Diane Francis' blog has moved

The Diane Francis blog has moved to a new home, over here: http://opinion.financialpost.com/category/diane-francis/

There will be no more updates at this location, so please change your bookmarks to the address above.

Oil spill economics

Fun and frolic in the sea near one of the world's thousands of offshore rigs 

Katrina II
Too big to drill trumped too big to fail this week in the world's headlines.
The latest catastrophe in Lose-iana was BP's gigantic underwater well blow-out. The causes are unknown because the witnesses died.
What is known is that this pollution nightmare will force the Obama administration to reverse its decision to permit offshore drilling on the east coast. And it shouldn't.
The facts are that most of the world's new oil is coming from offshore sources. There are 4,000 rigs in operation in the U.S. alone and this the first major spill since 1969. That's hardly the profile of a technological disaster waiting to happen.

Oh, Canada
The latest spill also sent NDP leader Jack Layton scurrying to a Parliamentary committee to stop Arctic offshore drilling.
Lest Jack forget, there has been a mini-North Sea play underway for years almost 200 miles off Newfoundland's coast. Platforms and rigs in three deep water fields are producing 267,613 barrels daily and at least two billion more barrels awaits exploitation.
Then there's the Beaufort Sea oil potential, just 10 miles offshore in shallow water, where one of the most promising wells in Canada was discovered then orphaned a generation ago because of Ottawa incompetence.
But political fallout is predictable. Oil-soaked turtles and birds are telegenic and very upsetting to all of us.

The real fix
Considerably more effective, in saving the turtles and the birds, will be the fact that BP's insurers, or re-insurers, are in for a frightening tab and frightening lawsuits in the U.S. because of the damage to tourism and fishery.
Like a bank crisis, the underwriting contagion will add mightily to everyone's production costs as offshore operations will be subjected to serious insurance premium increases or, possibly, denial of certain coverage.
That may shut in some supplies, which will increase prices in the long run. To be Cana-centric, this will skate the economics of Canada's oil sands production more onside than they already are and make the Canadian dollar go up. And Canadian resource stocks.

Goldman Sacks (sic) Greece

Audiences watch Sparta's massacre in "300". History repeats.

Greece isn't a country. It's a party.
The Germans, one of the few groups in Europe who work, are furious. They are balking at the bailout but must come across because a couple of big German banks are on the hook for Greece's IOUs.
Best suggestion by a German politician, not altogether silly, is that Greece should pay off its lenders with islands. These Aegean beauties are government-owned and their privatization might help skate the whole place onside quickly.
Despite the world's crisis, there are plenty of well-heeled buyers: the suits at Goldman Sachs (dubbed "haves" and "have yachts"), Russian oligarchs, oil sheiks or Mexican cartelistas.
That aside, the details oozing out about Greece's spendthrift ways, make it obvious that the real legacy of Goldman Sachs and Wall Street is that they democratized greed.

Hey gimme some of that
Greek retirement ages are 60 and 65 years, respectively, for males and females, but the average is more like 53 years because many jobs are considered physically strenuous or hazardous. These include hairdressers (all that standing and putting your hands into chemicals); musicians (all that plucking into the wee hours); bakers and radio presenters.
Public-sector employees have got bonuses for showing up to work on time. They received a 13th month's wages at Christmas and a 14th month's wages at Easter.
While these perqs are now history, at the insistence of the IMF and EU, it's hard to imagine the Greeks rolling up their sleeves and getting back to work. The same goes for the other members of PIIGS, more elegantly dubbed the "Club Med," which includes fellow miscreants Portugal, Italy, Ireland and Spain.
Well, the party's over for them, but not for Goldman Sacks (sic) yet. The investment banking casino played a starring role in the Greek comedy when it gave the country a strategy to hide debts from euro zone officials.
As we write, Goldman trading desks are busily shorting all those Greek stocks and bonds they once sold long to clients, and its underwriters are undoubtedly preparing a series of IPOs to peddle those islands.

