[QUOTE=cheesehead;234501]...an AIG collapse would have immediately brought about the collapse of numerous other financial institutions around the world. ... So, it was necessary for the Fed to set up an $85 billion credit line for AIG to prevent the collapse.

That Fed action was a thing "done right".[/QUOTE]

Done wrong.

Unlike Garo, I'll grant you and the Fed's analysis that an AIG collapse could lead to catastrophic world-wide meltdown and action was necessary. (For Garo to get his proof, the Fed would have to have let AIG collapse and see what ensued).

The fallacy is that a complete bailout is the only possible solution. Here's my basic outline for a solution that is slightly riskier but IMO a "fairer" solution in that those that took the risks get stuck with the consequences. With all the "geniuses" working at the Fed, I'm sure they could have improved on it.

The Fed seeing AIG does not have assets to back up its collateral requirements announces that AIG will likely go bankrupt in the coming days and it also announces what the consequences will be:

1) Shareholders will be wiped out. Sorry, that's what happens when you invest in a company run by reckless idiots.
2) Everyone stay calm -- AIG has many valuable assets that will be sold off. The Fed fullly expects bondholders and holders of failed CDS that AIG "insured" will receive 30, 50, 70, or whatever-the-estimate-was cents on the dollar.
3) Rather than troubled U.S. banks waiting years for bankruptcy court to figure it out and AIG assets to be sold, the Fed would make 0% interest loans to U.S. banks with claims against AIG. This insures banking liquidity.
4) The Fed coordinates with other central banks so that they can provide the same assurances of support to non-U.S. banks.
5) The Fed announces any number of other warm, fuzzy statements that it has many tools in its arsenal, won't let the banking system fail, blah, blah, blah.


Under such a system, Goldman Sachs does not receive a multi-billion dollar gift straight from the U.S. taxpayers. Goodbye, ill-deserved big fat bonuses in 2009. U.S. taxpayer money is not used to prop up foreign banks.

[QUOTE=ewmayer;234543][URL="http://us1.irabankratings.com/pub/IRAstory.asp?tag=451"]Triple Down: Fannie, Freddie, and the Triumph of the Corporate State[/URL]:[/QUOTE]From the article:
[quote=The Institutional Risk Analyst][SIZE=3]Despite examples of the success of restructuring with F and even General Motors, the invidious cowards who inhabit Washington are unwilling to restructure the largest banks and GSEs. The reluctance comes partly from what truths restructuring will reveal. As a result, these same large zombie banks and the U.S. economy will continue to shrink under the weight of bad debt, public and private.[/SIZE][/quote][SIZE=3]Although an immediate propping-up of AIG was necessary, and that was a thing "done right" IMO, the failure to follow up that action by directly confronting the mess at the banks and government-sponsored enterprises and begin cleaning it up by forcing the worst ones to restructure was a big "thing done wrong". TARP was therefore largely or entirely (I haven't decided yet) a thing "done wrong".

The government should have declared that its Sept. 15 rescue of AIG was only a short-term patch, to be followed by allowing other financial companies [I]and AIG itself, once the immediate crisis was over[/I], to go into bankruptcy.[/SIZE][SIZE=3] The terms of the Sept. 15 loan to AIG should have spelled that out, and required that AIG restructure (or divest or whatever the proper solution would have been) itself by, say, 2-3 months from that date. Though the whole CDO/CDS/etc. situation was too big to have been quickly remedied, a determined beginning to carefully knock off pieces of it should have begun that fall. That would have been a thing "done right" ... if it had happened.

[/SIZE]

[QUOTE=Prime95;234558][QUOTE=cheesehead;234501]...an AIG collapse would have immediately brought about the collapse of numerous other financial institutions around the world. ... So, it was necessary for the Fed to set up an $85 billion credit line for AIG to prevent the collapse.

That Fed action was a thing "done right".[/QUOTE]Done wrong.[/QUOTE]But you contradict yourself in your very next paragraph: "action was necessary".

[quote]Unlike Garo, I'll grant you and the Fed's analysis that an AIG collapse could lead to catastrophic world-wide meltdown and action was necessary. (For Garo to get his proof, the Fed would have to have let AIG collapse and see what ensued).[/quote]Thank you, but that changes your "done wrong" to a "done right".

[quote]The fallacy is that a complete bailout is the only possible solution.[/quote]... but I did not make or express that fallacy. The $85 billion was only to prevent an instant global collapse, not to provide a compete bailout. Note that AIG later needed much more than that $85 billion for its bailout.

