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Why No Financial Crisis Prosecutions? Ex-Justice Official Says It’s Just too Hard

Photo by Dan Nguyen/ProPublica

It’s an issue we and others have noted again and again: Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis.

Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases. Civil cases, of course, can produce penalties from the banks -- as well as promises to be on better behavior -- but don’t put any executives behind bars. Here’s the Journal:

While at the FBI, Mr. Cardona oversaw dozens of criminal probes of large financial firms. The FBI's probes haven't led to any successful prosecutions of high-profile executives in relation to the financial crisis, despite demands from some lawmakers and angry Americans. In contrast, the SEC has filed crisis-related civil-fraud cases against 81 firms and individuals, and it has negotiated almost $2 billion in penalties in cases that have been settled.

Cardona told the Journal that the failed first attempt to charge financial players with crisis-related fraud -- the 2009 trial and eventual acquittal of two Bear Stearns Cos. hedge-fund managers -- triggered "a lot of rethinking on how we do things.” After that, he said, the federal government began to question its “ability to convince a jury that criminality has occurred” on complex and technical financial cases.

The lack of prosecutions was also raised in a ‘60 Minutes’ piece Sunday about large-scale mortgage fraud during the bubble. Assistant Attorney General Lanny Breuer told CBS that the Justice Department had not lost confidence and was “bringing every case that we believe can be made.”

“I get it. I find the excessive risk taking to be offensive,” said Breuer. “I may personally share the same frustration that American people all over the country are feeling, that in and of itself doesn’t mean we bring a criminal case.”

However, one question raised by the 60 Minutes segment is why the Justice Department isn’t building criminal cases against companies for violating Sarbanes-Oxley -- a landmark corporate reform law enacted after Enron. From the transcript:

The Sarbanes Oxley Act imposed strict rules for corporate governance, requiring chief executive officers and chief financial officers to certify under oath that their financial statements are accurate and that they have established an effective set of internal controls to insure that all relevant information reaches investors. Knowingly signing a false statement is a criminal offense punishable with up to five years in prison.

Frank Partnoy is a highly regarded securities lawyer, a professor at the University of San Diego Law School and an expert on Sarbanes Oxley.

Frank Partnoy: The idea was to have a criminal statute in place that would make CEOs and CFOs think twice, think three times before they signed their names attesting to the accuracy of financial statements or the viability of internal controls.

Kroft: And this law has not been used at all in the financial crisis.

Partnoy: It hasn't been used to go after Wall Street. It hasn't been used for these kinds of cases at all.

Kroft: Why not?

Partnoy: I don't know.

As Cardona -- the former Justice official -- sees it, financial regulators have been doing a “fine job” building civil cases against big firms.

That might come as a surprise to U.S. District Judge Jed Rakoff, who’s repeatedly rebuked the SEC for striking relatively small agreements to settle civil charges against financial firms.

As we noted last week, Rakoff tore into a recent $285 million settlement with Citigroup, calling the financial penalty “pocket change” for Citi and blasting the SEC’s longstanding practice of allowing firms to settle without admitting wrongdoing.

It was hard to get Al Capone too, but the feds in the 30s figured it out.  So where is Elliot Ness when we need him????  Message to Obama administration—- people voted for the president because we EXPECTED you would use the powers of the federal government to keep a level playing field and to punish wrong doers and profiteers, not to wimp out because “it’s TOO hard!”

Brian Boucher

Dec. 6, 2011, 3:49 p.m.

What he said.

The only way to ensure change is to ensure the defenders of the status quo are not re-elected.  That includes Republicans, Obama and other Democrats who have demonstrated they love to feed at the Wall Street trough and protect their money grubbing providers, while giving the voters lines of B.S.

This is a bogus excuse. There is ample compelling evidence of all manner of criminal fraud throughout the financial services industry, from mortgage originators, to derivatives issuers, to mortgage servicers, etc. As but one obvious example, when foreclosure robo signers are committing perjury (a criminal felony in most jurisdictions) at the rate of several thousand documents per day, it’s preposterous to suggest that middle management, at the very least, didn’t know it was happening—at their express direction.

For more on this topic, see some of the excellent reporting at nakedcapitalism.com, such as http://tinyurl.com/6fxq5ff and http://tinyurl.com/7yp2e7o

Peter Anderson

Dec. 6, 2011, 4:04 p.m.

