…Well FHA has roughly those same serious mortgage defect rates on current loans 2014-2016 on their website…yet, that is an initial figure…when the adversarial process (of contract dispute) occurs between lender and FHA…FHA shows this “serious mortgage deficiency rate” goes down by 85% to 90% or so…to 2% to 5% defects!!!! These numbers are right on FHA’s website. The issue is the Obama Administration’s Justice Department deliberately suspended this adversarial process for crisis era mortgage loans, so they could tout the false headline number in their settlements. And all these banks, the officers like me where gone, so the new officers had no incentive to go in and perform the adversarial process when the government was determined to coerce settlements. That’s part of the false, liberal narrative of the financial crisis.”, Mike Perry, former Chairman and CEO, IndyMac Bank, responding to a friend who sent me The Economist article, “Housing in America”, August 19, 2016

Housing in America

…Isn’t it more likely that Obama’s DOJ looked hard and couldn’t find any evidence of criminal wrongdoing by bankers? Especially, since the Obama Administration couldn’t even make civil cases, with much lower standards of proof, against crisis era banks and bankers, and so they had to use the force of government to coerce banks into financial settlements, in which the banks and bankers did not admit to or agree with any of the Obama Administration’s allegations. As I have documented extensively on this blog, the liberal narrative that greedy and reckless bankers caused the financial crisis is false. Gretchen Morgenson might as well be writing a column for a section of The New York Times called “Anti-Business”, as nearly every article she has written is about evil businesses and business people and how they take advantage of average Americans and/or the poor. In her ridiculous November 16, 2016, column she says that had the Democrats jailed more crisis-era bankers/Wall Street, Hillary would have won the election and not Trump. She doesn’t have a shred of evidence to support that contention and in fact, in the article itself she notes that Trump never campaigned against bankers! Furthermore, why include in an article about “fraudster bankers” economic data about financially struggling Americans who have little savings and can barely pay their bills? Wouldn’t that explain why they couldn’t pay their mortgages in an economic downturn, not banker fraud? Also, while she notes the significant number of government prosecutions of bankers from an earlier financial crisis, she fails to note that Keating, the largest and most important banker prosecuted during that crisis, had his conviction overturned on appeal. He was completely exonerated! In other words, the government persecuted him unfairly, during a time of public sentiment negative towards bankers (just like now). The bottom line is that The New York Times’ Gretchen Morgenson is not a fact-based columnist anymore, if she ever was. She is a media propaganda tool of the hard left. Gretchen, Bernie, Warren and their ilk don’t care about facts or the truth. If they did, they wouldn’t call for innocent bankers to be prosecuted for crimes, knowing the Obama Administration’s DOJ investigated many of them and didn’t find evidence to prosecute them. Liberal politicians and their liberal lackey’s in the mainstream media/press like Gretchen and others calling for individual Americans to be prosecuted for crimes, without any evidence, is disgusting business and frankly un-American. It’s what happens in totalitarian countries like Cuba or Russia, not The United States of America.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Gretchen Morgenson, November 11, 2016, The New York Times

How Letting Bankers Off the Hook May Have Tipped the Election

Fair Game

By GRETCHEN MORGENSON

Attorney General Eric H. Holder Jr., right, speaking with Lanny Breuer, an assistant attorney general, ahead of their testimony in 2010 before the Financial Crisis Inquiry Commission, which investigated the causes of the 2008 financial crisis. Credit Jim Lo Scalzo for The New York Times

There are many facets to the populist, anti-establishment anger that swept Donald J. Trump into the White House in Tuesday’s election. A crucial element fueling the rage, in my view, was this: Not one high-ranking executive at a major financial firm was held to account for the crisis of 2008.

As millions of foreclosures and job losses followed, the failure to go after fraudsters confirmed the suspicion that the powerful got protection while those on Main Street were kicked to the curb. When Mr. Trump asserted that the system was rigged, he tapped directly into such misgivings.

Many readers of The New York Times, particularly if you live in Manhattan, San Francisco or another affluent enclave, may not see how an accountability failure of years ago could still resonate. But the failure to prosecute even one or two high-profile bankers — or force them simply to pay fines and penalties out of their own pockets — left millions of Americans believing that our justice system was unjust.

Recall that more than 800 bankers went to jail after the savings and loan crisis of the 1980s. And that mess wreaked nowhere near the devastation that the housing debacle did on the overall United States economy.

Embarrassed, perhaps, by their passivity, Justice Department officials recently pledged to take a more aggressive approach to white-collar crime. But the memo issued last September by Sally Quillian Yates, deputy attorney general, outlining new ways the department would hold individuals to account, has not translated into results.

These kinds of cases, of course, take time to mount. Still, data supplied by the Justice Department and compiled by Syracuse University shows that white-collar crime prosecutions are actually down significantly in 2016 from previous years. The Transactional Records Access Clearinghouse indicates that through August — the first 11 months of the government’s most recent fiscal year — prosecutions of all types were down almost 18 percent from five years ago.

I delved further into the figures and found that precious few of these were white-collar crime cases. According to the database, the largest number of cases pursued by prosecutors — representing almost 53 percent of the total — involved immigration. White-collar crime, by contrast, accounted for about 6,000 cases, or just 4.6 percent of the total so far this year.

That tally is far fewer than in previous periods. Compared with five years ago, for example, the number of cases is down 39 percent; going back a decade, near the height of the mortgage mania, cases have fallen by 19 percent.

“Criminal enforcement is required to deter criminal behavior, and the current Justice Department has more and more abandoned such activities,” said David Burnham, co-director of the records clearinghouse, who compiles the data.

A lighter form of punishment — termination — was also rare. “After the crisis, nobody on Wall Street lost their job in a Trump way — ‘You’re fired!’” said Dennis Kelleher, president at Better Markets, a nonpartisan organization that promotes the public’s interest in financial markets. “In addition, there has been this bipartisan interest in understating the deep economic damage from the financial crash. If you don’t have a compelling message that resonates with people in economic pain then you’re going to pay an electoral price.”

Consider one small measure of that pain. In May, the Federal Reserve published the “Report on the Economic Well-Being of U.S. Households,” its third in an annual series.

