarketWatch
Last update: 7:31 p.m. EDT June 2, 2008ARROYO GRANDE, Calif. (MarketWatch) -- You think I'm drinking that famous Beltway Kool-Aid, maybe because I'm predicting another meltdown coming in 2011? Well, you're being served from the same punch bowl, my friends.
Wall Street, Washington and the Fed are all praying the credit crisis is under control. Unfortunately, all their happy-talking is just a lot of hype, to hide their next bubble.
World markets are headed into another meltdown by the end of the first term of the next president ... and you won't even hear it coming under all the happy-talk.
Cycles happen. Bubbles blow, pop, meltdowns happen. Significantly, they're getting bigger and more frequent. Think 1987, 2000, 2007 -- the next in 2011. All the happy-talk from Washington and Wall Street gurus can't start the bull before it's time.
Nor will a lot of non-happy-talker warnings make a bubble burst early.
For example, two years ago I analyzed the 2000-2002 bear phase of "The Cycle." We reported on 16 reasons why all the happy-talk failed to restart the bull market during that 30-month recession, while investors slowly lost $8 trillion.
Now you'll see how all the warnings of a housing bubble and a coming meltdown also had no effect on the 2004-2007 bull phase of "The Cycle."
Why? Because bull/bear, bubble/bust, expansion/recession cycles have a natural pattern that ebbs and flows on their own time, making fools of all gurus predictions. And all the happy-talk and not-so-happy-talk in the world has no effect: Happy-talk won't restart a bull. Nor can not-so-happy-talk warnings puncture a bubble. Cycles have lives of their own, they mature and die unpredictable, age and pop when they feel like it.
Another will happen, soon. A busted bubble and a new meltdown coming by the end of the next presidential term. Why then? Because the last few occurred with increasing frequency, separated by thirteen years then seven, and the next will come within four years. These trends are obvious from studying the works of masters like former Commerce Department chief economist Ed Dewey's classics, including his Cycles, the Mysterious Forces that Trigger Events.
Here's my list of warnings from 20 not-so-happy-talkers. Notice how they were as unable to pop the 2004-2007 bubble before its time, as the happy-talkers were unable to restart a bull during the 2000-2002 recession:
2000: Fed governor warns Greenspan. Former Federal Reserve governor Ed Gramlich served 1997-2005. He was warning Alan Greenspan as early as 2000 about the coming subprime crisis. See his book "Subprime Mortgages: America's Latest Boom & Bust."
2004: Nixon's secretary of commerce. In "Running on Empty," Peter Peterson says: "This administration and the Republican Congress have presided over the biggest, most reckless deterioration of America's finances in history" creating a "bankrupt nation."
June 2005: The Economist. Cover story two years before collapse: "The worldwide rise in house prices is the biggest bubble in history. ... Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000." Values increased 75% worldwide in five short years. "Never before have real house prices risen so fast, for so long, in so many countries ... This is the biggest bubble in history."
January 2006: Fortune. Interview with Richard Rainwater. "This is the first scenario I've seen where I question the survivability of mankind." He's 112th on the Forbes 400, worth $2.3 billion: "Most people invest and then sit around worrying what the next blowup will be. I do the opposite. I wait for the blowup, then invest." He waited with a half-billion-dollar war chest.
February 2006: Faber's Market Newsletter. "Correction Time is Here!" was Faber's headline: "If we combine the overbought condition of the stock market, investors' sentiment high optimism, equity mutual funds' low cash positions, and also heavy foreign buying, we have all the ingredients for a stock market correction in the US getting underway very shortly."
March 2006: Forbes. Economist Gary Shilling wrote: "The current housing weakness will develop into a full-scale rout ... It's clearly a bubble and is nationwide ... The house-price collapse will induce a painful recession that will send U.S. stocks into a tailspin ... China will suffer a hard landing ... and weakness in the U.S. and China will spread worldwide."
March 2006: "Sell Now." Former Goldman Sachs investment banker John Talbott's book: "Sell Now! The End of the Housing Bubble." His statistics covered America's top 130 metropolitan areas. The top 40 were facing an average 47.2% decline.
March 2006: Pimco Investment Outlook. In the quarterly newsletter, "The Gang That Couldn't Shoot Straight," Pimco's boss Bill Gross took a big swipe at a presidential economic report: "It's not so much that the report was a compilation of untruths or even half-truths. It's just that it failed to tell the truth," and hid the fact that Washington's "borrowed from the future to pay for today's party."
March 2006: Buffett in Fortune. Remember Warren Buffett's famous farmer story: "Our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than they produce -- that's the trade deficit -- we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own."
May 2006: Harper's magazine. Michael Hudson wrote an article, "Guide to the Coming Real Estate Collapse," analyzing 20 trends: "Taken together, these factors will further shrink the 'real' economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagflation or worse."
August 2006: Wall Street Journal. Countrywide's CEO Angelo Mozilo: "I've never seen a 'soft-landing' in 53 years, so we have a ways to go before this levels out. I have to prepare the company for the worst that can happen." He did little. A year later, he was in full denial mode.
November 2006: Fortune. Cover story asks: "Can the Economy Survive the Housing Bust?" They said "the correlation between current builder confidence and future stock market returns over the past 10 years is downright unnerving." The NAHB confidence index is a leading indicator because the stock market inevitably follows in lockstep a year later. The index had "plummeted 54%."
November 2006: The Economist. In a cover story: "The Dark Side of Debt," Timothy Geithner, president of the Federal Reserve Bank of New York, said in a Hong Kong speech: "The same factors that have reduced the probability of future systemic events, however, may amplify the damage caused by, and complicate the management of, very severe financial shocks. The changes that have reduced the vulnerability of the system to smaller shocks may increase the severity of the larger ones." Geithner later negotiated the Bear Sterns collapse.
January 2007: Los Angeles Times. Schwab "averaged 242,300 trades a day the first nine months of 2006. That was up 29% from the same period a year earlier, and a click above its 242,000 peak in 2000"and the last collapse.
April 2007. GMO Quarterly Newsletter. GMO manages $145 billion. CEO Jeremy Grantham wrote: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it's bubble time. ... Everyone, everywhere is reinforcing one another. ... The bursting of the bubble will be across all countries and all assets ... no similar global event has occurred before."
June 2007: Shilling's Insight Newsletter. "Just as the U.S. housing bubble is bursting, speculation elsewhere will come to a violent end if history is any guide. ... Richard Bookstaber, who designed various derivative-laden strategies over the years, now fears that financial derivatives and hedge funds, focal points of today's huge leverage, will trigger a financial meltdown."
June 2007: Pop! Then it happened! And Dan Gross had a well-timed book: "Pop! Why Bubbles are Great for the Economy." He says bubbles work miracles, so just let them pop, Pop, POP!
July 2007: Fortune. As the contagion spread, Treasury Secretary and former Goldman Sachs CEO Henry Paulson tells Fortune "this is far and away the strongest global economy I've seen in my business lifetime." He's repeated the same remark often since. Earlier, he and Fed Chairman Ben Bernanke said the subprime crisis was "contained." Clueless, Bernanke assembled hedge fund managers, asking them to explain the global derivatives market.
August 2007. Wall Street Journal. Former SEC Chairman Arthur Levitt wrote on the Journal's Op-Ed page: "In terms of market meltdowns and the degree of pain inflicted on the financial system, the subprime mortgage crisis has the potential to rival just about anything in recent financial history, from the savings and loan crisis of the late 1980s to the post-Enron turndown in the beginning of this decade."
August 2007: 60 Minutes. While Paulson and Bernanke were claiming the subprime crisis was "contained," the chief architect of the subprime-housing meltdown, Alan Greenspan, was on tour, making millions, hustling his new book, "The Age of Turbulence."
On 60 Minutes he made a totally incredulous denial that he "really didn't get it until very late." He "didn't get it?" Yes, and to this day Greenspan rigidly maintains his blind faith in the free-market myth.
His latest argument: Bubbles are a function of innovation, like the dot-coms and subprime derivatives. Regulators should trust the free markets, never micromanage innovation.
But what blinded Greenspan? His ideology? A brain quirk? Genetics? The president's reelection? It doesn't matter why: Whatever it was, it's bad news for America. Why? Because if the leader of America's monetary system for 18 years "doesn't get" that he was also the chief architect of the biggest economic blunder in American history since the 1929 Crash, can we ever trust any future leaders?
Scary, isn't it! How can we have faith in the next guy? Are our leaders the problem? Or is the system broken? Is capitalism itself at risk when the best and brightest are "blinded," unable to see disasters until it's too late?
But that is our "system," and in this system our leaders inevitably morph into bulls, ideologically blinded by their power. And like real bulls, all they see is red. So eventually ... they must run onto a sword, and self-destruct!
20 reasons new megabubble pops in 2011
Greed blinded us to subprime meltdown, it'll blind us next time too
By Paul B. Farrell, MarketWatch
Last update: 7:31 p.m. EDT June 2, 2008ARROYO GRANDE, Calif. (MarketWatch) -- You think I'm drinking that famous Beltway Kool-Aid, maybe because I'm predicting another meltdown coming in 2011? Well, you're being served from the same punch bowl, my friends.
Wall Street, Washington and the Fed are all praying the credit crisis is under control. Unfortunately, all their happy-talking is just a lot of hype, to hide their next bubble.
World markets are headed into another meltdown by the end of the first term of the next president ... and you won't even hear it coming under all the happy-talk.
Cycles happen. Bubbles blow, pop, meltdowns happen. Significantly, they're getting bigger and more frequent. Think 1987, 2000, 2007 -- the next in 2011. All the happy-talk from Washington and Wall Street gurus can't start the bull before it's time.
Nor will a lot of non-happy-talker warnings make a bubble burst early.
For example, two years ago I analyzed the 2000-2002 bear phase of "The Cycle." We reported on 16 reasons why all the happy-talk failed to restart the bull market during that 30-month recession, while investors slowly lost $8 trillion.
Now you'll see how all the warnings of a housing bubble and a coming meltdown also had no effect on the 2004-2007 bull phase of "The Cycle."
Why? Because bull/bear, bubble/bust, expansion/recession cycles have a natural pattern that ebbs and flows on their own time, making fools of all gurus predictions. And all the happy-talk and not-so-happy-talk in the world has no effect: Happy-talk won't restart a bull. Nor can not-so-happy-talk warnings puncture a bubble. Cycles have lives of their own, they mature and die unpredictable, age and pop when they feel like it.
Another will happen, soon. A busted bubble and a new meltdown coming by the end of the next presidential term. Why then? Because the last few occurred with increasing frequency, separated by thirteen years then seven, and the next will come within four years. These trends are obvious from studying the works of masters like former Commerce Department chief economist Ed Dewey's classics, including his Cycles, the Mysterious Forces that Trigger Events.
Here's my list of warnings from 20 not-so-happy-talkers. Notice how they were as unable to pop the 2004-2007 bubble before its time, as the happy-talkers were unable to restart a bull during the 2000-2002 recession:
2000: Fed governor warns Greenspan. Former Federal Reserve governor Ed Gramlich served 1997-2005. He was warning Alan Greenspan as early as 2000 about the coming subprime crisis. See his book "Subprime Mortgages: America's Latest Boom & Bust."
2004: Nixon's secretary of commerce. In "Running on Empty," Peter Peterson says: "This administration and the Republican Congress have presided over the biggest, most reckless deterioration of America's finances in history" creating a "bankrupt nation."
June 2005: The Economist. Cover story two years before collapse: "The worldwide rise in house prices is the biggest bubble in history. ... Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000." Values increased 75% worldwide in five short years. "Never before have real house prices risen so fast, for so long, in so many countries ... This is the biggest bubble in history."
January 2006: Fortune. Interview with Richard Rainwater. "This is the first scenario I've seen where I question the survivability of mankind." He's 112th on the Forbes 400, worth $2.3 billion: "Most people invest and then sit around worrying what the next blowup will be. I do the opposite. I wait for the blowup, then invest." He waited with a half-billion-dollar war chest.
February 2006: Faber's Market Newsletter. "Correction Time is Here!" was Faber's headline: "If we combine the overbought condition of the stock market, investors' sentiment high optimism, equity mutual funds' low cash positions, and also heavy foreign buying, we have all the ingredients for a stock market correction in the US getting underway very shortly."
March 2006: Forbes. Economist Gary Shilling wrote: "The current housing weakness will develop into a full-scale rout ... It's clearly a bubble and is nationwide ... The house-price collapse will induce a painful recession that will send U.S. stocks into a tailspin ... China will suffer a hard landing ... and weakness in the U.S. and China will spread worldwide."
March 2006: "Sell Now." Former Goldman Sachs investment banker John Talbott's book: "Sell Now! The End of the Housing Bubble." His statistics covered America's top 130 metropolitan areas. The top 40 were facing an average 47.2% decline.
March 2006: Pimco Investment Outlook. In the quarterly newsletter, "The Gang That Couldn't Shoot Straight," Pimco's boss Bill Gross took a big swipe at a presidential economic report: "It's not so much that the report was a compilation of untruths or even half-truths. It's just that it failed to tell the truth," and hid the fact that Washington's "borrowed from the future to pay for today's party."
March 2006: Buffett in Fortune. Remember Warren Buffett's famous farmer story: "Our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than they produce -- that's the trade deficit -- we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own."
May 2006: Harper's magazine. Michael Hudson wrote an article, "Guide to the Coming Real Estate Collapse," analyzing 20 trends: "Taken together, these factors will further shrink the 'real' economy, drive down those already declining real wages, and push our debt-ridden economy into Japan-style stagflation or worse."
August 2006: Wall Street Journal. Countrywide's CEO Angelo Mozilo: "I've never seen a 'soft-landing' in 53 years, so we have a ways to go before this levels out. I have to prepare the company for the worst that can happen." He did little. A year later, he was in full denial mode.
November 2006: Fortune. Cover story asks: "Can the Economy Survive the Housing Bust?" They said "the correlation between current builder confidence and future stock market returns over the past 10 years is downright unnerving." The NAHB confidence index is a leading indicator because the stock market inevitably follows in lockstep a year later. The index had "plummeted 54%."
November 2006: The Economist. In a cover story: "The Dark Side of Debt," Timothy Geithner, president of the Federal Reserve Bank of New York, said in a Hong Kong speech: "The same factors that have reduced the probability of future systemic events, however, may amplify the damage caused by, and complicate the management of, very severe financial shocks. The changes that have reduced the vulnerability of the system to smaller shocks may increase the severity of the larger ones." Geithner later negotiated the Bear Sterns collapse.
January 2007: Los Angeles Times. Schwab "averaged 242,300 trades a day the first nine months of 2006. That was up 29% from the same period a year earlier, and a click above its 242,000 peak in 2000"and the last collapse.
April 2007. GMO Quarterly Newsletter. GMO manages $145 billion. CEO Jeremy Grantham wrote: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it's bubble time. ... Everyone, everywhere is reinforcing one another. ... The bursting of the bubble will be across all countries and all assets ... no similar global event has occurred before."
June 2007: Shilling's Insight Newsletter. "Just as the U.S. housing bubble is bursting, speculation elsewhere will come to a violent end if history is any guide. ... Richard Bookstaber, who designed various derivative-laden strategies over the years, now fears that financial derivatives and hedge funds, focal points of today's huge leverage, will trigger a financial meltdown."
June 2007: Pop! Then it happened! And Dan Gross had a well-timed book: "Pop! Why Bubbles are Great for the Economy." He says bubbles work miracles, so just let them pop, Pop, POP!
July 2007: Fortune. As the contagion spread, Treasury Secretary and former Goldman Sachs CEO Henry Paulson tells Fortune "this is far and away the strongest global economy I've seen in my business lifetime." He's repeated the same remark often since. Earlier, he and Fed Chairman Ben Bernanke said the subprime crisis was "contained." Clueless, Bernanke assembled hedge fund managers, asking them to explain the global derivatives market.
August 2007. Wall Street Journal. Former SEC Chairman Arthur Levitt wrote on the Journal's Op-Ed page: "In terms of market meltdowns and the degree of pain inflicted on the financial system, the subprime mortgage crisis has the potential to rival just about anything in recent financial history, from the savings and loan crisis of the late 1980s to the post-Enron turndown in the beginning of this decade."
August 2007: 60 Minutes. While Paulson and Bernanke were claiming the subprime crisis was "contained," the chief architect of the subprime-housing meltdown, Alan Greenspan, was on tour, making millions, hustling his new book, "The Age of Turbulence."
On 60 Minutes he made a totally incredulous denial that he "really didn't get it until very late." He "didn't get it?" Yes, and to this day Greenspan rigidly maintains his blind faith in the free-market myth.
His latest argument: Bubbles are a function of innovation, like the dot-coms and subprime derivatives. Regulators should trust the free markets, never micromanage innovation.
But what blinded Greenspan? His ideology? A brain quirk? Genetics? The president's reelection? It doesn't matter why: Whatever it was, it's bad news for America. Why? Because if the leader of America's monetary system for 18 years "doesn't get" that he was also the chief architect of the biggest economic blunder in American history since the 1929 Crash, can we ever trust any future leaders?
Scary, isn't it! How can we have faith in the next guy? Are our leaders the problem? Or is the system broken? Is capitalism itself at risk when the best and brightest are "blinded," unable to see disasters until it's too late?
But that is our "system," and in this system our leaders inevitably morph into bulls, ideologically blinded by their power. And like real bulls, all they see is red. So eventually ... they must run onto a sword, and self-destruct!
Morgan Stanley Real Estate Acquires Crescent Real Estate Equities
Morgan Stanley Real Estate Acquires Crescent Real Estate Equities (CEI) for $22.80/Sh
May 22, 2007 5:04 PM EDT
Crescent Real Estate Equities Company (NYSE: CEI) entered into a definitive agreement pursuant to which funds managed by Morgan Stanley Real Estate will acquire Crescent in an all cash transaction for $22.80 per share and the assumption of liabilities for total consideration of approximately $6.5 billion. Shares of Crescent Real Estate Equities closed at $21.62 today.