As in the recent Citi case, in which reports indicate that the government deliberately chose to stop looking after finding illegality by someone on the bottom rung, there have been recurring indications that the Administration made a deliberate decision to note dedicate serious resources to this matter.
  Can ProPublica get to the bottom of these rather critical issues.
  After all, it is not really a system of laws that underlies civilization—we’ve had too many systems of ersatz laws to maintain that pretense any longer—rather its the perception and reality of elemental fairness that binds many different people outside their families together.

Sounds to me like a CYA situation.  Face the facts; everything is corrupt, no more exceptions.

I see 2 problems with only civil enforcement:
1.  Sends the wrong message to Wall Street—tells them to keep taking undue risks for high personal reward and no personal liability
2.  allows settlements to be paid with shareholder money, not money extracted from the risk takers themselves. 

Yes criminal cases are tough as the Wall Street firms have lots of money and lots of law firms on retainer but one or two clear victories could go a long way. By clear victories I have in mind prison time.

Question: What are the hundreds (or thousands?) of lawyers doing in the US AG’s office and the 50 State AG offices? How about a combined task force along with a dozen accountants. 

Just dreaming

(ps Disclosure: I’m in a civil suit now in the 9th Cir. against the 3 rating agencies so I’m a bit biased)

Bob Gustafson

Dec. 6, 2011, 4:14 p.m.

If Congress would write the laws instead of the Lobbyists, then maybe they wouldn’t be so hard to prosecute.

In the short run, the Justice Department needs to hire smarter lawyers.

Too big to fail and too big to go to jail.This whole so-called crisis and collapse was a shame that if investigated would reach all the way to the Bush white house.

Ain’t that the height of laziness?
Well, next time there’s a war, we ain’t signin’ up, it’s just too hard.Get off your lazy tax collecting butts and get to work you SOB’s.

It’s a funny/sad irony that this guy is basically saying that the job that he used to be paid very well to do was just too darn hard.

See: ‘Inside Job’

this was a posting on naked capitalist on the same subject - shows why its “always” going to be .......... “too hard” ?????


..... Deutsche (Bank) as a major CDO malefactor. And as the NYT pointed out a month ago, Deutsche is a serial violator of securities laws—no different from any other big bank of course.

Deutsche’s lousy behavior and outright securities law violations since 2001 have occurred on the watch of Deutsche’s current general counsel, Dick Walker. Walker had come to Deutsche directly from the SEC, where he had spent ten years, the last three as SEC enforcement head, which is of course Khuzami’s current job. The circumstances of Walker’s move to Deutsche were less than exemplary. In 2001 SEC examiners had compiled a strong case of insider trading against Deutsche Bank, but in July of that year higher-ups in the enforcement division terminated the investigation, and ten weeks later Walker quit the SEC and went to work for Deutsche. (Matt Taibbi revealed this in RS in an 8/11 article.)

Walker’s ties to Khuzami are interesting. Much of Deutsche’s bad behavior over the past decade occurred while Khuzami himself was there at Deutsche, as Yves pointed out, having been hired by Walker in 2004. And it is well known that Khuzami was recommended for his current job by Walker to SEC head Mary Shapiro (she of the $9 million goodbye gift from FINRA).

What I find fascinating is that when Walker hired Khuzami into Deutsche in 2004 it was the second time he had given ol’ Bob a job. Twenty years earlier, in 1984, Walker gave Khuzami his first job as a lawyer, hiring him into the firm of Cadwalader, Wickersham & Taft. Walker began there in 1976, and he and Bob remained there together until 1991, when Walker went to the SEC and Khuzami went to the Manhattan US Attorney’s office.

I happen to be an ex-Lehman Brothers attorney, so please allow me to now tie all this in to Lehman, a bit of unfinished business that I would guess most readers agree still needs attending to. When Khuzami was hired by the SEC in 2009, he was replaced at Deutsche by Joe Polizzotto, ex-general counsel of Lehman. As we all know, none of Lehman’s executives have yet been charged by Khuzami (or Preet Bharara, currently in charge of the Manhattan US Attorney’s office, where Khuzami had been before going to Deutsche). For Polizzotto, just like it was for Khuzami, it was the second time Dick Walker had taken him under his wing: Polizzotto too had gotten his first job from Walker and his partners at Cadwalader, and was there from 1980 to 1989.

