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Where Are the Financial Crisis Prosecutions?

Note: The Trade is not subject to our Creative Commons license.

You may have noticed that prosecutors in this country are in something of a white-collar slump lately.

The stock options backdating prosecutions have largely been a bust, not because it wasn’t a true scandal. The Securities and Exchange Commission and the Justice Department investigated more than 100 companies. Over a hundred took accounting restatements. Yet only a handful of executives went to prison, with some high-profile cases fizzling out.

Prosecutors also stumbled in other high priority corporate fraud prosecutions, like the KPMG tax shelter and the stock-exchange specialists cases.

The most spectacular prosecutorial flameout was the case against the Bear Stearns hedge fund managers. The consequences of that disaster are still reverberating. The United States attorney’s office in Brooklyn rushed to haul low-level executives in front of a jury based on a few seemingly incriminating emails. The defense was easily able to convince jurors that these represented only out-of-context glimpses of fear as markets swooned, not a conspiracy to mislead.

Now we have a supposedly new push: the insider trading scandal.

The United States attorney in Manhattan, Preet Bharara, and the United States Attorney, General Eric H. Holder Jr., are hyping their efforts. “Illegal insider trading is rampant and may even be on the rise,” Mr. Bharara dubiously pronounced in a speech in October. The Feds are raiding hedge funds and publicly celebrating their criminal investigations related to insider trading.

The storyline is that Wall Street now lives in fear. Hedge fund managers’ phones might be tapped, any stray remark is suspect, and old trades are being exhumed so that the entrails can be examined.

In fact, plenty of folks on Wall Street are happy about the investigation. A scant few — the ones with clean consciences — like the idea that the world of special access to favorable tips is being cleaned up.

But others are pleased for a different reason: They realize the investigation is a sideshow.

All the hype carries an air of defensiveness. Everyone is wondering: Where are the investigations related to the financial crisis?

John Hueston, a former lead Enron prosecutor, wonders: “Have they committed the resources in the right place? Do these scandals warrant apparent national priority status?"

Nobody from Lehman, Merrill Lynch or Citigroup has been charged criminally with anything. No top executives at Bear Stearns have been indicted. All former American International Group executives are running free. No big mortgage company executive has had to face the law.

How about someone other than the Fabulous Fab at Goldman Sachs? How could the Securities and Exchange Commission merely settle with Countrywide’s Angelo Mozilo -- and for a fraction of what he made as C.E.O.?

The world was almost brought low by the American banking system and we are supposed to think that no one did anything wrong?

The most common explanation from lawyers for this bizarre state of affairs is that it’s hard work. It’s complicated to make criminal cases in corporate fraud. Getting a case that shows the wrong-doer acted with intent — and proving it to a jury — is difficult.

But, of course, Enron was complicated too, and prosecutors got the big boys. Ken Lay was found guilty (he died before he served his time). Jeff Skilling is in prison now, though the end result was bittersweet for prosecutors when much of his conviction was overturned by the Supreme Court. WorldCom’s Bernie Ebbers and Tyco’s Dennis Kozlowski are wearing stripes.

Sure, it takes time to investigate complicated cases. Many people think that the S.E.C,., at the least, will bring some charges against top executives at Lehman Brothers. The huge, ground-breaking special examiner’s report on Lehman Brothers laid bare problems with Lehman’s accounting. But that report came out back in March — on a bank that blew up more than two years ago. That seems awfully slow.

The most popular reason offered for the dearth of financial crisis prosecutions is the 100-year flood excuse: The banking system was hit by a systemic and unforeseeable disaster, which means that, as unpleasant as it may be to laymen, it’s unlikely that anyone committed any crimes.

Or, barring that wildly implausible explanation (since, indeed, many people saw the crash coming and warned about it), the argument is that acting stupidly and recklessly is no crime.

As I ride the subway every morning, I often fantasize about criminalizing stupidity and fecklessness. But alas, it’s not to be.

Nevertheless, it’s hardly reassuring that bankers, out of necessity, have universally adopted the dumb-rather-than-venal justification. That doesn’t mean, however, that the rest of us need to buy it. It’s shocking how pervasive and triumphant this narrative of the financial crisis has been.

Just as it’s clear that not all bankers were guilty of crimes in the lead-up to the crisis, it strains credulity to contend no one was. Corporate crime is usually the act of desperate people who have initially made relatively innocent mistakes and then seek to cover them up. Some banks went down innocently. Surely some housed bad actors who broke laws.

As a society, we have the bankers we deserve. Sadly, it’s looking like we have the regulators and prosecutors we deserve, too.

Bankers, Banksters, Regulators, Politicians, Prosecutors, Lawyers…all cut from the same cloth.  And we wonder why so few are rotting in jail!

We’ve been in a state of political corruption for a long time. We’re just waking up to that fact late.

michael kelley

Dec. 8, 2010, 3:04 p.m.