You, like garo, invalidly extrapolated statements I made about a very specific time to infer that my opinions about the later period would match his/your false assumptions about me. You both seem to have assumed that you knew what I thought should have happened after Sept. 15 [I]even though I hadn't yet ever posted my opinion about actions in the post-Sept. 15 period[/I].

[QUOTE=garo;234550]Prove it! I have read this line many times but have never seen any supporting evidence.[/QUOTE][I]Time[/I] and [I]New York Times[/I] published explanations right after the Sept. 15 weekend. Here is the NYT:

[URL]http://www.nytimes.com/2008/09/16/opinion/16lewitt.html?_r=1[/URL]

[quote=NYT]Why the Fed Can’t Let A.I.G. Go Under

. . .

But there is a bigger potential failure lurking: the American International Group, the insurance giant. It poses a much larger threat to the financial system than Lehman Brothers ever did because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds.

Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

A.I.G. does business with virtually every financial institution in the world. Most important, it is a central player in the unregulated, Brobdingnagian credit default swap market that is reported to be at least $60 trillion in size.

Nobody knows this market’s real size, or who owes what to whom, because there is no central clearinghouse or regulator for it. Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss. The insurer (which could be a bank, an investment bank or a hedge fund) is required to post collateral to support its payment obligation, but in the insane credit environment that preceded the credit crisis, this collateral deposit was generally too small.

As a result, the credit default market is best described as an insurance market where many of the individual trades are undercapitalized. But even worse, many of the insurers are grossly undercapitalized. In one case in the New York courts, the Swiss banking giant UBS is suing a hedge fund that said it would insure nearly $1.5 billion in bonds but was unable to do so. No wonder — the hedge fund had only $200 million in assets.

If A.I.G. collapsed, its hundreds of billions of dollars of mortgage-related assets would be added to those being sold by other financial institutions. This would just depress values further. The counterparties around the world to A.I.G.’s credit default swaps may be unable to collect on their trades. As a large hedge-fund investor, A.I.G. would suddenly become a large redeemer from hedge funds, forcing fund managers to sell positions and probably driving down prices in the world’s financial markets. More failures, particularly of hedge funds, could follow.

Regulators knew that if Lehman went down, the world wouldn’t end. But Wall Street isn’t remotely prepared for the inestimable damage the financial system would suffer if A.I.G. collapsed.

While Gov. David A. Paterson of New York on Monday allowed A.I.G. to borrow $20 billion from its subsidiaries, that move will only postpone the day of reckoning. The Federal Reserve was also trying to arrange at least $70 billion in loans from investment banks, but it’s hard to see how Wall Street could come up with that much money.

More promisingly, A.I.G. asked the Federal Reserve for a bridge loan. True, there is no precedent for the central bank to extend assistance to an insurance company. But these are unprecedented times, and the Federal Reserve should provide A.I.G. with some form of financial support while the company liquidates its mortgage-related assets in an orderly manner.

. . .[/quote]My next post will quote the [I]Time[/I] article.

[URL]http://www.time.com/time/business/article/0,8599,1841699,00.html[/URL]

[quote=Time]Why the Government Wouldn't Let AIG Fail

After establishing a supposed hard line against bailouts over the weekend with Lehman Brothers, the government abruptly abandoned it Tuesday and [URL="http://www.federalreserve.gov/newsevents/press/other/20080916a.htm"]announced an $85 billion Federal Reserve loan[/URL] to insurance giant AIG. The explanation: AIG was deemed too huge (its assets top $1 trillion), too global and too interconnected to fail.

That, and the fact that unlike with Lehman — where the possibility of failure was openly discussed for months and to a certain extent planned for — federal officials and market participants don't seem to have really focused on AIG's problems until this week. While the company's insurance subsidiaries are regulated by New York insurance superintendent [URL="http://www.ins.state.ny.us/bios/bios_ed_sup.htm"]Eric Dinallo[/URL], it is overseen at the holding company level by the federal Office of Thrift Supervision, which mostly regulates the savings and loan industry. Plus, it was awfully hard for outsiders — and even insiders — to understand the gravity of the company's problems. "You can read through every financial statement in the world and have absolutely no clue as to the risks they are taking," says [URL="http://www.atlanticpartnership.org/?p=200"]Leo Tilman[/URL], a former Bear Stearns strategist who now runs the advisory firm L.M. Tilman & Co.