Polizzotto’s boss while at Lehman Brothers, Tom Russo, is now the top lawyer at AIG. Before joining Lehman in 1993 Russo was at—you guessed it—Cadwalader, where he worked from 1971 to 1975 and again from 1978 to 1993 (spending the time he wasn’t there, of course, at the SEC as well as at the CFTC). So Russo and Walker were together at Cadwalader from 1978 to 1991, with their younger charges Polizzotto and Khuzami overlapping with them there for several years each. In other words, four happy friends, going way, way back, and apparently still looking out for each other, watching each others’ backs. As I see it, the investments Walker and Russo made in Khuzami and Polizzotto are now paying off handsomely: Walker’s hiring of Lehman’s Polizzotto at Deutsche is a very elegant way of keeping Khuzami under control (if in fact it is even necessary), both as to Deutsche’s misdeeds and as to Lehman’s, and a very nice favor by Walker to his old pal Russo, who would be immediately blamed for as much as possible by Dick Fuld and his assorted henchmen if anyone were ever to bring the heat to Lehman.

We MUST be as creative about our prosecutions as they were about their swindles. They should be tried for TREASON. Let’s drag this oldie out and dust it off. What they did in bringing our nation to its knees is treason.There is a much different threshold for proving guilt under this charge.
While we are at - let’s look beyond Wall Street and bestow this charge on a few others as well.

Wow, David, what an eye opener.  Sure would like to see 60 Minutes take these 4 on.

Tom Riddering

Dec. 6, 2011, 5:18 p.m.

I saw the 60 Minutes piece and there was no good reason given to not prosecute under the Sarbanes-Oxley law.  It’s not “too complicated” to point out that the CEOs manifestly LIED on their financial solvency forms when within a week the company was begging for a bail-out.

60 Minutes also interviewed the chief fraud investigator at Citibank who said she was willing to name names to a grand jury.  She said she had never even been interviewed by the FBI or the Justice Department!

when the attorney general is a political hack, and as corrupt as anyone in govenment, what do you expect

it shuld be easy if you go after bank of america fraud in our court system in america every forclosure bank of america is fraud and shuld be looked closely,and any judge that rubber stemp boa fraud shuld
be investigated

Victor Gillespie

Dec. 6, 2011, 6:11 p.m.

And after the SEC, I am sure that Mr. Cardona has his eye on a nice job at CITICORP or B of A.  He is just being a little more patient than our current crop of pond scum, for example ex-Sec Treasury Rubin who went to CITICORP as fast as he could (after saving their butt with USA money in the Mexico meltdown)

David: Thanks for your fine example of the incestuous nature of the relationship between the SEC and the institutions they’re charged to regulate. Therein lies the real problem! (a problem for us, not them)

Michael Belzer

Dec. 6, 2011, 7:03 p.m.

Excellent discussion.  David seems to have the goods on these guys, but what we are seeing is a banana republic in action.  We lecture the Chinese about the need to be a nation of laws, yet we make these sorts of corrupt decisions, which I am sure were very carefully considered by SERIOUS people, not to apply the laws of the land.  So we too become a nation of people, not law, and we wonder why the citizens question the legitimacy of the government?  Legitimacy is at stake here, and when that goes, civilization goes with it.

It’s “too hard,” so we don’t do it??? I expect to hear that from a 12-year-old. And probably not ALL 12-year-olds.

Have I lived so long that I have witnessed the end of the age when we did something, no matter how hard, because it had to get done?

This is pathetic. Leadership is dead.

Carola Von H.

Dec. 6, 2011, 7:54 p.m.

If there’s anything encouraging in this corrupt mess, it’s the level of financial knowledge and moral understanding expressed by posters at this site. In general, many Americans understand the system much more clearly than they did a decade ago.

what jury would need convincing?
they should drag mozilo, all the other bank and wall street ceos in and strip them of all they own!
nothing but a bunch of thieves.

Too difficult a task?  Wow, so why would any of these banksters not continue doing what they do?  Obviously then, it is really not a criminal or legal issue as much as it is a business/economic decision. 

Break the law, make billions and risk having to give some of it back in the form of penalties without admitting wrongdoing or guilt.  Not a bad day’s work.  What has our country come to….?

P.S.  Wanna bet your bottom dollar that if any one of us mortals did 1% of what these banksters did we’d be in jail for a very very long time.

@Carola Von H.- I completely appreciate your line of thought and the truth revealed. My only regret is what it has cost us, not only monetarily, but in our trust and belief of what we were raised to believe…that hard work and honesty would be rewarded.

Carola Von H: I agree with you about the level of discourse at this site. But those who read ProPublica are far more informed than the general public since they actually seek reliable information.

I’m trying to wrap my brain around jury selection issues (should any of these long overdue trials ever take place) which require “impartial” (thus in my view, uninformed, incurious, and intellectually lazy) jurors. Defendant’s lawyers would obviously make every effort to prevent anyone with functioning synapses to sit on the panel.