Perhaps the approaching WikiLeaks outing of the bankster scandal will open some doors that will reveal how the Illuminati and their bag men on Wall Street and in the world banking industry have been ripping off the tax payers for at least 150 years.

Prosecutions? 

When Wall Street and banking have purchased sufficient power within our government to effectively enforce a tiered system of laws wherein if you have enough wealth and/or steal enough wealth, you’re immune from accountability for your actions so long as your victims fall outside of the top 1% of America’s economic strata (i.e., Bernie goofed)?

lolll…that’s why they bought the Republicans - the party of “responsibility” - you know:  So as to avoid any.

The rich banksters are apparently above the law.  The law, being the SEC and Eric Holder, have apparently also been bought.  We, the people, still hold the power to undo them.  We need to act together.  We need to help each other, not play in the right/left game against each other.  http://www.challengingforeclosure.com

I work in the mortgage modification industry. I am affiliated with a law firm that negotiates the modification directly with the lender. I speak with hundreds of people per week that tell stories that show these lenders and their practices to be irresponsible at best or illegal at least. For example, a common practice for these lenders is to put people in a Trial Modification. This trial is not supposed to last more than 3 months. A Trial Modification is where the lender temporarily lowers the monthly payment based on a predetermined formula to test whether the borrower can maintain that payment without failure. They don’t tell the borrower unless asked that non of the payments will be credited to their mortgage balance nor will they tell them that they will be considered delinquent for the term they are in the trial. So the end result is that the borrower is behind 3 months and can be put into foreclosure if they cannot make up the difference between the regular payment and the trial payment they will lose their home. Also, some of these lenders have had people in Trial Modifications for over a year. Not only do I think this is criminal but no one is doing anything about it. If you or I pulled that kind of a stunt in business, we would be prosecuted for fraud. This is just one of the practices that these lender employ that is clearly their inability to deal in good faith. I had had clients tell me that someone at their lender has told them not to make their mortgage payment. They can’t talk to the same person twice. The lender in so many cases asks for documents, then says they didn’t receive them. They have the borrower jumping through so many hoops and rings they are frantic. Then they foreclose on them. They are not accountable for their practices and someone needs to do something about it. I won’t hold my breath.

Gartrell Bibberts

Dec. 8, 2010, 3:31 p.m.

Sounds just like Roosevelt in 1933!  Lets put some SOBs in jail and ramp up our constituencies.

I watch the industry too and outside of Chris Dodd and a few of his associates, I see more stupidity and greed than criminality.

It would be of interest if someone could research who the thieves were, and PUBLISH them everywhere, with a message for Main Street to NOT buy their products. It is the punishment they understand—take away their money.

Thanks Mark, you’re confirming the legalized land-grab going on.  Even if you know your rights, and are jumping through the hoops, it does not MATTER since the game is rigged to begin with.  I lost my house and I KNOW what a nightmare it is.  Unfortunately, many folks (like myself) who have/had been in their homes for many years and paid their mortgages and have had something go wrong get no HONEST consideration to remedy.  Oh well, good luck if things go wrong, be prepared to get creamed!

Regrettably, there are very few statesmen left in our government, either Democrat or Republican.
Everyone seems to be more afraid of damaging their careers than showing courage to prosecute the"big boys”. And A’that, and A’that (Robert Burns).
Sad state of affairs.

Thinking Gartrell Bibbert’s comment to the effect that he sees “more stupidity and greed than criminality” is Wall Street and banking’s line:  As long as you are only doing it to satiate your greed, it ain’t criminal.

I tend to disagree; I wouldn’t accept that excuse after a drug manufacturer or Boeing caused a catastrophe that devastated the lives of millions of Americans, so why, pray tell, should Wall Street and banking get a free pass?

How do they - how does all of Corporate America - get off with thinking that anything done in the name of profit is OK no matter how many Americans are hurt?

Gunther Steinberg

Dec. 8, 2010, 4:30 p.m.

The bad actors in the financial industry are getting off scot free, because of the industry’s clout with Congress and their financing the elections. Money buys influence and the banks have bought Congress.
  Actions for which small scale crooks would go to jail are excused as “honest mistakes” by presidents of banks who pushed for maximum profits at any cost to the country and their customers.

michael kelley

Dec. 8, 2010, 4:40 p.m.

Ibsteve2u:  Well spoken. For most of my 74 years on this planet I’ve been fighting this World Wide ignorance now being exposed by WikiLeaks.  Through the years I’ve often wondered if my work was wasted.  But now I can go peacefully to my final reward knowing that thanks to intelligent people like you I’ll leave this Old World in good hands to carry on The Good Fight.

Eileen Sullivan

Dec. 8, 2010, 5:06 p.m.

