So say several memorandums penned during the past week by executive committee cochair and banking transactions rainmaker Edward Herlihy, 14-year SEC veteran and firm of counsel Theodore Levine, and associate Carmen Woo.
“In today’s markets, short sales continue to be at record levels, there are false rumors in the marketplace about the demise of financial firms, bear raids and abusive short selling are taking place, and there is significant disruption in the fair and orderly functioning of the securities markets,” said Herlihy and Levine in their first memo on September 16. “The markets are in crisis.”
Generally, we like our political power brokers to be elected or at least appointed by somebody who was elected. However, with everybody else in government waiting for Mr. Paulson to come and save America, maybe it is not a bad thing to have professional lawyers suggesting a strong course of action.
We don’t know if the SEC was listening. But we do know that Wachtell told them to ban short-selling on September 16th, and the SEC banned short-selling on September 19th. Post hoc ergo propter hoc …
Wachtell’s next gambit after the jump.
If Wachtell is running a shadow government then they should
raise salaries telegraph their next move to the public. On cue, Am Law produced a September 22nd Wachtell memo which specifically calls for regulatory oversight of the credit default swap market. The memo reads (in part):
We believe that a critical next step is for the Federal Reserve Board, the Treasury Department, the SEC and the CFTC to undertake on an urgent basis a 30-day comprehensive review of the credit default swap market. It is indefensible that the CDS market, with trillions of dollars of notional value, has virtually no regulatory oversight. The CDS market has experienced exponential growth over the last several years without transparency and other structures normally present in such a market. The CDS market is being used by speculative traders to purchase CDS protection relating to the debt of an issuer even though they have no risk of loss in connection with a credit default by such issuer. Why should we allow these CDS speculators to bet against the future of American business?
Full copies of all the Wachtell memos are available here.
Paulson and Ben Bernanke will be testifying in front of the Senate Banking Committee just as soon as our elected officials prove that they have no freaking clue as to what the hell is going on. Let’s see if we can tell who wrote their testimony.