@ carolyn I don’t think both sides in a criminal trial would have any problems identifying enough financial illiterates to construct an impartial jury, but at least they may be angry enough to listen to the evidence.  I don’t doubt there are bureaucratic obstacles to pursuing criminal indictments, trials and convictions, but I think in the public interest the administration should proceed with the most egregious cases and lock someone up.  Peal off the top 100 at the top of the corporate pyramid in any mega bank and let them roll over on one another until some of the big dogs at the top are cornered.  This is organized crime in the 21st Century just like the gangsters in the 1930s.  If corporations are people then we have a right to expect them to abide by the law and demonstrate corporate responsibility to their community.  We had massive mortgage fraud on the way up and a foreclosure mill/fraud on the way down.  The same people doing the same things to the country.  This is my biggest single issue with the Obama administration and the one reason I am withholding donations to his campaign despite the incredible danger if we get another Milton Friedman Republican in the White House.  My advice to the President is stop giving lectures and prosecute some of these banksters now.

I.e., the cooperation between the Republicans and the Clinton-lead neoliberals that yielded “deregulation” was successful in that it transformed the paradigm that once controlled the greed of the “high finance” in America from “You shall do this and no more!” to “Unless there is a a law that specifically forbids it then go for it - and to hell with concepts like responsibility, ethics, and morality!”.

Ludicrous, to say that those whose every action is motivated by overwhelming greed can be “self-regulating”.  Can an addict be left alone in an evidence room full of confiscated heroin once informed that their only boundary is your expectation that they will respect the property rights of others - but there is no penalty if they don’t?

In case you might not have been paying attention.

The Dodd Frank bill, since the House has been taken over by the Republicans, who are fighting tooth and nail to keep the funding of the SEC, CFTC, FBI and other investigative government prosecution Headcount funding at a low level. In other words, the banks, Wall Street, and Ponzi Schemers are making sure these agencies have no money to hire the people they need to go after the “Fraudsters”.

When the last election happened, which allowed the House of Representatives to have a majority of Republicans and the Tea Party Republicans, that was a victory for Wall Street, the Banks, the Corporations, and Fraudsters.

But, having reviewed how many more fraudsters are being taken to court, the SEC and others have ramped up their prosecutions huge from the “get the government off our backs and let the market decide crap of Greenspan, Summers, and the former CEO’s of Goldman Sachs who tookover the US Treasury, but the investigative agencies are still hampered by the Republican Controlled Money allocated to them.

In the meantime, the banks are raking it in, they have the deep pockets to keep the Investigators at bay, and we still have lenient laws when it comes to fraud.

When you have a business where you can steal $ One Billion like Ciit-bank (former US Treasury Secretary Rubin of Goldman Sachs CEO as CEO of CIticorp) being fined $200 million, 20% of what they scammed and no admission of guilt is a travesty. We had a fellow who stole $44 million locally and plea bargained 7 years (like Gecho from Wall Street never Sleeps). In both cases the judges did not accept the plea. But the outcome is yet to come, 3 years after the scam.

To put sentencing in perspective, if you have 100 plants of marijuana in possession with $100,000 value, it is mandatory 5 years, no parole in Federal Prison. If you have 1000 plants, $ One Million in value, it is 10 years. But steal $44 million? 7 years?

Just a “Cost of doing business” especially if you don’t do the time, even though you committed a crime.  Having no prosecutions will continue the fraud in our financial system.

Thank the Bank, Wall Street, and Corporate Money that wrote the bills, that our Bribed Congress pushed through into Law for no prosecutions. Until we get people in Congress that will change the Bribery laws, we will have this ‘pseudo system” of justice and no one going to jail for Financial Fraud.

Susan Thompson

Dec. 7, 2011, 10:06 a.m.

Thanks for spotlighting this. The “60 Minutes” piece was very revealing. Politics and money, money and politics, that is the problem.

As an aside to this topic, and something that I hope someone with more understanding and insight can look into I bring up this:

Yesterday, I got a new “Addenda” attachment to my bank accounts from Wells Fargo that begins on Feb. 15. It seems to be saying (I am not a lawyer) that I cannot join in class action law suits, and that all disputes will go to arbitration individually. Also, that I waive my right to have disputes put in front of a jury.

Way to cover your a**, WF.