While the Fed concluded that more Americans than in previous studies were comfortable or “O.K.” with their financial positions, the researchers made a disturbing finding. If faced with emergency expenses of $400, almost half of the 5,600 respondents said they either would not be able to cover the costs or they would have to sell something or borrow to do so.

Another troubling statistic from the study: 22 percent of workers in the survey said they were holding down two or more jobs.

“It’s important to identify the reasons why so many families face continued financial struggles and to find ways to help them overcome them,” said Lael Brainard, a Federal Reserve governor, at the time the study was published.

I’d call that an understatement.

Marcus Stanley, policy director at the nonprofit Americans for Financial Reform, agreed that outrage over the accountability gap played a role in the election’s outcome.

The degree to which these voters favored Mr. Trump is something of a paradox, given his persona of the wealthy real estate mogul. Jailing bankers wasn’t one of his campaign’s main themes.

Still, Mr. Trump did call for bringing back Glass-Steagall, the Depression-era law that separated commercial banking from investment banking. And he threatened to revoke the special tax treatment known as carried interest that enriches private equity executives and hedge fund managers.

On the other hand, he also promised to dismantle aspects of the Dodd-Frank legislation, Congress’s response to the 2008 mayhem.

“Trump’s personal background does not necessarily strike a populist chord,” Mr. Stanley said. “But his campaign rhetoric portrayed a situation where the economy was being rigged by powerful insiders. We’re going to be holding him accountable to deliver on some of that rhetoric.”

That points to one of the risks to Mr. Trump of riding a populist wave. If voters come to believe that he is actually more interested in protecting his friends or dispensing favors to the powerful, they will turn on him.

The first inkling of whether Mr. Trump is truly on the side of Main Street may emerge when his administration sets out to change Dodd-Frank.

There is much to dislike in the legislation — its rules are maddeningly complex and were weakened by Wall Street lobbyists. Changes to the law could help protect the system, Mr. Stanley said, or leave it vulnerable to another collapse.

“Are you going to return to the situation under Bush and Clinton where Wall Street wrote its own rules in the back room?” Mr. Stanley asked. “Or are you going to put forward something that constitutes a genuine alternative and that will prevent Wall Street from rigging the economy?”

It seems pretty clear that’s what voters are looking for. Will they get it? Stay tuned.

A version of this article appears in print on November 13, 2016, on page BU1 of the New York edition with the headline: The Impunity That Main St. Didn’t Forget

…This jives perfectly with what former Fed Chairman Greenspan said in his paper, “The Crisis”, where he said that “central bankers deliberately set bank capital levels at a level that did not account for the once-or-twice in a century financial crisis and as a result, sovereign governments must step in and provide capital to the banking system, at those times.” So the truth is revealed. How can private bankers like myself, following all of the pre-crisis government banking rules and regulations, be blamed for our bank’s failing, when most Too Big to Fail Banks would have also failed, if they had not been bailed out with government capital, government loans, and the government’s bailout and/or guarantees of otherwise insolvent Fannie Mae, Freddie Mac, FHA, the FDIC, private mortgage insurers, and money market funds? It’s outrageous and un-American what happened to bankers like myself.”, Mike Perry, former Chairman and CEO, IndyMac Bank

“Minneapolis Fed President Neel Kashkari is proposing that the biggest banks vastly increase the amount of equity capital they hold. The plan doesn’t require any big banks to shrink, merely to raise more capital over five years so that it reaches 15% of assets. At that point, if the Treasury Secretary refuses to certify that a giant bank is no longer a systemic risk, capital would rise to 24%. By contrast the Fed now requires 5%. The practical implication is that some banks would shrink on their own unless the economies of scale are valuable enough to justify their size. Mr. Kashkari and his team want to make the chances of a bailout extremely small. They calculate that under the pre-crisis regulations there was an 84% chance of a crisis requiring taxpayer bailouts over a 100-year period, and that Dodd-Frank reduced that risk only to 67%. They want a plan that would bring the risk below 10% while still passing a cost-benefit test, and they claim to have done it. Let the debate over statistics and methodology begin.”, “Cash and Kashkari”, The Wall Street Journal Editorial Board, November 22, 2016

Opinion

Cash and Kashkari

The consensus grows that Dodd-Frank won’t stop the next financial crisis.

Neel Kashkari, president and chief executive officer of the Federal Reserve Bank of Minneapolis, speaks at the Economic Club of New York in New York, U.S., on Wednesday, Nov. 16, 2016. PHOTO: BLOOMBERG NEWS

As President Obama prepares to leave town, the world is learning that his reforms aren’t holy writ. The latest evidence is Minneapolis Federal Reserve President Neel Kashkari’s plan to end too-big-to-fail banks.

Mr. Kashkari, who rolled out his proposal last week, starts with an understanding that the 2010 Dodd-Frank Act’s vast regulatory superstructure isn’t the protector of taxpayers that its authors claim. “I start with the assumption that regulators are going to miss the next crisis,” he said in a visit to the Journal. “We’re going to miss it.”

That’s refreshing modesty in a federal regulator, and it has the added advantage of being true. Financial manias become panics because everyone assumes there’s no problem while the good times roll. Exhibit A was the New York Fed’s failure to rein in Citigroup’s off-balance sheet vehicles before the 2008 panic. Tim Geithner’s Fed regulators were as clueless as anyone.

Mr. Kashkari knows the territory. A Goldman Sachs alum, he helped design and implement the Troubled Asset Relief Program for Treasury Secretary Hank Paulson in 2008. The Minneapolis Fed chief was also in the room in 2008 when federal officials decided to make taxpayers stand behind the subordinated debt of mortgage monsters Fannie Mae and Freddie Mac—though that debt was never supposed to be guaranteed.

The lesson he drew is that if you want to reduce the risk that taxpayers will have to finance another rescue, financial giants need to be much better fortified before the next panic hits. And that means they need to have much more equity and less debt.