May 22, 2007 5:04 PM EDT
Crescent Real Estate Equities Company (NYSE: CEI) entered into a definitive agreement pursuant to which funds managed by Morgan Stanley Real Estate will acquire Crescent in an all cash transaction for $22.80 per share and the assumption of liabilities for total consideration of approximately $6.5 billion. Shares of Crescent Real Estate Equities closed at $21.62 today.
Toxic Corporate Real Estate
This occurred in 2007?
Morgan Stanley Real Estate announced today that it has completed the previously announced acquisition of Crescent Real Estate Equities Company (CEI) for $6.5 billion.
All of Crescent’s outstanding shares of common stock have been converted to the right to receive $22.80 per share in cash without interest and less any applicable withholding for each share of common stock.
“We are excited to acquire the unique portfolio of properties that Crescent put together,” said Michael Franco, Managing Director, Morgan Stanley Real Estate. “We believe that the depth and breadth of our real estate investing platform will enable us to maximize the value of the diverse holdings of office, destination resorts and resort residential.”
With the acquisition of Crescent, Morgan Stanley Real Estate adds to its portfolio 54premier office buildings totaling 23 million square feet located in select markets across the United States with major concentrations in Dallas, Houston, Denver, Miami, and Las Vegas. In addition, it gains investments in resort residential developments in locations such as Scottsdale, AZ; Vail Valley, CO; and Lake Tahoe, CA and in the wellness lifestyle leader, Canyon Ranch®.
Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day acting as legal counsel. Greenhill & Co., LLC acted as the financial advisor to Crescent with Pillsbury Winthrop Shaw Pittman LLP acting as legal counsel.
Morgan Stanley Real Estate is comprised of three major global businesses: Investing, Banking and Lending. Since 1991, Morgan Stanley Real Estate has acquired $121.5 billion of real estate assets worldwide and currently manages $55.6 billion in real estate assets on behalf of its clients. A complete range of market-leading investment banking services for real estate clients include advice on strategy, mergers, acquisitions and restructurings, as well as underwriting public and private debt and equity financings. As a global leader in real estate lending, Morgan Stanley has offered approximately $156.0 billion of CMBS through the capital markets since 1997, including $35.5 billion in 2006. For more information about Morgan Stanley Real Estate, please visit www.morganstanley.com/realestate.
Morgan Stanley (MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 32 countries. For further information about Morgan Stanley, please visit
www.morganstanley.com.
Contacts:
For Morgan Stanley Real Estate
Media Relations:
Alyson D’Ambrisi, 212-762-7006
Morgan Stanley Real Estate announced today that it has completed the previously announced acquisition of Crescent Real Estate Equities Company (CEI) for $6.5 billion.
All of Crescent’s outstanding shares of common stock have been converted to the right to receive $22.80 per share in cash without interest and less any applicable withholding for each share of common stock.
“We are excited to acquire the unique portfolio of properties that Crescent put together,” said Michael Franco, Managing Director, Morgan Stanley Real Estate. “We believe that the depth and breadth of our real estate investing platform will enable us to maximize the value of the diverse holdings of office, destination resorts and resort residential.”
With the acquisition of Crescent, Morgan Stanley Real Estate adds to its portfolio 54premier office buildings totaling 23 million square feet located in select markets across the United States with major concentrations in Dallas, Houston, Denver, Miami, and Las Vegas. In addition, it gains investments in resort residential developments in locations such as Scottsdale, AZ; Vail Valley, CO; and Lake Tahoe, CA and in the wellness lifestyle leader, Canyon Ranch®.
Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day acting as legal counsel. Greenhill & Co., LLC acted as the financial advisor to Crescent with Pillsbury Winthrop Shaw Pittman LLP acting as legal counsel.
Morgan Stanley Real Estate is comprised of three major global businesses: Investing, Banking and Lending. Since 1991, Morgan Stanley Real Estate has acquired $121.5 billion of real estate assets worldwide and currently manages $55.6 billion in real estate assets on behalf of its clients. A complete range of market-leading investment banking services for real estate clients include advice on strategy, mergers, acquisitions and restructurings, as well as underwriting public and private debt and equity financings. As a global leader in real estate lending, Morgan Stanley has offered approximately $156.0 billion of CMBS through the capital markets since 1997, including $35.5 billion in 2006. For more information about Morgan Stanley Real Estate, please visit www.morganstanley.com/realestate.
Morgan Stanley (MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 600 offices in 32 countries. For further information about Morgan Stanley, please visit
www.morganstanley.com.
Contacts:
For Morgan Stanley Real Estate
Media Relations:
Alyson D’Ambrisi, 212-762-7006
Rainwater's 'Single Worst Investment' Toxic Real Estate
Renowned investor Richard Rainwater saw 70% of the value drain out of his $100 million investment in Thornburg Mortgage
by Christopher Palmeri
Sometimes even billionaires make bone-headed moves. Richard Rainwater, the legendary Fort Worth investor, has seen a 70% decline in just two months on some $100 million he put into troubled home lender Thornburg Mortgage (TMA). Rainwater calls it the "the single worst investment of my career."
The 65-year-old-financier, with a fortune estimated at $3 billion by Forbes magazine, told BusinessWeek.com he was watching TV last year when he saw Thornburg's chief executive, Larry Goldstone, speaking about the mortgage crisis. "He seemed like a bright guy," Rainwater recalls. Rainwater says he then checked with some of his investment industry sources who said they considered Thornburg a "capable group."
Buying into the Jumbo MarketIn January Rainwater plunked down about $100 million to buy roughly 5 million shares of the Santa Fe (N.M.) company's preferred stock. Rainwater bought shares both in a public offering that Thornburg had arranged and on the open market. He says his average cost was 21.45 a share. The preferred stock trades today at 6.25 per share; Thornburg common shares closed Mar. 13 at 2.26, down from 28 in May.
Filings with the Securities & Exchange Commission show that Rainwater and his wife, Darla Moore, own preferred stock convertible into 9.3 million shares of Thornburg's common stock, about 6% of the company's shares outstanding. By the time Rainwater invested, Thornburg was already in trouble. That was reflected in the fact that Thornburg was offering a dividend on the preferred shares of 10%. The company declined to comment on the issue.
Founded in 1993 by the current chairman, Garrett Thornburg, the company specializes in making "jumbo" single-family home loans to what it calls "superprime" customers. Those are individuals with credit scores of 744 or higher. Some 97% of its investments are in loans rated AA or higher by ratings agencies. Thornburg says just 0.4% of its loans are delinquent, compared to an industry average of more than 4%.
Rainwater says it was the high-end nature of Thornburg's business that attracted him to the company. "Housing values are suffering everywhere," he says. "But at the high end things are holding up better." On its Web site Thornburg is offering mortgage rates as low as 7.9%.
Crumbling Credit Markets
Last summer Thornburg averted greater financial difficulties by selling $20 billion of its assets. In recent weeks, though, its problems have escalated as lenders began requiring the company to put up more capital to back its mortgage investments. The company says it is presently negotiating with creditors who want $600 million in additional financing.
The problem, says Keefe, Bruyette & Woods (KBW) analyst Bose George, is that Thornburg has been funding its business with short-term loans. That worked when capital was easy to find. "They have one of the best balance sheets on the asset side," George says. "The problem is in the market—it's hard to borrow money." George says he sees the market shifting away from independent lenders such as Countrywide Financial (CFC) and Thornburg. In the future, "mortgage lending is going to be done by banks," he says. "Nonbanks have turned out to be extremely vulnerable to this kind of downturn."
Win Some, Lose Some
Rainwater is famous for scooping up assets in troubled companies. As a chief adviser to Fort Worth's billionaire Bass brothers in the 1980s, he directed the family to invest in then-floundering Walt Disney (DIS). That company went on to great success under Chief Executive Michael Eisner. In the 1990s, Rainwater plunged into oil and gas companies then struggling with low commodities prices. He invested in the Hunt brothers' bankrupt Penrod Drilling, since merged into Ensco International (ESV), and T. Boone Pickens' Mesa Petroleum, now a part of Pioneer Natural Resources (PXD). "Oil I understand," Rainwater says. "Interest rates…?"
Last August Rainwater sold Crescent Real Estate Equities to Morgan Stanley (MS) for $6.5 billion. Crescent was a big owner of office buildings. Rainwater sold at what now looks to have been the peak of the recent commercial real estate cycle. "It just seemed like the right time to do it," he says, with the prices paid for office property working out to yield just 4% to 5% for buyers.
Rainwater says his portfolio is still up for the year thanks to his energy holdings, which include blue chip oil and gas companies such as Chevron (CVX) and ConocoPhillips (COP).
Nonetheless, he says, the losses so far on Thornburg "still don't feel good."
Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau
by Christopher Palmeri
Sometimes even billionaires make bone-headed moves. Richard Rainwater, the legendary Fort Worth investor, has seen a 70% decline in just two months on some $100 million he put into troubled home lender Thornburg Mortgage (TMA). Rainwater calls it the "the single worst investment of my career."
The 65-year-old-financier, with a fortune estimated at $3 billion by Forbes magazine, told BusinessWeek.com he was watching TV last year when he saw Thornburg's chief executive, Larry Goldstone, speaking about the mortgage crisis. "He seemed like a bright guy," Rainwater recalls. Rainwater says he then checked with some of his investment industry sources who said they considered Thornburg a "capable group."
Buying into the Jumbo MarketIn January Rainwater plunked down about $100 million to buy roughly 5 million shares of the Santa Fe (N.M.) company's preferred stock. Rainwater bought shares both in a public offering that Thornburg had arranged and on the open market. He says his average cost was 21.45 a share. The preferred stock trades today at 6.25 per share; Thornburg common shares closed Mar. 13 at 2.26, down from 28 in May.
Filings with the Securities & Exchange Commission show that Rainwater and his wife, Darla Moore, own preferred stock convertible into 9.3 million shares of Thornburg's common stock, about 6% of the company's shares outstanding. By the time Rainwater invested, Thornburg was already in trouble. That was reflected in the fact that Thornburg was offering a dividend on the preferred shares of 10%. The company declined to comment on the issue.
Founded in 1993 by the current chairman, Garrett Thornburg, the company specializes in making "jumbo" single-family home loans to what it calls "superprime" customers. Those are individuals with credit scores of 744 or higher. Some 97% of its investments are in loans rated AA or higher by ratings agencies. Thornburg says just 0.4% of its loans are delinquent, compared to an industry average of more than 4%.
Rainwater says it was the high-end nature of Thornburg's business that attracted him to the company. "Housing values are suffering everywhere," he says. "But at the high end things are holding up better." On its Web site Thornburg is offering mortgage rates as low as 7.9%.
Crumbling Credit Markets
Last summer Thornburg averted greater financial difficulties by selling $20 billion of its assets. In recent weeks, though, its problems have escalated as lenders began requiring the company to put up more capital to back its mortgage investments. The company says it is presently negotiating with creditors who want $600 million in additional financing.
The problem, says Keefe, Bruyette & Woods (KBW) analyst Bose George, is that Thornburg has been funding its business with short-term loans. That worked when capital was easy to find. "They have one of the best balance sheets on the asset side," George says. "The problem is in the market—it's hard to borrow money." George says he sees the market shifting away from independent lenders such as Countrywide Financial (CFC) and Thornburg. In the future, "mortgage lending is going to be done by banks," he says. "Nonbanks have turned out to be extremely vulnerable to this kind of downturn."
Win Some, Lose Some
Rainwater is famous for scooping up assets in troubled companies. As a chief adviser to Fort Worth's billionaire Bass brothers in the 1980s, he directed the family to invest in then-floundering Walt Disney (DIS). That company went on to great success under Chief Executive Michael Eisner. In the 1990s, Rainwater plunged into oil and gas companies then struggling with low commodities prices. He invested in the Hunt brothers' bankrupt Penrod Drilling, since merged into Ensco International (ESV), and T. Boone Pickens' Mesa Petroleum, now a part of Pioneer Natural Resources (PXD). "Oil I understand," Rainwater says. "Interest rates…?"
Last August Rainwater sold Crescent Real Estate Equities to Morgan Stanley (MS) for $6.5 billion. Crescent was a big owner of office buildings. Rainwater sold at what now looks to have been the peak of the recent commercial real estate cycle. "It just seemed like the right time to do it," he says, with the prices paid for office property working out to yield just 4% to 5% for buyers.
Rainwater says his portfolio is still up for the year thanks to his energy holdings, which include blue chip oil and gas companies such as Chevron (CVX) and ConocoPhillips (COP).
Nonetheless, he says, the losses so far on Thornburg "still don't feel good."
Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau
Here come the Real Estate Toxic Mortgages...
Crescent Real Estate Equities Co. (NYSE: CEI) has finally found a buyer, and one that seems to like its mixed-use approach. Morgan Stanley Real Estate has agreed to acquire the Fort Worth, Texas-based REIT for a deal that totals $6.5 billion, including the assumption of debt.
Crescent, a mixed-use REIT owned by Texas billionaire Richard Rainwater, was in the midst of morphing itself into a pure-play office REIT. After evaluating its strategic options, the company came to the conclusion that it could "take advantage of the void left by rabid industry consolidation" as a remade office REIT. More likely, it was positioning itself better for an outright sale.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal
Prior to the deal with Morgan Stanley, Crescent had set into motion a series of deals, including the $550 million sale of its six hotels plus the 343,664-square-foot Austin Centre office building for $75.5 million to Walton Street Capital LLC in March. It also struck a deal recently to sell a portfolio of Dallas-area office assets to a venture between Trimarchi Management and UBS for about $420 million, according to published reports. Crescent also sold the historic Exchange Building in Seattle for $80.6 million to a joint venture between GE Asset Management and The Ashforth Co.
The REIT was preparing to shop its resort and residential development business through JP Morgan and was still evaluating plans for Canyon Ranch, a wellness lifestyle company owned in partnership with Mel Zuckerman and Jerry Cohen.
It's not clear what Morgan Stanley will do with the various pieces of Crescent going forward. The financial services firm considers Crescent's "unique" platform complimentary to its own wide range of business lines.
Morgan Stanley has certainly cast a wide net for real estate acquisitions, gobbling up properties and real estate companies in all sectors of the industry, and has been a major force in the take-private deals that have fueled the hot investment sales market over the past two years.
Last year, it acquired Town and Country Trust, an apartment REIT, through a venture with Onex Real Estate and Sawyer Realty Holdings LLC, in a deal valued at $1.5 billion. Also in 2006, it paid $1.9 billion to acquire Glenborough Realty Trust, a San Mateo, CA-based office REIT. It recently acquired CNL Hotels & Resorts for about $6.6 billion, including the sale of a portion of the properties to Ashford Hospitality Trust.
The financial firm has also reached into its deep pockets for a plethora of property acquisitions lately. It recently paid about $2.43 billion to buy a portfolio of former EOP assets in San Francisco from Blackstone. It also acquired a 28-story office tower at 2 Park Ave. in Manhattan for $519 million. On the retail side, Morgan Stanley recently formed a joint venture with Inland Western Retail Real Estate Trust Inc. to acquire and manage retail properties in target markets across the U.S. with a goal of building a billion-dollar portfolio.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal counsel. Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day providing legal counsel.
Crescent, a mixed-use REIT owned by Texas billionaire Richard Rainwater, was in the midst of morphing itself into a pure-play office REIT. After evaluating its strategic options, the company came to the conclusion that it could "take advantage of the void left by rabid industry consolidation" as a remade office REIT. More likely, it was positioning itself better for an outright sale.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal
Prior to the deal with Morgan Stanley, Crescent had set into motion a series of deals, including the $550 million sale of its six hotels plus the 343,664-square-foot Austin Centre office building for $75.5 million to Walton Street Capital LLC in March. It also struck a deal recently to sell a portfolio of Dallas-area office assets to a venture between Trimarchi Management and UBS for about $420 million, according to published reports. Crescent also sold the historic Exchange Building in Seattle for $80.6 million to a joint venture between GE Asset Management and The Ashforth Co.
The REIT was preparing to shop its resort and residential development business through JP Morgan and was still evaluating plans for Canyon Ranch, a wellness lifestyle company owned in partnership with Mel Zuckerman and Jerry Cohen.
It's not clear what Morgan Stanley will do with the various pieces of Crescent going forward. The financial services firm considers Crescent's "unique" platform complimentary to its own wide range of business lines.
Morgan Stanley has certainly cast a wide net for real estate acquisitions, gobbling up properties and real estate companies in all sectors of the industry, and has been a major force in the take-private deals that have fueled the hot investment sales market over the past two years.
Last year, it acquired Town and Country Trust, an apartment REIT, through a venture with Onex Real Estate and Sawyer Realty Holdings LLC, in a deal valued at $1.5 billion. Also in 2006, it paid $1.9 billion to acquire Glenborough Realty Trust, a San Mateo, CA-based office REIT. It recently acquired CNL Hotels & Resorts for about $6.6 billion, including the sale of a portion of the properties to Ashford Hospitality Trust.
The financial firm has also reached into its deep pockets for a plethora of property acquisitions lately. It recently paid about $2.43 billion to buy a portfolio of former EOP assets in San Francisco from Blackstone. It also acquired a 28-story office tower at 2 Park Ave. in Manhattan for $519 million. On the retail side, Morgan Stanley recently formed a joint venture with Inland Western Retail Real Estate Trust Inc. to acquire and manage retail properties in target markets across the U.S. with a goal of building a billion-dollar portfolio.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal counsel. Morgan Stanley acted as financial advisor to Morgan Stanley Real Estate with Goodwin Procter LLP and Jones Day providing legal counsel.
Morgan Stanley Real Estate - Corporate Real Estate Toxic Mortgages
January 2006: Fortune. Interview with Richard Rainwater. "This is the first scenario I've seen where I question the survivability of mankind." He's 112th on the Forbes 400, worth $2.3 billion: "Most people invest and then sit around worrying what the next blowup will be. I do the opposite. I wait for the blowup, then invest." He waited with a half-billion-dollar war chest.