The particular risks that brought the company to the brink of bankruptcy seem to lie not with its core insurance businesses but with its derivatives-trading subsidiary [URL="http://www.aigfp.com/"]AIG Financial Products[/URL]. AIG FP, as it's called, merits a mere paragraph in the nine-page description of the company's businesses in its [URL="http://www.ezodproxy.com/AIG/2008/AR2007/HTML2/aig_ar2007_0055.htm"]most recent annual report[/URL]. But it's a huge player in the new and mysterious business of credit-default swaps: derivative securities that allow banks, hedge funds and other financial players to insure against loans gone bad.

AIG generally sells credit-default swaps, thereby promising to insure others against defaults. It's a great business when defaults are low; when they rise it can turn toxic. AIG FP lost more than $10 billion in 2007 and $14.7 billion in the first six months of this year. That, along with losses in other investment portfolios, has cut deeply into the parent company's capital reserves. The credit-default-swap contracts decree that if AIG's credit rating drops below a certain level, it has to fork over $13 billion in collateral to the buyers of the swaps. Monday night, because of the losses at AIG FP and in AIG's investment portfolios, Moody's and S&P cut the company's ratings. After that, the consensus was that the company could survive only another day or two.

The New York Fed asked Goldman Sachs and JPMorgan Chase & Co. to try to arrange a $70 billion private loan for AIG, but that didn't go anywhere. Treasury officials [URL="http://www.bloomberg.com/apps/news?pid=20601087&sid=a11UW1B8w8uM&refer=home"]mulled[/URL] a government conservatorship as with Fannie Mae and Freddie Mac, but it [URL="http://www.reuters.com/article/bondsNews/idUSWBT00972920080916"]might have required an act of Congress[/URL] to make that happen. So the Fed devised a deal in which AIG agrees to repay the loan with asset sales and give the government (and thus taxpayers) a 79.9% equity stake in the company.

Confused? You're not alone. The best case for the bailout seems to be that nobody has the faintest idea what the consequences of AIG's failure for financial markets would be, but the fear was that it could lead to total chaos. The biggest fears had to do with the credit-default swaps, which AIG appears to have sold in large quantities to practically every financial institution of significance on the planet. RBC Capital Markets analyst Hank Calenti [URL="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=auT7xM5x3Yyo"]estimated Tuesday[/URL] that AIG's failure would cost its swap counterparties $180 billion.

"Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression," [URL="http://www.nytimes.com/2008/09/16/opinion/16lewitt.html"]wrote money manager Michael Lewitt in Tuesday morning's New York [I]Times[/I][/URL]. There's also the fact that through its insurance policies AIG touches far more regular Americans (and consumers around the world) than Lehman Brothers did. Plus, AIG's insurance businesses make so much money that they could conceivably [URL="http://time-blog.com/curious_capitalist/2008/09/why_bailing_out_aig_might_be_a.html"]pay off the cost of the bailout within a few years[/URL]. [/quote]

[QUOTE=cheesehead;234566]... but I did not make or express that fallacy. The $85 billion was only to prevent an instant global collapse, not to provide a compete bailout. Note that AIG later needed much more than that $85 billion for its bailout.[/QUOTE]

Sorry, IMO, still "done wrong".

Why piss away $85 billion on an incomplete bailout only to force AIG into bankruptcy a few weeks later? I again say force bankruptcy immediately.

You even claim later it was "done wrong", or at least "done poorly", by stating:

[quote]The government should have declared that its Sept. 15 rescue of AIG was only a short-term patch, to be followed by allowing other financial companies and AIG itself, once the immediate crisis was over, to go into bankruptcy.[/quote]

[quote]You, like garo, invalidly extrapolated statements I made about a very specific time to infer that my opinions about the later period would match his/your false assumptions about me. You both seem to have assumed that you knew what I thought should have happened after Sept. 15 even though I hadn't yet ever posted my opinion about actions in the post-Sept. 15 period.[/quote]

I made no such extrapolations. You stated that the $85 billion propping up of AIG was "done right". It is my opinion that the $85 billion prop-up was the incorrect response on that date.

If you had stated that on Sept 15 the Fed needed to "do something" then I would have agreed with you. When you say, "done right" you are implying both "do something" and "did the right something".

[QUOTE=Prime95;234579]Why piss away $85 billion on an incomplete bailout only to force AIG into bankruptcy a few weeks later? I again say force bankruptcy immediately.[/QUOTE]I don't see you acknowledging the difference between the global situation on Sept. 15 and the global situation later on. The situation on Sept. 15 and the situation on, say, Sept. 20 were different in an important respect. (Read the NYT and Time articles.) Until you've taken that into account, your argument is useless.