Gaming China

China's unrelenting, subsidized trade success by sea must end

The subtext going on with the G2 -- the United States and China -- is fun to watch as an example of the Obama team's nuanced global strategies.
Both President Obama and his Treasury Secretary Timothy Geithner spent a chunk of their childhoods in Asia, so they get the culture. Obama lived for years in Indonesia and Geithner in India.
The challenge is getting China to stop cheating by keeping its yuan artificially low. However, this also involves admitting that it has been happening.
But the concept of diu lian, or loss of face, is critical in order to get Asians to reverse course. So nothing has been direct.
This month, Obama and his Treasury Secretary are to release the results of a currency study, which likely reveals China's currency should be 27.5% higher. In U.S. law, they can immediately impose tariffs on everything from China.
That would spark a world trade war and a sell-off or diversion by China out of U.S. government bonds.

Sober second thought by Beijing
But signs are China is coming around in a face-saving way. The President and Treasury Secretary have left the criticisms about China mostly to others, such as Brazil this weekend or Congress, which is probably China's only de facto opposition party.
Earlier this month, Geithner flew to China's arch-rival India for a two-day love-in, which was duly noted in Beijing. He then dropped in on China on his way back.
China's President Hu Jintao then went to Obama's nuclear summit in Washington and, for the first time, hinted it will stop vetoing sanctions at the UN Security Council against Iran even though it's a big oil supplier to Beijing.
Next, Geithner announced a postponement of his currency report and said he will go to China in May for a two-country, high-level forum to solve the world's problems.
All this was preceded by "softening up" when Washington suddenly announced US-billion armaments deals to Taiwan and a meeting with Tibet's Dalai Lama.
It will be interesting to see if all this face-saving, indirect pressure will work. This is the most important economic issue in the world.
Last weekend, Geithner was mute on the yuan but said, "We have seen encouraging signs of a shift toward more rapid consumption growth that needs to be sustained and reinforced by a return to market-oriented exchange rates."
With Brazil and others joining the fray, it's likely the yuan will start its quiet climb in May or June.

GoldmanGate worsens

Goldman Sachs and other Wall Streeters face more problems, now that some of the banks they ruined, and the countries that bailed them out, realize they may have been taken.
Goldman Sachs is under investigation by the European Union into a 2002 swap deal it carried out with Greece that, some say, may have helped hide the extent of the country's financial troubles. May have hidden it? Is the Pope Catholic?
Friday's fraud charges against Goldman by the U.S.Securities and Exchange Commission led to requests by British, German and Dutch officials for information to pursue their own probes or lawsuits. SEC officials hinted that Goldman is the beginning of a widespread investigation into the derivatives that destroyed the world's financial system.
The collapse of 2007-08 was not about investors' manias. It was, as I pointed out in 2008, the result of America's unrestricted, reckless and rogue banking system.
Goldman "lifers" have run the U.S. Secretary of the Treasury for nearly a generation, removing walls between investment and other banks and taking controls off Wall Street cronies, non-transparent derivatives and hedge funds. Clinton listened to Rob Rubin for almost two terms (26 years at Goldman, director and co-chair) and Bush had Henry Paulson (ex Goldman Chair) until the end. Both were confirmed by the Senate. Both pushed for deregulation and both pushed around the SEC and other regulatory bodies.
The fallout may have just begun. Rubin's proteges are still there, namely Larry Summers and Timothy Geithner. Last week, another left before the SEC's fraud lawsuit  -- White House economic advisor, Lewis A. Sachs.

Clinton decoupling the politics
In an interview this weekend, Clinton admitted he was wrong to listen to Rubin. The significance of this is that it removes the Wall Street reform issue from the partisan fray over financial reform now before the Senate. It moves removing and fixing Wall Street from a Democrat versus Republican issue to a decent governance issue.
"I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don?t need any extra protection, and any extra transparency,? Clinton said. ?And the flaw in that argument was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency.?
He added he was wrong about understanding the consequences if that shadow market tanked. "So much money was involved that if they went bad, they could affect a 100 percent of the investments, and indeed a 100 percent of the citizens in countries, not [just] investors,? he said.
Just as Abu Ghraib robbed America of its moral high ground, so has Wall Street. Washington's house cleaning must be swift and severe.