I like to think of the various scoundrels, i.e., Bush, Cheney, Wall Streeters as “Too Big to Jail”.
I’m sure they would agree.

You got it right Sophie, except you left out the guys at the top - judges!  They are the ones that make it all possible BECAUSE if a judge says you are innocent or NOT ENOUGH EVIDENCE, then it becomes the truth according to the judge and he/she has the final say.  Get on the wrong side of judge, well, you are in for a long hard ride.

Yes Anne, you are right, judges are a very IMPORTANT part and interestingly enough are being seriously overlooked regarding the power they wield.

Let’s assume there are greedy and unethical people—some in corporations, some operating from the trunk of their car (or on the internet) and some not surprisingly in government. Now, isn’t the government with all their regulatory powers and rules galore supposed to protect us from these types of villains? For you partisan types, assume further that Republicans are not up to the job. Then, what about that supposed protectors of the “little people”—-the Democrats…like Dodd, Barney Frank, Joe Biden.

It is unbelievable ... the corruption, greed and power that continue to thrive, on such an expansive scale ... and that accountability to “We the People” is forgotten, ignored and even scoffed at, as if it were too much to expect.  I suppose that this is naive thinking, given that Wall Street, much of our Congress ... hell, even the Supreme Court, have been bought by the uber wealthy and the corporate “powers that be”.  I pray daily that “what goes around, comes around” to these pompous individuals who obviously lack integrity (among other virtues) and that the American public awakens, unites and is able to salvage our country.

I’m open to suggestions.  Where do we gather together?  In this age of rapid technological advancement and information overload, it seems that we are, as individuals, becoming all the more isolated and distant from our fellow citizens on the planet ... or maybe, just distracted; preoccupied?  Has this resulted in the ultimate “dumbing down” of the electorate? 

Of course, as one member of the so-called vanishing middle class, I am, at times, overwhelmed just trying to keep a roof over the heads of my family, finding a way to pay for my children’s education and saving a little something to retire on before I’m 90.  My heart goes out to each and every one of my compatriots who have lost even more than I in this, the latest financial debacle, that yes, could have been avoided.

Hal Blackwell

Dec. 8, 2010, 6:34 p.m.

In my book “Secrets of the Skim” I tell of my time at Merrill Lynch during the crisis. Management lied to financial advisors repeatedly. Their line was “the worst is over but their may be more shoes to drop.” From the demise of Bear to that faithful weekend in September this is what we were told. In early August I asked to have an escrow account set up for a client bringing $400 million from Dubai. Merrill was unable to accept the deposit in the foreign currency. Management knew the gig was up in early August. To understand the implications of this read my blog entry entitled “$400 Million Dollar Question for B of A” at Money Force. Link is at HalBlackwell.com.

michael kelley

Dec. 8, 2010, 6:40 p.m.

Dear Laf:  The 1929 Stock Market Crash and subsequent Depression was a model for the present capital markets collapse which will be a much more efficient model for the next planned collapse.  Our best bet to stop this insanity is to Support WikiLeaks and Julian Assange.

WHO OWNS THIS COUNTRY ANYWAY?

We Do!  It’s the right of We The People to join together in an assembly on the authority of the U.S. Constitution to discuss concerns politicians and media are failing to mention.  Are you aware we’re currently being denied that constitutional right?  Despite 400+ Article V applications from all 50 states, Congress is ignoring its obligation to issue the call for the Article V Convention.  Since history began, all political reformations the world over have always come down to one thing: a tipping-point majority joined in common cause.  If you want to help return our nation to the Constitution, the rule of law, and its founding principles, then you’ve come to the right place.

Visit:  ConventionUSA.org

ARTICLE V CONVENTION FACTS

•   The Article V Convention is not a “constitutional convention” or Con-Con, and does not and cannot re-write the U.S. Constitution.

•   Whatever is discussed at the Article V Convention, 38 states must then agree to adopt any proposals before an amendment is ratified.

•   The Article V Convention is simply a deliberative assembly of state delegates discussing what might garner the approval from an overwhelming amount of citizens from across the political spectrum.

•   The Article V Convention is, by law, currently mandated by Article V and the U.S. Constitution.

•   The Article V Convention returns us to the U.S. Constitution and the rule of law, reviving both in the face of current institutionalized corruption.

I have been and continue to “fight” with Bank of America.  I was offered a Final Modification (which had several “holes” in it but I signed it anyway on the advice of a financial consultant who said I could recover my losses in a year if they weren’t corrected) and I thought there might be a glimmer of hope for me but since it has been 3 months since I signed the final modification (again, reluctantly) and having heard nothing and continuing to pay my own insurance payments which is not what the agreement says should happen and since I have received no copy and since I was advised last time I called I was $5,000 in arrears and that they were still “reviewing” the final modification I am not at all sure.  And based on the state of the economy and the deterioration of the neighborhood I live in and the rising crime rate and my desire to be free of the city I am considering that I might be better off to just leave.