He is proposing that the biggest banks vastly increase the amount of equity capital they hold. The plan doesn’t require any big banks to shrink, merely to raise more capital over five years so that it reaches 15% of assets. At that point, if the Treasury Secretary refuses to certify that a giant bank is no longer a systemic risk, capital would rise to 24%. By contrast the Fed now requires 5%. The practical implication is that some banks would shrink on their own unless the economies of scale are valuable enough to justify their size.

Mr. Kashkari and his team want to make the chances of a bailout extremely small. They calculate that under the pre-crisis regulations there was an 84% chance of a crisis requiring taxpayer bailouts over a 100-year period, and that Dodd-Frank reduced that risk only to 67%. They want a plan that would bring the risk below 10% while still passing a cost-benefit test, and they claim to have done it. Let the debate over statistics and methodology begin.

There should be skepticism about other parts of the Kashkari plan, such as his maintenance of much of the existing regulatory structure and his desire to control large financial firms that aren’t banks. Bank regulators call these firms “shadow banks,” meaning every finance business they don’t control. But there’s no reason to make taxpayers stand behind hedge funds.

We prefer the trade-off between capital and regulation offered by House Financial Services Chairman Jeb Hensarling, who would give banks the choice of raising more capital in return for less Dodd-Frank micromanagement. Mr. Kashkari says that may well be the result down the road of his plan too. The larger point is that a consensus is growing that Dodd-Frank is flawed and has stymied economic growth without making the financial system safer. The Kashkari plan is a welcome addition to this debate.

…Mr. Paulson’s hedge-fund firm, Paulson & Co., is suffering painful losses this year, extending a period of uneven performance that has left the firm managing about $12 billion, down from $38 billion in 2011. Behind the recent difficulties: A big, faulty bet on pharmaceutical companies, as well as excessive caution about the broader market, according to people close to the matter.”, “Big Hit on Drug Stocks Caps $26 Billion Decline for John Paulson”, The Wall Street Journal, November 5, 2016

“Paulson’s no genius. He is a big risk taker who wins big and loses big. I believe his and others (possibly coordinated) short-selling drove mortgage securities and financial stocks down farther than warranted and likely made the financial crisis and housing/mortgage crisis worse than it had to be. This was never really investigated to any degree, as far as I am aware, despite fellow short-seller Soros’ writing a book on the crisis where he discusses his economic theory of “reflexivity”….essentially “man can manipulate markets and create their own reality”…..almost an admission of coordinated and/or powerfully manipulative trading activities. ”, Mike Perry, former Chairman and CEO, IndyMac Bank

Markets

Big Hit on Drug Stocks Caps $26 Billion Decline for John Paulson

Hedge-fund manager’s top holdings are down by double digits this year; assets tumble to $12 billion from $38 billion five years ago

John Paulson, pictured in August at the U.S. Open Tennis Championships, has argued that the pharmaceutical industry’s consolidation will accelerate, boosting growth prospects of specialty drug companies cutting deals. PHOTO: REX SHUTTERSTOCK/ZUMA PRESS

By Gregory Zuckerman

John Paulson’s subprime trade led to historic fortune. His drug-company investments? Big losses and plunging assets.

Mr. Paulson’s hedge-fund firm, Paulson & Co., is suffering painful losses this year, extending a period of uneven performance that has left the firm managing about $12 billion, down from $38 billion in 2011. Behind the recent difficulties: A big, faulty bet on pharmaceutical companies, as well as excessive caution about the broader market, according to people close to the matter.

Over the past two years, Mr. Paulson has argued to his investors that the pharmaceutical industry’s consolidation would accelerate, boosting growth prospects of specialty drug companies cutting deals. Six of Paulson & Co.’s 10 largest holdings as of June 30 were pharmaceutical companies, the most recent securities filings show, including the firm’s four largest positions. At one point in late 2014, Mr. Paulson told a client that one of Paulson’s major holdings, Valeant Pharmaceuticals International Inc., would hit $250 a share. At the time, the stock was trading at around $140. To hedge, or protect, his drug investments, Paulson adopted bearish positions on the overall market, viewing stocks to be expensive.

The trades haven’t worked out. Health care is the worst performer among the 11 sectors in the S&P 500, with a drop of 6.1% so far this year. Paulson’s holdings have done worse. Shares of the firm’s largest investment, U.K. pharmaceutical company Shire PLC, are down 19% so far in 2016. The holding, worth about $864 million at current share prices, represented 9.1% of Paulson & Co.’s portfolio at the end of June, according to FactSet Research Systems Inc. The next three biggest Paulson investments, Mylan NV, Allergan PLC and Teva Pharmaceutical Industries, are down 37%, 40% and 40% this year, respectively. The three stocks represent $2.16 billion of investments for the firm at current prices. Meanwhile, the S&P 500 is up 2.2% this year, undercutting Paulson’s bearish position.

As for Valeant, Mr. Paulson was right—briefly. The stock crossed $262 in August of last year. But it has since tumbled to just over $19, amid accounting questions and executive departures. Paulson held more than 19 million shares, or about 5.5% of Valeant’s shares outstanding, at the end of June, after adding about 5.8 million shares this year.

Some of Mr. Paulson’s moves have been winners. His fifth-largest holding, the  SPDR Gold Trust, is up 23% this year. And in an industry where many funds ape one another, clients give Mr. Paulson credit for adopting distinctive positions and holding them over longer periods than some rivals, reducing their potential tax hit.

Paulson isn’t the only major fund placing faith in drug stocks. Andreas Halvorsen’s Viking LP was Teva’s second-largest holder at the end of June, for example, while William Ackman’s Pershing Square Capital Management LP remains Valeant’s largest investor.

Still, the Paulson Advantage fund was down 18.5% through September, Paulson Partners fund was down 22.3% and the Paulson Special Situations fund was down 29%, investors say. A credit hedge fund is close to flat this year, while Paulson’s gold fund, the smallest of his funds, rose 80% through September.

Mr. Paulson gained fame betting against subprime mortgages and financial investments before the financial crisis, making his firm $20 billion in 2007 and 2008. That resulted in a rush by investors into his funds. In subsequent years, the firm has made significant investments in gold, banks and other areas, with mixed results.

