Sunday, May 17, 2009
Schapiro's Head Fake
"The [SEC] brought its first-ever case alleging insider trading in credit-default swaps--an opaque derivative instrument at the heart of the recent carnage in the financial industry. ...The SEC's action shows that the Obama administration is eager to more closely regulate a host of esoteric trading strategies, the agency says. Both the White House and Congress have viewed the derivatives markets as having grown too large and unruly in recent years, contributing to the financial woes. 'We are looking at a broad array of financial products associated with the financial crisis, including credit-default swaps,' Kay Lackey, associate regional director of the SEC's New York office, said in an interview. .... Mr. [Renato] Negrin allegedy used that information to earn a $1.2 million profit on credit-default swaps tied to the value of the company's debt. Mr. [Paul] Rorech, in turn, got some of the trader's sales buiness, the complaint alleges. ... Since taking over in January, SEC Chairman Mary Schapiro has talked tough about taking the 'handcuff's off enforcement attorneys. The rescession is adding to concerns that people with an inside track to troubles at companies can use swaps to cash in on their knowledge before it becomes publicly known", my emphasis, Liz Rappaport at the WSJ, 6 May 2009.
More of the same. The SEC pursues insignificant cases to appear to do something. Schapiro, how about investigating all of AIG's filings for the last two years. See if you can find anything. This case reminds me of the Bear Stearns two, my 3 July 2008 post: http://skepticaltexascpa.blogspot.com/2008/07/bear-stearns-two.html. Schapiro talks tough. So? $1.2 million? Not even close to my Blankfein test. Schapiro, close this case to go on to more serious business. Hey Lackey, is that your real name, or a pseudonym you selected?