I live in a state where they do not have to go to court to foreclose and I’m not sure how long I could live here without paying.

I faced another legal challenge.  Two actually.  This has been a year of challenges one after the other.  Anyway, during the Number 2 challenge in court my eyes were WIDE OPEN to the obvious corruption and collusion between the judiciary (despite the fact that “they” tell you it is answerable and accountable and thus held in to proper ethics) and the attorneys and the money lenders and money grubbers.

I do not like where this country is going.  I no longer feel safe in my home (I was the victim of a home invasion this summer along with theft).  I have maybe 10-20 percent hope that if I were accused of something dreadful that I might be able to extricate myself from it if I were in fact innocent.  The courts are not what I was educated to believe they were.  And being as I have very few resources to call upon and no “friends in high places” I have actual fear growing in my heart.

Part of the reason for my fear as that when I try to tell almost anyone about everything I’ve learned and seen and witnessed, I am either labeled as crazy, a troublemaker, or else I appear to have become invisible and my voice inaudible to almost all around me.

What I have seen reminds me of the oft heard “when they came for me there was no one left to protest”.  I think the only way that the masses are going to wake up is when someone comes for them.  And by then it will be too late.

I never thought I would find myself in my homeland thinking these sorts of thoughts, believing these things, but this is not a dream and I am very concerned for my family and I and for the world I used to think I was a part of.

The Constitution, as holy a document as it was written to be, will be of little help if the current trend continues.

By way of analogy, thousands of times a day people seek and get restraining orders from someone they fear or someone who is harassing them.  However, should that person come after them that little piece of paper they have is going to do nothing for them.  Should the worst happen and they be killed by their aggressor, he/she might get a harsher sentence (or not) on account of the restraining order but it won’t keep you from being killed and anyone who believes otherwise is a fool.

The way I see things right now, the Constitution is the same as a piece of paper.  I think those who wrote it took great pains to write it in such a way as to remain safe from government tyranny but it has been eroded and taken for granted and the balance of power has shifted.

People who were not born in this country are now demanding rights to be protected from us in our homeland.  Our borders are not safe and when one of our states seek to make them so, our President files suit so that they cannot.  The media is losing ground, weapons are being confiscated, every day the government is becoming an oppressive intruder into our lives.  They teach our children what they want them to know and if it is not what we would teach them it will happen anyway.  Our value system is eroded, the world around us is chaotic.  The most outrageous proposals are being put forth by our government, that we can be jailed for growing things in our back yard garden and/or trying to sell the same at market.  The free information on the internet is threatened along with our access to it.  One of the first things I recall Obama doing when he became president was to begin making “inquiries” into how he might shut down the internet “if the situation called for it”.  If our government is the one who decides if the situation calls for it then we are all doomed.

Sorry to be such a gloomy eyeore but I am, if nothing else, honest and open and realistic.  Not a pessimist, a realist.

@ibsteve2u-“so why, pray tell, should Wall Street and banking get a free pass?” It’s simple, really, Congress under both Republicans (Graham-Leach-Bliley) and Clinton’s embrace the Commodity Futures Modernization Act meant there was no regulation of admittedly egregious behavior. No laws were broken since deregulation eliminated the need for laws. Even Greenspan said his view of the financial World was flawed. He realized in hindsight that bankers and Wall Street actors can’t be trusted to police themselves. Doh!

Oh, I’m aware of Clinton’s collusion, SeattleGuy.

We seem to have a difficult time when it comes to electing Presidents who are, in fact, Democrats.

There are no prosecutions,do to a lack of who is regulating who , we have the SEC for investment banks,the OCC for banks and the DoJ &, FBI for criminal activity . We have the biggest crime of all time enacted and 2 years after, the above agencies are playing dumb .Congress recently acted surprised in hearing that the banks have submitted fraudulent documents in the millions of foreclosures over the last few years .. As of today not one indictment . Possibly there is a connection to the all time record profits wall street execs will be getting and the ” I see nothing, I hear nothing ,I say nothing law breakers in Washington .

This post would be a tad more credible if the author gave an example of a crime that ought to be prosecuted.  A real example, naming names and describing the elements of the crime.  Financial failure is not a crime.  Getting swept up in a bubble is not a crime.  Knowingly issuing a false prospectus - that’s a crime.  Put another way, where’s the money?  Don’t make broad allegations about how there must have been crimes committed unless you are prepared to name names and cite facts.

Bosco LaMonte

Dec. 9, 2010, 3:11 a.m.

ANNE…

The CHOICE is to GET THE GUTS or GET YOUR GUNS regarding the Constitution.  Stand up for your RIGHTS as sovereign citizens—YOU own this country, not Congress, not the Banks, not Wall Street.