One year later- look at the deal Morgan closed on May 22, 2007
Morgan Stanley Real Estate Acquires Crescent Real Estate Equities (CEI) for $22.80/Sh
Crescent Real Estate Equities Company (NYSE: CEI) entered into a definitive agreement pursuant to which funds managed by Morgan Stanley Real Estate will acquire Crescent in an all cash transaction for $22.80 per share and the assumption of liabilities for total consideration of approximately $6.5 billion. Shares of Crescent Real Estate Equities closed at $21.62 today.
Crescent Real Estate Equities Co. (NYSE: CEI) has finally found a buyer, and one that seems to like its mixed-use approach. Morgan Stanley Real Estate has agreed to acquire the Fort Worth, Texas-based REIT for a deal that totals $6.5 billion, including the assumption of debt.
Crescent, a mixed-use REIT owned by Texas billionaire Richard Rainwater, was in the midst of morphing itself into a pure-play office REIT. After evaluating its strategic options, the company came to the conclusion that it could "take advantage of the void left by rabid industry consolidation" as a remade office REIT. More likely, it was positioning itself better for an outright sale.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal
Goldman Sachs and Morgan Stanley decided—while fearing for their own existence—to transform themselves into bank holding companies in September (bringing with it the ability to access the Federal Reserve's discount window), they essentially brought to an end the era of the standalone investment bank.
Bank of America said it couldn't even close its Merrill Lynch acquisition without substantial extra government help, and is likely to get billions of dollars in federal guarantees.
One year later- look at the deal Morgan closed on May 22, 2007
Morgan Stanley Real Estate Acquires Crescent Real Estate Equities (CEI) for $22.80/Sh
Crescent Real Estate Equities Company (NYSE: CEI) entered into a definitive agreement pursuant to which funds managed by Morgan Stanley Real Estate will acquire Crescent in an all cash transaction for $22.80 per share and the assumption of liabilities for total consideration of approximately $6.5 billion. Shares of Crescent Real Estate Equities closed at $21.62 today.
Crescent Real Estate Equities Co. (NYSE: CEI) has finally found a buyer, and one that seems to like its mixed-use approach. Morgan Stanley Real Estate has agreed to acquire the Fort Worth, Texas-based REIT for a deal that totals $6.5 billion, including the assumption of debt.
Crescent, a mixed-use REIT owned by Texas billionaire Richard Rainwater, was in the midst of morphing itself into a pure-play office REIT. After evaluating its strategic options, the company came to the conclusion that it could "take advantage of the void left by rabid industry consolidation" as a remade office REIT. More likely, it was positioning itself better for an outright sale.
The Crescent deal just underscores the notion that the private equity boom is still in full swing. According to a New York Times article citing data from Thomson Financial, there have been $281 billion worth of private equity deals in the U.S. so far this year -- that's triple the amount compared to the same period last year, which ended up breaking all sorts of records.
There seems to be plenty of momentum left for REIT take-private deals, too. Year to date, 12 REITs have gone private for a total of $16.2 billion. But, there's still a ways to go to catch up to the lofty levels of 2006, when 23 deals totaling $64.3 billion, including the mammoth EOP buyout, took place, according to SNL Financial data listed in an article by The Wall Street Journal.
Greenhill & Co. LLC served as Crescent's financial advisor and Pillsbury Winthrop Shaw Pittman LLP provided legal
Goldman Sachs and Morgan Stanley decided—while fearing for their own existence—to transform themselves into bank holding companies in September (bringing with it the ability to access the Federal Reserve's discount window), they essentially brought to an end the era of the standalone investment bank.
Bank of America said it couldn't even close its Merrill Lynch acquisition without substantial extra government help, and is likely to get billions of dollars in federal guarantees.
Rick Scott, Bigger then Enron
New Commercial for Richard Scott
Conservatives for Patients' Rights
Remember who Richard is:
The Epitome of Fraud- Waste-Abuse:
2009 - WSJ reported that Richard Scott, "the former CEO of HCA Inc," had formed the non-profit organization-
Conservatives for Patients' Rights
as part of a "lobbying campaign to derail or modify" health care reform.
non-profit? What a joke.
Not this thief: THURSDAY, JUNE 26, 2003; WWW.USDOJ.GOV;
HCA Inc. (formerly known as Columbia/HCA and HCA - The Healthcare Company)
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION NETS RECORD TOTAL OF $1.7 BILLION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
He features a doctor from England. I wonder why?
HCA International
242 Marylebone Road London, NW1 6JL
News & Events Careers Sitemap Legal
2008-
Welcome to London's leading private hospitals
Text size: A A
With six world-class hospitals and four outpatient medical centres in London, we are the private hospitals of choice for the successful treatment of serious and complex medical conditions. We also achieve some of the highest patient outcome and survival rates in the UK and our hospitals are virtually MRSA-free*
Conservatives for Patients' Rights
Remember who Richard is:
The Epitome of Fraud- Waste-Abuse:
2009 - WSJ reported that Richard Scott, "the former CEO of HCA Inc," had formed the non-profit organization-
Conservatives for Patients' Rights
as part of a "lobbying campaign to derail or modify" health care reform.
non-profit? What a joke.
Not this thief: THURSDAY, JUNE 26, 2003; WWW.USDOJ.GOV;
HCA Inc. (formerly known as Columbia/HCA and HCA - The Healthcare Company)
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION NETS RECORD TOTAL OF $1.7 BILLION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
He features a doctor from England. I wonder why?
HCA International
242 Marylebone Road London, NW1 6JL
News & Events Careers Sitemap Legal
2008-
Welcome to London's leading private hospitals
Text size: A A
With six world-class hospitals and four outpatient medical centres in London, we are the private hospitals of choice for the successful treatment of serious and complex medical conditions. We also achieve some of the highest patient outcome and survival rates in the UK and our hospitals are virtually MRSA-free*
Tuesday, April 21, 2009
"Tea Baggers" take note- Bigger than Enron
TruthDig
By Robert Scheer
April 15, 2009
Robert Scheer is the editor of Truthdig, where this article originally appeared. His latest book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened
One wonders if Phil Gramm has been made just a tad nervous by the news on Tuesday that one of UBS's super-wealthy private clients has pleaded guilty to tax evasion. That's the second case in two weeks involving the bank at which the former senator is a vice chairman, and 100 other clients are under investigation for possible bank-assisted tax fraud.
Gramm, the Republican former chair of the Senate Finance Committee, where he authored much of the deregulatory legislation at the heart of the current banking meltdown, has for the six years since he left office helped lead a foreign-owned bank specializing in tax dodges for the wealthy. These schemes by the Swiss-based UBS not only force the rest of us taxpayers to pay more to make up the government revenue shortfall but are blatantly illegal. In February, UBS admitted to having committed fraud and conspiracy and agreed to pay a fine of $780 million. Republican "Tea Baggers" take note: Offshore tax havens do not equal populist revolt.
In the UBS "deferred prosecution agreement" with the Justice Department, the bank agreed to turn over the names of its secret account holders to avoid a criminal indictment. The complicity of top executives in this far-ranging scheme to use foreign tax havens to cheat the US treasury of billions in uncollected taxes was noted at the time in a Justice Department statement: "Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to United States clients interested in attempting to evade United States income taxes."
What did Gramm think all of those Swiss bankers from his firm were doing over here? Was he totally clueless? The Justice Department statement suggests otherwise: "UBS executives knew that UBS's cross-border business violated the law. They refused to stop this activity, however, and in fact instructed their bankers to grow the business. The reason was money--the business was too profitable to give up. This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect of the law."
Is it conceivable that this "knowing crime," so widespread within the UBS enterprise, was unknown to Vice Chairman Gramm--even though it primarily involved US tax evasion, and he had been hired by the company because of his expertise in American law, some of which he helped to write? As Gramm said when he was hired in 2002 by UBS, the position "will provide me with the opportunity to practice what I have always preached. I have been involved in every major financial debate since I've been in the Congress."
How could Gramm, who prides himself on expertise in these matters, have been unaware of the damage that the Swiss bankers who worked for him were doing to American taxpayers saddled with making up the shortfall in government revenue? As the Justice Department said: "In 2004 alone, Swiss bankers allegedly traveled to the United States approximately 3,800 times to discuss their clients' Swiss bank accounts.
The information further alleges that UBS managers and employees used encrypted laptops and other counter-surveillance techniques to help prevent the detection of their marketing efforts and the identities and offshore assets of their U.S. clients."
But then again, if you are Phil Gramm or his wife, Wendy, you might expect to get away with a great deal in the way of financial machinations. After all, neither has ever been held legally responsible for the Enron debacle, in which the Gramms played a major part.
As a top government regulator, Wendy Gramm changed the rules to make Enron's chicanery possible, and as the chairman of the Senate Finance Committee, Phil codified those rule changes into federal law. While Enron execs like Chairman Ken Lay (a major Gramm campaign contributor) were indicted, the charmed couple that created the loopholes Lay and others jumped through escaped legal responsibility.
After leaving the government, Wendy Gramm joined Enron's board, where she headed the audit committee that managed to avoid auditing the company's disgraceful accounting procedures--just as her husband has apparently looked the other way during his stint in the private sector with UBS.
Sure, Phil Gramm lost his position as the co-chairman of John McCain's presidential campaign when he blamed the recession not on the banking deregulation he championed but rather the people of the United States, which he described as a "nation of whiners." But that was a sideshow compared with the serious charges now swirling around UBS, charges that may finally prove to be Gramm's undoing.
http://www.thenation.com/doc/20090427/scheer?rel=emailNation
By Robert Scheer
April 15, 2009
Robert Scheer is the editor of Truthdig, where this article originally appeared. His latest book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened
One wonders if Phil Gramm has been made just a tad nervous by the news on Tuesday that one of UBS's super-wealthy private clients has pleaded guilty to tax evasion. That's the second case in two weeks involving the bank at which the former senator is a vice chairman, and 100 other clients are under investigation for possible bank-assisted tax fraud.
Gramm, the Republican former chair of the Senate Finance Committee, where he authored much of the deregulatory legislation at the heart of the current banking meltdown, has for the six years since he left office helped lead a foreign-owned bank specializing in tax dodges for the wealthy. These schemes by the Swiss-based UBS not only force the rest of us taxpayers to pay more to make up the government revenue shortfall but are blatantly illegal. In February, UBS admitted to having committed fraud and conspiracy and agreed to pay a fine of $780 million. Republican "Tea Baggers" take note: Offshore tax havens do not equal populist revolt.
In the UBS "deferred prosecution agreement" with the Justice Department, the bank agreed to turn over the names of its secret account holders to avoid a criminal indictment. The complicity of top executives in this far-ranging scheme to use foreign tax havens to cheat the US treasury of billions in uncollected taxes was noted at the time in a Justice Department statement: "Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to United States clients interested in attempting to evade United States income taxes."
What did Gramm think all of those Swiss bankers from his firm were doing over here? Was he totally clueless? The Justice Department statement suggests otherwise: "UBS executives knew that UBS's cross-border business violated the law. They refused to stop this activity, however, and in fact instructed their bankers to grow the business. The reason was money--the business was too profitable to give up. This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect of the law."
Is it conceivable that this "knowing crime," so widespread within the UBS enterprise, was unknown to Vice Chairman Gramm--even though it primarily involved US tax evasion, and he had been hired by the company because of his expertise in American law, some of which he helped to write? As Gramm said when he was hired in 2002 by UBS, the position "will provide me with the opportunity to practice what I have always preached. I have been involved in every major financial debate since I've been in the Congress."
How could Gramm, who prides himself on expertise in these matters, have been unaware of the damage that the Swiss bankers who worked for him were doing to American taxpayers saddled with making up the shortfall in government revenue? As the Justice Department said: "In 2004 alone, Swiss bankers allegedly traveled to the United States approximately 3,800 times to discuss their clients' Swiss bank accounts.
The information further alleges that UBS managers and employees used encrypted laptops and other counter-surveillance techniques to help prevent the detection of their marketing efforts and the identities and offshore assets of their U.S. clients."
But then again, if you are Phil Gramm or his wife, Wendy, you might expect to get away with a great deal in the way of financial machinations. After all, neither has ever been held legally responsible for the Enron debacle, in which the Gramms played a major part.
As a top government regulator, Wendy Gramm changed the rules to make Enron's chicanery possible, and as the chairman of the Senate Finance Committee, Phil codified those rule changes into federal law. While Enron execs like Chairman Ken Lay (a major Gramm campaign contributor) were indicted, the charmed couple that created the loopholes Lay and others jumped through escaped legal responsibility.
After leaving the government, Wendy Gramm joined Enron's board, where she headed the audit committee that managed to avoid auditing the company's disgraceful accounting procedures--just as her husband has apparently looked the other way during his stint in the private sector with UBS.
Sure, Phil Gramm lost his position as the co-chairman of John McCain's presidential campaign when he blamed the recession not on the banking deregulation he championed but rather the people of the United States, which he described as a "nation of whiners." But that was a sideshow compared with the serious charges now swirling around UBS, charges that may finally prove to be Gramm's undoing.
http://www.thenation.com/doc/20090427/scheer?rel=emailNation
Sunday, April 19, 2009
Leo J. Wise, Staff Director & Chief Counsel
OFFICE OF CONGRESSIONAL ETHICS
UNITED STATES HOUSE OF REPRESENTATIVES
WASHINGTON, D. C. 20515
FOR IMMEDIATE RELEASE Contact: Leo Wise
April 15, 2009 oce@mail.house.gov
PRESS ADVISORY:
OFFICE OF CONGRESSIONAL ETHICS RELEASES FIRST QUARTER REPORT
The Office of Congressional Ethics, established by the House of Representatives, is an independent, non-partisan entity charged with receiving and reviewing allegations of misconduct concerning House Members and staff and, when appropriate, referring matters to the Committee on Standards of Official Conduct (commonly referred to as the Ethics Committee).
Consistent with the desire of the House for more transparency in these matters, the OCE released today a report of its activities for the first quarter, January to March, of 2009.
# # #
Leo J. Wise, Staff Director & Chief Counsel
1017 Longworth House Office Building
(202) 225-9739
(202) 226-0997 fax
David Skaggs, Chair Porter Goss, Co-Chair
Yvonne Burke Jay Eagen
Karan English William Frenzel
Allison Hayward Abner Mikva
In 1997, as part of Richard Scott's severance package from Columbia he was paid $5.13 million and given a five year consulting contract at $950,000 per year
1997 + 5 = 2002
Remember- 1997 Columbia just decided to sell its home health-care business.
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
Guess where those home health care units were found?
Yes- "...largest corporate fraud investigations involving a privately held company headquartered in small town America,”
Why the need for ‘healthcare financial service’ i.e. (NCFE) National Century Financial Enterprises?
Home health - which was struggling under the Balanced Budget Act of 1997; about 1,400 agencies closed nationwide in 1998.
On Sept 8, 1998 Standard and Poors downgraded the bonds of Charter/HCA to negative bases on
poor earnings. Looks like Rainwater and his Crescent Cos' have finally stumbled. One source within the company said it would be a long while before any new high-ticket acquisitions would take place. A previous deal with Prudential is in danger of being jettisoned.
Part Four- Richard (aka Rick) Scott/Conservatives for Patients' Rights
A 2009 article from - The Wall Street Journal reported that Richard Scott, "the former chief executive of HCA Inc," had formed the non-profit organization Conservatives for Patients' Rights as part of a "lobbying campaign to derail or modify" President Obama's health care proposals, but failed to note that Scott resigned from HCA in 1997 amid a federal investigation into the company's Medicare billing, physician recruiting, and home-care practices. HCA eventually pleaded guilty to fraud charges and paid approximately $1.7 billion in fines and penalties.
THURSDAY, JUNE 26, 2003; WWW.USDOJ.GOV;
WASHINGTON, D.C.
HCA Inc. (formerly known as Columbia/HCA and HCA - The Healthcare Company)
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION NETS RECORD TOTAL OF $1.7 BILLION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
Enron and National Century Financial Enterprises, one of the largest corporate fraud investigations involving a privately held company headquartered in small town America.
On 3-9-2006 10-K SEC Filing, filed by J P MORGAN CHASE & CO: Enron litigation. JPMorgan Chase and certain of its officers and directors are involved in a number of lawsuits arising out of its banking relationships with Enron Corp.; the three current or former Firm employees are sued in their roles as former members of NCFE's board of directors
Friday, March 14, 2008 3:16 AM
Guilty, guilty, guilty, guilty...
5 National Century executives face prison time for fraud
BY JODI ANDES AND KEVIN MAYHOOD
THE COLUMBUS DISPATCH
It seemed the jury had little doubt about the guilt of the former National Century executives accused of the nation's biggest private fraud.
After a day and a half of deliberation, the jury of eight women and four men came back with a determination of "guilty" for every one of the 40 charges against two of the Dublin company's founders and three of its former executives.
March 26, 2008; By Jodi Andes; THE COLUMBUS DISPATCH
Nine other executives have been convicted or pleaded guilty in National Century's collapse.
Only Poulsen and executive James Happ still await trial.
FOR IMMEDIATE RELEASE--Friday, October 31, 2008--WWW.USDOJ.GOV
Former National Century Financial Enterprises CEO Convicted of Conspiracy, Fraud and Money Laundering
Fraud Cost Investors More Than $2 Billion
November 2008 - Only executive James Happ still await trial.
December 18, 2008 - The ONE AND ONLY acquittal; James K Happ!
By Jodi Andes THE COLUMBUS DISPATCH
Prosecutors' case fell short; juror says National Century fraud case produces 1st acquittal
The "not guilty" verdicts that came in federal court yesterday were not so much a vindication of the last National Century Financial Enterprises executive to stand trial, a juror said.
Instead, they were more a belief that:
‘federal prosecutors had not done their job ‘
the juror said after he and his fellow jurors acquitted James K. Happ of five counts after 12 hours of deliberation.