Roy nailed it.  If the Department of Justice or the FBI can’t find evidence of wrongdoing, then they need to be fired and put in a home where someone ties their shoelaces for them.  Even someone as poorly educated as I am in these matters can come up with fraud and money laundering.  From money laundering, there’s a path to RICO on one hand and aiding terrorism on the other.  That’s the easy stuff, built out of nothing but headlines!

Reaching further but requiring a case constructed, you have espionage and insider trading (access to computers inside the stock exchange), conspiracy to commit fraud (any exchange of information on unsafe financial instruments), price-fixing (collective refusal to accept market value for fraudulent, inflated assets), sabotage (mass foreclosures damaging local economies and withholding credit to cover payrolls), market manipulation (naked shorts and indexed commodities like the long-only GSCI bubble), counterfeiting (claiming to be owed more money than many times the combined value of everything on the planet), and seriously, any one of us could probably go on for another hour without any education in finance or law.

At the bottom, maybe not treason, but given the push for further deregulation and the “it’s too hard” concept from this article, I don’t think Sedition is too hard to illustrate.

George W. Drance

Dec. 7, 2011, 11:25 a.m.

“david” has done us all (US citizens ) a tremedous service and to me in particular. I too had a “Khuzami experience”  that was so brazen and
unlawful that I felt nobody would believe it. And his then-job at the US
Attorney’s office would make his word beyond reproach. And who could I complain to? When I filed a complaint against then-Travelers, now Citigroup, Khuzami intercepted it to prevent it from being forwarded to the FBI for investigating. Khuzami TELEPHONED me to tell me that he would investigate my charges. When I asked “who are you?” he told me of his job in securities fraud enforcement. I protested that my complaint was NOT securities fraud but plain vanilla stealing fraud (for which I had and still have irrefutable proof) and a continuing cover-up conspiracy: that this matter is for the FBI to investigate, not him. And when I asked why he was telephoning me for information instead of writing, I got a nonsense reply. A few telephone calls later, Khuzami calls me to say that his “investigation” of my charges proved unfounded. When I asked for a WRITTEN report stating that, Khuzami said it was not necessary and that there would be no further contact

In view of the latest shenanigans coming out of the SEC’s “investigations”, coupled with “david’s” detailed chronology
suddenly my “incredible” story has traction. My experience wasn’t an isolated incident: it’s part of a decades-long pattern

Here’s the thing: “Knowingly signing a false statement is a criminal offense punishable with up to five years in prison.”  I always viewed my responsibility as an officer that had to certify compliance with SOX that I had to KNOW if controls were adequate and being executed because, if controls were not in place, I would be criminally liable REGARDLESS of whether or not I knew.  In the 60 minutes piece, the AG officer kept saying that they were having difficulty proving intent.  I thought proving intent was not necessary if controls failed.  If intent is required to prosecute, then SOX has no teeth.  It would only work if there was evidence that the officer in question directly circumvented or ordered the circumvention of controls.

“Too hard” to prosecute?  It’s funny how zealously a prosecutor will go after a teenager from the ghetto who happens to be in the same store his friend robs, and convict him as an accessory.

But, financial fraud?  When the Financial Crisis Inquiry Commission uncovered things like emails from Goldman’s own employees calling the deals they were constructing “dog sh*t”?

The inequality of our society runs deeper than just income inequality; the rules are simply different now for those that have from those that have-not.

@George W. Drance: I would hope that you could get together with Oliver Budde, the author of the first Khuzami related comments David re-posted here from “naked capitalism”. Then possibly you both know others who have been equally offended (the more the merrier) and set up a meeting with someone in the MSM who’s brave and smart enough to follow up. (Steve Croft again?) The media seems to be the only recourse since the agencies empowered to deal with these issues are riddled with co-conspirators.

I wish Bill Moyers was still on the job.

George W. Drance

Dec. 7, 2011, 3:24 p.m.

@carolyn: Thanks for your suggestion to get together with Oliver Budde, (“david”) whose extensive chronology of the incestuous SEC-big money relationship in general and Robert Khuzami’s odyssey is revealing and confirms what I had long suspected.

I’ve heard the name before, but don’t know how to reach him. Do you?
If anyone can put us together, I’d be grateful. There’s lots more to come. It’s time for some “disinfecting sunlight” (Lewis D. Brandeis).

@ George W. Drance: I just googled Budde and got his entire resume. Quite impressive! You’ll find it fast! Good luck, and keep us posted!

George W. Drance

Dec. 7, 2011, 3:33 p.m.

@david: Your authoritative posting on the SEC/Khuzami chronology is an excellent historical base on which I can offer additional information.
Please let me know how I might reach you: your conditions will be met.