In some ways, the pharmaceutical investments hark back to those of Mr. Paulson’s early career. For over a decade before the subprime trade, Mr. Paulson was a merger arbitrager, betting on companies involved in acquisitions. He sometimes took a riskier stance than rivals by holding shares he thought might receive takeover offers, as well as companies making acquisitions that he felt investors had unfairly punished.

Over the past two years, Paulson built huge stakes in some of the drug companies after they entered deal talks, and held on after talks fell apart. In the third quarter of 2014, for example, Paulson bought 5.7 million shares of Shire, more than doubling its holdings to $2.3 billion of shares. In October, 2014,AbbVie Inc. and Shire officially agreed to terminate a $54 billion deal amid an effort by the Obama administration to deter overseas mergers prompted by tax advantages. Instead of selling Shire shares, as some of its rivals did, Paulson held on to most of its stock as Shire made its own acquisitions. Shire’s shares have fallen more than 35% since the end of the third quarter of 2014.

Part of the reason pharmaceutical shares are struggling: The expectation among some investors that Hillary Clinton, the Democratic presidential nominee, will emerge victorious in next Tuesday’s presidential election. Mrs. Clinton has been critical of drug pricing. In August, for example, amid scrutiny over Mylan’s high-profile move to raise prices for its EpiPen product, Mrs. Clinton tweeted that “there’s no justification for these price hikes,” pushing Mylan shares lower. Mr. Paulson’s firm owned more than 4% of Mylan’s shares at the end of June.

For his part, Mr. Paulson has been a vocal supporter of Donald J. Trump. In June, he co-hosted a fundraiser for the Republican nominee at Manhattan’s Le Cirque restaurant. If Mr. Trump emerges as president, drug stocks likely would rise. A person close to Mr. Paulson said his investments have no bearing on his backing for Mr. Trump.

Corrections & Amplifications:
Valeant Pharmaceuticals International Inc. has been among the top holdings of hedge fund firm Paulson & Co. An earlier version of this article incorrectly stated the name of the company as Valeant Pharmaceuticals Inc. (Nov. 4, 2016)

…A later study, in 2014 by my colleague at the American Enterprise Institute Edward Pinto, showed that by 2008 more than half of all mortgages in the U.S. were subprime or otherwise risky, and 76% of those were on the books of government agencies. This leaves no doubt that government housing policies—and not a lack of regulation—created the demand for these risky mortgages. But by then it was too late. It is not difficult to find connections between Dodd-Frank and the historically slow recovery from the financial crisis.”, Peter Wallison, “What Dismantling Dodd-Frank Can Do”, The Wall Street Journal, November 17, 2016

“As Mr. Wallison, who was a Republican member of the Financial Crisis Inquiry Commission, has pointed out….not a single Republican member signed onto the Democrat-majority report’s findings about the financial crisis. In other words, it was a completely partisan/political document and as a result created a false narrative about the financial crisis. This blog’s purpose (after resolution of all of my civil litigation) has been to counter this false, liberal/progressive narrative.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Opinion

What Dismantling Dodd-Frank Can Do

The market bump from Donald Trump’s win is peanuts compared with what regulatory relief can bring.

On the floor of the New York Stock Exchange, Nov. 11. PHOTO: BLOOMBERG NEWS

By Peter J. Wallison

The sharp rise in the Dow Jones Industrial Average after Donald Trump’s election could be short-lived, but based on what the president-elect has promised to do it is an accurate assessment of the U.S. economy’s prospects. All through his campaign, Mr. Trump said regulatory relief for the economy was a priority, including the repeal of the Dodd-Frank Act. Repeal or thoroughgoing reform of that destructive law is certainly a key step toward an economic recovery.

Signed into law in 2010, Dodd-Frank was based on the idea that insufficient regulation, particularly of Wall Street, had allowed a buildup of subprime mortgages, a housing bubble and, ultimately, the 2008 financial crisis. The Democrats who controlled the Congress elected in 2008 acted quickly to follow out the implications of this diagnosis by adopting Dodd-Frank, the most restrictive financial legislation since the New Deal.

Strikingly for such important legislation, there was no significant debate in Congress about whether the cause of the crisis had been correctly identified.

A later study, in 2014 by my colleague at the American Enterprise Institute Edward Pinto, showed that by 2008 more than half of all mortgages in the U.S. were subprime or otherwise risky, and 76% of those were on the books of government agencies. This leaves no doubt that government housing policies—and not a lack of regulation—created the demand for these risky mortgages. But by then it was too late.

It is not difficult to find connections between Dodd-Frank and the historically slow recovery from the financial crisis. Here’s a sampling.

The Financial Stability Oversight Council, a Dodd-Frank invention, was empowered to designate large financial firms as systemically important financial institutions, or SIFIs, turning them over to the Federal Reserve for “stringent” regulation. One of the council’s earliest actions, in July 2013, designated GE Capital as a SIFI.

GE soon recognized that its huge financial subsidiary was wilting under the Fed’s control. Seeking an exit, GE wound down GE Capital, eliminating from the market an important source of funding for small and innovative firms.

The Volcker rule, another Dodd-Frank provision, prohibited banks and their affiliates from trading securities for their own account, although there was no evidence that this activity had any role in the financial crisis.

Soon, trading desks all over Wall Street were closing down, and traders were complaining that the debt markets were dangerously short of liquidity. The Treasury Department, deeply tied into Dodd-Frank, said it was “studying” the issue. It still is, and spreads are still historically wide.

Small banks, the credit sources for small businesses and startups, faced new and costly regulation, requiring them to hire compliance officers instead of lending officers.

One regulation on mortgage lending from the Consumer Financial Protection Bureau—a Dodd-Frank agency—was over 1,000 pages long. Imagine that landing on your desk in a small bank.

No wonder, as this newspaper recently reported, banks are no longer the nation’s principal mortgage lenders. Worse still, as reported last week, job gains at startup firms, which are major sources of new employment and technological innovation, are at their lowest level in 20 years.