"He very well may have been guilty. A lot of us thought he was," said the juror
December 18, 2008 - the ONE AND ONLY acquittal- James K Happ
Who is James K Happ?
SEC Form September 9, 2003 Annual Meeting of Stockholders, Med Diversified Inc.:
Previously, Mr. Happ served for three years as executive vice president of NCFE, during which time he restructured the servicer department to improve operational performance and accelerated the utilization of technology to increase operational efficiency.
Mr. Happ also served as chief financial officer of the Dallas-based Columbia Homecare Group, Inc.,
CFO of Dallas-based Columbia Homecare Group, Inc.?
James K Happ … In this role, he directed the company through the challenging reimbursement climate, known as the interim payment system, and participated in the divestiture of all of Columbia/HCA's home care operations
Richard Rainwater and Darla Moore in 1997, as part of Richard Scott's severance package from Columbia was paid $5.13 million and given a five year consulting contract at $950,000 per year
UNITED STATES HOUSE OF REPRESENTATIVES
WASHINGTON, D. C. 20515
FOR IMMEDIATE RELEASE Contact: Leo Wise
April 15, 2009 oce@mail.house.gov
PRESS ADVISORY:
OFFICE OF CONGRESSIONAL ETHICS RELEASES FIRST QUARTER REPORT
The Office of Congressional Ethics, established by the House of Representatives, is an independent, non-partisan entity charged with receiving and reviewing allegations of misconduct concerning House Members and staff and, when appropriate, referring matters to the Committee on Standards of Official Conduct (commonly referred to as the Ethics Committee).
Consistent with the desire of the House for more transparency in these matters, the OCE released today a report of its activities for the first quarter, January to March, of 2009.
# # #
Leo J. Wise, Staff Director & Chief Counsel
1017 Longworth House Office Building
(202) 225-9739
(202) 226-0997 fax
David Skaggs, Chair Porter Goss, Co-Chair
Yvonne Burke Jay Eagen
Karan English William Frenzel
Allison Hayward Abner Mikva
In 1997, as part of Richard Scott's severance package from Columbia he was paid $5.13 million and given a five year consulting contract at $950,000 per year
1997 + 5 = 2002
Remember- 1997 Columbia just decided to sell its home health-care business.
In 2002 FBI raided the offices of National Century Financial Enterprises in Dublin, Ohio
“This case is one of the largest corporate fraud investigations involving a privately held company headquartered in small town America,” said Assistant Director Kenneth W. Kaiser of the FBI Criminal Investigative Division.
Guess where those home health care units were found?
Yes- "...largest corporate fraud investigations involving a privately held company headquartered in small town America,”
Why the need for ‘healthcare financial service’ i.e. (NCFE) National Century Financial Enterprises?
Home health - which was struggling under the Balanced Budget Act of 1997; about 1,400 agencies closed nationwide in 1998.
On Sept 8, 1998 Standard and Poors downgraded the bonds of Charter/HCA to negative bases on
poor earnings. Looks like Rainwater and his Crescent Cos' have finally stumbled. One source within the company said it would be a long while before any new high-ticket acquisitions would take place. A previous deal with Prudential is in danger of being jettisoned.
Part Four- Richard (aka Rick) Scott/Conservatives for Patients' Rights
A 2009 article from - The Wall Street Journal reported that Richard Scott, "the former chief executive of HCA Inc," had formed the non-profit organization Conservatives for Patients' Rights as part of a "lobbying campaign to derail or modify" President Obama's health care proposals, but failed to note that Scott resigned from HCA in 1997 amid a federal investigation into the company's Medicare billing, physician recruiting, and home-care practices. HCA eventually pleaded guilty to fraud charges and paid approximately $1.7 billion in fines and penalties.
THURSDAY, JUNE 26, 2003; WWW.USDOJ.GOV;
WASHINGTON, D.C.
HCA Inc. (formerly known as Columbia/HCA and HCA - The Healthcare Company)
LARGEST HEALTH CARE FRAUD CASE IN U.S. HISTORY SETTLED; HCA INVESTIGATION NETS RECORD TOTAL OF $1.7 BILLION
Note: Hospital Corporation of America (HCA) was acquired by Columbia in 1994.
Enron and National Century Financial Enterprises, one of the largest corporate fraud investigations involving a privately held company headquartered in small town America.
On 3-9-2006 10-K SEC Filing, filed by J P MORGAN CHASE & CO: Enron litigation. JPMorgan Chase and certain of its officers and directors are involved in a number of lawsuits arising out of its banking relationships with Enron Corp.; the three current or former Firm employees are sued in their roles as former members of NCFE's board of directors
Friday, March 14, 2008 3:16 AM
Guilty, guilty, guilty, guilty...
5 National Century executives face prison time for fraud
BY JODI ANDES AND KEVIN MAYHOOD
THE COLUMBUS DISPATCH
It seemed the jury had little doubt about the guilt of the former National Century executives accused of the nation's biggest private fraud.
After a day and a half of deliberation, the jury of eight women and four men came back with a determination of "guilty" for every one of the 40 charges against two of the Dublin company's founders and three of its former executives.
March 26, 2008; By Jodi Andes; THE COLUMBUS DISPATCH
Nine other executives have been convicted or pleaded guilty in National Century's collapse.
Only Poulsen and executive James Happ still await trial.
FOR IMMEDIATE RELEASE--Friday, October 31, 2008--WWW.USDOJ.GOV
Former National Century Financial Enterprises CEO Convicted of Conspiracy, Fraud and Money Laundering
Fraud Cost Investors More Than $2 Billion
November 2008 - Only executive James Happ still await trial.
December 18, 2008 - The ONE AND ONLY acquittal; James K Happ!
By Jodi Andes THE COLUMBUS DISPATCH
Prosecutors' case fell short; juror says National Century fraud case produces 1st acquittal
The "not guilty" verdicts that came in federal court yesterday were not so much a vindication of the last National Century Financial Enterprises executive to stand trial, a juror said.
Instead, they were more a belief that:
‘federal prosecutors had not done their job ‘
the juror said after he and his fellow jurors acquitted James K. Happ of five counts after 12 hours of deliberation.
"He very well may have been guilty. A lot of us thought he was," said the juror
December 18, 2008 - the ONE AND ONLY acquittal- James K Happ
Who is James K Happ?
SEC Form September 9, 2003 Annual Meeting of Stockholders, Med Diversified Inc.:
Previously, Mr. Happ served for three years as executive vice president of NCFE, during which time he restructured the servicer department to improve operational performance and accelerated the utilization of technology to increase operational efficiency.
Mr. Happ also served as chief financial officer of the Dallas-based Columbia Homecare Group, Inc.,
CFO of Dallas-based Columbia Homecare Group, Inc.?
James K Happ … In this role, he directed the company through the challenging reimbursement climate, known as the interim payment system, and participated in the divestiture of all of Columbia/HCA's home care operations
Richard Rainwater and Darla Moore in 1997, as part of Richard Scott's severance package from Columbia was paid $5.13 million and given a five year consulting contract at $950,000 per year
Wednesday, April 15, 2009
BUCKEYE, LLC ---
Detail by Entity Name
Florida Limited Liability Company
BUCKEYE, LLC
Filing Information
Document Number L08000084792
FEI/EIN Number NONE
Date Filed 09/05/2008
State FL
Status ACTIVE
Principal Address
5290 SEMINOLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Mailing Address
5290 SEMINOLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Registered Agent Name & Address
YINGLING, GREGORY
5290 SEMIONLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Manager/Member Detail
Name & Address
Title MGRM
YINGLING, GREGORY
5290 SEMINOLE BLVD STE A
SAINT PETERSBURG FL 33708 US
Title MGR
ALEPA, CHRISTOPHER J
63 WESTDALE DRIVE
HILLSDALE NJ 07642 US
Annual Reports
No Annual Reports Filed
Document Images
Florida Limited Liability Company
BUCKEYE, LLC
Filing Information
Document Number L08000084792
FEI/EIN Number NONE
Date Filed 09/05/2008
State FL
Status ACTIVE
Principal Address
5290 SEMINOLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Mailing Address
5290 SEMINOLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Registered Agent Name & Address
YINGLING, GREGORY
5290 SEMIONLE BLVD
SUITE A
SAINT PETERSBURG FL 33708 US
Manager/Member Detail
Name & Address
Title MGRM
YINGLING, GREGORY
5290 SEMINOLE BLVD STE A
SAINT PETERSBURG FL 33708 US
Title MGR
ALEPA, CHRISTOPHER J
63 WESTDALE DRIVE
HILLSDALE NJ 07642 US
Annual Reports
No Annual Reports Filed
Document Images
Wednesday, April 1, 2009
U.S. Seeks to Drop Case Against Former Sen. Stevens
Prosecutors did not do their job!
Well I hope the AG looks at his case-jurors said the prosecutor did not do their job in December 2008...
2002-The largest private financial fraud case in our country's history began to uncover itself back in 2002, and no one heard of it. Wonder why?
JPMorgan, Citi, Goldman, Merrill, Morgan were all involved in this scheme, for years and were found guilty of contributing to the largest financial fraud case in our history; the largest financial fraud case that just ended Dec 2008 and no one paid attention. Credit Suisse LLC is pending with litigation with its involvement in this case.
The last trial for this case, even after the CEO stood trial was James K Happ. The ONE AND ONLY acquittal James K Happ!
December 18, 2008 - THE COLUMBUS DISPATCH By Jodi Andes --Prosecutors' case fell short, juror says, instead, they were more a belief that federal prosecutors had not done their job…
The SEC places Happ at CFO of Columbia Homecare prior to arriving at NCFE. The years Happ was at NCFE were what the trial was focused on.
Guess what James K Happ did as CFO at Columbia? He used NCFE to finance HCA’s losing asset-homecare into a dumping ground, Medshares Inc in Memphis financed by NCFE. All the while Medshares was under multiple investigations for Medicare Medicaid fraud. Yet no one has heard of this case.
He was the ex-CFO of HCA-Columbia Homecare Group prior to arriving at NCFE and the only one not guilty.
Who is behind this fraud, really? Who are they covering up for?
Well I hope the AG looks at his case-jurors said the prosecutor did not do their job in December 2008...
2002-The largest private financial fraud case in our country's history began to uncover itself back in 2002, and no one heard of it. Wonder why?
JPMorgan, Citi, Goldman, Merrill, Morgan were all involved in this scheme, for years and were found guilty of contributing to the largest financial fraud case in our history; the largest financial fraud case that just ended Dec 2008 and no one paid attention. Credit Suisse LLC is pending with litigation with its involvement in this case.
The last trial for this case, even after the CEO stood trial was James K Happ. The ONE AND ONLY acquittal James K Happ!
December 18, 2008 - THE COLUMBUS DISPATCH By Jodi Andes --Prosecutors' case fell short, juror says, instead, they were more a belief that federal prosecutors had not done their job…
The SEC places Happ at CFO of Columbia Homecare prior to arriving at NCFE. The years Happ was at NCFE were what the trial was focused on.
Guess what James K Happ did as CFO at Columbia? He used NCFE to finance HCA’s losing asset-homecare into a dumping ground, Medshares Inc in Memphis financed by NCFE. All the while Medshares was under multiple investigations for Medicare Medicaid fraud. Yet no one has heard of this case.
He was the ex-CFO of HCA-Columbia Homecare Group prior to arriving at NCFE and the only one not guilty.
Who is behind this fraud, really? Who are they covering up for?
Tuesday, March 31, 2009
Fraud-Fraud-Fraud Not a word about prosecutor not doing his job with the ex-CFO of Columbia Homecare Group ....
Where was James K Happ?
Notice not one word- He wasa the last person to stand trial and the only acquittal.
Jurors said prosecutor did nto do his job.
NEWS RELEASE
GREGORY G. LOCKHART
UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF OHIO
FOR IMMEDIATE RELEASE
TUESDAY, MARCH 27, 2009
http://www.usdoj.gov/usao/ohs
CONTACT: Fred Alverson
614 469-571
FORMER NATIONAL CENTURY FINANCIAL ENTERPRISES CEO SENTENCED TO 30 YEARS IN PRISON, CO-OWNER SENTENCED TO 25 YEARS IN PRISON FOR CONSPIRACY, FRAUD AND MONEY LAUNDERING
Defendants Ordered to Pay Restitution of $2.3 Billion and Forfeit $1.7 Billion
WASHINGTON—Two former National Century Financial Enterprises (NCFE) executives were sentenced today for their roles in a scheme to deceive investors about the financial health of NCFE, Acting Assistant Attorney General Rita M. Glavin and U.S. Attorney Gregory G. Lockhart of the Southern District of Ohio announced. NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.
Lance K. Poulsen, 65, former president, owner and chief executive officer of NCFE was sentenced to 30 years in prison and three years of supervised release following the prison term. A federal jury convicted Poulsen on Oct. 31, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Poulsen was also found guilty by a federal jury on March 26, 2008, of conspiring to interfere with a witness who was preparing to testify in the fraud trial against Poulsen and other NCFE executives. He is currently serving a 10-year prison sentence for that conviction. The court ordered Poulsen’s 30-year sentence to be served concurrently with the 10-year sentence for witness tampering.
Rebecca S. Parrett, 60, former vice chairman, secretary, treasurer, director and owner of NCFE was sentenced to 25 years in prison and three years of supervised release following the prison term. A federal jury convicted Parrett on March 13, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Parrett fled after the conviction and remains at large.
U.S. District Court Judge Algenon Marbley also ordered Poulsen and Parrett to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion, jointly and severally with other defendants.
“Corporate executives who violate the law, as well as investors’ trust, can and will be held accountable for their illegal actions,” said Acting Assistant Attorney General Rita M. Glavin. “The Department of Justice will continue to seek appropriate punishment, including jail time, for individuals who participate in financial frauds to the detriment of the investing public.”
“Evidence showed that Poulsen knew the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls,” U.S. Attorney Lockhart said. “Their actions were designed to hide a financial house of cards from investors, eventually costing investors $2 billion.”
“When corporate officers elect to betray the public’s trust for personal gain, the very core of how and why our corporate system operates is immediately and negatively impacted,” Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division Jose A. Gonzalez said. “As signified by today’s NCFE sentences, the IRS gives priority to investigations involving the alleged breach of the public trust by corporate officials at any level.”
FBI Cincinnati Special Agent in Charge Keith L. Bennett noted the significant sentences imposed on both Poulsen and Parrett. “This should serve as a warning to those who might be tempted to manipulate the complexities of our financial systems to defraud others. The FBI stands ready to root out those who would do so, bring them to the judicial system and ensure they lose both their ill-gotten wealth and their freedom.”
Witnesses testified at both trials that Poulsen, Parrett and other NCFE executives engaged in a scheme from 1995 until the collapse of the company to deceive investors and rating agencies about the financial health of NCFE and how investors’ money would be used. NCFE bought accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors, including pension funds, insurance companies and churches.
Evidence at both trials showed that NCFE misused investors’ money and made unsecured loans to health care providers, including those owned in whole or in part by Poulsen, Parrett and another owner of NCFE, Donald H. Ayers. Former employees testified that Poulsen, Parrett and other NCFE executives covered up the fraud by lying to investors and rating agencies. The government presented evidence that Poulsen and others created investor reports containing fabricated data and moved money back and forth between programs in order to make it appear that NCFE was in compliance with its own governing documents. Evidence showed that Poulsen and Parrett knew the business model NCFE presented to the investing public differed significantly from the way NCFE actually conducted business.
Four other NCFE executives have been convicted in connection with the fraud. Donald H. Ayers, an NCFE vice chairman, chief operating officer, director and an owner of the company, was found guilty on charges of conspiracy, securities fraud and money laundering and was sentenced to 15 years in prison. Randolph H. Speer, NCFE’s chief financial officer, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 12 years in prison. Roger S. Faulkenberry, vice president for client development, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 10 years in prison. James E. Dierker, chief credit officer, was found guilty on charges of conspiracy and money laundering and was sentenced to five years in prison. In addition, four other former NCFE executives have pleaded guilty in connection with this fraud.
The cases were prosecuted by the U.S. Attorney’s Office for the Southern District of Ohio and the Criminal Division’s Fraud Section and investigated by FBI Special Agents Matt Daly, Ingrid Schmidt and Tad Morris; IRS Special Agents Greg Ruwe and Mark Bailey, U.S. Postal Inspector Dave Mooney; and Immigration and Customs Enforcement Agent Celeste Koszut. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern and Senior Trial Attorney Wes R. Porter of the Criminal Division’s Fraud Section prosecuted Parrett, Ayers, Speer, Faulkenberry and Dierker. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern, Trial Attorneys N. Nathan Dimock, and former Trial Attorney Leo Wise of the Criminal Division’s Fraud Section prosecuted Poulsen. Fraud Section Paralegal Specialists Crystal Curry and Sarah Marberg assisted with these cases.
Notice not one word- He wasa the last person to stand trial and the only acquittal.
Jurors said prosecutor did nto do his job.
NEWS RELEASE
GREGORY G. LOCKHART
UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF OHIO
FOR IMMEDIATE RELEASE
TUESDAY, MARCH 27, 2009
http://www.usdoj.gov/usao/ohs
CONTACT: Fred Alverson
614 469-571
FORMER NATIONAL CENTURY FINANCIAL ENTERPRISES CEO SENTENCED TO 30 YEARS IN PRISON, CO-OWNER SENTENCED TO 25 YEARS IN PRISON FOR CONSPIRACY, FRAUD AND MONEY LAUNDERING
Defendants Ordered to Pay Restitution of $2.3 Billion and Forfeit $1.7 Billion
WASHINGTON—Two former National Century Financial Enterprises (NCFE) executives were sentenced today for their roles in a scheme to deceive investors about the financial health of NCFE, Acting Assistant Attorney General Rita M. Glavin and U.S. Attorney Gregory G. Lockhart of the Southern District of Ohio announced. NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.
