Like most people, I hate to admit it when I’m wrong. But today, I admit it.
I have been wrong about regulation. All wrong. I’ve been calling for more, better regulations to stem the fraud and wicked ways of errant Wall Streeters.
But it’s come to light, in a sad and almost tragic way, that this whole regulation thing is wrong from the get-go.
After all, it ruined one poor man’s near-perfect life. And that’s where I draw the line.
Thanks to a suicide note, penned before (obviously) his attempted mea culpa exit stage left, which thankfully failed, we know why poor Russell Wasendorf Sr. was so distraught.
Yeah, that Russell Wasendorf Sr., the guy who founded and was CEO of failed brokerage house Peregrine Financial, also known as PFGBest.
Well, it turns out poor old Russ actually is poor – “poor,” as in he has no more money (still has that jet and a few other little assets, however) – and his firm is being liquidated because of those stupid, useless regulations and those horribly pesky regulators.
According to Russ’ suicide note, for almost 20 years, he ripped off his clients by stealing their money to keep his firm afloat so he could continue to service them, his clients, that is… and the regulators.
Now, that’s what I call service!
You see, the regulators were calling him out on some of those useless regulations that a lot of folks now know, for a fact, are completely useless (thank you, Russ, for your service in that respect).
These regulations were in place to ensure that firms properly tended to their clients’ deposits in their brokerages.
But since the regulations were there to protect the firm’s clients (and Russ was there too, to protect his clients and his business), and the necessary deposits that should have been there to readily count as part of examinations into the firm’s capital, and stupid stuff like that, weren’t there… well, Russ did the only thing he could. He fooled those stupid, onerous regulators by lying to them and saying he had money in drawer number two. In fact, he actually took monies from drawer number one (that one was marked “client money”) to put into drawer number two.
Of course, the regulators – being as adept as they usually are – didn’t really look into drawer number two. Russ actually fabricated a daisy chain mailing scheme to send them a note that said, don’t look in drawer number two, let this note to you idiots be all the proof that you need that what I say is in drawer number two is really in drawer number two.
Of course, there was nothing in drawer number two – except maybe for some real “number two.” And there was nothing in drawer number one, either.
That’s because, according to Russ’ note (you can’t make this stuff up) he had to spend what was in drawer number one (some $200 million clams) on paying fines and maintaining capital to keep the firm open to service his beloved clients, of course.
So, let me say this about that.
I’m wrong. I’m saddened by Russ’ plight and my own stupidity (it must be up there with Russ’) at not understanding that regulations are what’s really stupid.
Without regulations, Peregrine would be an ongoing concern today, Russ would be getting married (officially) and on his way to his honeymoon in his jet (the one paid for out of drawer number one).
So forgive me for my rants on regulation. We need less regulation, or maybe none, so we don’t have to hear about these tragic stories every day.
No… you just can’t make this “number two” up.