If you didn't know better, you might reasonably conclude that the top financial regulator in the United States is Andrew Cuomo. The hard-working New York State attorney general has been engaged for weeks in hardball negotiations with major banks—including UBS, Wachovia, Citigroup, and Merrill Lynch—successfully forcing them to buy back billions of auction-rate securities, on the basis that those instruments were misleadingly sold to investors. And if Cuomo doesn't like a bank's terms, he throws them right back, as the Financial Times reports today; Cuomo rejected Morgan Stanley's $4.5 billion offer as "too little, too late."
New Yorkers who remember the gubernatorial career of Andrew's father, Mario, will have little trouble imagining the family gift for tough negotiations. And given how swiftly the banks seem to be getting in line, there seems to be no question that Cuomo has the authority and jurisdiction to take on global financial firms. But isn't protecting investors from alleged Wall Street fraud also a duty of the U.S. government—namely, the Securities and Exchange Commission?
Yes, allows the Wall Street Journal's Heidi Moore: The SEC played a role in these deals, but "Cuomo won the headlines and took on the mantle of Savior of the Little Guy just as his predecessor, Eliot Spitzer, fell into disgrace and the SEC itself is begging for its life from a newly powerful Federal Reserve." Perhaps this is lame-duckery from outgoing SEC head Christopher Cox, but it may have lasting damage, notes Moore: "Considering how embattled the regulator is right now in both finances and reputation, count failing to get out ahead of this auction-rate securities raid as a missed opportunity for getting some credit for fighting for Main Street."
Is Great Britain being squeezed by a punishing bout of inflation? That may depend on which paper you read. "Inflation set to hit 5 percent as goods prices surge," warns today's London Times headline. "Official figures confirmed that prices for U.K.-manufactured products last month rose by 10.2 percent from a year earlier, marking their fastest annual pace of increase since 1986," reports the paper. That sounds bad, but somehow the WSJ isn't alarmed. Under the headline "U.K. Data Show Signs Inflation Is Easing," the WSJ argues that the 10.2 percent figure "was lower than expected," although it fails to indicate who was doing the expecting.
It looks as if two more Southern California banks may be teetering on the financial edge. Downey Financial Corp and Vineyard National Bancorp "may not have enough capital to continue operations amid a surge in depositor withdrawals," Bloomberg reports. Downey, based in Newport Beach, was heavily involved in option-adjustable-rate mortgages, which make payments balloon over time and look increasingly risky. The company lost its CEO last month, and has seen its stock shrivel from $63 a share last fall to under $2 a share on Monday. Downey has had to rely on loans from the federal government, and now Marketwatch reports that regulators are restricting aspects of Downey's business, including limits on dividends and new borrowing.
We've not heard the last of the international hacking ring that prosecutors fingered last week for stealing tens of millions of credit and debit card identities. A front-page New York Times story this morning serves up chilling details from the case, notably the fact that the government's chief cooperating informant, Albert Gonzalez, was apparently profiting from illegal activity while seeming to help the government shut it down. It also notes the use of "sniffer programs" that can extract credit-card data from retailer networks even using remote access. The tools of identity theft have become so sophisticated and widespread, according to the Los Angeles Times, that the crime has become a major focus for street gangs like the Crips and the Mexican Mafia.
What will be the hot-selling business book this fall? Our money is on the 976-page authorized biography of Warren Buffett (or, as USA Today spells it, "Buffet"), titled The Snowball, according to Reuters. Buffett's Berkshire Hathaway may be having a tough year, with two consecutive quarters of dropping profits. But the book, written by former insurance analyst Alice Schroeder, will focus on the long term. Its title apparently comes from a Forrest Gump-like Buffett quip: "Life is like a snowball. The really important thing is finding wet snow and a really long hill."