Goldman got it

Ever since the financial catastrophe of 2007-08, Goldman Sachs has been hyper-vigilant when it comes to the media. Many like myself have been complained about and rudely denied access. The blogosphere has been patrolled 24/7 so that critics can be promptly pounced on.

Now we know why.

Yesterday's bombshell announcement that Goldman was charged with fraud by the U.S. Securities and Exchange Commission is hardly surprising. This is Wall Street's last survivor, and it is about to be ordered off the island too, so to speak.

The others disappeared or were forced into shotgun marriages. All are dogged by lawsuits and under investigation by the world's largest law firm, the U.S. Department of Justice. Many more cases are under investigation.

In a statement, Goldman said, "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."

The SEC's statement alleges the fraud arose around an issue of subprime debt instruments in 2007. Bad enough this junk was questionably rated, but Goldman collected US-million in fees to sell this stuff to investors without telling them another one of their clients, the big hedge fund Paulson & Co., was on the other side of the trade. Worse yet, that hedge fund had helped sandbag the other investors by helping to select debts that were likeliest to default. Goldman did not disclose this conflict of interest to other investors, the SEC claims.

The hedge fund was run by billionaire John Paulson, but he has not been charged because Goldman was responsible for disclosure to other investors, not Paulson. (Not to be confused with very rich Henry Paulson who ran Goldman before becoming Bush's Treasury Secretary.)

Like AIG and so many other shenanigans, the deal took place outside U.S. borders, in London. Charged by the SEC was a 31-year-old Goldman vice-president, Fabrice Tourre.

The meltdown, which destroyed many lives and businesses and wounded countries, represented the confluence of government incompetence, immoral people and systemic corruption.

Goldman Sachs deserves to be separated from its taxpayer-backed deposit-taking incarnation, which was a lifeline extended by Republicans along with a big fat bailout of itself and its biggest accounts receivable, AIG.

Lastly, bankers should forever be separated from special access to Washington and the White House so that regulators and oversight can remain independent, which was not the case under Bush libertarianism.

This case, while far from over, certainly restores a bit of confidence in the law and that perhaps it will be applied against the richest, most plugged-in people in the world.

Tiger Wood rebrand 101

Which picture is the real Tiger? Bad boy pumping iron or golf dweeb?

I won a bet that Tiger Woods would not win the Masters this weekend.
That is because his rebranding would have been derailed if he had gone out there, automaton-like, and swept through the course to win his fifth green blazer. So he didn't.
The tournament was won by Phil Mickelson, one of the nicest guys on the tour who is coping with a family crisis which is not of his own making.
Even so, in the world of brands Tiger's remains on thin ice.
All of his sponsors will now be well-advised to back Mickelson who is only one green jacket behind the Woods Machine. The media will be well-advised to publish or broadcast lots of verbiage about Mickelson' exemplary personal life, struggles and career in order to change the topic.
Tiger, for his part, performed according to script. He showed up and behaved with dignity. This was after the first two steps were adhered to which was to hold a remorseful press conference, then to restrict interviews before his return to a couple of friendlies.

Where are those pecks?
Most importantly, for that money shot on the first day he dressed like a golf frump: A striped pastel golf shirt and semi-baggy pants. In fact, he strode onto the course looking like a clone of one of his portly entourage. This was in contrast to those shape-hugging shirts and beautifully tailored pants which displayed his football-player, buff physique.
The next move is to stay away for awhile for two reasons. The Masters was safe for him on this journey back to fame from infamy. It is a particularly classy event where the crowd and press are screened and restrained. The "Enquirer" or New York Post's sports guys were not invited.
But other tournaments are different, more of a free-for-all. Not a good idea.
The second reason is the public's memory is fickle and will gradually fade from memories of Tiger's misconduct to a vague recollection that he came in fourth at the Masters and a really nice person won instead.
As for his marriage, it's likely over unless he can promise her a Senate seat in New York State.
Frankly, I think the next step is intermittent absence from the game unless all variables (crowd, commentators) can be controlled. Then there may be a discreet press release about a "trial" separation and dates with some A-list movie stars to remove the odor of his proclivity toward prostitutes. Eventually, he will be able to woo back into his life Buick and Accenture and another green jacket.