While Drance and Budde are making contact, it’s time to go to Credo, read up on today’s alarming developments, and make the call to our president to dissuade him from having Geithner reach a “settlement” with banks/financial institutions - which would then hold them immune from any further prosecution.

http://act.credoaction.com/call/report/index.html?cp_id=156&tg=31

Darryl Phillips

Dec. 7, 2011, 3:55 p.m.

Federal prosecutors (all prosecutors, for that matter) have budgets. They can hire lawyers but not the best ones. They can hire investigators but not the best ones. They can hire expert witnesses, but not the best ones.

Almost always the winner in the courtroom is the one with the most money. This was true with OJ and was true during OJ’s trial, down the hall in the other courtrooms, where poor defendants were sentenced to prison on much less evidence.

The legal system is akin to judo wrestling, pick the heaviest contestant. And this is exactly what David Cardona meant. The government cannot win against the uber-rich.

Mr Drance & Carolyn - glad that the information was useful. i will be at the tenament house next tuesday for Propublica presentation would be happy to talk then - first -  the contact to Mr Budde is available Mr Drance - he obviously understands the six degrees of separation

this level of granular information is coming out more and more as people hit 65 and others are laid off - they are all time bombs for those in power currently - especially in NYC where may of us still remember the late 60’s and what we stopped at that time - then it was “hell no we wont go” today will be “hell no we wont pay” the BANKSTERS - it is coming

the multiple threads on the scatter diagram point towards a confluence of overwhelming fraud that is more and more coming out in the open

they dont care now - why? - because they believe the sheeple cannot stop them

in this particular subject - OBAMA pact for re-election with Dimon is to move the ball beyond the statute of limitations - then you can tell jokes on Leno or Lettermen or SNL about them - whatever -  they dont care!

this is the same with all the other subjects - they own the politicians and the judges - i have seen first hand in the court house the arbitrary summary judgments despite the facts -

the only solution is what AG’s -  Schneiderman / Coakley / Del /  CA / NEV are in motion - they have supoena power if they - cant - be stopped by Obama - if they go after $1.5 trillion - spread between those states as credits toward their own budgets and property taxes they can change the game dramatically but the budget is the key - they must have the best talent and an army as well - a Peace Corps - of students with massive tuition credits for the computer &  law degrees - is necessary in trade for research of millions of documents so no settlement is made prematurely - coupled with the best litigators there is enough spoils for all constituents  

any thing i can do would be happy to help !

Citi Group is a Commercial Trading Bank.

It is licenced to “creat credit”

The $285 million fine will cost it no more than to “honor” its own check.

Cost of Check ?

Say - 2 cents.
..and a little time on a computer setting a couple of accounts.

..to balance the books.

George W. Drance

Dec. 7, 2011, 5:55 p.m.

david: glad to hear from you. Things will happen.

George W. Drance

Dec. 7, 2011, 6 p.m.

david: glad to hear from you. Nobody said it would be easy; even the SEC said it would be “too hard” to do the job they’re being paid to do.
So we’ll help.

I have not yet read the article nor many of the comments, but here’s what is obvious to me.

1.  It is difficult to investigate and prosecute all of the illegal and/or fraudulent actions.

2.  As soon as President Obama was elected, he was seeking campaign donations from all the big money folks on Wall Street and elsewhere.  Michael Moore, on the Piers Morgan program on CNN Tuesday evening, stated as fact that Obama has received more donations from Wall Street types than all of the 8 Republican candidates for president.  The implications are clear here.

3.  Michael Moore also stated that Goldman Sachs was the largest corporate donor to Obama’s 2008 campaign.  If we accept that as true (along with the corollary that other big money folks also made large contributions), is there any reason to believe there would be any extensive investigation?

4.  Some time after the financial meltdown of 2007-2008, Warren Buffett and Berkshire Hathaway made a big investment in Goldman Sachs.  Might it be plausible to suggest that Mr. Obama might have been dissuaded from a serious, open-air investigation into the causes of the meltdown—with fingers pointing at specific individuals?

As a postscript:  What could have prevented the real-world political need for President Obama to seek out the Big Money Folks (prior to and subsequent to the 2008 election)?  How do we initiate another futile effort to banish the role of private money in election campaigns—seeking a reversal of Citizens United as well as elimination of most PACs and contributions by wealthy individuals.  Reform/revolution is not possible, as nearly all public office holders (Dem, GOP, independent, other) are sycophants for the wealthy.