Fortunately, some reforms take care of themselves because of the people Mr. Trump is likely to choose for his administration. The Financial Stability Oversight Council (FSOC) is headed by the secretary of the Treasury and composed of the heads of all the major financial regulators. It is unlikely that Mr. Trump’s new Treasury secretary or any other new appointees will be interested in designating SIFIs, so that threat to the economy is probably off the table.

A bonus is that the Financial Stability Board, a largely European body of which the Treasury and Fed are members, needs an active FSOC in the U.S. to implement its plan for regulating what it calls “shadow banks.” The Fed and the Treasury have been driving the stability board’s effort on this, but are now likely to stand down. Shadow banks—which the stability board defined as all financial firms, of any size, without a regulator of their risk-taking—are safe.

Other provisions must be addressed with legislation. Fortunately, House Republicans have laid the groundwork. The House Financial Services Committee, under Chairman Jeb Hensarling, has already voted through the Choice Act, which would let banks avoid costly regulations by holding significantly more capital, and which substitutes a tangible asset-based leverage ratio for the complex Basel risk-based capital rules.

Once made law, the Choice Act will create a new, less costly landscape for small banks and help revive small businesses and startups with the credit they’ve lacked under Dodd-Frank.

The Choice Act also turns the Consumer Financial Protection Bureau—now headed by a single administrator accountable to no one—into a bipartisan commission, funded by Congress as the Constitution intended for all executive agencies. Rulings that require 1,000 pages to explain, produced without consulting anyone, should be a thing of the past. The act would also repeal the Volcker rule, returning liquidity to the markets for debt securities.

These are among the most important provisions of the Choice Act, but other initiatives might also be considered.

Dodd-Frank authorized the Commodity Futures Trading Commission and the Securities Exchange Commission to make rules for trading derivatives, including requirements for mandatory clearing of most derivatives transactions. Because mandatory clearing could make clearinghouses the sources of systemic risk, the FSOC voted to give them access to the Federal Reserve’s discount window, setting up another government backstop that will impair market discipline. The Trump administration should consider removing that backstop, together with mandatory clearing itself.

With a Republican House and Senate, President-elect Trump has an opportunity to eliminate many of the regulations that have held back economic growth. As Ronald Reagan used to say, “If not us, who? If not now, when?”

Mr. Wallison, a senior fellow at the American Enterprise Institute, is the author of “Hidden In Plain Sight: What Caused the World’s Worst Financial Crisis and Why It Could Happen Again (Encounter 2015).

U.K. Government to Restart Lloyds Bank Share Sale

Plan to sell via a retail offering has been ditched

The sign outside a Lloyds Bank branch in New Street, Birmingham. PHOTO: JOE GIDDENS/PA WIRE/ZUMA PRESS

By Max Colchester and Jason Douglas

LONDON—The U.K. government Friday announced it will re-start the privatization of Lloyds Banking Group PLC by drip selling shares into the market.

The British Treasury, which owns a 9.1% stake in Lloyds following a bailout in 2009, said in a statement that it had ditched a plan to sell its stake via a retail offering to members of the public. Instead Morgan Stanley will be appointed to slowly sell the shares over the next 12 months.

“I have listened to the experts. Ongoing market volatility means it is not the right time for a retail offer,” U.K. Chancellor Philip Hammond said in a statement.

Unlike a previous plan to sell down the stake, Mr. Hammond didn’t pledge to sell the shares above the price the government paid for them. Lloyds shares currently trade at 53 pence, well below the average 73 pence buy in price paid by British taxpayers. Following the June Brexit vote, Lloyds’s shares lost a quarter of their value, raising questions whether the Treasury would exit the bank soon.

So far the Treasury has recouped around GPB 16.9 billion from previous Lloyds share sales. British taxpayers pumped just over GBP20 billion into the lender to save it from collapse during the financial crisis. In statement Lloyds welcomed the Treasury’s decision.

More complex is the prospect of returning part of the GBP45.5 billion that was pumped into Royal Bank of Scotland Group PLC during the crisis. On Friday Mr. Hammond dismissed the idea of a quick sale of its 73% stake in RBS. “It is clear that disposal of the RBS shares at a price that recovers taxpayers investment is not practical at the moment,” he said during a visit to the U.S. The bank will first have to settle allegations around the sale of toxic mortgage backed securities with the Justice Department and then dispose of its Williams & Glyn retail unit before any privatization proceeds, Mr. Hammond added.

…before his appointment to Mr. Trump’s transition team.”, Ben Protess and Alexandra Stevenson, “Mary Jo White to Step Down as S.E.C. Chief”, The New York Times, November 15, 2016

“I could not agree more. Under President Obama, and with significant pressure from the most liberal wings of his party (Elizabeth Warren, etc.) as a result of the financial crisis, the S.E.C. became politicized, abandoned The Rule of Law, and overreached in many cases, especially under former Chairman Schapiro. That unfair and un-American overreach damaged the rights and reputations of many innocent Americans like myself. It wasn’t right and I am very hopeful that under President Trump, we will see a new and better S.E.C. that follows The Rule of Law, without regard to person or popularity.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Mary Jo White to Step Down as S.E.C. Chief

By BEN PROTESS and ALEXANDRA STEVENSON

Mary Jo White, chairwoman of the Securities and Exchange Commission, appearing before a Senate committee in June. Credit Mark Wilson/Getty Images

Wall Street regulators began an exodus from Washington on Monday as Mary Jo White, the chairwoman of theSecurities and Exchange Commission, announced plans to leave the agency.

The decision makes Ms. White, a former federal prosecutor who has served more than two decades in the federal government, the first major Obama administration appointee to step down after Donald J. Trump’s upset victory last week. Other financial regulators are expected to follow suit in the coming weeks.

The election of Mr. Trump is a game-changer for the S.E.C. — and for that matter, all financial agencies.

Ms. White was expected to leave no matter the outcome of the election. But many Democrats had hoped that if Hillary Clinton won, she would choose a strong proponent of regulation to succeed Ms. White, whose policies often reflected a political middle ground. Now, the agency is almost certain to be pushed to the right.

Mr. Trump has vowed to dismantle Dodd-Frank, the financial regulatory overhaul Congress passed in response to the 2008 financial crisis. And although Dodd-Frank will more likely be watered down than repealed, his appointments will no doubt shift the tone and priorities across financial regulatory agencies.