Colombia's Comeback

CARTAGENA -- New skyscrapers soar along the shores of this charming port city on the Caribbean Sea and represent a symbol of Colombia's comeback.
They are being snapped up by Europeans, expatriate Colombians and South Americans who want to enjoy this 500-year-old city's charming heritage district, cuisine, its beaches and lively Spanish culture.
The city's transformation is remarkable. Just eight years ago, Colombia was a failed state controlled by vicious drug cartels who created vastly profitable multinational cocaine operations with tentacles around the world. This port was a main conduit for trafficking but, ironically, was off limits in terms of violence because it was the designated playground, and neutral turf, for gangs.
Today, Colombia's 44 million residents are much safer and more prosperous. The two conditions are not mutually exclusive because personal security is a critical infrastructure when it comes to growing any economy.
For instance, my last visit to this country was in 1999 to speak at a journalist's conference in Bogota where I had to be accompanied everywhere by three police bodyguards because kidnapping of foreigners was a hugely lucrative sideline. I swore never to return and so did many businessmen who fled the place, along with their capital.

Best Bet
Consensus is that Colombia is the best investment destination in an otherwise difficult continent. Its people are industrious and its national finances are buoyed by significant mineral and oil wealth. Some 785,000 barrels a day are produced here, a large increase in a decade, and estimates are that by 2020 the country should reach the big leagues with production of 1.5 million barrels a day, more than any Latin American country except Mexico and Venezuela.
The bounce is dramatic. Its economy tanked for years, thousands were murdered, the country's best brains left and billions were spent by Colombia, and the United States, to defeat the "traficantes". Colombians reformed their police and judicial systems and took back their country.
That's why the sprouting of sliver-like towers in Cartagena is a good sign of confidence on the part of foreigners and, most importantly, Colombia's "diaspora" of wealthy and educated ex-residents.
"Security is an investment and safety is a democratic value," said Oscar Navanjo, director of Colombia's National Police Force during a panel discussion at the World Economic Forum meeting held here this week. "Drug trafficking is not linked to poverty. It is about a vacuum of enforcement and drug traffickers allowed to flourish or 30 years altered the values and principles of an entire society."
Of course, Colombia did not solve the cocaine issue. It merely pushed it out of its borders into countries with corrupt and ineffective justice systems. Production has shifted to Peru and Bolivia and Mexican cartels control the trade and are creating the same murder and mayhem in Mexico that nearly destroyed Colombia.
Unfortunately, some of those countries resist reforms.
"Safety must be a national priority," said Navanjo.

Cannabis economics

Vansterdam was front and center during its Winter Olympics and its downtown streets were full of revelers who partied even though the liquor stores were closed much of the time.
That's because pot was everywhere and several foreign commentators remarked on its popularity. This is nothing new. Marijuana has been virtually decriminalized in British Columbia and it's an open secret that the annual export crop has been bigger than forestry for a decade.
Trafficking for export is still very illegal in Canada, but it appears as though one of the biggest markets, California, is likely to legalized cannibis in the November 2 elections. 

California Dreamin'
The issue will be a referendum question on the ballot and a majority voting yes will carry the force of law. It is being promoted by a movement called "Tax Cannibis" designed to appeal to those voters who refuse to allow tax hikes, or a curtailment of government services, and have sent the state into near-bankruptcy.
Estimates are that sales of marijuana total US billion every year. Proponents talk about a USrdaddphp.4 billion tax on sales but if the stuff is taxed the same as cigarettes or liquor the government's take could be up to US billion. Its 2009 deficit was around US billion.
A tax on pot would be talkin' real money.
The Governator is leaving and the two principal competitors for the job of running a state, the economic size of France, are both opposed to legalization. But that doesn't matter in the wacky world of neverendums in California.