I write all of this as someone who was an enthusiastic supporter of Mr. Obama in 2008.  I still hope the “real’ Obama will emerge to take on many of the issues he raised.  Mr. Obama has accomplished much despite the opposition from the Party of No. 

Finally, in the world of real politics, the GOP and their ilk have many more deep pockets to support all of the GOP-oriented PACs and their anti-Obama campaigns.  Alas.

@ David, Mr. Drance, and Mr. Budde: I certainly wish I lived near Manhattan instead of on the west coast so I could listen in next Tuesday when you meet at the tenement museum. Many of us here certainly hope to see you in headlines soon!

Meanwhile, for anyone who wants to stop Obama from squashing legal recourse and giving the banks carte blanche to continue business as usual, hit the Credo link I posted above and call him up! It’s easy!! (I told him the reason I haven’t contributed to his campaign this time around is primarily due to his abysmal handling of this exact issue.) Thanks!!

To summarize my longer comment, let’s start with the 60 Minutes discussion of Sarbanes Oxley:

Kroft: And this law has not been used at all in the financial crisis.

Partnoy: It hasn’t been used to go after Wall Street. It hasn’t been used for these kinds of cases at all.

Kroft: Why not?

Partnoy: I don’t know.


I know (and so do many others).  President Obama more or less single-handedly made the policy decision to not pursue the wrongdoers (many of whom gave huge donations to his campaign coffers).  He made a decision not to pursue justice.  He abandoned his rank-and-file supporters.  He needed to cultivate and increase his base of wealthy supporters.

deregulate - lift the regulations on

<u>Synonyms</u>:
exempt<b>, <b>relieve, free - grant relief or an exemption from a rule or requirement to; “She exempted me from the exam”

<u>Antonyms</u>:
govern, regularise, regularize, regulate, order - bring into conformity with rules or principles or usage; impose regulations; “We cannot regulate the way people dress”; “This town likes to regulate”

————————

It takes provable criminal activity to successfully prosecute.  To accuse someone of “criminal activity”, you must be able to show that an existing law or regulation was broken.

IMHO anyone blaming Obama (or, more realistically, the DOJ) for not prosecuting those who did not provably break the inadequate laws and regulations that remain in the realm of “high finance” post-deregulation is no different than those who say it was “OK” for Bush, Cheney, & PNAC, LLP to break the Geneva Conventions we are signatories to by using torture:  They’re both attacking the concept and system of law.

A society’s laws have to be enforced to have justice, but prosecuting some for breaking laws and regulations that do not exist is not justice, it is tyranny.  If you want to blame somebody for the lack of prosecutions, blame the Republicans who crafted deregulation and Clinton who signed it into law.

In fact, you should blame the Republicans and Clinton, for they intentionally used deregulation to eliminate the constraint of law in an effort to transform Wall Street and banking into a cesspool wherein the scum that has the least in the way of individual morality and ethics to restrain them rises to the top.

For under those conditions - with the constraint of law removed - the few who dare to (and who care to) can make money faster.  The more you dare, the more wealth you can take; consequently, wherever law and regulation is non-existent those who are the most willing to become predators - those who see the most people as prey - inevitably take control.  That is just how some humans are.

That is even why the right loves Ayn Rand, for she told them - and tells them now, even from the grave - that such behavior is the right thing to do. (Which makes the right’s use of religion to entrap those who practice religion even more of a cosmic joke, but that is a tale for another day.)

Enabling excesses - transforming you, the American people, into prey - was the goal of deregulation.  And now some would blame the guy who walked into a mess he didn’t make?  Either you make Congress re-regulate, or accept your status as prey.  The latter is easy enough to do; just keep voting for Republicans.

Isn’t it ironic that the people (whose sovereign right it is to create credit and have allowed corporations this right - in trust, to manage diligently) must find a budget (to be approved by politicians- financed by bankers) to pay an army to go after the bankers.

Bankers use the power to create credit WE gave them, to hire the best and brightest and most experienced legal minds in the nation to oppose us, who wish to prosecute malfeasance, against our (the peoples) TRUST.
Bankers do this at no cost to themselves, simply by the expedient of honoring their own check.

Giving the power to create credit to private corporations was justified by the fear that politicians would abuse it.
I say politicians would abuse it and now we are faced with out of control criminal behaviour by corporations we must look at new paradigm.
I believe and suggest “the power to create credit” must be taken back by the people. To be called Democratic Credit, it shall be a right alongside “right to life, justice, health, religion, education, etc,etc.”