Simply put, it will take a tipping-point majority to scare the (expletive) out of these thieves.  It’s time to get behind the growing movement to DEMAND that Congress call an Article V Amendments Convention which opens the door for We The People to draft amendments for the STATES to consider and ratify.  Once OK’ed by 38 of the 50 States it becomes LAW - High Law - Constitutional Law.  It will only happen by doing something - go to conventionusa.org or article-v-convention.com and bring yourself up to speed by studying instead of complaining.  THIS IS YOUR COUNTRY!  Stand up for it and make right for your children or the future OR LOSE IT FOREVER!

DBL2…

This is as simple as it gets: Follow the Money!

I have been adamantly pursuing my case as best I can with ZERO help from anyone.  the cold shoulder at best.  Complaints to the judicial oversight committee leading nowhere.

Complaints about fraud in court by an attorney, an obvious collusion and lie, but the decision comes back that the place to address the “infraction” is in court not the oversight committee.

Then why have an oversight committee if they just tell you to pursue legal remedies for unethical behavior?  Because they don’t MEAN IT, its just lip service to tell people and point to “We are all above-board, after all we have the Commissions”  And those who have never faced any of this will say “too true”, they except at face value that the commissions are there to keep our judges on the straight and narrow.

I wondered at first why the silent treatment from the media and attorneys.  And then I see it is because they don’t want to get themselves into tight/bad spots so they stay clear of anyone like me making waves.  It is possible to be made to “be quiet”.  there are people in prison for bogus charges because they would not be quiet, professional people.

A plan must be had because one by one we will be picked off and disposed of.  Even then there are no guarantees.  the balance of power has shifted in the extreme.

@DBL2, Goldman Sachs, one of the private banks that runs (and has ruined) the US economy,
was charged with securities fraud.
Their crime: Creating garbage securities,
packaging them like gold, and then lying
about their value.
In the normal world, this would be called
a “criminal enterprise.”
On Wall Street and in Washington DC
it’s called “a bank too big to fail.”
Creating and approving a mortgage that they knew would fail,is against Freddie,Fannie,federal rules .
Not recording ownership of notes (chain of title ) broke a law as old as the country . Submitting forged , fraudulent documents to courts knowingly, is perjury at the very least ..Judges issuing judgements prior to hearing , no due process . Do you need any more examples of crimes committed by our financial institutions .

@Equity, I cannot lay my hands on it now, maybe tomorrow, but I read an article about the Florida Rocket Dockets where they are trying to ram through as many foreclosures as possible and if the documents don’t measure up to support it, instead of the crooks going to jail for attempted fraud, the case is dismissed by the judge without prejudice so they can return another day.  If the judge were sincerely trying to make a difference he would use logic to know that if the door is left open for them to come back, having already attempted to used fraudulent documents as evidence, they will return again and again until their illegal acts are rewarded not with prison but with money for other peoples homes.

Anne , keep resisting and demand them to prove ownership . Yes the game is rigged but stay in the game demanding they prove their BS . THEY CANNOT !

That is correct , no one checked the documents for accuracy . They hired retired judges to help the back log , and all they did was favor the banks . Only a few defendants showed up so as many as 99 % were non defense which the banks knew full well ,thus the rocket docket . Submit anything its a slam dunk . Its when the middle tranch borrower started defending that the fraudulent docs were being found . The banks are caught lying to investors in the prospectus of the RMBS as well . They separated the note and mortgage making the notes non-secured debt also , to save recordation fee’s.around the country . Stiffing the counties . Their crooks .

I like the comment “DBL2” made; it perfectly reflects the attitude that Wall Street and banking have.

You know:  The smugness that comes from knowing that they have the Republicans - and had Clinton - in their pocket and so got anything and everything legalized…so they can do anything and everything and face no personal risk - only reward.

It is as if the airline pilots had gotten the Republicans to say that they could fly any old place they pleased…and every now and again, when one of ‘em tried to take a Boeing 747 below the Golden Gate Bridge, there is an “Ooops!” and everybody aboard the aircraft dies.

Although to make the analogy fit the situation Wall Street and banking have bought for themselves from our government, the airline pilot would have to be flying the plane by remote control and receive his golden parachute in the comfort of a certain private club in NYC even before the screams of the dying faded away…

Yes, it would be hard to prove wrongdoing if you don’t have any laws to regulate Wall Street. This is why anti trust laws are critical…there should be criminal charges for breaking them as well as monetary charges. Perhaps, it would be easier to prove criminal negllgence against those banks that intensionally defraud and the public with regards to mortgage modifications and illegel foreclosures!

As far as I’m concerned, it’s the largest theft in American history and what’s worse, it’s still going on.

Bosco LaMonte

Dec. 9, 2010, 11:38 a.m.

JUDY AND ALL…

An Article V Amendments Convention is the ONLY lawful means of getting results: We The People are SOVEREIGN, not the Legislative, Executive or Judicial branches of government.