Californians have done crazier things
Since the latest referendum forbid taxes or cost cutting, the result has been release of prisoners before sentences are completed and a host of other loopy goings-on, including paying suppliers with I.O.U.s, not real money.
And the state is halfway there now. It legalized medical marijuana use in the late 1990s.
This has pitted California against the federal government's Drug Enforcement Agency which has continued to harass and arrest pot growers on the basis that some are a little too aggressive in their marketing techniques.
Outright legalization will escalate this federal-state squabble, but Obama was sympathetic to lifting controls on pot during his election campaign.
And for good reason. The substance is less harmful than alcohol and could raise a bunch of tax dollars. Besides, Prohibition didn't work in the 1920s and it doesn't work now.
It's silly that prisons and paddy wagons throughout the U.S. are unfortunately full of people busted for a little bit of pot that sells openly on Vancouver, or Toronto, street corners as well as in most parts of the world.
Once California makes it legal, other states and provinces will too, notably British California.

Never short America

One of Barron's best CEOs, Royal's Gordon Nixon

"I never short America and I never short the U.S. dollar. The United States has an instinctive ability to self-correct" -- Gordon Nixon, Chair and CEO The Royal Bank of Canada.

He told me that in interview in September 2009 when the media, and politicians, were predicting the decline of America.
This week, six months later, markets are waiting for the breakthrough jump in this Friday's U.S. Labor Department job creation statistics, with estimates as high as 200,000 new jobs in March.
Last week, the Commerce Department spending had risen for the fifth consecutive month which points to optimism and job creation.
My guess is that April consumer spending, and jobs numbers, alike will jump into the summer now that health care reform removes the anxiety from America's middle class about catastrophic health care costs and financial ruination.
This is good news on two levels. As the economic turnaround appears to be happening, the noise coming from an increasingly worrisome Republican fringe, Tea Party types and Fox TV blowhards will become more of a freak show to the majority of the American voting public than it already is. That's because their "audio" of disaster and the "video" of America's gradual improvement will clearly underline their disconnect from reality.

More indications
Besides official figures, there are other, quirky indicators that point to economic expansion. Jack Welch, former General Electric honcho, recently on a U.S. business show pointed to improved sales at restaurants, hair salons, travel bookings and lawn care contracts.
There's also a pulse returning to residential real estate in some regions which has shown up in higher sales for furniture, building materials, sporting goods and electronic goods and appliances.
March car sales have picked up and manufacturers in general south of the border have been hiring in that last three months, according to the Institute for Supply Chain Management.
In April, the most critical shoe will fall in terms of job creation enhancement policy with the release of the April U.S. Treasurer's Report as to whether China's currency is heavily subsidized (it is) and what tariff to slap on its goods as a result. Most do no realize but the U.S. Treasury has the power to ask the President, without Congressional consent, to impose a tariff against all Chinese goods and services equal to the currency subsidy they calculate is in place. This is the neutron bomb of diplomacy and is the Grand Game going on behind closed doors with Beijing, not Google's tantrum and exit.
China knows this is possible and is well-advised to agree quietly to increase the value of its currency in order to stop stealing jobs from Americans. Obama has been strong-arming China in a nuanced way: This winter, he quietly announced an unexpected sale of jets to fortify Taiwan and he also met with the Dalai Lama. Objections were strenuous for the Chinese and totally ignored.

Big Oil goes green

Shale gas nixes any Alaska or Mackenzie Delta, Arctic pipelines from being built

Producing natural gas from shale is going to replace cap and trade as the new green issue in U.S. politics.
Gas is dramatically cleaner than other fossil fuels and so much has been tapped in deep shale formations in North America that it may eventually back out gasoline, nuclear and coal plants.
Shale gas is the game-changer and has suddenly become possible due to a disruptive technology -- expensive, horizontal drilling then fraccing or atomizing the shale at depths of one mile or more.
There has been much noise by independent oil companies touting their finds, and skepticism, but not any longer because the world's major oil companies are buying them up quickly.