Lance K. Poulsen, 65, former president, owner and chief executive officer of NCFE was sentenced to 30 years in prison and three years of supervised release following the prison term. A federal jury convicted Poulsen on Oct. 31, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Poulsen was also found guilty by a federal jury on March 26, 2008, of conspiring to interfere with a witness who was preparing to testify in the fraud trial against Poulsen and other NCFE executives. He is currently serving a 10-year prison sentence for that conviction. The court ordered Poulsen’s 30-year sentence to be served concurrently with the 10-year sentence for witness tampering.
Rebecca S. Parrett, 60, former vice chairman, secretary, treasurer, director and owner of NCFE was sentenced to 25 years in prison and three years of supervised release following the prison term. A federal jury convicted Parrett on March 13, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Parrett fled after the conviction and remains at large.
U.S. District Court Judge Algenon Marbley also ordered Poulsen and Parrett to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion, jointly and severally with other defendants.
“Corporate executives who violate the law, as well as investors’ trust, can and will be held accountable for their illegal actions,” said Acting Assistant Attorney General Rita M. Glavin. “The Department of Justice will continue to seek appropriate punishment, including jail time, for individuals who participate in financial frauds to the detriment of the investing public.”
“Evidence showed that Poulsen knew the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls,” U.S. Attorney Lockhart said. “Their actions were designed to hide a financial house of cards from investors, eventually costing investors $2 billion.”
“When corporate officers elect to betray the public’s trust for personal gain, the very core of how and why our corporate system operates is immediately and negatively impacted,” Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division Jose A. Gonzalez said. “As signified by today’s NCFE sentences, the IRS gives priority to investigations involving the alleged breach of the public trust by corporate officials at any level.”
FBI Cincinnati Special Agent in Charge Keith L. Bennett noted the significant sentences imposed on both Poulsen and Parrett. “This should serve as a warning to those who might be tempted to manipulate the complexities of our financial systems to defraud others. The FBI stands ready to root out those who would do so, bring them to the judicial system and ensure they lose both their ill-gotten wealth and their freedom.”
Witnesses testified at both trials that Poulsen, Parrett and other NCFE executives engaged in a scheme from 1995 until the collapse of the company to deceive investors and rating agencies about the financial health of NCFE and how investors’ money would be used. NCFE bought accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors, including pension funds, insurance companies and churches.
Evidence at both trials showed that NCFE misused investors’ money and made unsecured loans to health care providers, including those owned in whole or in part by Poulsen, Parrett and another owner of NCFE, Donald H. Ayers. Former employees testified that Poulsen, Parrett and other NCFE executives covered up the fraud by lying to investors and rating agencies. The government presented evidence that Poulsen and others created investor reports containing fabricated data and moved money back and forth between programs in order to make it appear that NCFE was in compliance with its own governing documents. Evidence showed that Poulsen and Parrett knew the business model NCFE presented to the investing public differed significantly from the way NCFE actually conducted business.
Four other NCFE executives have been convicted in connection with the fraud. Donald H. Ayers, an NCFE vice chairman, chief operating officer, director and an owner of the company, was found guilty on charges of conspiracy, securities fraud and money laundering and was sentenced to 15 years in prison. Randolph H. Speer, NCFE’s chief financial officer, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 12 years in prison. Roger S. Faulkenberry, vice president for client development, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 10 years in prison. James E. Dierker, chief credit officer, was found guilty on charges of conspiracy and money laundering and was sentenced to five years in prison. In addition, four other former NCFE executives have pleaded guilty in connection with this fraud.
The cases were prosecuted by the U.S. Attorney’s Office for the Southern District of Ohio and the Criminal Division’s Fraud Section and investigated by FBI Special Agents Matt Daly, Ingrid Schmidt and Tad Morris; IRS Special Agents Greg Ruwe and Mark Bailey, U.S. Postal Inspector Dave Mooney; and Immigration and Customs Enforcement Agent Celeste Koszut. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern and Senior Trial Attorney Wes R. Porter of the Criminal Division’s Fraud Section prosecuted Parrett, Ayers, Speer, Faulkenberry and Dierker. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern, Trial Attorneys N. Nathan Dimock, and former Trial Attorney Leo Wise of the Criminal Division’s Fraud Section prosecuted Poulsen. Fraud Section Paralegal Specialists Crystal Curry and Sarah Marberg assisted with these cases.
NEWS RELEASE-Prosecutor did not do his job with the ex-CFO of Columbia Homecare Group-Richard Rainwater Richard Scott
NEWS RELEASE
GREGORY G. LOCKHART
UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF OHIO
FOR IMMEDIATE RELEASE
TUESDAY, MARCH 27, 2009
http://www.usdoj.gov/usao/ohs
CONTACT: Fred Alverson
614 469-571
FORMER NATIONAL CENTURY FINANCIAL ENTERPRISES CEO SENTENCED TO 30 YEARS IN PRISON, CO-OWNER SENTENCED TO 25 YEARS IN PRISON FOR CONSPIRACY, FRAUD AND MONEY LAUNDERING
Defendants Ordered to Pay Restitution of $2.3 Billion and Forfeit $1.7 Billion
WASHINGTON—Two former National Century Financial Enterprises (NCFE) executives were sentenced today for their roles in a scheme to deceive investors about the financial health of NCFE, Acting Assistant Attorney General Rita M. Glavin and U.S. Attorney Gregory G. Lockhart of the Southern District of Ohio announced. NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.
Lance K. Poulsen, 65, former president, owner and chief executive officer of NCFE was sentenced to 30 years in prison and three years of supervised release following the prison term. A federal jury convicted Poulsen on Oct. 31, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Poulsen was also found guilty by a federal jury on March 26, 2008, of conspiring to interfere with a witness who was preparing to testify in the fraud trial against Poulsen and other NCFE executives. He is currently serving a 10-year prison sentence for that conviction. The court ordered Poulsen’s 30-year sentence to be served concurrently with the 10-year sentence for witness tampering.
Rebecca S. Parrett, 60, former vice chairman, secretary, treasurer, director and owner of NCFE was sentenced to 25 years in prison and three years of supervised release following the prison term. A federal jury convicted Parrett on March 13, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Parrett fled after the conviction and remains at large.
U.S. District Court Judge Algenon Marbley also ordered Poulsen and Parrett to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion, jointly and severally with other defendants.
“Corporate executives who violate the law, as well as investors’ trust, can and will be held accountable for their illegal actions,” said Acting Assistant Attorney General Rita M. Glavin. “The Department of Justice will continue to seek appropriate punishment, including jail time, for individuals who participate in financial frauds to the detriment of the investing public.”
“Evidence showed that Poulsen knew the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls,” U.S. Attorney Lockhart said. “Their actions were designed to hide a financial house of cards from investors, eventually costing investors $2 billion.”
“When corporate officers elect to betray the public’s trust for personal gain, the very core of how and why our corporate system operates is immediately and negatively impacted,” Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division Jose A. Gonzalez said. “As signified by today’s NCFE sentences, the IRS gives priority to investigations involving the alleged breach of the public trust by corporate officials at any level.”
FBI Cincinnati Special Agent in Charge Keith L. Bennett noted the significant sentences imposed on both Poulsen and Parrett. “This should serve as a warning to those who might be tempted to manipulate the complexities of our financial systems to defraud others. The FBI stands ready to root out those who would do so, bring them to the judicial system and ensure they lose both their ill-gotten wealth and their freedom.”
Witnesses testified at both trials that Poulsen, Parrett and other NCFE executives engaged in a scheme from 1995 until the collapse of the company to deceive investors and rating agencies about the financial health of NCFE and how investors’ money would be used. NCFE bought accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors, including pension funds, insurance companies and churches.
Evidence at both trials showed that NCFE misused investors’ money and made unsecured loans to health care providers, including those owned in whole or in part by Poulsen, Parrett and another owner of NCFE, Donald H. Ayers. Former employees testified that Poulsen, Parrett and other NCFE executives covered up the fraud by lying to investors and rating agencies. The government presented evidence that Poulsen and others created investor reports containing fabricated data and moved money back and forth between programs in order to make it appear that NCFE was in compliance with its own governing documents. Evidence showed that Poulsen and Parrett knew the business model NCFE presented to the investing public differed significantly from the way NCFE actually conducted business.
Four other NCFE executives have been convicted in connection with the fraud. Donald H. Ayers, an NCFE vice chairman, chief operating officer, director and an owner of the company, was found guilty on charges of conspiracy, securities fraud and money laundering and was sentenced to 15 years in prison. Randolph H. Speer, NCFE’s chief financial officer, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 12 years in prison. Roger S. Faulkenberry, vice president for client development, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 10 years in prison. James E. Dierker, chief credit officer, was found guilty on charges of conspiracy and money laundering and was sentenced to five years in prison. In addition, four other former NCFE executives have pleaded guilty in connection with this fraud.
The cases were prosecuted by the U.S. Attorney’s Office for the Southern District of Ohio and the Criminal Division’s Fraud Section and investigated by FBI Special Agents Matt Daly, Ingrid Schmidt and Tad Morris; IRS Special Agents Greg Ruwe and Mark Bailey, U.S. Postal Inspector Dave Mooney; and Immigration and Customs Enforcement Agent Celeste Koszut. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern and Senior Trial Attorney Wes R. Porter of the Criminal Division’s Fraud Section prosecuted Parrett, Ayers, Speer, Faulkenberry and Dierker. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern, Trial Attorneys N. Nathan Dimock, and former Trial Attorney Leo Wise of the Criminal Division’s Fraud Section prosecuted Poulsen. Fraud Section Paralegal Specialists Crystal Curry and Sarah Marberg assisted with these cases.
Press Releases | Cincinnati
GREGORY G. LOCKHART
UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF OHIO
FOR IMMEDIATE RELEASE
TUESDAY, MARCH 27, 2009
http://www.usdoj.gov/usao/ohs
CONTACT: Fred Alverson
614 469-571
FORMER NATIONAL CENTURY FINANCIAL ENTERPRISES CEO SENTENCED TO 30 YEARS IN PRISON, CO-OWNER SENTENCED TO 25 YEARS IN PRISON FOR CONSPIRACY, FRAUD AND MONEY LAUNDERING
Defendants Ordered to Pay Restitution of $2.3 Billion and Forfeit $1.7 Billion
WASHINGTON—Two former National Century Financial Enterprises (NCFE) executives were sentenced today for their roles in a scheme to deceive investors about the financial health of NCFE, Acting Assistant Attorney General Rita M. Glavin and U.S. Attorney Gregory G. Lockhart of the Southern District of Ohio announced. NCFE, formerly based in Dublin, Ohio, was one of the largest healthcare finance companies in the United States until it filed for bankruptcy in November 2002.
Lance K. Poulsen, 65, former president, owner and chief executive officer of NCFE was sentenced to 30 years in prison and three years of supervised release following the prison term. A federal jury convicted Poulsen on Oct. 31, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Poulsen was also found guilty by a federal jury on March 26, 2008, of conspiring to interfere with a witness who was preparing to testify in the fraud trial against Poulsen and other NCFE executives. He is currently serving a 10-year prison sentence for that conviction. The court ordered Poulsen’s 30-year sentence to be served concurrently with the 10-year sentence for witness tampering.
Rebecca S. Parrett, 60, former vice chairman, secretary, treasurer, director and owner of NCFE was sentenced to 25 years in prison and three years of supervised release following the prison term. A federal jury convicted Parrett on March 13, 2008, of conspiracy, securities fraud, wire fraud and money laundering. Parrett fled after the conviction and remains at large.
U.S. District Court Judge Algenon Marbley also ordered Poulsen and Parrett to forfeit $1.7 billion of property representing the proceeds of the conspiracy and to pay restitution of $2.3 billion, jointly and severally with other defendants.
“Corporate executives who violate the law, as well as investors’ trust, can and will be held accountable for their illegal actions,” said Acting Assistant Attorney General Rita M. Glavin. “The Department of Justice will continue to seek appropriate punishment, including jail time, for individuals who participate in financial frauds to the detriment of the investing public.”
“Evidence showed that Poulsen knew the business model NCFE presented to the investing public differed drastically from the way NCFE did business within its own walls,” U.S. Attorney Lockhart said. “Their actions were designed to hide a financial house of cards from investors, eventually costing investors $2 billion.”
“When corporate officers elect to betray the public’s trust for personal gain, the very core of how and why our corporate system operates is immediately and negatively impacted,” Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division Jose A. Gonzalez said. “As signified by today’s NCFE sentences, the IRS gives priority to investigations involving the alleged breach of the public trust by corporate officials at any level.”
FBI Cincinnati Special Agent in Charge Keith L. Bennett noted the significant sentences imposed on both Poulsen and Parrett. “This should serve as a warning to those who might be tempted to manipulate the complexities of our financial systems to defraud others. The FBI stands ready to root out those who would do so, bring them to the judicial system and ensure they lose both their ill-gotten wealth and their freedom.”
Witnesses testified at both trials that Poulsen, Parrett and other NCFE executives engaged in a scheme from 1995 until the collapse of the company to deceive investors and rating agencies about the financial health of NCFE and how investors’ money would be used. NCFE bought accounts receivable from healthcare providers using money NCFE obtained through the sale of asset-backed notes to institutional investors, including pension funds, insurance companies and churches.
Evidence at both trials showed that NCFE misused investors’ money and made unsecured loans to health care providers, including those owned in whole or in part by Poulsen, Parrett and another owner of NCFE, Donald H. Ayers. Former employees testified that Poulsen, Parrett and other NCFE executives covered up the fraud by lying to investors and rating agencies. The government presented evidence that Poulsen and others created investor reports containing fabricated data and moved money back and forth between programs in order to make it appear that NCFE was in compliance with its own governing documents. Evidence showed that Poulsen and Parrett knew the business model NCFE presented to the investing public differed significantly from the way NCFE actually conducted business.
Four other NCFE executives have been convicted in connection with the fraud. Donald H. Ayers, an NCFE vice chairman, chief operating officer, director and an owner of the company, was found guilty on charges of conspiracy, securities fraud and money laundering and was sentenced to 15 years in prison. Randolph H. Speer, NCFE’s chief financial officer, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 12 years in prison. Roger S. Faulkenberry, vice president for client development, was found guilty on charges of conspiracy, securities fraud, wire fraud and money laundering and was sentenced to 10 years in prison. James E. Dierker, chief credit officer, was found guilty on charges of conspiracy and money laundering and was sentenced to five years in prison. In addition, four other former NCFE executives have pleaded guilty in connection with this fraud.
The cases were prosecuted by the U.S. Attorney’s Office for the Southern District of Ohio and the Criminal Division’s Fraud Section and investigated by FBI Special Agents Matt Daly, Ingrid Schmidt and Tad Morris; IRS Special Agents Greg Ruwe and Mark Bailey, U.S. Postal Inspector Dave Mooney; and Immigration and Customs Enforcement Agent Celeste Koszut. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern and Senior Trial Attorney Wes R. Porter of the Criminal Division’s Fraud Section prosecuted Parrett, Ayers, Speer, Faulkenberry and Dierker. Assistant U.S. Attorney Douglas Squires of the Southern District of Ohio, Assistant Chief Kathleen McGovern, Trial Attorneys N. Nathan Dimock, and former Trial Attorney Leo Wise of the Criminal Division’s Fraud Section prosecuted Poulsen. Fraud Section Paralegal Specialists Crystal Curry and Sarah Marberg assisted with these cases.
Press Releases | Cincinnati
Monday, March 30, 2009
Executive Gets 30 Years in $2.9 Billion Fraud - One acquittal, the ex-CFO of Columbia Homecare Group
Executive Gets 30 Years in $2.9 Billion Fraud
By ZACHERY KOUWE
Published: March 27, 2009
NYT
Nearly seven years after National Century Financial Enterprises collapsed in a $2.9 billion fraud, its founder, Lance K. Poulsen, was sentenced to 30 years in prison on Friday in one of the harshest white-collar punishments in history.
Mr. Poulsen was convicted in October of leading a vast fraud as chief executive of National Century, a company based in Dublin, Ohio, that provided financing for hundreds of clinics, hospitals and other health care providers.
The company’s fall in 2002 contributed to the bankruptcies of 275 health care facilities and cost Credit Suisse and the Pacific Investment Management Company, the nation’s biggest bond fund investor, more than $540 million.
“Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder,” Judge Algenon Marbley said in Federal District Court in Ohio. “It is considered the largest fraud at a private company in the United States. Mr. Poulsen perpetrated this fraud over a seven-year period and went to enormous lengths to conceal it.”
Mr. Poulsen, 65, is already serving a 10-year sentence for trying to bribe the main witness against him in the case. His sentence will run concurrently with the sentence for witness tampering.
Mr. Marbley’s decision signals that federal judges could begin imposing harsher sentences for white-collar crime in response to the rise in public outrage over corporate fraud after the discovery of Bernard L. Madoff’s multibillion-dollar Ponzi scheme. The sentence for Mr. Poulsen exceeds the 25 years given to Bernard J. Ebbers, the former chief executive of WorldCom, and the 24 years given to Jeffrey K. Skilling, the former Enron chief.
Mr. Marbley also handed out a 25-year sentence to Rebecca Parrett, a former National Century executive who became a fugitive after she was convicted last year.
Mr. Poulsen and Ms. Parrett were also ordered to pay $2.38 billion in restitution.
Before it filed for bankruptcy in 2002, National Century provided loans to a variety of health care companies that were backed by payments expected to be made by insurance companies and government programs like Medicaid and Medicare. Mr. Poulsen then packaged the loans into bonds and sold them to institutional investors and Wall Street firms.
In many cases, the company deliberately lent more to the facilities, many of which were owned by Mr. Poulsen, than their receivables were worth. The scheme finally came apart in the spring of 2002 when investors began to question the value of the loans, which forced National Century into a liquidity crisis.