A tipping-point majority of 20 million active and concerned citizens out of the 330 million population would do it.  Imagine inundating every member of Congress, the President and the Attorney General with TONS of messages every week or every day via SNAIL MAIL, TELEGRAM or a PHONE CALL demanding an Article V Amendments Convention.

Lawfully only 34 States need to make application to Congress to call convention, yet over 700 (foavc.org) are now in the Congressional Record—WHY haven’t they called the convention so We The People can draft and submit amendments to the other States for ratification?  The Answer: The Banksters and Wall Street OWN Congress and other members of our so-called government.  Let’s take it back and put in truly good people.

Please continue offering your opinions to ProPublica, but with each one also write a letter or make a phone call to a DC politician!  Do it to SAVE THE REPUBLIC—Be Part OF The Solution.

We have the laws, Goldman Sacks was charged with securities fraud,every other entity was/are doing the same . Corporations have impunity from laws ,they pay a fine (maybe) and have their best year EVER . Layoffs,millions out of work because of their doings and financial institutions collectively make a 144 BILLION profit ! Then have the #&$^ to take it while millions are losing everything saying it (the bail out,and now cuts to SS) were/are necessary or it would be worse . Ask a person who lost his job, house, savings,and health care if it can get any worse .
I think not .

Edward Ericson

Dec. 9, 2010, 1:01 p.m.

DBL2, Seatlle Guy et.al.: There are two impediments to prosecution, technical and political. The political impediment is well understood: the criminals effectively control the government. Who do I mean? Blankfein, Paulson (Henry and John) Dimon, etc. The technical question can hardly be asked until the political one is answered—or answered differently than it has been. But assuming the political winds shift towards justice, the technical problems are easily solvable. Theft is still theft, fraud is still fraud. You say derivatives were unregulated, do you? Well, actually, they were exempted from anti-gambling laws. Rigged games of chance can still be prosecuted where and when gambling is otherwise legal, though. Magnetar, Abacus & many other late-stage “deals” were nothing more than that.

EQUITY FREE…

There’s the Uber Wealthy and there’s YOU, the Debtor Slave.  What more do you need to be so damn mad that you’ll voice your opinion AND get involved to obtain an Article V Amendments Convention? Educate yourself by going to article-v-convention.com OR conventionusa.org OR fixcongressfirst.org OR foavc.org OR thelibertytree.org? What will it take??

GoDuck - thanks for the information. I will visit those websites and do my part!

1)  Goldman as broker did not have, and in any reasonable world would not have, any fiduciary duty to the buyers.  The buyer, a sophisticated European bank, had the opportunity to do due diliigence and chose to go long on mortgage backed securities.  The seller of the CDO chose to go short.  I fail to see a crime, just consenting adults doing business.
2) Anyone who signed a false affidavit should go to jail as should anyone in management who told them to do that.  Of course this had little or nothing to do with the cause of Panic of 08.
3)  Banks that failed to properly record ownership of morgages or transfers thereof didn’t violate any laws - they may have impaired their or their transferee’s legal right to enforce that mortgage, but that’s all.  Again, this had zero to do with the causes of the Panic of 08.
4)  Bankers who conspired with borrowers and mortgage brokers to accept phony loan applications?  They should all go to jail, including the borrowers.  Any management types who directed any of his employees to accept a phony mortgage ought to go jail, too.  Any senior management types responsible for MBS issuances who knew that a material percentage of the mortgages were phony ought to be prosecuted, too. At the end of the day, though, I don’t think fraud was a material cause of the Panic of 08, not compared to the relaxation of underwriting standards by Fannie and Freddie which was a political problem.
5) The vast majority of the credit default swaps written in the period at question settled without any problems. Indeed, that market performed far better than the debt markets where holders of SEC-registered and regulated CDOs suffered huge losses.  The only real problems in the credit default swap market were with the ones written by the insurance companies - e.g., AIG and Ambac - which suggests that the problem was with the regulation of insurance companies, not with the unregulated CDS market. 
3)

Re:  “Goldman as broker did not have, and in any reasonable world would not have, any fiduciary duty to the buyers.”

I.e., Wall Street and banking have bought the legislation required to exempt themselves from any responsibility for selling you a pig in a poke.

And there are still Americans who don’t have the wealth required to be treated gently by Wall Street’s brokers and bankers who are investing in stocks, bonds, and securities?

Why?  Don’t they like themselves?  Do they hate their children?

ibsteve2u:

Have you ever bought a house?  Whom did the broker represent, you or the seller?  In most states, it’s the seller.

In securities markets, why do you think a Dutch bank needs to be able to sue Goldman for selling it a CDO that went south?  If there were any false statements in the offering materials, sure, that’s fraud.  But you seem to want something more than disclosure - you want to impose on the broker the duty to tell the buyer and the seller whether they should buy or sell.  How can a broker do that?  How could a broker give that advice to both sides of the trade?  Please explain.