The president-elect’s biggest move on Wall Street could be his choice for Treasury secretary. Mr. Trump’s short list is said to include Steven Mnuchin, an investment manager and former Goldman Sachs partner who was Mr. Trump’s campaign finance chairman, and Representative Jeb Hensarling, Republican of Texas and chairman of the House Financial Services Committee.

Mr. Hensarling is still being considered, in part because of pressure from Congress, but Mr. Mnuchin is the favorite of Mr. Trump’s Wall Street backers, according to someone with direct knowledge but who was not authorized to speak publicly. A decision is expected within 10 days.

Either way, the Trump Treasury Department might rein in the Financial Stability Oversight Council, a collection of regulators who examine financial risks and designate companies as systemically important. The Treasury secretary is chairman of the council and could effectively defang it, according to Ian Katz, a policy analyst at Capital Alpha who predicted that the council might essentially become “a quarterly kaffeeklatsch.”

Mr. Trump was elected at a pivotal time for the S.E.C., an agency that had already turned a corner under Ms. White. Unlike Mary L. Schapiro, who inherited a scandal-plagued S.E.C. after the financial crisis, Ms. White needed not to save the agency, but to modernize it, a task that the next administration also will face.

Ms. White’s departure, which will take effect at the end of the Obama administration in January, will set off speculation about whom Mr. Trump will select to succeed her. Though such talks have barely begun, the field of potential contenders could include Michael S. Piwowar, a Republican commissioner at the agency.

Paul S. Atkins, a former S.E.C. Republican commissioner who has advocated deregulatory policies, is leading Mr. Trump’s effort to select a new chair for the agency and could be a candidate. Anthony Scaramucci, a hedge fund manager who supported Mr. Trump’s candidacy, is also advising the transition team.

“As the head of the S.E.C., you’ve got to get back into reffing the game properly and end the demonization of Wall Street,” Mr. Scaramucci said in an interview last week before his appointment to Mr. Trump’s transition team.

As other of President Obama’s financial regulators step down, the firewall around his Wall Street legacy will start to crumble. Timothy Massad, the chairman of the Commodity Futures Trading Commission, is expected to leave by early 2017, though he could briefly stay at the agency as a Democratic commissioner.

An even bigger change could occur at the banking regulators — the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency — which became a thorn in the side of Wall Street under President Obama. Martin J. Gruenberg and Thomas Curry, the leaders of the F.D.I.C. and O.C.C., will probably leave office next year when their terms expire, or possibly even sooner.

Daniel Tarullo, the Federal Reserve governor who oversees many of the central bank’s regulatory efforts, is not expected to serve out his term through early 2022. He could leave early next year, which would deliver a blow to proponents of Wall Street regulation.

With turnover at the S.E.C., Ms. White’s legacy could be in jeopardy as well.

She oversaw a record number of enforcement actions and directed a rapid pace of rule-writing based not only on Dodd-Frank, but on regulations of her own making. Those initiatives were aimed at improving money market fund regulation and the broader asset management industry.

“I think what we’ve done so far has been quite transformative and really modernized that core responsibility,” Ms. White said in a recent interview.

Yet Ms. White has not completed more than a dozen rules, nor has she formalized a plan to require that financial advisers act in their clients’ best interests. Now that these initiatives will fall into the hands of a Republican chairman, they may come off the agenda.

As it was, Ms. White, a political independent, drew criticism from liberal lawmakers who view her as the quintessential moderate. Senator Elizabeth Warren, the Massachusetts Democrat who channels the populist outrage over Wall Street excess, even called on President Obama to designate a new S.E.C. leader because the agency had not required companies to disclose political contributions.

In her first public remarks on the subject, Ms. White said in an interview that the criticism “really does come with the territory.”

“I think I’m a very constructive recipient of constructive criticism,” she said, adding: “It’s not like you like people to beat on your head, whoever they are, however baseless it is.”

Before the S.E.C., Ms. White was the first woman to become United States attorney in Manhattan, one of the most apolitical jobs in government. Earning a reputation as a tenacious prosecutor with an independent streak, Ms. White embraced the joke that her office was the United States attorney for the “sovereign,” rather than Southern, district of New York.

“She’s not motivated by any special interest,” said Preet Bharara, a prosecutor under Ms. White who is now the United States attorney in Manhattan. “People may disagree from time to time, and, in fact, in any high-stakes environment, it would be unnatural if there weren’t disagreement from special interests and adversaries. But she’s hyper smart and makes a decision immune from any political wind or political criticism, and I think that’s a good way to be.”

Ms. White’s prosecutorial experience — she supervised the original investigation into Osama bin Laden — raised expectations for her enforcement agenda at the S.E.C.

And in its last fiscal year, the agency brought a record 548 stand-alone enforcement actions. In conjunction with Andrew J. Ceresney, the agency’s enforcement director, Ms. White reversed the S.E.C.’s longstanding yet unofficial policy of allowing companies to neither admit nor deny wrongdoing. Seventy-three such admissions have been made since.

Other “firsts” occurred under Ms. White and Mr. Ceresney: the first action against a major ratings firm, Standard & Poor’s, and the first action against a company, KBR Inc., for inserting overly restrictive confidentiality agreements that could stifle whistle-blowers. Some of the agency’s most novel cases came against private equity firms that failed to disclose fees and conflicts of interest.

Ms. White is known for keeping a workaholic’s schedule. Colleagues said it was common for her to hold a 9 p.m.Sunday conference call, before dispatching middle-of-the night emails and placing a 5:30 a.m. call to senior staff.

But she also promoted staff morale by holding coffee and doughnut sessions. Every holiday season, she would give a party for her staff at Rosa Mexicano restaurant, where she would hand out gifts to each of her aide’s children.

Ms. White, a partial Yankees season ticket holder whose favorite moment as S.E.C. chairwoman came when throwing out the first pitch at a Washington Nationals game, said her dream job would be the first female baseball commissioner.