By ZACHERY KOUWE
Published: March 27, 2009
NYT
Nearly seven years after National Century Financial Enterprises collapsed in a $2.9 billion fraud, its founder, Lance K. Poulsen, was sentenced to 30 years in prison on Friday in one of the harshest white-collar punishments in history.
Mr. Poulsen was convicted in October of leading a vast fraud as chief executive of National Century, a company based in Dublin, Ohio, that provided financing for hundreds of clinics, hospitals and other health care providers.
The company’s fall in 2002 contributed to the bankruptcies of 275 health care facilities and cost Credit Suisse and the Pacific Investment Management Company, the nation’s biggest bond fund investor, more than $540 million.
“Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder,” Judge Algenon Marbley said in Federal District Court in Ohio. “It is considered the largest fraud at a private company in the United States. Mr. Poulsen perpetrated this fraud over a seven-year period and went to enormous lengths to conceal it.”
Mr. Poulsen, 65, is already serving a 10-year sentence for trying to bribe the main witness against him in the case. His sentence will run concurrently with the sentence for witness tampering.
Mr. Marbley’s decision signals that federal judges could begin imposing harsher sentences for white-collar crime in response to the rise in public outrage over corporate fraud after the discovery of Bernard L. Madoff’s multibillion-dollar Ponzi scheme. The sentence for Mr. Poulsen exceeds the 25 years given to Bernard J. Ebbers, the former chief executive of WorldCom, and the 24 years given to Jeffrey K. Skilling, the former Enron chief.
Mr. Marbley also handed out a 25-year sentence to Rebecca Parrett, a former National Century executive who became a fugitive after she was convicted last year.
Mr. Poulsen and Ms. Parrett were also ordered to pay $2.38 billion in restitution.
Before it filed for bankruptcy in 2002, National Century provided loans to a variety of health care companies that were backed by payments expected to be made by insurance companies and government programs like Medicaid and Medicare. Mr. Poulsen then packaged the loans into bonds and sold them to institutional investors and Wall Street firms.
In many cases, the company deliberately lent more to the facilities, many of which were owned by Mr. Poulsen, than their receivables were worth. The scheme finally came apart in the spring of 2002 when investors began to question the value of the loans, which forced National Century into a liquidity crisis.
Bigger than Enron
First off get it straight-FBI RAIDED the offices on Dublin Ohio in 2002-then it filed for bankruptcy, after the fraud was beginning to uncover, but the trial left out the root-the one acquittal, the ex-CFO of Columbia Homecare Group, James K Happ.
Nearly seven years after National Century Financial Enterprises collapsed in a $2.9 billion fraud, its founder, Lance K. Poulsen, was sentenced to 30 years in prison on Friday in one of the harshest white-collar punishments in history, The New York Times’s Zachery Kouwe reported.
Mr. Poulsen was convicted in October of leading a vast fraud as chief executive of National Century, a company based in Dublin, Ohio, that provided financing for hundreds of clinics, hospitals and other health care providers.
The company’s fall in 2002 contributed to the bankruptcies of 275 health care facilities and cost Credit Suisse and the Pacific Investment Management Company, the nation’s biggest bond fund investor, more than $540 million.
“Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder,” Judge Algenon Marbley said in Federal District Court in Ohio. “It is considered the largest fraud at a private company in the United States. Mr. Poulsen perpetrated this fraud over a seven-year period and went to enormous lengths to conceal it.”
Mr. Poulsen, 65, is already serving a 10-year sentence for trying to bribe the main witness against him in the case. His sentence will run concurrently with the sentence for witness tampering.
Mr. Marbley’s decision signals that federal judges could begin imposing harsher sentences for white-collar crime in response to the rise in public outrage over corporate fraud after the discovery of Bernard L. Madoff’s multibillion-dollar Ponzi scheme. The sentence for Mr. Poulsen exceeds the 25 years given to Bernard J. Ebbers, the former chief executive of WorldCom, and the 24 years given to Jeffrey K. Skilling, the former Enron chief.
Mr. Marbley also handed out a 25-year sentence to Rebecca Parrett, a former National Century executive who became a fugitive after she was convicted last year.
Mr. Poulsen and Ms. Parrett were also ordered to pay $2.38 billion in restitution.
Before it filed for bankruptcy in 2002, National Century provided loans to a variety of health care companies that were backed by payments expected to be made by insurance companies and government programs like Medicaid and Medicare. Mr. Poulsen then packaged the loans into bonds and sold them to institutional investors and Wall Street firms.
In many cases, the company deliberately lent more to the facilities, many of which were owned by Mr. Poulsen, than their receivables were worth. The scheme finally came apart in the spring of 2002 when investors began to question the value of the loans, which forced National Century into a liquidity crisis.
Go to Article from The New York Times
Nearly seven years after National Century Financial Enterprises collapsed in a $2.9 billion fraud, its founder, Lance K. Poulsen, was sentenced to 30 years in prison on Friday in one of the harshest white-collar punishments in history, The New York Times’s Zachery Kouwe reported.
Mr. Poulsen was convicted in October of leading a vast fraud as chief executive of National Century, a company based in Dublin, Ohio, that provided financing for hundreds of clinics, hospitals and other health care providers.
The company’s fall in 2002 contributed to the bankruptcies of 275 health care facilities and cost Credit Suisse and the Pacific Investment Management Company, the nation’s biggest bond fund investor, more than $540 million.
“Mr. Poulsen is an architect of a fraud of such magnitude that it would make sophisticated financial analysts shudder,” Judge Algenon Marbley said in Federal District Court in Ohio. “It is considered the largest fraud at a private company in the United States. Mr. Poulsen perpetrated this fraud over a seven-year period and went to enormous lengths to conceal it.”
Mr. Poulsen, 65, is already serving a 10-year sentence for trying to bribe the main witness against him in the case. His sentence will run concurrently with the sentence for witness tampering.
Mr. Marbley’s decision signals that federal judges could begin imposing harsher sentences for white-collar crime in response to the rise in public outrage over corporate fraud after the discovery of Bernard L. Madoff’s multibillion-dollar Ponzi scheme. The sentence for Mr. Poulsen exceeds the 25 years given to Bernard J. Ebbers, the former chief executive of WorldCom, and the 24 years given to Jeffrey K. Skilling, the former Enron chief.
Mr. Marbley also handed out a 25-year sentence to Rebecca Parrett, a former National Century executive who became a fugitive after she was convicted last year.
Mr. Poulsen and Ms. Parrett were also ordered to pay $2.38 billion in restitution.
Before it filed for bankruptcy in 2002, National Century provided loans to a variety of health care companies that were backed by payments expected to be made by insurance companies and government programs like Medicaid and Medicare. Mr. Poulsen then packaged the loans into bonds and sold them to institutional investors and Wall Street firms.
In many cases, the company deliberately lent more to the facilities, many of which were owned by Mr. Poulsen, than their receivables were worth. The scheme finally came apart in the spring of 2002 when investors began to question the value of the loans, which forced National Century into a liquidity crisis.
Go to Article from The New York Times
Thursday, March 26, 2009
Bigger than Enron-CNBC
CNBC's editorial staff seemed to have awakened from its eight-year slumber just in time to realize that it was Democrats who wrecked the economy. Indeed, according to CNBC's money guru and his radical "wealth destruction" rhetoric, stocks had been hammered, on perhaps an unprecedented level, since Obama took office.
Except, of course, that they hadn't. At least not compared to the stock drops suffered under President Bush. For instance, in the less than six weeks between September 19, 2008, and October 27, 2008, the Dow lost 3,055 points. And between October 10, 2007, and November 20, 2008, the Dow lost a staggering 6,526 points on Bush's watch. By contrast, between January 21 and March 3, when Cramer lobbed his false claim against Obama, the Dow had lost 1,223 points.
Did an extraordinary amount of wealth get destroyed via the stock markets during Bush's tenure? Absolutely. Yet CNBC's Cramer only appeared on Today to blame Obama by name for comparatively modest Dow declines. (And speaking of wealth destruction, if you followed Cramer's "buy" and "sell" stock tips between May 2008 and December 2008, you would have lost 35 percent on your investment.)
And on and on the attacks came from Cramer. As Media Matters previously noted, Cramer this year repeatedly characterized Obama and congressional Democrats as Russian communists, claiming Obama is "taking cues from Lenin" and using terms such as "Bolshevik," "Marx," "comrades," "Soviet," "Winter Palace," and "Politburo" to describe Democrats.
And it hasn't just been Cramer. CNBC's Maria Bartiromo falsely suggested that Obama has proposed taxing small-business revenue. CNBC news anchor Melissa Francis announced she wouldn't vote for Obama's stimulus package. Host Joe Kernen mocked Obama as having been "hijacked by those -- the crazy -- by [Nancy] Pelosi, by [Harry] Reid" and described Obama's budget as "far left." During the same segment, reporter Carl Quintanilla said of Obama's budget, "There is some social engineering going on." Kernen also falsely claimed that Obama had promised to eliminate earmarks.
CNBC host Erin Burnett announced there were "interesting" and "serious" ideas in an op-ed Rush Limbaugh wrote for The Wall Street Journal about how he'd fix the economy. (His remedy: slash capital gains taxes. No, really.) In the op-ed, Limbaugh suggested that if the government did nothing, this recession would pretty much fix itself. That's the column Burnett heralded as "interesting" and "serious."
And now we've suddenly got a showcase CNBC host reportedly eyeing public office in Connecticut as a Republican while bashing away at the new Democratic administration each night, and even criticizing -- on-air -- the Connecticut pol the host wants to unseat.
And did we mention the idiotic Santelli episode? In terms of newsroom standards, it's like Fox News run amok over at CNBC.
And that, Jeff Zucker, is the real problem.
Except, of course, that they hadn't. At least not compared to the stock drops suffered under President Bush. For instance, in the less than six weeks between September 19, 2008, and October 27, 2008, the Dow lost 3,055 points. And between October 10, 2007, and November 20, 2008, the Dow lost a staggering 6,526 points on Bush's watch. By contrast, between January 21 and March 3, when Cramer lobbed his false claim against Obama, the Dow had lost 1,223 points.
Did an extraordinary amount of wealth get destroyed via the stock markets during Bush's tenure? Absolutely. Yet CNBC's Cramer only appeared on Today to blame Obama by name for comparatively modest Dow declines. (And speaking of wealth destruction, if you followed Cramer's "buy" and "sell" stock tips between May 2008 and December 2008, you would have lost 35 percent on your investment.)
And on and on the attacks came from Cramer. As Media Matters previously noted, Cramer this year repeatedly characterized Obama and congressional Democrats as Russian communists, claiming Obama is "taking cues from Lenin" and using terms such as "Bolshevik," "Marx," "comrades," "Soviet," "Winter Palace," and "Politburo" to describe Democrats.
And it hasn't just been Cramer. CNBC's Maria Bartiromo falsely suggested that Obama has proposed taxing small-business revenue. CNBC news anchor Melissa Francis announced she wouldn't vote for Obama's stimulus package. Host Joe Kernen mocked Obama as having been "hijacked by those -- the crazy -- by [Nancy] Pelosi, by [Harry] Reid" and described Obama's budget as "far left." During the same segment, reporter Carl Quintanilla said of Obama's budget, "There is some social engineering going on." Kernen also falsely claimed that Obama had promised to eliminate earmarks.
CNBC host Erin Burnett announced there were "interesting" and "serious" ideas in an op-ed Rush Limbaugh wrote for The Wall Street Journal about how he'd fix the economy. (His remedy: slash capital gains taxes. No, really.) In the op-ed, Limbaugh suggested that if the government did nothing, this recession would pretty much fix itself. That's the column Burnett heralded as "interesting" and "serious."
And now we've suddenly got a showcase CNBC host reportedly eyeing public office in Connecticut as a Republican while bashing away at the new Democratic administration each night, and even criticizing -- on-air -- the Connecticut pol the host wants to unseat.
And did we mention the idiotic Santelli episode? In terms of newsroom standards, it's like Fox News run amok over at CNBC.
And that, Jeff Zucker, is the real problem.
Comprehensive regulatory reform is critical to these efforts
March 26, 2009 10:00 AM EDT
Below is Treasury Secretary Tim Geithner's Written Testimony to the House Financial Services Committee Hearing on financial regulatory reform:
Thank you Chairman Frank, Ranking Member Bachus, and other members of the Committee. I appreciate the opportunity to testify about the critical topic of financial regulatory reform.
Over the past 18 months, we have faced the most severe global financial crisis in generations. Some of the world’s largest financial institutions have failed. Equity and real estate prices have fallen sharply, eroding the value of our savings. The supply of credit has tightened dramatically. Confidence in the overall financial system, in the protections it is supposed to afford for investors and consumers, has eroded. These financial pressures have intensified the recession now underway around the world.
And as in any financial crisis, the damage falls on Main Street. It affects the vulnerable. It affects those who were conservative and responsible, not just those who took too much risk.
Our system is wrapped today in extraordinary complexity, but beneath all that, financial systems serve an essential and basic function. Financial institutions and markets transform the earnings and savings of American workers into the loans that finance a home, a new car or a college education. They exist to allocate savings and investment to their most productive uses.
Our financial system does this better than any other financial system in the world, but our system failed in basic fundamental ways. The system proved too unstable and fragile, subject to significant crises every few years, periodic booms in real estate markets and in credit, followed by busts and contraction. Innovation and complexity overwhelmed the checks and balances in the system. Compensation practices rewarded short-term profits over long-term return. We saw huge gains in increased access to credit for large parts of the American economy, but those gains were overshadowed by pervasive failures in consumer protection, leaving many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Large amounts of leverage and risk were created both within and outside the regulated part of the financial system.
These failures have caused a great loss of confidence in the basic fabric of our financial system, a system that over time has been a tremendous asset for the American economy.
To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game. The new rules must be simpler and more effectively enforced and produce a more stable system, that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market.
On February 25, after meeting with the banking and financial services leadership from Congress, President Obama directed his economic team to develop recommendations for financial regulatory reform and to begin the process of working with the Congress on new legislation. The Treasury Department has been working with the President’s Working Group on Financial Markets (PWG) to develop a comprehensive plan of reform. This effort has been and will be guided by principles the President set forth earlier this year and in his speech as a candidate at Cooper Union in March 2008.
Financial institutions and markets that are critical to the functioning of the financial system and that could pose serious risks to the stability of the financial system need to be subject to strong oversight by the government. Our financial system and the major centralized markets must be strong and resilient enough to withstand very severe shocks and the failure of one or more large institutions. We need much stronger standards for openness, transparency, and plain, common sense language throughout the financial system. And we need strong and uniform supervision for all financial products marketed to consumers and investors, and tough enforcement of the rules to ensure full accountability for those who violate the public trust.
Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take. We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.
And we need to recognize that risk does not respect national borders. We need to prevent national competition to reduce standards and encourage a race to higher standards. Markets are global and high standards at home need to be complemented by strong international standards enforced more evenly and fairly. These are global markets and challenges. Building on these principles, we want to work with Congress to put in place fundamental reforms that create a stronger, more stable system, with much stronger protections for consumers and investors, and a more streamlined, consolidated, and simple oversight framework.
I want to begin that process today by focusing on proposals that are essential to creating a more stable system, with stronger tools to prevent and manage future crises. In this context, my objective is to concentrate on the substance of the reform agenda, rather than the complex and sensitive questions of who should be responsible for what.
Over the next few weeks we will outline proposals in the areas of consumer and investor protection and for reform of regulatory oversight arrangements.
We start with systemic risk, not just because of its obvious importance to our future economic performance, but also because these issues require more cooperation globally, and they will be at the center of the agenda at the upcoming Leaders’ Summit of the G-20 in London on April 2.
These proposals reflect a range of complex and consequential policy choices. They will require careful work and drafting. It is important that we get this right. We recognize there will be many alternative models put forth to achieve the objective we all share of creating a more stable system. And we look forward to working with the Federal Reserve, with the agencies that make up the President’s Working Group on Financial Markets, and with the Congress on a package of reforms that we can all support.
The Crisis and Its Fundamental Causes
The current crisis had many causes.
Two decades of sustained economic growth bred widespread complacency among financial intermediaries and investors, lowering borrowing costs and weakening lending standards.
A global boom in savings resulted in large flows of capital into the United States and other markets, pushing down long-term interest rates and pushing up asset prices. The rising market hid Ponzi schemes and other flagrant abuses that should have been detected and eliminated.
In that environment, institutions and investors looked for higher returns by taking on greater exposure to the risk of infrequent but severe losses.
A long period of home price appreciation encouraged borrowers, lenders, and investors to make choices that could only succeed if home prices continued to appreciate. We had a system under which firms encouraged people to take unwise risks on complicated products, with ruinous results for them and for our financial system.
Market discipline failed to constrain dangerous levels of risk-taking throughout the financial system. New financial products were created to meet demand from investors, and the complexity outmatched the risk-management capabilities of even the most sophisticated financial institutions. Financial activity migrated outside the banking system, relying on the assumption that liquidity would always be available.
Regulated institutions held too little capital relative to the risks to which they were exposed. And the combined effects of the requirements for capital, reserves and liquidity amplified rather than dampened financial cycles. This worked to intensify the boom and magnify the bust.
Supervision and regulation failed to prevent these problems. There were failures where regulation was extensive and failures where it was absent.
Regulators were aware that a large share of loans made by banks and other lenders were being originated for distribution to investors through securitizations, but they did not identify the risks caused by explosive growth in complex products based on these products.
Investment banks, large insurance companies, finance companies, and the GSEs were subject to only limited oversight on a consolidated basis, despite the fact that many of those companies owned federally insured depository institutions or had other access to explicit or implicit forms of support from the government. Federal law allowed many institutions to choose among regulatory regimes for consolidated supervision and, not surprisingly, they avoided the stronger regulatory authority applicable to bank holding companies. Those companies and others were highly leveraged or used short-term borrowing to buy long-term assets, yet lacked strong federal prudential regulation and routine access to central bank liquidity.