The Sept. 15 AIG crisis had the possibility of wreaking [I]global collapse[/I] (because AIG's ties to derivatives throughout the world meant that [I]its[/I] collapse at that particular time would've been so much more consequential than any other institution's collapse [I]at that time[/I]). That's what an immediate AIG bankruptcy had a high chance of bringing about! (Note that Lehman Brothers [I]was[/I] allowed to go into bankruptcy [I]because it was so much smaller than AIG that its collapse did not present a global threat![/I]

[U]After[/U] the global collapse was averted, [I]then[/I] it was not proper to continue to bail out AIG.

[quote]You even claim later it was "done wrong", or at least "done poorly", by stating:[/quote]You are mistaken. Until you acknowledge the difference between actions on Sept. 15 and actions later on, you continue to misinterpret me by falsely extrapolating my Sept. 15 support of AIG assistance to include post-Sept. 15 AIG bailout. I don't think the further AIG bailout beyond the immediate Sept. 15 crisis was proper.

Perhaps you misinterpreted my sentence
[quote]The government should have declared that its Sept. 15 rescue of AIG was only a short-term patch, to be followed by allowing other financial companies and AIG itself, once the immediate crisis was over, to go into bankruptcy.[/quote]to mean that I wanted the government to make that declaration as soon as it announced its Sept. 15 action. I didn't say that -- but I'd agree that I didn't make what I wrote crystal-clear, and that it was reasonably possible to misread my sentence as meaning that it was to be done in the Sept. 15-18 period. (Announcements about Sept. 15 were made Sept. 18.)

I intended for that declaration to be made only several days or more later after the immediate global crisis had been clearly averted -- but I didn't make that clear.

[quote]I made no such extrapolations.[/quote]As I've just explained, you did so -- by showing no awareness of the difference between Sept. 15 and later on, so that you've failed to distinguish between my support for Sept. 15 and supposed-by-you, but not stated-by-me, support for later bailout.

[quote]You stated that the $85 billion propping up of AIG was "done right". It is my opinion that the $85 billion prop-up was the incorrect response on that date.[/quote]... but you have not yet shown us why it was proper to risk the global collapse!

[quote]If you had stated that on Sept 15 the Fed needed to "do something" then I would have agreed with you.[/quote]Actually, I did say that earlier (second paragraph of post #616), in addition to my more specific statements.

[quote]When you say, "done right" you are implying both "do something" and "did the right something".[/quote]Yes, that's correct.

George, you have to show us that you understand the gravity of the Sept. 15 situation, in contrast to the later situation, before you'll convince me or anyone else who has the clue about Sept. 15 that your argument holds water.

This has degenerated into the standard wrangling match that happens whenever cheesehead gets deeply involved in a thread. I don't have time for this so I will excuse myself from the AIG discussion after this comment.

I do agree that AIG should not have been let collapse in a disorderly fashion a la Lehman. But like George I think the way it was done was not right. And that is precisely the problem I have with Mr. Conrad and cheesehead's formulation. That the choice was between doing it the precise way that things were done and doing nothing. That is the dishonest part that I disagree with. George's plan, for instance, is far superior to those two alternatives. And there have been many other plans proposed by people such as Barry Ritholtz that take into account the severity of the situation and that action needed to be taken but at the same time assign significant losses to those who made investments instead of lumping everything to the taxpayer.

And with that I hold my peace.

I too am tired of the wrangling. It was done the way it was done. I too agree that it was done wrong, but that does not change the way it fell out. The question now should be "how do we handle this going forward?". If you note carefully, AIG has via re re re negotiation weaseled out of financial responsibility for repaying the loans. This is what happens when a major debt obligation is converted into an "ownership stake" in a company. Granted that there are some situations where it can work, but in AIG's case, there is no way the company can recover sufficiently for the taxpayer dollars to be recovered. Note that the initial $85 Billion was just the tip of the iceberg compared to later amounts. This pig has so much lipstick on that it looks like a baboon's rear end rubbed in poke weed berry juice.

My major disagreement is that AIG was not immediately forced into a limited bankruptcy ala GM or something similar. My secondary disagreement is with the hundreds of millions of dollars that AIG subsequently paid out in bonuses to the same !#@#%@# that created the mess in the first place. Those bonuses were paid with taxpayer dollars. Had they been forced into bankruptcy, those bonuses could have been canceled!

