On Whose Watch Did This Happen?!

I read over at Joe Powell’s this nonsense about how the investment advice given to small Tennessee communities by Morgan Keegan is going to wipe them out.  This is bad enough, but I invite you to ponder this:

In Lewisburg, after Mr. Overman pitched the swap idea for the sewer project, Kenneth E. Carr, a city official, attended the class. “The seminar was dull and boring,” said Mr. Carr, who still has a copy of the book, stamped with the state seal of Tennessee on every page. “I thought, ‘Well, this is approved by the state because they put their seal of approval on it.” [emphasis mine]

Hmm.  Who’s running this motherfucking state right now?  So, who is ultimately responsible for this?

But, yeah, let’s continue to fight about how the Democrats farted sunshine back before Chip Forrester ruined it all.

Did Chip Forrester give free reign to Morgan Keegan?  Or is this Jennifer Buck Wallace’s fault, somehow?

Or are we going to take a step back and admit that our problems run deeper than that?

Edited to add: Andy’ll make you sicker, if you like.

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9 thoughts on “On Whose Watch Did This Happen?!

  1. A former Bass Berry & Sims partner is now chief legal counsel to the governor, by the way.

    Sleep tight, Lewisburg.

  2. I lived in Lewisburg for eleven years – Bob Phillips’s daughter, my favorite teacher, taught my AP English class – but I’ve spent very little time there since the Clinton administration.

    None of this surprises me.

    I am especially disappointed that nobody seems APPALLED at what Carr said.

  3. In the New York Times piece they say that the state is an unwitting accomplice. That’s utter bullshit. How can the state both put its seal on every damn page of the sales brochure, oh, excuse me, the textbook for the seminar, and somehow be an unwitting participant? Someone just accidentally stamped those seals on there thinking it was a voting guide? What?

  4. The Tennessee General Assembly is to blame, Aunt. B. The state comptroller simply administered the program they enacted.

    In 1999, the General Assembly passed HB1530/SB1543, which allowed municipalities to purchase these bond derivatives. It also allowed MorganKeegan to educate local governments about these bonds at the same time that the bank underwrites them.

    Three legislators now running for governor voted in favor of these bills. Kim McMillan on May 19, 1999. Roy Herron and Ron Ramsey on May 27, 1999.

    The members of the General Assembly are notorious for looking out for their big business buddies. This is just one particularly messy example.

    Makes you wonder what these three would do to our state.

  5. As if all this wasn’t bad enough, there have been warning signs on the horizon. Morgan Keegan’s shenanigans have been well demonstrated by now…

    Investors in six Regions Morgan Keegan (“RMK”) bond funds lost $2 billion in 2007. This paper explains how extraordinary and undisclosed risks allowed these funds to generate higher returns than their competitors for many years but ultimately caused the funds’ collapse in 2007.

    The investors’ losses were not the result of a “flight to quality” or a “mortgage meltdown.” Diversified portfolios of high yield bonds and mortgage-backed securities did not suffer significant losses as the RMK funds suffered massive losses. The RMK funds collapsed because they held concentrated holdings of low-priority tranches in structured finance deals backed by risky assets.

    RMK did not disclose in its Securities and Exchange Commission filings the risks it was exposing investors to by investing the majority of its portfolio in subordinated tranches of asset-backed securities until after the losses had occurred. RMK also misrepresented hundreds of millions of dollars of asset-backed securities as corporate bonds and preferred stocks in its SEC filings thereby making the funds seem more diversified and less risky than they were.

    RMK further misled investors in its SEC filings and marketing materials by comparing its funds to the Lehman Brothers Ba Index. This index contains only corporate bonds – no asset-backed securities which dominated the RMK funds’ portfolios and which resulted in virtually all the investors’ losses. RMK also misled investors by claiming that its funds were diversified.

    Where’s the oversight? Who should have sounded the alarm?

    As I’ve stated elsewhere, Bass Berry & Sims is representing Regions-Morgan Keegan in at least 19 separate claims in class action, derivative, and ERISA cases. One was recently settled for $18,000 in arbitration – the woman had gone to her Regions Bank and was referred to these RMK instruments, which as stated before, hemorrhaged their value relative to their peers in 2007. Absolutely bled out. The woman in that suit said that she received no information about risk, and didn’t so much as receive a prospectus.

  6. I’m so mad I can’t see straight. Thanks for laying all this out, AA. I plan to spend quite a bit of time cutting/pasting from your quotes in the next few days.

    WHY isn’t anyone ever held accountable in this pitiful state?????!!!!

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