And while supervision and regulation failed to constrain the build up of leverage and risk, the United States came into this crisis without adequate tools to manage it effectively. Until the Housing and Economic Recovery Act and the Emergency Economic Stabilization Act were passed in the summer and fall of 2008, the executive branch had effectively no ability to provide the capital or guarantees necessary to contain the damage caused by the crisis.
And as I discussed before this committee on Tuesday, U.S. law left regulators without good options for managing failures of systemically important non-bank financial institutions.
Regulation of a financial system as complex and dynamic as our system is inherently difficult and challenging. But that difficulty has been compounded by a U.S. regulatory structure that is unnecessarily complex and fragmented. The complexity has sometimes resulted in a failure to assign clear responsibility for achievement of some public policy objectives, notably for financial stability.
Toward a More Stable and Resilient Financial System
Our comprehensive framework for regulatory reform will cover four broad areas: systemic risk, consumer and investor protection, eliminating gaps in our regulatory structure; and international coordination.
In the coming weeks, I will present detailed frameworks for each of these areas. Today, I will discuss in greater detail the need to create tools to identify and mitigate systemic risk, including tools to protect the financial system from the failure of systemically important financial institutions.
Second, weaknesses in our consumer and investor protections harm individuals, undermine trust in our financial system, and can contribute to systemic crises that shake the very foundations of our financial system. The choice of what home mortgage to get or how to save for retirement are some of the most important financial decisions that households make. It is crucial that when households make choices we have clear rules of the road that prevent manipulation and abuse. We must restore integrity to our financial system and strengthen these protections. Consumer and investor protection is a critical component of the President’s regulatory reform plan. We are developing a strong, comprehensive plan for consumer and investor regulation to simplify financial decisions for households and to protect people from unfair and deceptive practices.
We must end the practice of allowing banks and other financial companies to choose their regulator simply by changing their charters; regulators must choose who to regulate. Moreover, our regulatory system must be comprehensive and eliminate gaps in coverage. Our regulatory structure must assign clear regulatory authority, resources, and accountability for each of the key regulatory functions. We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people.
To match the increasing global markets, we must ensure that global standards for financial regulation are consistent with the high standards we will be implementing in the United States.
The Financial Stability Forum (FSF) has played an essential role in the effort, working with the world’s standard - setting bodies to study the underlying causes of the crises and address these weaknesses. Much progress is being made to enhance sound regulation, strengthen transparency, and reinforce international collaboration.
We have begun to work with international colleagues to reform and strengthen the FSF so that it can play a more effective role alongside the original Bretton Woods institutions in strengthening the financial system. We have already gotten agreement to expand the membership to include all G-20 countries, giving it a stronger mandate for promoting more robust standards consistent with the principles above, and working with the IMF and the World Bank to monitor the implementation of those standards.
In addition, we will launch a new, initiative to address prudential supervision, tax havens, and money laundering issues in weakly regulated jurisdictions. President Obama will underscore in London on April 2 at the Leaders’ Summit the imperative of raising standards across the globe and encouraging a race to the top rather than a race to the bottom.
Reducing Systemic Risk
The crisis of the past 18 months has exposed critical gaps and weaknesses in our regulatory system. As risks built up, internal risk management systems, rating agencies and regulators simply did not understand or address critical behaviors until they had already resulted in catastrophic losses.
This crisis has made clear that certain large, interconnected firms and markets need to be under a more consistent, and more conservative regulatory regime. These standards cannot simply address the soundness of individual institutions, but must also ensure the stability of the system itself. We need to strengthen our system of prudential supervision across the financial sector. We must require that firms build up capital during good economic times so that they have a more robust protection against losses in down times – and can continue to lend to America’s households and businesses big and small. We need to examine our accounting rules to see whether, consistent with investor protection, we can require firms to build up loan loss reserves that look forward and account for losses in downturns.
In addition, regulators must issue standards for executive compensation practices across all financial firms. These guidelines should encourage prudent risk-taking, incent a focus on long-term performance of the firm rather than short-term profits, and should not otherwise create incentives that overwhelm risk management frameworks.
The key elements of our plan to address systemic risk are:
First, we need to establish a single entity with responsibility for systemic stability over the major institutions and critical payment and settlement systems and activities.
Second, we need to establish and enforce substantially more conservative capital requirements for institutions that pose potential risk to the stability of the financial system, that are designed to dampen rather than amplify financial cycles.
Third, we should require that leveraged private investment funds with assets under management over a certain threshold register with the SEC to provide greater capacity for protecting investors and market integrity.
Fourth, we should establish a comprehensive framework of oversight, protections and disclosure for the OTC derivatives market, moving the standardized parts of those markets to central clearinghouse, and encouraging further use of exchange-traded instruments.
Fifth, the SEC should develop strong requirements for money market funds to reduce the risk of rapid withdrawals of funds that could pose greater risks to market functioning.
And sixth, we need to establish a stronger resolution mechanism that gives the government tools to protect the financial system and the broader economy from the potential failure of large complex financial institutions.
Systemically Important Financial Firms and Markets
To ensure appropriate focus and accountability for financial stability we need to establish a single entity with responsibility for consolidated supervision of systemically important firms and for systemically important payment and settlement systems and activities.
We can no longer allow major financial institutions to choose among consolidated supervision regimes and regulators or to avoid consolidated supervision entirely. That means we must create higher standards for all systemically important financial firms regardless of whether they own a depository institution, to account for the risk that the distress or failure of such a firm could impose on the financial system and the economy. We will work with Congress to enact legislation that defines the characteristics of covered firms, sets objectives and principles for their oversight, and assigns responsibility for regulating these firms.
In identifying systemically important firms, we believe that the characteristics to be considered should include: the financial system’s interdependence with the firm, the firm’s size, leverage (including off-balance sheet exposures), and degree of reliance on short-term funding, and the firm’s the importance of the firm as a source of credit for households, businesses, and governments and as a source of liquidity for the financial system.
In general, the design and degree of conservatism of the prudential requirements applicable to such firms should take into account the inherent inability of regulators to predict future outcomes.
Capital requirements for these firms must be sufficiently robust to be effective farther into the tails of potential outcomes than capital requirements for other financial firms. And they must be less pro-cyclical, requiring firms to build up substantial capital buffers in good economic times so that they can avoid deleveraging in cyclical downturns.
The single systemic regulator will also need to impose liquidity, counterparty, and credit risk management requirements that are more stringent than for other financial firms. For instance, supervisors should apply more demanding liquidity constraints; and require that these firms are able to aggregate counterparty risk exposures on an enterprise basis within a matter of hours.
The regulator of these entities will also need a prompt, corrective action regime that would allow the regulator to force protective actions as regulatory capital levels decline, similar to that of the FDIC with respect to its covered agencies.
Payment and Settlement Activities
Weaknesses in the settlement systems for key funding and risk transfer markets, notably overnight and short-term lending markets (such as those for tri-party repurchase agreements) and OTC derivatives, have been highlighted as a key mechanism that could spread financial distress between institutions and across borders. While some progress was made in the markets for CDS and other OTC derivatives while I was at the New York Fed, federal authority over such arrangements is incomplete and fragmented, and we have been forced to rely heavily on moral suasion to encourage market participants to strengthen these markets.
We need to give a single entity broad and clear authority over systemically important payment and settlement systems and activities. Where such systems or their participants are already federally regulated, the authority of those federal regulators should be preserved and the single entity should consult and coordinate with those regulators.
Hedge Funds and Other Private Pools of Capital
U. S. law generally does not require hedge funds or other private pools of capital to register with a federal financial regulator, although some funds that trade commodity derivatives must register with the CFTC and many funds register voluntarily with the SEC. As a result, there are no reliable, comprehensive data available to assess whether such funds individually or collectively pose a threat to financial stability. However, in the wake of the Madoff episode it is clear that, in order to protect investors, we must close gaps and weaknesses in regulation of investment advisors and the funds they manage.
Accordingly, we recommend that all advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) with assets under management over a certain threshold be required to register with the SEC. All such funds advised by an SEC-registered investment adviser should be subject to investor and counterparty disclosure requirements and regulatory reporting requirements. The regulatory reporting requirements for such funds should require reporting, on a confidential basis, information necessary to assess whether the fund or fund family is so large or highly leveraged that it poses a threat to financial stability. The SEC should share the reports that it receives from the funds with the entity responsible for oversight of systemically important firms, which would then determine whether any hedge funds could pose a systemic threat and should be subjected to the prudential standards outlined above.
Credit Default Swaps and Other OTC Derivatives
The current financial crisis has been amplified by excessive risk-taking by certain insurance companies and poor counterparty credit risk management by many banks trading Credit Default Swaps (CDS) on asset-backed securities. These complex instruments were poorly understood by counterparties, and the implication that they could threaten the entire financial system or bring down a company of the size and scope of AIG was not identified by regulators, in part because the CDS markets lacked transparency.
Let me be clear: the days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayers from losses must end.
In our proposed regulatory system, the government will regulate the markets for credit default swaps and over-the-counter derivatives for the first time.
We will subject all dealers in OTC derivative markets and any other firms whose activities in those markets pose a systemic threat to a strong regulatory and supervisory regime as systemically important firms.
We will force all standardized OTC derivative contracts to be cleared through appropriately designed central counterparties (CCPs). We will also encourage greater use of exchange-traded instruments.
The CCPs will be subject to comprehensive settlement systems supervision and oversight, consistent with the authority outlined above.
We will require that all non-standardized derivatives contracts be reported to trade repositories and be subject to robust standards for documentation and confirmation of trades, netting, collateral and margin practices, and close-out practices.
We will bring unparalleled transparency to the OTC derivatives markets by requiring CCPs and trade repositories to make aggregate data on trading volumes and positions available to the public and make individual counterparty trade and position data available on a confidential basis to federal regulators, including those with responsibilities for market integrity.
Finally, we will strengthen participant eligibility requirements and, where appropriate, introduce disclosure or suitability requirements, and we will require all market participants to meet recordkeeping and reporting requirements.
Money Market Mutual Funds (MMFs)
In the wake of Lehman Brothers’ bankruptcy, we learned that even one of the most stable and least risky investment vehicles - money market mutual funds - was not safe from the failure of a systemically important institution. These funds are subject to strict regulation by the SEC and are billed as having a stable asset value - a dollar invested will always return the same amount. But when a major prime MMF “broke the buck” - lost money - the event sparked sharp withdrawals across the entire prime MMF industry. Those withdrawals resulted in severe liquidity pressures, not only on prime MMFs but also on financial and non-financial companies that relied significantly on MMFs for funding. The vulnerability of MMFs to breaking the buck and the susceptibility of the entire prime MMF industry to sharp withdrawals in such circumstances remains a significant source of systemic risk.
We believe that the SEC should strengthen the regulatory framework around MMFs in order to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole is less susceptible to runs.
Resolution Authority
As I discussed on Tuesday, we must create a resolution regime that provides authority to avoid the disorderly liquidation of any nonbank financial firm whose disorderly liquidation would have serious adverse effects on the financial system or the U.S. economy.
Please note that the draft resolution legislation we have submitted is a first step intended to address a significant void in today's regulatory structure. This mechanism is intended to be a permanent authority and therefore, will also be a critical element of Treasury's broader regulatory reform proposals. As we move forward on those proposals, we will need to align the draft legislation with the broader regulatory reform effort as it develops. At this point, however, I will focus on how the authority and mechanism would work within our current regulatory framework.
We must cover financial institutions that have the potential to pose systemic risks to our economy but that are not currently subject to the resolution authority of the FDIC. This would include bank and thrift holding companies and holding companies that control broker-dealers, insurance companies, and futures commission merchants, or any other financial firm posing substantial risk to our economy.
Before any of the emergency measures specified could be taken, the Secretary of the Treasury, upon the positive recommendations of both the Federal Reserve Board and the FDIC and in consultation with the President, would have to make a triggering determination that (1) the financial institution in question is in danger of becoming insolvent; (2) its insolvency would have serious adverse effects on economic conditions or financial stability in the United States; and (3) taking emergency action as provided for in the law would avoid or mitigate those adverse effects.
The Treasury and the FDIC would decide whether to provide financial assistance to the institution or to put it into conservatorship/receivership. This decision will be informed by the recommendations of the Federal Reserve Board and the appropriate federal regulatory agency (if different from the FDIC). The U.S. government would be permitted to utilize a number of different forms of financial assistance in order to stabilize the institution in question. These include making loans to the financial institution in question, purchasing its obligations or assets, assuming or guaranteeing its liabilities, and purchasing an equity interest in the institution.
This authority is modeled on the resolution authority that the FDIC has under current law with respect to banks and that the Federal Housing Finance Agency has with regard to the GSEs. Here, conservatorships or receiverships aim to minimize the impact of the potential failure of the financial institution on the financial system and consumers as a whole, rather than simply addressing the rights of the institution’s creditors as in bankruptcy.
Depending on the circumstances, the FDIC and the Treasury would place the firm into conservatorship with the aim of returning it to private hands or a receivership that would manage the process of winding down the firm. The trustee of the conservatorship or receivership would have broad powers, including to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution’s contracts (including with its employees), and to deal with a derivatives book. A conservator would also have the power to fundamentally restructure the institution by, for example, replacing its board of directors and its senior officers. None of these actions would be subject to the approval of the institution’s creditors or other stakeholders.
The proposed legislation would create an appropriate mechanism to fund the appropriately limited exercise of the resolution authorities it confers. This could take the form of a mandatory appropriation to the FDIC out of the general fund of the Treasury (subject to all the restrictions on the use of appropriated funds, including apportionments under the Anti-Deficiency Act), and/or through a scheme of assessments, ex ante or ex post, on the financial institutions covered by the legislation. The government would also receive repayment from the redemption of any loans made to the financial institution in question, and from the ultimate sale of any equity interest taken by the government in the institution. The Deposit Insurance Fund will not be used to fund such assistance.
Conclusion
The President has made clear that we will do what is necessary to stabilize the financial system and restore the conditions for economic growth. Working closely with the Congress, we have moved quickly and with forceful action to help get people back to work and the economy growing again. With your help we are also moving to repair the financial system so that it works for, rather than against, recovery.
Comprehensive regulatory reform is critical to these efforts. In the coming days and weeks, we will continue to lay out the steps we must take to protect against systemic risk. We will also lay out a detailed framework for stronger rules to protect consumers and investors against fraud and abuse.
Next week I will join President Obama in London for the G-20 leaders meeting to build support - with the help of other interested nations and strengthened international bodies -for higher global standards for financial regulation.
We are a strong and resilient country. We came into the current crisis without the authority and tools we needed to contain the damage to the economy from the financial crisis. We are moving to ensure that we are equipped with both in the future, and in the process, that we modernize our 20th century regulatory system meet 21st century financial challenges.
Below is Treasury Secretary Tim Geithner's Written Testimony to the House Financial Services Committee Hearing on financial regulatory reform:
Thank you Chairman Frank, Ranking Member Bachus, and other members of the Committee. I appreciate the opportunity to testify about the critical topic of financial regulatory reform.
Over the past 18 months, we have faced the most severe global financial crisis in generations. Some of the world’s largest financial institutions have failed. Equity and real estate prices have fallen sharply, eroding the value of our savings. The supply of credit has tightened dramatically. Confidence in the overall financial system, in the protections it is supposed to afford for investors and consumers, has eroded. These financial pressures have intensified the recession now underway around the world.
And as in any financial crisis, the damage falls on Main Street. It affects the vulnerable. It affects those who were conservative and responsible, not just those who took too much risk.
Our system is wrapped today in extraordinary complexity, but beneath all that, financial systems serve an essential and basic function. Financial institutions and markets transform the earnings and savings of American workers into the loans that finance a home, a new car or a college education. They exist to allocate savings and investment to their most productive uses.
Our financial system does this better than any other financial system in the world, but our system failed in basic fundamental ways. The system proved too unstable and fragile, subject to significant crises every few years, periodic booms in real estate markets and in credit, followed by busts and contraction. Innovation and complexity overwhelmed the checks and balances in the system. Compensation practices rewarded short-term profits over long-term return. We saw huge gains in increased access to credit for large parts of the American economy, but those gains were overshadowed by pervasive failures in consumer protection, leaving many Americans with obligations they did not understand and could not sustain. The huge apparent returns to financial activity attracted fraud on a dramatic scale. Large amounts of leverage and risk were created both within and outside the regulated part of the financial system.
These failures have caused a great loss of confidence in the basic fabric of our financial system, a system that over time has been a tremendous asset for the American economy.
To address this will require comprehensive reform. Not modest repairs at the margin, but new rules of the game. The new rules must be simpler and more effectively enforced and produce a more stable system, that protects consumers and investors, that rewards innovation and that is able to adapt and evolve with changes in the financial market.
On February 25, after meeting with the banking and financial services leadership from Congress, President Obama directed his economic team to develop recommendations for financial regulatory reform and to begin the process of working with the Congress on new legislation. The Treasury Department has been working with the President’s Working Group on Financial Markets (PWG) to develop a comprehensive plan of reform. This effort has been and will be guided by principles the President set forth earlier this year and in his speech as a candidate at Cooper Union in March 2008.
Financial institutions and markets that are critical to the functioning of the financial system and that could pose serious risks to the stability of the financial system need to be subject to strong oversight by the government. Our financial system and the major centralized markets must be strong and resilient enough to withstand very severe shocks and the failure of one or more large institutions. We need much stronger standards for openness, transparency, and plain, common sense language throughout the financial system. And we need strong and uniform supervision for all financial products marketed to consumers and investors, and tough enforcement of the rules to ensure full accountability for those who violate the public trust.
Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take. We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.
And we need to recognize that risk does not respect national borders. We need to prevent national competition to reduce standards and encourage a race to higher standards. Markets are global and high standards at home need to be complemented by strong international standards enforced more evenly and fairly. These are global markets and challenges. Building on these principles, we want to work with Congress to put in place fundamental reforms that create a stronger, more stable system, with much stronger protections for consumers and investors, and a more streamlined, consolidated, and simple oversight framework.