The Transformation
This is why it's a game-changer. The majors buying shale gas also control most of the American gasoline stations which means that they can bring about the gasification of transportation fuels and power generation.
The idea of using compressed natural gas instead of gasoline was the brainchild of Calgary's Jim Gray of Canadian Hunter in the 1980s. It's inexpensive to retrofit a car to use gas and easier on engines.
But the idea went nowhere because gasoline chains weren't interested and governments weren't concerned about the environment or about the cost of oil imports.
Shale gas supporters include ExxonMobil Corp., Royal Dutch Shell and ConocoPhillips and those three are the biggest gasoline station marketers in the United States.
The deal to watch is ExxonMobil's -billion purchase of XTO Energy Inc., due to close this June. The backroom politics are ferocious over shale gas and pits Big Oil against two unlikely bedfellows, environmentalists and the coal lobby. Both have been making a fuss over alleged negative impacts on water supplies as a result of the production of shale oil deposits near population centers in New York and Pennsylvania states.

Trending
But most shale gas is in remote areas and deeper levels where water isn't an issue. And Canada has as much shale gas as does the United States. Here are recent developments:
1. Besides ExxonMobil's big bet, Royal Dutch Shell and China's biggest oil company are spending billions buying shale and coal seam companies in Australia with a view toward converting it into LNG and shipping to China.
2. EnCana Corp. of Calgary (one fo the world's 20 biggest oil companies) just inked its deal, worth up to rdaddphp.2 billion, with Korea Gas Corp. to ship LNG to Korea from B.C.
3. EnCana just announced it will double gas production over five years despite sagging prices, zeroing in on shale gas.
4. Imperial Oil and its Mackenzie Valley gas pipeline partners announced last week a postponement of the project for five more years. That gas, and Alaska's, may never be shipped in North America but more likely be bought by Asians then converted into LNG for shipment home.

Sarah Palin the slippery slope

US health care reform is good for economy

Impoverished Americans get free health care in a barn in 2008 in makeshift clinics

On Sunday the United States finally joined the ranks of civilized nations by passing a commitment to look after everyone's health care needs.
Of course, some marked this as the beginning of a Soviet-style, Canadian, socialist, commie health care system. Some threatened to derail it. And radio hate-host Rush Limbaugh threatened to leave the American health care system if this is passed and go to Costa Rica. Does he know that Costa Rica has a government medical system like communist Kanada's?
Amusement aside, the legislation benefits millions as well as the economy because universal health care is not just smart and fair social policy; it is also smart economic policy.

The catastrophes disappear under these reforms. Consumer spending, which ground to a halt in the United States, can increase as people realize they don't have to set aside huge amounts to pay for a catastrophic illness, do without necessities to pay medical bills or go bankrupt because of an appendectomy.
That's good news for Canada and others which rely somewhat on a successful U.S.
It's also good news for America's economy in the long run because Washington now has oversight over doctors and insurance companies for the first time ever. This means that the second health-care issue -- cost -- can finally be addressed. America's biggest competitive advantage is the gouging by health-care monopolies which over-charge because they can.

Next
Cost-cutting, down to Canadian and European levels, should be the next target. The Americans spend 16% of their GDP on their health care, covering only half the population adequately, compared with the Canadian system which covers everyone for 10% of GDP. Then there's the 3% of GDP involving U.S. litigation to cover medical bills which will now diminish because most are covered.
Gouging is obvious. The health insurance lobby makes more profits in the U.S. than Canada pays out in health care benefits for 34 million people. The pharma industry lobbied for laws that made volume discounts illegal which is why Americans pay up to twice as much for U.S. drugs than do Canadians or Europeans or Japanese. Americans pay too much for doctors, tests and hospital beds.
Republicans may pick off a few seats in the fall over this, but this is legislation that will concretely benefit millions -- including their own rank and file as well as the economy -- and last. As Obama's advisor David Axelrod said. "This issue only worked well for the Republican Party if it failed to pass. They wanted to run against a caricature of it rather than the real bill. Now let them tell a child with a pre-existing condition `we don't think you can should be covered'," he said in an interview.
Finally, Washington did something right.