Let us put together a Charter that will allow people, and not corporations or shareholders to own banks, but individual “depositors”

Let the power to create be in service to the people to meet all our basic needs such as health, education, shelter, work.
Let us build our communities and finally let the nation come to me, in the most democratic form off all, to ask me for the finance to deliver services that I think are necessary.

Do the ‘Chartered Banks of the People” wish to finance an undeclared war in a foreign country that is not a security threat, but has valuable oil reserves.  NO

Does the “Chartered Banks of the People” wish to finance alternative energy programmes, projects that will create millions of jobs for its people that will provide security, stabilize its currency against foreign reserve depletion, and avoid the deaths of its young men.
YES

It does not require the destruction of one system for another; it does not require the risky change back to the “gold reserve standard” advocated by the next likely President of the United States, Ron Paul.
( How are the Banksters to deal with him?)

All it requires is enough honest individuals to get together to for the first Chartered Bank of America, apply honest regulation, and LOBBY the people of America to give you a ” Commercial Bank Trading Licence”, currently only issued by the FED, a private consortium of bankers who control the “power to create credit” for the United States of America, the most powerful empire the world has seen in all history.

The power to create credit, the most powerful force on the planet, a power if diligently applied and directed, can mitigate the damage we as a species is causing it.

We do not need to battle the incredibly entrenched forces, but simply offer a humane alternative to ourselves, and take the wind out of their sails (sales.lol)

Democratic Credit. The New Paradigm!

by Colin Barclay-Smith

It’s time the people knew the alarming facts. Test your own knowledge of these facts by the following questions:

Do you know that no bank lends money deposited with it?

Do you know that when a bank lends money it CREATES it out of nothing?

Do you know that bank loans are merely pen and ink entries in the credit columns of a bank’s ledger? They have no other existence.

Do you know that practically all the money in the community comes into circulation as a debt to the banks?

Do you know that money loaned by a Government bank is just as much a debt to the people as if it were loaned from a private bank?

Do you know that “fixed deposits” are a plausible screen to hide the creation of credit?

Did it ever occur to you that the banks enjoy this unique facility of creating credit and putting the nation progressively into debt-bondage because they create FINANCIAL credit against the REAL credit created by the people?

Do you realize that every time a Government borrows money for a public work, the people are debited with the liability (in perpetuity), but are never credited with the value of the asset?

Do you know that every repayment of a bank loan cancels the amount of the loan out of existence?

Do you know that Treasury Notes are Government I.O.U.‘s — national pawn tickets for pledging the assets of the country to the banks for the loan of OUR OWN financial credit?

Do you know that banks purchase bank sites, build premises, and acquire assets at no real cost whatever to themselves — by the simple process of honoring their own checks?

You may dismiss these affirmations as “incredible”, or “absurd”, but if you will read on, each one will be proved beyond all shadow of doubt.

Most of us have grown up with only the vaguest notions of money. We are fairly certain that it is the Government’s right to print notes and mint coins. For the rest, our knowledge is distinctly foggy.

Most people, for example, labor under the impression that the only money in the community is notes, silver, and copper. But this is a very, very small part of the community’s money.

In fact, notes, silver, and copper — legal tender — is used for less than five per cent of the total purchases made. Over 95 per cent of all business is done by checks.

This check currency is really bank-created money — bank credit — but it functions exactly the same as legal tender money. Banking authorities of world-wide repute state that banks can and do create credit up to nine or ten times their cash resources.

Banks go to great pains to perpetuate the fiction that they are merely “the custodians of their customers’ deposits” — that they lend these deposits, and that their profit consists of the difference in the rate of interest which they pay to depositors, and the interest they receive from borrowers. Such an idea is quite wrong, and it is the popular acceptance of this major monetary fallacy which gives rise to most of the false notions upon the subject of money.

The facts about money are as follows: —

(1) Banks do not lend money deposited with them.

(2) Every bank loan or overdraft is a creation of entirely new money (credit), and is a clear addition to the amount of money in the community.

(3) No depositor’s money is used when a bank lends money.

(4) Practically all the money in the community begins its life as an interest-bearing debt to the banks.

The technique of a bank loan

All that a bank does in lending anybody, say $1,000, is to open an account in the borrower’s name — if he hasn’t already got an account — and write Limit: $1,000, across the top of the ledger. The borrower is now free to operate and overdraw on this account to the limit indicated.

When the account is drawn on the check, and in turn the check is lodged in another account at the same or another bank, a “deposit” is thus created, and the supply of money increased. Thus bank loans create “deposits”, which plainly are not the source of loan money but, rather, the other way around, they are the outcome of loans.

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