DarJones

[QUOTE=garo;234617]That the choice was between doing it the precise way that things were done and doing nothing. That is the dishonest part that I disagree with.[/QUOTE]It's dishonest to represent my position as choosing "between doing it the precise way that things were done and doing nothing".

[quote]George's plan, for instance, is far superior to those two alternatives.[/quote]But he hasn't shown us how it would've averted global financial collapse, so it doesn't meet my criterion for acceptability.

I'm quite willing to agree that some other action might have also been okay -- if someone shows me. I don't recall seeing the "many other plans proposed by people such as Barry Ritholtz that take into account the severity of the situation and that action needed to be taken but at the same time assign significant losses to those who made investments instead of lumping everything to the taxpayer" that satisfy me, but I never claim to have seen all those plan proposals. It's even possible that I've simply forgotten having read some plan that satisfies me -- or even that I read something before I had formulated my current conditions for acceptability, but don't recall it now.

Please direct me to descriptions of such plan proposals, so that I can evaluate them -- before you condemn me for rejecting something I haven't yet seen or don't recall!

I said that what was done was "done right", but that doesn't mean I think nothing but that "precise way" would've been okay. I never characterized what was done as "the only possible way it could've been done right". I do put a condition on "done right" that it would have to have averted collapse of the global financial system, but I've never maintained that only the "precise way" it was done was possible to meet that condition.

You've once again distorted my views by extrapolating my comments past what I actually said. Please stop it.

Hint: You could've, instead, [U][I]asked[/I][/U] me whether any other action besides that "precise way" would've been okay with me.

But you didn't do me that courtesy.

Instead, you just flat out accused me of holding the view that the only alternative to doing precisely what was done was to do nothing.

Try being a bit humbler about someone else's views. Consider that you might not actually know what someone else has in mind that he hasn't actually expressed.

(BTW, that's one criticism of Obama -- that he's too sure he knows others' views, so he doesn't do enough listening.)

Retiring CFTC judge alleges corruption
 

This story first broke (e.g. on Ritholtz and ZeroHedge) a couple of weeks ago ... I wanted to wait for some more corroboration before discussing it. Note that - in a manner very reminiscent of what they`ve been doing with the foreclosuregate scandal, the industry whores at the WSJ editorial board immediately tried to smear judge Painter`s credibility by dredging up the scurrilous accusations about his alleged senility. Utterly disgusting ... but don`t take it from me, here is an LA Times piece dated Tuesday:

[url=http://www.latimes.com/business/la-fi-hiltzik-20101026,0,180301.column]Retiring CFTC judge`s allegations should concern small investors[/url]: [i]Judge George Painter`s contention that a colleague had vowed never to rule in an investor`s favor appears to be borne out by the record. Yet a court case over guardianship of the ailing Painter is being used to dismiss his words.[/i]
[quote]Cards on the table: When George H. Painter says the game is rigged against the small investor in Washington, I have reason to take him at his word.

Even when his word comes wrapped up like a bombshell.

Painter, 83, detonated that bombshell recently in the course of announcing his retirement as an administrative law judge for the Commodity Futures Trading Commission, effective in January. In a public notice, he accused his lone colleague on the CFTC bench, Bruce Levine, of having made a vow nearly 20 years ago never to rule in a complainant`s — that is, an investor`s — favor.

"A review of his rulings," Painter stated, "will confirm that he has fulfilled his vow."

He asked the CFTC, which regulates the commodity futures markets, to bring in a new judge instead of transferring his pending cases to Levine. The two judges rule on allegations of fraud or other misdeeds brought by investors against futures brokers and traders.

Strong words, but not entirely out of character for Painter. And they`ve stirred up a fairly ugly cloud of dust, involving claims and counterclaims about Painter`s physical and mental health, traded between his wife and other members of his family in a Maryland court. Whether the court case would have reached the newspapers if not for Painter`s attention-grabbing resignation is hard to say. But it`s now being used to dismiss his attack on Levine as the words of someone who`s not all there.

I first encountered Judge Painter nearly three decades ago, when he issued a number of stern rulings involving a Newport Beach investment operator I had been writing about.

The investment firm, Monex International, had been hawking illegal futures contracts, he ruled. In one case, he found that Monex had ignored a customer`s repeated pleas to cash out her deteriorating stake, and awarded her $20,000 in reparations.