“I really don’t think about what I’m doing next until I’m done,” she said, except, “If you have baseball commissioner to offer me, then I can tell you what my plans are.”

A version of this article appears in print on November 15, 2016, on page B1 of the New York edition with the headline: S.E.C. Chief Among First to Plan Exit.

…Mnuchin and other wealthy investors, including Michael Dell and a hedge fund run by Soros, bought failed IndyMac in March 2009, putting up about $1.6 billion in cash and renaming it OneWest Bank. Investors bought the bank’s assets at a bargain price, and also arranged a deal whereby the Federal Deposit Insurance Corp., which had seized the savings and loan in mid-2008, agreed to cover as much as 75% of the losses from IndyMac’s already discounted loan portfolio. The FDIC often agrees to such deals when trying to sell a failed lender, but bank analyst Bert Ely said the insurer gave Mnuchin’s group a particularly sweet deal. “It was certainly richer than average,” he said of the arrangement, describing it as a combination of good deal-making by Mnuchin and bad decision-making by the FDIC. The insurer, Ely said, seemed keen on keeping IndyMac an independent institution and did not want to sell it to another big bank. “I’m certainly not going to be critical of Mnuchin,” Ely added. “He took advantage of what I think was a bad policy decision by the FDIC. The deal was as sweet as it was because the FDIC limited the field of potential acquirers.” Mnuchin and other investors sold OneWest to New Jersey lender CIT Group last year for $3.4 billion.”, Daniel Miller and James Rufus Koren, “Film financier and Wall Street executive Steven Mnuchin a leading candidate for Treasury secretary”, The Los Angeles Times, November 13, 2016

“The FDIC also sold IndyMac Bank at the very bottom of market disruption in late 2008/early 2009, at a time when FDIC Chairperson Sheila Bair herself was quoted in the NY Times saying “asset prices are irrational” and as a result there were few buyers. Every other wiser conservator/trustee (The Fed, the U.S. Treasury, foreign governments, Lehman trustees, etc.), held bank assets/securities for months and years (some like the U.K. government with its banks and others still to this day), until markets recovered. The massive insurance fund loss was caused by the FDIC and its unwise conservatorship of IndyMac Bank.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Film financier and Wall Street executive Steven Mnuchin a leading candidate for Treasury secretary

Film financier Steven Mnuchin and actress Louise Linton arrive at the premiere of the Warner Bros. film “Jupiter Ascending” at the TCL Chinese Theatre in Hollywood on Feb. 2, 2015. (Frazer Harrison/Getty Images)

Daniel Miller and James Rufus Koren

Much of liberal Hollywood may be lamenting the prospect of a Donald Trump presidency, but one prominent industry player could wind up getting a high-profile position in the new administration.

Steven Mnuchin, 53, a wealthy Wall Street executive and successful film financier who served as the national finance chairman of Trump’s campaign, is widely considered one of the leading contenders to become the next Treasury secretary, along with Rep. Jeb Hensarling (R-Texas), head of the House Committee on Financial Services, and JPMorgan Chase & Co. Chief Executive Jamie Dimon.

Mnuchin, chief executive of New York-based hedge fund Dune Capital Management, spent 17 years early in his career at Goldman Sachs, where he was a partner and eventually chief information officer, before leaving in 2002. He then started an investment fund with billionaire investorGeorge Soros, a prominent Hillary Clinton supporter, before co-founding Dune. Mnuchin, along with other investors, made a windfall after purchasing the failed bank IndyMac in 2009 in the wake of the financial crisis, and selling it for a substantial profit in 2015.

In addition, Mnuchin has long been a financial backer of high-profile movies, most recently the August hit “Suicide Squad,” a dark comic book film from Warner Bros. that grossed nearly $750 million worldwide. Via Dune, Mnuchin has cut slate financing deals with 20th Century Fox and Warner Bros. over the years, leading to his executive producing credits on several critical and commercial hits, including “American Sniper” and “Mad Max: Fury Road.”

But some of his business associations have been controversial, including dealings with the once high-flying film and TV studio Relativity Mediaand OneWest Bank, which he and others created out of the assets of IndyMac.

Mnuchin, a divorced father of three children, owns a $26.5 million mansion in Bel Air and previously lived at New York’s 740 Park Avenue, a tony cooperative apartment building, according to public records and news reports. In 2011, the lawn of his 22,000-square-foot L.A. residence was the site of demonstrations by dozens of “Make Banks Pay” activists, including a foreclosed homeowner whose loan was serviced by OneWest, which had drawn scrutiny for its eviction tactics.

Mnuchin, who was named Friday to Trump’s Presidential Transition Team, did not respond to phone calls and emails seeking comment. Trump campaign spokeswoman Hope Hicks did not respond to requests for comment.

Few people in the entertainment industry whose business has intersected with Mnuchin were willing to speak about him after Tuesday’s election. Those that would talk about Mnuchin described him as smart, savvy and serious.

Jon Landau, who produced Fox’s “Avatar,” got to know Mnuchin during the making of the blockbuster 2009 film, which the businessman helped finance. Typical of a financier, Mnuchin did not have a hands-on role in the making of the movie, Landau said. But in their limited dealings Mnuchin was a “smart, personable guy.”

“He has certainly proven himself in the business world,” said Landau, who has attended Los Angeles Lakers games with Mnuchin over the years.

Entertainment industry attorney Peter Dekom, who had a preliminary meeting about a prospective film financing pact with Mnuchin earlier this year, said he “understands the finance side of Hollywood as well as anyone.”

But unlike many in Hollywood, Mnuchin is said to avoid the limelight.

Lionel Chetwynd, a filmmaker who co-founded Friends of Abe, a group for Hollywood conservatives, called Mnuchin “a very sober individual.” He said he’d met the financier at black-tie functions over the years.

“He’s not Mark Cuban,” said Chetwynd, referring to the flamboyant billionaire investor. “There are people who operate in Hollywood but who do so in a very pristine manner, who don’t show up every night at the right restaurants, and he would be one of those. Not flashy people, but very solid business people whose interests stretch very far beyond movies and movie stars.”