Wall Street controls overdue

"Some of the worst things they [Wall Street] did were, unfortunately, legal. They didn't have to break the law to be unethical, immoral. We have to pass the laws. We are not waiting for people to get nicer so we have to pass laws" -- Barney Frank, Chairman House Finance Committee at the World Economic Forum in Davos 2010.

Representative Frank is street-smart enough to know that deregulation has been a license to steal. His House reforms, passed this fall, were tough and appropriate. Now it's the Senate's turn.
Democrat Senator Christopher Dodd this week unveiled a bill that has the Wall Street lobbyists apoplectic, which would be reason enough to pass it in the public's mind. Most of the ideas they are upset about are already in place in Canada, one of the few countries with strong banks. But there are some interesting ideas in Dodd's bill worth considering north of the border.
-- A right for shareholders of financial institutions to cast a "non-binding vote" on executive pay and bonuses. This would be a useful shaming mechanism that would reverse ever-escalating compensation levels. In essence, it would force banks to poll their investors annually and would provide a useful check and balance that's currently missing.
-- Regulation of credit default swaps, major contributors to the financial system's failure in 2008.
-- New regulations governing credit-rating agencies by the Securities and Exchange Commission and increased liability if they make errors. Canada needs this too. Credit-agencies were responsible for the sub-prime contagion by allowing these junk debts to be re-rated as Triple A credits.
-- Adoption of the Volcker rule limiting banks from proprietary trading and owning hedge funds. 
The easiest fix would be a restructuring, rather than more regulation, such as the return to Glass-Steagall legislation in the 1930s which separated banks from brokerages. This would, as both Volcker and Britain's central banker have suggested, remove systemic risk by separating the "utilities" or traditional banks from the "casinos" or their trading arms.
Instead, Dodd has chosen the Canadian model where utilities own the casinos but will be more heavily regulated. It's worked here so far but the reality is that rules are made to be broken in the canyons of Wall Street.
That's why the non-binding shareholder vote that shames obscene payouts may be the most effective reform of all. Negative headlines and blogs are sometimes the best regulators.

Lehman Brothers, Greece and Enron

Enron's Kenneth Lay in cuffs -- the biggest shenanigans/bankruptcy before Lehman Brothers.

What do Enron, Greece and Lehman Brothers have in common?
The world is about to find out.
The latest disturbing news to crawl out from under a rock this weekend was that Lehman's used offshore accounting gimmicks to mislead the world about its financial problems.
This was the conclusion reached by Anton Valukas, a Chicago prosecutor and fraud expert and contained in his 2,200-page report. He was commissioned by the bankruptcy court to pore over millions of documents to get to the bottom of the biggest bankruptcy in U.S. history involving US3 billion in debts.

Among his findings and opinions:
-- Valukas believes that Lehman executives were involved in "balance sheet manipulation" in order to shift tens of billions of dollars of bad assets off its books.
-- The shift was done, as was the case with Greece, using the repo market or an eyebrow-raising buy-sell arrangement.
-- Valukas said Ernst & Young, Lehman's auditors, did not "question and challenge improper or inadequate disclosures" in the firm's professed results.
-- Lehman could not get their offshore gimmick "papered" (which means a legal opinion approving the maneuver) by any credible American law firm so they shopped around and used Linklaters, a legal shop in London, he alleged.
-- The New York Federal Reserve Bank, run at the time by Timothy Geithner (now U.S. Treasury Secretary), imposed no restraints on Lehman even though the firm failed to pass several smell tests conducted by Fed staff, alleged Valukas.
-- Valukas said he questioned Lehman executives in the past few months and they said full and complete information was disclosed to government agencies (stock markets, SEC, the Fed) about the repo transactions and the governments never raised objections nor did they demand corrective action.
The report raises questions. Were the market's "cops" then the same people who are still in charge and advising Obama and Congress? Did they have any inkling of trouble or not?
If regulators knew, why didn't they do something? If they knew, why didn't they force disclosure to the investing public?
Conversely, if they were not told the truth, then why haven't charges been laid?
The revelations may take down some very prominent people, send a few others to jail and explain why the former administration refused to bail out Lehman Brothers.