Your argument, dbl2, is that Wall Street and banking are entitled to take any piece of [...], assert that it has value, and then foist it off on a buyer.

Where is the “due diligence” on Goldman et al’s end?  Where is the record that they investigated and assigned a fair market value to the mortgages they were packaging?

How are Goldman et al any different from those who were selling Florida swampland to unsuspecting buyers in the 1950s and 1960s?

Are you asserting that Wall Street and banking are indeed a bunch of crooks and thieves, but that it is “caveat emptor” and they are ENTITLED to scam whoever is stupid enough to trust - to deal with - Wall Street and American banking?

And an even better question:  Why did I even bother to ask you that last question, when that is indeed the spirit and substance of your argument?

In final analysis, there is a golden - and I mean GOLDEN - opportunity for the DAX, TSE, the Berne and SIX exchanges, and BMF Bovespa (possibly others, too) in the mounting evidence of the corruption of Wall Street and American banking.

I think a little lobbying to permit the transfers of American 401Ks to global exchanges that can show that they will not permit the excesses of American operators would yield handsome returns.

I do not feel that I am overstepping my bounds by stating that the average American investor is sick of being robbed by high finance in America every 10 or so years - a cycle that is both shortening and increasing in frequency.

ibsteve2u

I’m sorry, but you didn’t answer my question. If all you are saying is that fraud ought to be prosecuted, I’m with you. If Goldman circulated an offering memo that contained lies, it ought to be prosecuted. But if the offering memo was accurate, and the buyer and seller were left to analyze the materials and decide for themselves whether to buy and sell, then how can you impose a legal duty on Goldman to advise both the buyer and seller whether to buy or sell and at what price?  How would that work?  How can a fiduciary serve two masters?

lolll…you’re consistent, dbl2. 

You’ve not deviated one whit from your argument that Wall Street and American banking are crooked and it is the responsibility of the prospective buyer to acknowledge that fact, assume they’re being lied to, and practice caveat emptor.

Although it sounds far nicer to say that they have no “fiduciary responsibility”, doesn’t it?

Before you protest (and methinks thou doth protest too much) I hasten to add that when I say “being lied to”, I mean by attaching the former (fabricated, it now appears) prestige of their firms to their offerings.

There is a difference between buying something in an alley off 42nd Street and buying something from Goldman Sachs, Merrill Lynch, Lehman, Citigroup - or there was.

No more.

ibsteve2u - I’m happy to have a reasoned discussion and to delineate areas of disagreement, but please don’t mischaracterize my point of view.

I said very clearly that underwriters should be liable for fraud.  If Goldman lies in the prospectus that it sends to potential buyers, it should be liable for that lie.  Buyers should certainly be able to assume that the facts set out in the prospectus are true. 

You want something more than truth telling. You want Goldman and other brokers to have a duty to tell buyers whether they should buy something and what price they ought to pay.  I think that is an impossible standard for the same reason that house brokers can’t advise both buyers and sellers whether to sell and at what price.  For some reason, which you have yet to articulate, you think it would be possible for brokers to do that.  I think imposing such a duty on brokers is just a back-door way to make them insurers for buyer’s losses.  Maybe that’s what you want. If so, why not just say so?

In essence, the arguments I’ve seen are that Wall Street merely provided the conduit through which the banks cheated the American people and their government as well as the peoples and governments of many, many other nations.

The fact that they facilitated a scam is irrelevant as they have no “fiduciary responsibility”.

The question, then, is whether they were aware that a scam was ongoing.  Given Goldman Sachs’ betting against what they were selling, the obvious answer is “Yes”.

So again I ask:  What American - and what pension fund, what government, what foreign national - has any business whatsoever investing in or through Wall Street?

lolll…you have to be a proponent of financial suicide to trust them - ‘cuz when it gets down to your losses, they’ll whip that “fiduciary responsibility” out of their bag of tricks and walk off with the money they made betting that you’d take a bath on the deal they suckered you into “oh so legally”.

Personally, I think it’s foolish for individual investors to buy individual stocks or bonds.  Index funds are the only way to go.  Institutional investors - well, many of them don’t do any better than the index funds, so it’s not clear that all the money they pay for research is worth it.  But markets go up and they go down.  Anyone who thinks there’s a risk free way to invest is fooling himself.  And if you think that foreign markets are “safer” than American markets, well, there are index funds for those markets, too.