When I reached Painter again last week, he didn`t seemed to have changed much. "It`s gone to hell," he said, referring to the standing of the investor at the CFTC. "But it`s always been that way, hasn`t it? We`re not prosecuting the bad guys." For the record: He sounded perfectly lucid.

Under normal circumstances, Painter`s view might be taken to heart by the bureaucratic establishment in Washington. It was regulatory agencies` failures to look out for consumers that helped win enactment of a new consumer protection agency this year. Furthermore, the CFTC has long had the character of a place where regulations go to die — although, to be fair, that`s not entirely the fault of its commissioners.
[b]
In 1998, during the Clinton administration, then-CFTC Chairwoman Brooksley Born urged Congress to place over-the-counter derivatives, then a $100-trillion business, under the agency`s control. She was rudely slapped down by her fellow financial regulators, who said things were fine. That was before derivatives helped bring down Enron Corp. in 2001 and the world financial system in 2008.

One of Born`s predecessors as CFTC chair was Wendy Gramm, wife of former Sen. Phil Gramm (R-Texas), who pushed through key financial deregulatory legislation while he was senator.

After leaving the CFTC, Wendy Gramm joined the Enron board. She was still there when the company went under. The CFTC chair to whom Judge Levine supposedly made his pledge, according to Painter, was Wendy Gramm. (I couldn`t reach her or Levine for their comments on Painter`s remarks.)
[/b]
Returning to the case involving Judge Painter`s health, his wife of eight years, Elizabeth Ritter, has petitioned to be made his legal guardian. Ritter, a CFTC attorney, says Painter was diagnosed with Alzheimer`s disease in February and transferred to a residential treatment center in June.

She says Painter`s son, Douglas, and other relatives improperly removed him from the center, got him a lawyer to file for divorce, and have kept him on the move cross-country to keep him isolated and disoriented.

Douglas Painter, a Los Angeles attorney, contends that Ritter overmedicated his father in preparation for the Alzheimer`s tests and tried to isolate him from his friends and family, and that no one else has reported seeing the symptoms in his father that Ritter reports.

"Elizabeth just wants what`s best for him to protect his well-being and his dignity," her lawyer, Kim Viti Fiorentino, told me. Judge Painter`s lawyer, Jean Galloway Ball, responded: "He`s in full control of his affairs, and if he needs assistance he can make his own choices."

It`s fair to say that, whatever one thinks of the allegations about Judge Painter`s treatment, the litigation process alone is Dickensian, and one can only hope that the judicial system works its way through the competing claims quickly and puts an end to it.

But it shouldn`t distract the CFTC from facing up to Painter`s assertions about Levine. I did a cursory search of both judges` rulings in reparations cases, in which investors seek to recoup losses due to alleged fraud, going back to 2007.

In that period, Painter found for investors at least five times, and Levine once (in that case he cut the investor`s $114,000 claim to $52,000). Both also dismissed a lot of claims. The most recent ruling I could find from Painter was a closely reasoned 21-page decision dated Feb. 26, about the time Ritter says he was first diagnosed with Alzheimer`s and well after she says he first exhibited severe behavioral problems, including alcoholism.
[b]
It would be hard for the commission to claim it has been unaware of serious issues with Levine`s work. My search found three cases in which it overturned dismissals by Levine, sometimes with harsh words for his performance.

In 2007, for instance, the CFTC concluded that Levine committed "procedural errors" and "severely prejudiced" an investor in his $74,000 complaint against a futures broker. The commission awarded the investor more than $32,000.

In another case, the commission overruled Levine`s dismissal of an investor`s complaint twice before finally transferring the matter to Painter. He awarded the investor, a 75-year-old retiree, $47,627.

In a third case, the CFTC bounced a dismissal back to Levine with instructions to waive the procedural rule that prompted his dismissal. Levine dismissed it again, throwing in for good measure harsh words about the commission`s performance.

In 2000, the Wall Street Journal — in a piece Painter appended to his resignation notice — found that during his eight years at the commission, Levine had never found for an investor except in a few cases involving defunct commodities firms.
[/b]
He still has that reputation. Steven Berk, an investor protection attorney in Washington, says, "It`s an open secret among my brethren that if you get Levine, he`s not going to rule for the investor."

It`s possible that Levine`s record is fairer than it looks or that his dismissals were the product of sound legal reasoning, not bias.

But if the CFTC has been harboring in its bosom a judge with a pronounced hostility to the consumer all these years, how sad is it that it took another judge`s parting blast to wake it up?[/quote]