Almost a year ago, in a Washington Examiner column on the Chrysler bailout, I reflected on the Obama administration's decision to force bondholders to accept 33 cents on the dollar on secured debts while giving United Auto Worker retirees 50 cents on the dollar on unsecured debts.
This was a clear violation of the ordinary bankruptcy rule that secured creditors are fully paid off before unsecured creditors get anything. The politically connected UAW folks got preference over politically unconnected bondholders. "We have just seen an episode of Gangster Government," I wrote. "It is likely to be a continuing series."
Fast-forward to last Friday, when the Securities Exchange Commission filed a complaint against Goldman Sachs, alleging that the firm violated the law when it sold a collaterized debt obligation based on mortgage-backed securities without disclosing that the CDO was assembled with the help of hedge fund investor John Paulson.
On its face the complaint seems flimsy. Paulson has since become famous because his firm made billions by betting against mortgage-backed securities. But he wasn't a big name then, and the sophisticated firm buying the CDO must have assumed the seller believed its value would go down.
That's not the only fishy thing about the complaint. Tuesday came the news, undisclosed by the SEC on Friday, that the commissioners approved the complaint by a 3-2 party-line vote. Ordinarily the SEC issues such complaints only when the commissioners unanimously approve.
Fishy thing No. 3: Democrats immediately used the complaint to jam Sen. Christopher Dodd's financial regulation through the Senate. You may want to believe the denials that the Democratic commissioners timed the action in coordination with the administration or congressional leaders.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/politics/Gangster-Government-becomes-a-long-running-series-91656284.html#ixzz0ljrfM8cA
No comments:
Post a Comment