I want to begin that process today by focusing on proposals that are essential to creating a more stable system, with stronger tools to prevent and manage future crises. In this context, my objective is to concentrate on the substance of the reform agenda, rather than the complex and sensitive questions of who should be responsible for what.
Over the next few weeks we will outline proposals in the areas of consumer and investor protection and for reform of regulatory oversight arrangements.
We start with systemic risk, not just because of its obvious importance to our future economic performance, but also because these issues require more cooperation globally, and they will be at the center of the agenda at the upcoming Leaders’ Summit of the G-20 in London on April 2.
These proposals reflect a range of complex and consequential policy choices. They will require careful work and drafting. It is important that we get this right. We recognize there will be many alternative models put forth to achieve the objective we all share of creating a more stable system. And we look forward to working with the Federal Reserve, with the agencies that make up the President’s Working Group on Financial Markets, and with the Congress on a package of reforms that we can all support.
The Crisis and Its Fundamental Causes
The current crisis had many causes.
Two decades of sustained economic growth bred widespread complacency among financial intermediaries and investors, lowering borrowing costs and weakening lending standards.
A global boom in savings resulted in large flows of capital into the United States and other markets, pushing down long-term interest rates and pushing up asset prices. The rising market hid Ponzi schemes and other flagrant abuses that should have been detected and eliminated.
In that environment, institutions and investors looked for higher returns by taking on greater exposure to the risk of infrequent but severe losses.
A long period of home price appreciation encouraged borrowers, lenders, and investors to make choices that could only succeed if home prices continued to appreciate. We had a system under which firms encouraged people to take unwise risks on complicated products, with ruinous results for them and for our financial system.
Market discipline failed to constrain dangerous levels of risk-taking throughout the financial system. New financial products were created to meet demand from investors, and the complexity outmatched the risk-management capabilities of even the most sophisticated financial institutions. Financial activity migrated outside the banking system, relying on the assumption that liquidity would always be available.
Regulated institutions held too little capital relative to the risks to which they were exposed. And the combined effects of the requirements for capital, reserves and liquidity amplified rather than dampened financial cycles. This worked to intensify the boom and magnify the bust.
Supervision and regulation failed to prevent these problems. There were failures where regulation was extensive and failures where it was absent.
Regulators were aware that a large share of loans made by banks and other lenders were being originated for distribution to investors through securitizations, but they did not identify the risks caused by explosive growth in complex products based on these products.
Investment banks, large insurance companies, finance companies, and the GSEs were subject to only limited oversight on a consolidated basis, despite the fact that many of those companies owned federally insured depository institutions or had other access to explicit or implicit forms of support from the government. Federal law allowed many institutions to choose among regulatory regimes for consolidated supervision and, not surprisingly, they avoided the stronger regulatory authority applicable to bank holding companies. Those companies and others were highly leveraged or used short-term borrowing to buy long-term assets, yet lacked strong federal prudential regulation and routine access to central bank liquidity.
And while supervision and regulation failed to constrain the build up of leverage and risk, the United States came into this crisis without adequate tools to manage it effectively. Until the Housing and Economic Recovery Act and the Emergency Economic Stabilization Act were passed in the summer and fall of 2008, the executive branch had effectively no ability to provide the capital or guarantees necessary to contain the damage caused by the crisis.
And as I discussed before this committee on Tuesday, U.S. law left regulators without good options for managing failures of systemically important non-bank financial institutions.
Regulation of a financial system as complex and dynamic as our system is inherently difficult and challenging. But that difficulty has been compounded by a U.S. regulatory structure that is unnecessarily complex and fragmented. The complexity has sometimes resulted in a failure to assign clear responsibility for achievement of some public policy objectives, notably for financial stability.
Toward a More Stable and Resilient Financial System
Our comprehensive framework for regulatory reform will cover four broad areas: systemic risk, consumer and investor protection, eliminating gaps in our regulatory structure; and international coordination.
In the coming weeks, I will present detailed frameworks for each of these areas. Today, I will discuss in greater detail the need to create tools to identify and mitigate systemic risk, including tools to protect the financial system from the failure of systemically important financial institutions.
Second, weaknesses in our consumer and investor protections harm individuals, undermine trust in our financial system, and can contribute to systemic crises that shake the very foundations of our financial system. The choice of what home mortgage to get or how to save for retirement are some of the most important financial decisions that households make. It is crucial that when households make choices we have clear rules of the road that prevent manipulation and abuse. We must restore integrity to our financial system and strengthen these protections. Consumer and investor protection is a critical component of the President’s regulatory reform plan. We are developing a strong, comprehensive plan for consumer and investor regulation to simplify financial decisions for households and to protect people from unfair and deceptive practices.
We must end the practice of allowing banks and other financial companies to choose their regulator simply by changing their charters; regulators must choose who to regulate. Moreover, our regulatory system must be comprehensive and eliminate gaps in coverage. Our regulatory structure must assign clear regulatory authority, resources, and accountability for each of the key regulatory functions. We must not let turf wars or concerns about the shape of organizational charts prevent us from establishing a substantive system of regulation that meets the needs of the American people.
To match the increasing global markets, we must ensure that global standards for financial regulation are consistent with the high standards we will be implementing in the United States.
The Financial Stability Forum (FSF) has played an essential role in the effort, working with the world’s standard - setting bodies to study the underlying causes of the crises and address these weaknesses. Much progress is being made to enhance sound regulation, strengthen transparency, and reinforce international collaboration.
We have begun to work with international colleagues to reform and strengthen the FSF so that it can play a more effective role alongside the original Bretton Woods institutions in strengthening the financial system. We have already gotten agreement to expand the membership to include all G-20 countries, giving it a stronger mandate for promoting more robust standards consistent with the principles above, and working with the IMF and the World Bank to monitor the implementation of those standards.
In addition, we will launch a new, initiative to address prudential supervision, tax havens, and money laundering issues in weakly regulated jurisdictions. President Obama will underscore in London on April 2 at the Leaders’ Summit the imperative of raising standards across the globe and encouraging a race to the top rather than a race to the bottom.
Reducing Systemic Risk
The crisis of the past 18 months has exposed critical gaps and weaknesses in our regulatory system. As risks built up, internal risk management systems, rating agencies and regulators simply did not understand or address critical behaviors until they had already resulted in catastrophic losses.
This crisis has made clear that certain large, interconnected firms and markets need to be under a more consistent, and more conservative regulatory regime. These standards cannot simply address the soundness of individual institutions, but must also ensure the stability of the system itself. We need to strengthen our system of prudential supervision across the financial sector. We must require that firms build up capital during good economic times so that they have a more robust protection against losses in down times – and can continue to lend to America’s households and businesses big and small. We need to examine our accounting rules to see whether, consistent with investor protection, we can require firms to build up loan loss reserves that look forward and account for losses in downturns.
In addition, regulators must issue standards for executive compensation practices across all financial firms. These guidelines should encourage prudent risk-taking, incent a focus on long-term performance of the firm rather than short-term profits, and should not otherwise create incentives that overwhelm risk management frameworks.
The key elements of our plan to address systemic risk are:
First, we need to establish a single entity with responsibility for systemic stability over the major institutions and critical payment and settlement systems and activities.
Second, we need to establish and enforce substantially more conservative capital requirements for institutions that pose potential risk to the stability of the financial system, that are designed to dampen rather than amplify financial cycles.
Third, we should require that leveraged private investment funds with assets under management over a certain threshold register with the SEC to provide greater capacity for protecting investors and market integrity.
Fourth, we should establish a comprehensive framework of oversight, protections and disclosure for the OTC derivatives market, moving the standardized parts of those markets to central clearinghouse, and encouraging further use of exchange-traded instruments.
Fifth, the SEC should develop strong requirements for money market funds to reduce the risk of rapid withdrawals of funds that could pose greater risks to market functioning.
And sixth, we need to establish a stronger resolution mechanism that gives the government tools to protect the financial system and the broader economy from the potential failure of large complex financial institutions.
Systemically Important Financial Firms and Markets
To ensure appropriate focus and accountability for financial stability we need to establish a single entity with responsibility for consolidated supervision of systemically important firms and for systemically important payment and settlement systems and activities.
We can no longer allow major financial institutions to choose among consolidated supervision regimes and regulators or to avoid consolidated supervision entirely. That means we must create higher standards for all systemically important financial firms regardless of whether they own a depository institution, to account for the risk that the distress or failure of such a firm could impose on the financial system and the economy. We will work with Congress to enact legislation that defines the characteristics of covered firms, sets objectives and principles for their oversight, and assigns responsibility for regulating these firms.
In identifying systemically important firms, we believe that the characteristics to be considered should include: the financial system’s interdependence with the firm, the firm’s size, leverage (including off-balance sheet exposures), and degree of reliance on short-term funding, and the firm’s the importance of the firm as a source of credit for households, businesses, and governments and as a source of liquidity for the financial system.
In general, the design and degree of conservatism of the prudential requirements applicable to such firms should take into account the inherent inability of regulators to predict future outcomes.
Capital requirements for these firms must be sufficiently robust to be effective farther into the tails of potential outcomes than capital requirements for other financial firms. And they must be less pro-cyclical, requiring firms to build up substantial capital buffers in good economic times so that they can avoid deleveraging in cyclical downturns.
The single systemic regulator will also need to impose liquidity, counterparty, and credit risk management requirements that are more stringent than for other financial firms. For instance, supervisors should apply more demanding liquidity constraints; and require that these firms are able to aggregate counterparty risk exposures on an enterprise basis within a matter of hours.
The regulator of these entities will also need a prompt, corrective action regime that would allow the regulator to force protective actions as regulatory capital levels decline, similar to that of the FDIC with respect to its covered agencies.
Payment and Settlement Activities
Weaknesses in the settlement systems for key funding and risk transfer markets, notably overnight and short-term lending markets (such as those for tri-party repurchase agreements) and OTC derivatives, have been highlighted as a key mechanism that could spread financial distress between institutions and across borders. While some progress was made in the markets for CDS and other OTC derivatives while I was at the New York Fed, federal authority over such arrangements is incomplete and fragmented, and we have been forced to rely heavily on moral suasion to encourage market participants to strengthen these markets.
We need to give a single entity broad and clear authority over systemically important payment and settlement systems and activities. Where such systems or their participants are already federally regulated, the authority of those federal regulators should be preserved and the single entity should consult and coordinate with those regulators.
Hedge Funds and Other Private Pools of Capital
U. S. law generally does not require hedge funds or other private pools of capital to register with a federal financial regulator, although some funds that trade commodity derivatives must register with the CFTC and many funds register voluntarily with the SEC. As a result, there are no reliable, comprehensive data available to assess whether such funds individually or collectively pose a threat to financial stability. However, in the wake of the Madoff episode it is clear that, in order to protect investors, we must close gaps and weaknesses in regulation of investment advisors and the funds they manage.
Accordingly, we recommend that all advisers to hedge funds (and other private pools of capital, including private equity funds and venture capital funds) with assets under management over a certain threshold be required to register with the SEC. All such funds advised by an SEC-registered investment adviser should be subject to investor and counterparty disclosure requirements and regulatory reporting requirements. The regulatory reporting requirements for such funds should require reporting, on a confidential basis, information necessary to assess whether the fund or fund family is so large or highly leveraged that it poses a threat to financial stability. The SEC should share the reports that it receives from the funds with the entity responsible for oversight of systemically important firms, which would then determine whether any hedge funds could pose a systemic threat and should be subjected to the prudential standards outlined above.
Credit Default Swaps and Other OTC Derivatives
The current financial crisis has been amplified by excessive risk-taking by certain insurance companies and poor counterparty credit risk management by many banks trading Credit Default Swaps (CDS) on asset-backed securities. These complex instruments were poorly understood by counterparties, and the implication that they could threaten the entire financial system or bring down a company of the size and scope of AIG was not identified by regulators, in part because the CDS markets lacked transparency.
Let me be clear: the days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayers from losses must end.
In our proposed regulatory system, the government will regulate the markets for credit default swaps and over-the-counter derivatives for the first time.
We will subject all dealers in OTC derivative markets and any other firms whose activities in those markets pose a systemic threat to a strong regulatory and supervisory regime as systemically important firms.
We will force all standardized OTC derivative contracts to be cleared through appropriately designed central counterparties (CCPs). We will also encourage greater use of exchange-traded instruments.
The CCPs will be subject to comprehensive settlement systems supervision and oversight, consistent with the authority outlined above.
We will require that all non-standardized derivatives contracts be reported to trade repositories and be subject to robust standards for documentation and confirmation of trades, netting, collateral and margin practices, and close-out practices.
We will bring unparalleled transparency to the OTC derivatives markets by requiring CCPs and trade repositories to make aggregate data on trading volumes and positions available to the public and make individual counterparty trade and position data available on a confidential basis to federal regulators, including those with responsibilities for market integrity.
Finally, we will strengthen participant eligibility requirements and, where appropriate, introduce disclosure or suitability requirements, and we will require all market participants to meet recordkeeping and reporting requirements.
Money Market Mutual Funds (MMFs)
In the wake of Lehman Brothers’ bankruptcy, we learned that even one of the most stable and least risky investment vehicles - money market mutual funds - was not safe from the failure of a systemically important institution. These funds are subject to strict regulation by the SEC and are billed as having a stable asset value - a dollar invested will always return the same amount. But when a major prime MMF “broke the buck” - lost money - the event sparked sharp withdrawals across the entire prime MMF industry. Those withdrawals resulted in severe liquidity pressures, not only on prime MMFs but also on financial and non-financial companies that relied significantly on MMFs for funding. The vulnerability of MMFs to breaking the buck and the susceptibility of the entire prime MMF industry to sharp withdrawals in such circumstances remains a significant source of systemic risk.
We believe that the SEC should strengthen the regulatory framework around MMFs in order to reduce the credit and liquidity risk profile of individual MMFs and to make the MMF industry as a whole is less susceptible to runs.
Resolution Authority
As I discussed on Tuesday, we must create a resolution regime that provides authority to avoid the disorderly liquidation of any nonbank financial firm whose disorderly liquidation would have serious adverse effects on the financial system or the U.S. economy.
Please note that the draft resolution legislation we have submitted is a first step intended to address a significant void in today's regulatory structure. This mechanism is intended to be a permanent authority and therefore, will also be a critical element of Treasury's broader regulatory reform proposals. As we move forward on those proposals, we will need to align the draft legislation with the broader regulatory reform effort as it develops. At this point, however, I will focus on how the authority and mechanism would work within our current regulatory framework.
We must cover financial institutions that have the potential to pose systemic risks to our economy but that are not currently subject to the resolution authority of the FDIC. This would include bank and thrift holding companies and holding companies that control broker-dealers, insurance companies, and futures commission merchants, or any other financial firm posing substantial risk to our economy.
Before any of the emergency measures specified could be taken, the Secretary of the Treasury, upon the positive recommendations of both the Federal Reserve Board and the FDIC and in consultation with the President, would have to make a triggering determination that (1) the financial institution in question is in danger of becoming insolvent; (2) its insolvency would have serious adverse effects on economic conditions or financial stability in the United States; and (3) taking emergency action as provided for in the law would avoid or mitigate those adverse effects.
The Treasury and the FDIC would decide whether to provide financial assistance to the institution or to put it into conservatorship/receivership. This decision will be informed by the recommendations of the Federal Reserve Board and the appropriate federal regulatory agency (if different from the FDIC). The U.S. government would be permitted to utilize a number of different forms of financial assistance in order to stabilize the institution in question. These include making loans to the financial institution in question, purchasing its obligations or assets, assuming or guaranteeing its liabilities, and purchasing an equity interest in the institution.
This authority is modeled on the resolution authority that the FDIC has under current law with respect to banks and that the Federal Housing Finance Agency has with regard to the GSEs. Here, conservatorships or receiverships aim to minimize the impact of the potential failure of the financial institution on the financial system and consumers as a whole, rather than simply addressing the rights of the institution’s creditors as in bankruptcy.
Depending on the circumstances, the FDIC and the Treasury would place the firm into conservatorship with the aim of returning it to private hands or a receivership that would manage the process of winding down the firm. The trustee of the conservatorship or receivership would have broad powers, including to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution’s contracts (including with its employees), and to deal with a derivatives book. A conservator would also have the power to fundamentally restructure the institution by, for example, replacing its board of directors and its senior officers. None of these actions would be subject to the approval of the institution’s creditors or other stakeholders.
The proposed legislation would create an appropriate mechanism to fund the appropriately limited exercise of the resolution authorities it confers. This could take the form of a mandatory appropriation to the FDIC out of the general fund of the Treasury (subject to all the restrictions on the use of appropriated funds, including apportionments under the Anti-Deficiency Act), and/or through a scheme of assessments, ex ante or ex post, on the financial institutions covered by the legislation. The government would also receive repayment from the redemption of any loans made to the financial institution in question, and from the ultimate sale of any equity interest taken by the government in the institution. The Deposit Insurance Fund will not be used to fund such assistance.
Conclusion
The President has made clear that we will do what is necessary to stabilize the financial system and restore the conditions for economic growth. Working closely with the Congress, we have moved quickly and with forceful action to help get people back to work and the economy growing again. With your help we are also moving to repair the financial system so that it works for, rather than against, recovery.
Comprehensive regulatory reform is critical to these efforts. In the coming days and weeks, we will continue to lay out the steps we must take to protect against systemic risk. We will also lay out a detailed framework for stronger rules to protect consumers and investors against fraud and abuse.
Next week I will join President Obama in London for the G-20 leaders meeting to build support - with the help of other interested nations and strengthened international bodies -for higher global standards for financial regulation.
We are a strong and resilient country. We came into the current crisis without the authority and tools we needed to contain the damage to the economy from the financial crisis. We are moving to ensure that we are equipped with both in the future, and in the process, that we modernize our 20th century regulatory system meet 21st century financial challenges.
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