Receiving Wide Coverage ...
E.U. or P.U.?: Standard & Poor's put Germany, France and 13 other euro-zone nations on review for possible downgrade as French President Nicolas Sarkozy and German Chancellor Angela Merkel set a week-end deadline for the 27 European Union governments to accept mandatory limits on budget deficits. The Post quotes Michael Hood, a market strategist at J.P. Morgan Asset Management, as warning of an EU breakup: "The risk is likely paralysis. You won't even know what people owe you." New York Times, Wall Street Journal, Washington Post
Too Arrogant to Succeed: Deposed MF Global chief executive Jon Corzine blew off concerns about his firm's exposure to European sovereign debt, despite warnings from chief risk officer Michael Roseman, the Journal reports. Corzine, a former Goldman Sachs boss and career trader, dismissed his risk chief's concerns by arguing the scenarios he was painting were "too extreme and likely impossible." It makes you wonder if Corzine was snoozing when Goldman was up to its eyeballs in the Long Term Capital Management meltdown. But hold on. He wasn't snoozing. In fact, in an interview he told PBS that LTCM's fatal mistakes were eerily like MF Global's "In every market they seemed to [occupy] a disproportionate concentration of positions. And so if all of this came unwound at a given moment in time -- and [you can] go back to the Thailand situation, where everybody wanted out at once -- you would have had distress in every financial market all over the globe." In the latest regulatory bid to close the barn door now that the cows are gone, the Commodity Futures Trading Commission enacted a new so-called MF Global Rule. It will largely bar "firms from using client funds to buy foreign sovereign debt. It also prevents a complex transaction that allowed MF Global, in essence, to borrow money from its own customers," according to the Times. The rule also requires additional reporting of customer cash held and data on investment risks, according to the Journal.
Wall Street Journal
Wall Street bigwigs are likely breathing easier across their linen tablecloths this morning, thanks to a Journal story reporting that the Federal Bureau of Investigation is unlikely to slap any of them with criminal charges over the financial meltdown. The feds have apparently decided that although some actions were not within the letter of the law, criminal prosecutions would fail, according to David Cardona, formerly an FBI deputy assistant director. Criminal law enforcers have decided such cases are "better left to civil regulators," according to Cardona. Given the trouble the Securities and Exchange Commission has had recently getting even approval of settlements in which the target neither confirms or denies wrongdoing, it looks like happy days are here again for the Park Avenue crowd.
The SEC pushed off for a "few" months a decision on whether to make U.S. companies follow international accounting rules.
New York Times
On the heels of Judge Rakoff's rejection of the SEC/Citigroup settlement, the agency's chairwoman, Mary S. Schapiro, is asking the Senate Banking subcommittee on securities for the ability to issue much higher penalties for violations. The New York Times summarized the impact of the plan: "If adopted, the net effect of Ms. Schapiro's proposal would give the SEC the authority to seek significantly higher financial penalties for violations without ever having to resort to a federal district court by pursuing cases in administrative proceedings." The Journal reported this last week.