Ted Kaufman - United States Senator for Delaware

The Senate`s Cop Cracks Down on Financial Fraud

May 24, 2010

Kaufman Connection - Highlights of Ted s work for Delaware

June 11, 2010

 

The Motley Fool, a highly-regarded and broadly read multimedia investment advisory service, is featuring Sen. Kaufman as part of its ongoing efforts to advocate for the individual investor.

Jennifer Schonberger conducted the interviews.

 

The Senate's Cop Cracks Down on Financial Fraud
May 21, 2010

"Fraud and potential criminal conduct were at the heart of the financial crisis," Senator Ted Kaufman (D, Del) said in a speech last month on the Senate floor.

Look no further than the civil fraud charges the Securities & Exchange Commission has brought against Goldman Sachs (NYSE: GS) to understand some banks' securities dealings at the core of the financial crisis. The SEC alleges that the firm misled investors about securities known as collateralized debt obligations. The lawsuit doesn't just have possible repercussions for Goldman Sachs, but also potentially for other brokerage houses that engaged in similar trades or possible misrepresentation of their roles in marketing mortgage-backed securities deals. Federal prosecutors have issued civil subpoenas and launched preliminary criminal probes for several banks: JPMorgan Chase (NYSE: JPM), Deutsche Bank (NYSE: DB), and UBS (NYSE: UBS) among them, according to The Wall Street Journal.

Senator Kaufman has taken a lead role in tackling financial fraud. Last year he sponsored and helped pass the Fraud Enforcement and Recovery Act, and he recently has proposed a couple amendments on fraud. Among those proposals, the amendments -- if passed -- would impose fiduciary duties on all registered brokers in an effort to end conflict of interest; they also increase law enforcement resources to find and prosecute financial and securities fraud.

I sat down with Senator Kaufman to discuss cracking down on fraud on Wall Street. He says we need to get the regulators back on the beat, get Wall Street on board, and write clearer laws.

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The Man Behind the SAFE Banking Act on Fixing Wall Street
May 20, 2010

If they're too big to fail, they're too big," former Federal Reserve Chief Alan Greenspan, normally a proponent of self-regulation, said in a speech last year about the size of banks.

Since the crisis, our biggest banks have only gotten bigger. Of the 8,195 banks in the country, four -- JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America -- control almost 40% of the nation's deposits. Along with Goldman Sachs and Morgan Stanley, they control 63% of the nation's GDP in assets.

Yet in a 61-to-33 vote, the Senate voted down an amendment that would have capped the size and leverage of banks in this country. That amendment, dubbed the SAFE Banking Act, was proposed by Sen. Ted Kaufman, D-Del. In an interview, Sen. Kaufman told me he doesn't think we've solved the problem of "too big to fail" as the financial-reform bill stands, but despite the defeat of his amendment, there is still hope for real reform. Here is our edited conversation.

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The Senator Leading the "Flash Crash" Charge Weighs In
May 20, 2010

Two weeks after one of the wildest rides the market has ever seen, regulators still aren't sure what caused the cataclysmic drop. In what's being called the "flash crash" because of the role of high-frequency trading, close to $1 trillion in capital evaporated, followed by a sharp rebound, all within a span of 15 minutes. Procter & Gamble (NYSE: PG) saw its share price decline by 35%, while shares of Accenture (NYSE: ACN) and Boston Beer (NYSE: SAM) plummeted to a penny.

We do know that during this time period, the NYSE shut down computer trades on certain stocks and handed the job to humans to slow the trading. However, high-speed traders, which operate on a separate system, either continued to trade at a high speed, which magnified moves, or shut down their operations altogether, ejecting liquidity out of the market. (Keep in mind that high-frequency traders offer a lot of liquidity for the market, and their shutting down left a lot of sellers with no buyers.)

One lawmaker who's been warning about the lack of transparency and unintended consequences of the unregulated, opaque dark pools and high-frequency trading platforms is Sen. Ted Kaufman (D.-Del.). He has been calling for an investigation of high-frequency trading since last August, and he has proposed an addition to the Senate's Wall Street reform bill that would direct the Securities and Exchange Commission and the Commodity Futures Trading Commission to report to Congress on several key issues surrounding the market meltdown. I sat down with Senator Kaufman to discuss the flash crash and the conclusions he's drawing.

Photo credit - Diego Radzinschi/American Lawyer Media

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