Mnuchin has East Coast pedigree. The Yale University graduate grew up in a powerful New York family: He is the son of Robert Mnuchin, a former Goldman Sachs banker who became a prominent Manhattan art gallerist, and the late Elaine Cooper, a former vice president of the International Directors Council of the Solomon R. Guggenheim Museum. And Mnuchin’s brother, Alan, worked at Goldman Sachs and Lehman Bros. before founding his own investment advisory firm, AGM Partners.

Despite Mnuchin’s New York business credentials, one of his most notable financial bonanzas came via a regional commercial bank based in sleepy Pasadena.

Mnuchin and other wealthy investors, including Michael Dell and a hedge fund run by Soros, bought failed IndyMac in March 2009, putting up about $1.6 billion in cash and renaming it OneWest Bank.

Investors bought the bank’s assets at a bargain price, and also arranged a deal whereby the Federal Deposit Insurance Corp., which had seized the savings and loan in mid-2008, agreed to cover as much as 75% of the losses from IndyMac’s already discounted loan portfolio.

The FDIC often agrees to such deals when trying to sell a failed lender, but bank analyst Bert Ely said the insurer gave Mnuchin’s group a particularly sweet deal. “It was certainly richer than average,” he said of the arrangement, describing it as a combination of good deal-making by Mnuchin and bad decision-making by the FDIC. The insurer, Ely said, seemed keen on keeping IndyMac an independent institution and did not want to sell it to another big bank.

“I’m certainly not going to be critical of Mnuchin,” Ely added. “He took advantage of what I think was a bad policy decision by the FDIC. The deal was as sweet as it was because the FDIC limited the field of potential acquirers.”

Mnuchin and other investors sold OneWest to New Jersey lender CIT Group last year for $3.4 billion. The deal was delayed — and nearly derailed — by complaints about OneWest’s foreclosure practices.

As part of its arrangement with the FDIC, Mnuchin’s group had agreed to participate in a mortgage-modification program, but community groups charged that the bank was aggressive when it came to foreclosing on homeowners. The California Reinvestment Coalition, which pushes banks to offer fair and equal access to credit, claimed that the bulk of OneWest’s estimated 35,000 foreclosures took place in minority communities and that the bank was notoriously difficult when dealing with homeowners and housing counselors. It was alleged practices like those that drew the ire of the “Make Banks Pay” protesters who visited Mnuchin’s home.

Regulators, too, went after OneWest’s foreclosure practices. In 2011, two years after Mnuchin’s group came in, the Office of Thrift Supervision hit the bank with a regulatory order saying it had failed to follow various procedures when foreclosing on homeowners.

CIT Group did not respond to requests for comment.

OneWest and Mnuchin also were embroiled in the saga of Relativity Media, the studio co-founded by flashy Hollywood executive Ryan Kavanaugh. Mnuchin had invested in the studio via Dune, and served as nonexecutive co-chairman of the board from October 2014 to May 2015, exiting just ahead of the company’s Chapter 11 bankruptcy.

According to documents from Relativity’s bankruptcy proceedings, OneWest, a lender to the studio, was repaid $50 million it lent to the company just before it filed for bankruptcy protection. A July 2015 filing by Relativity’s financial adviser at Blackstone Group, which was hired to advise the studio before its bankruptcy, said that this repayment exacerbated its “already problematic liquidity situation.”

Adviser Timothy Coleman of Blackstone wrote in the filing that this caused Relativity to “largely have to stop paying many vendor bills, to postpone production of certain film projects, and to postpone the release of certain completed films.”

Typically, bankruptcy courts look askance at large payments to one creditor shortly before filing for Chapter 11, because companies aren’t supposed to favor one creditor over another. Nonetheless, Relativity’s plan to reorganize its business was approved by a New York bankruptcy court judge in March, wiping hundreds of million of dollars of debt from its balance sheet.

But the issue of the $50 million repayment also surfaced in a civil lawsuit filed by RKA Film Financing, an investor in Relativity, against Kavanaugh, Mnuchin and others. The case, which was filed in New York County Supreme Court and included allegations of fraud, claimed that money RKA lent to Relativity was used for purposes other than those it was earmarked for. The lawsuit alleged that at least some of RKA’s money was likely included in the funds paid to OneWest.

The complaint, which was first filed last year and amended in March, claimed that Mnuchin “was in a unique position, affording him knowledge of both Relativity’s precarious financial position and the ability to ensure certain creditors — namely, OneWest Bank — were able to siphon away funds that had been commingled with RKA’s [money].”

In separate June court filings, Kavanaugh and Mnuchin asked the court to throw out the case. It was dismissed Oct. 11 by Judge Charles Ramos, according to court documents. Ramos has given RKA, which sought damages of more than $110 million, the chance to replead the case.

Mnuchin’s attorney, Robert Sacks, said that claims made about Mnuchin in the lawsuit were “preposterous.” He said that the contract between RKA and Relativity was entered into before Mnuchin invested in the studio, adding that RKA has “no basis whatsoever to assert a claim against Steve Mnuchin and they’ve articulated none.” Sacks dismissed RKA’s claim that Mnuchin’s connection to OneWest and Relativity uniquely situated him to ensure the bank was repaid ahead others.

“The bank had whatever rights the bank had based on [having] provided funds to Relativity,” Sacks said. “Steve Mnuchin did not have a dual role with regard to that.”

In a statement, Beverly Hills-based Relativity said it was pleased with Ramos’ Oct. 11 decision.

But the dispute may not be over. Attorney Benjamin Naftalis, who represents RKA, said his client plans to soon file an amended complaint. “RKA has and will allege a fraud claim,” Naftalis said. “And Steve Mnuchin played an integral role in executing that fraud and misappropriating RKA’s investment to his and others’ benefit.”

Mnuchin would be an out-of-the box choice for Treasury secretary, having neither served in government nor risen to the top ranks of corporate America. Treasury secretaries appointed by Barack Obama and George W. Bush all worked for the federal government at some point in their careers.

And the three secretaries appointed by Bush were all chief executives of major corporations. Henry Paulson, for example, worked in the Defense Department in the 1970s and was chief executive of Goldman Sachs before being named Treasury secretary.