Could someone explain to me how a company like Magnetar is able to procure $1 billion from the FED to be able to sustain their betting against the housing market…when the same s..t they put into the CDO’s they sold made sure they would profit.
How about the poor “mark” that has worked all his life for a company who was limited in his options as to how to “invest” his 401(k) and pension funds?
What a crap shoot these guys had…then be rewarded with record $144 billion bonuses this year. All with the knowledge that they can go back to the “trough” next year and for years to come. Along with all the women and chidren being put out on the street (due to their not being financially responsible), I worry of possibility of more innocent people being harmed, because the greedy bastards feel they do not have enough. The only comfort I can find in all of this is the FACT they will burn in Hell!

I would judge that foreign markets are safest of all if and only if your broker is located in Switzerland, Germany, or…anywhere but Wall Street.

lolll…there I go again, forgetting who operates out of Connecticut, and Delaware, and…make that a broker who is not American and does not do business within the continental United States or any of its possessions.

I have found the enemy, and he is I!  We have done this to ourselves. We live in a world where everyone is looking out for themselves as best they can.  Nothing wrong with that at all.  It’s how things should be.  Call it greed if you like, but we all guilty of that a little bit.  What if we simply acknowledge this fact and create an environment where risk and the threat of losing something we value makes us all more cautious.  More generous to others.  Government involvement makes us all believe that Uncle Sam is looking out for us and the bad doings of others,  but he is not and he can not.  You will find that the problems will diminish when we start doing some very unintuitive things.  Tax less and save more.  Spend less and invest your money in business so that they have the cash to increase productivity and hire people to the most productive.  The sooner we stop looking for monsters and criminals everywhere better of well be.  Let’s look at ourselves and ask how we have contributed to this.  Strip the federal government of ever power not specifically and narrowly defined by the constitution.  This includes central banking and regulation of financial institutions.  Don’t bail them out either.  If you fail, too bad, your out.  If you succeed, congratulations you deserve the riches you have earned!  I could go on…  mises.org

The manager of a CDO has the responsibility / duty to see that the debt obligations he puts in the CDO meets the stated requirements in the prospectus . These laws were broken by every institution on Wall Street . Investors are suing them to buy back their loans .The insurers are not paying on 85% of the loans because that many of them did not meet the requirements .
Had Wall Street not created the demand for these products, or if they called a turd a turd,  the fraud from the cradle to the grave would be history . They committed fraud and deliberately mislead investors as well as homeowners . Still in doubt ask Angelo Mozilo ceo of Countrywide king of the fraudulent mortgages . The real crime is that these robber barons are free and still have their stolen money,and the dumb downed people believe that wealth is what determines a persons success . MOVE to AMEND take the person hood from corporations . They are not a person and should be subordinate to THE PEOPLE . Tell me how do we arrest this criminal Goldman Sacks ?

Lehman’s Repo 105 account, where investors were misled in material fashion, was known to the current U.S. Treasury Secretary Tim Geithner.

Somehow, the guys that appointed a tax dodging, inside trade abetting Treasury Secretary are going to clean up Wall Street.

Why do you think the street gave 2/3’s of it’s money to Obama?  Of course it’s a deceptive game.  What would expect from a President who bought his house with the aid of a convicted financial criminal?

DBL2 wasin the business and is a Golman Sachs/wallstreet apologist, ibsteve2u.  What more can you expect?  He has the lingo down pat so assumes to be able to out ‘financialspeak’ you.

You were right on the money, Steve..  Having the name Goldman Sachs was supposed to be synonymous with trust and respect.  NO MORE!!  They are synonymous with a sucker bet and fraud and deserve the monikers.

Goldman (and others) had and used insider knowledge to make up the junk portfolios and ensure they were junk and then made the short bet.  That is fraud and they should be prosecuted for it. 

The mortgages were concocted to fail, and Goldman didn’t only know it, had affiliated mortgage servicers provide them with more and more junk knowing they were worthless.

The fact that everyone was doing it, and that the whole industry (banks, lenders, rating agencies, etc) was in on the fraud, doesn’t make it any less fraudulent.

Equity Free…. I was pondering the thought of corps. having citizenship status. Would this not make them liable to the same lawsuits as every other citizen is? If I sold someone a set of custom cabinets with high-end hardware “on the insides” but installed a set with very low-end hardware and some non-existent hardware “on the insides”, where would that land my butt? Simple analogy but to me about the same logic except that the cabinets would be able to be inspected by the customer. but maybe before I delivered, the customer is allowed somehow to take out an insurance policy that bets I’m going to do just that. A win-win situation except that it smacks with collusion by the insurance company. Besides that where could the customer find an ins. company’s Risk Assessment Manager that would underwrite the policy?
And by the way DBL2 from your comments I gather that stands for Devious Banker Logic round #2.

Aubrey M. Farb

Jan. 2, 2011, 7:21 a.m.

Your article is great; however, it does not amaze me that our government settled with the chief honcho of Countrywide.

Much of the fraud perpetrated in recent years could have been curtailed and exposed if the auditors in the major CPA firms had been honest and forthright in their reporting of their examinations of the companies involved in the major frauds in the past ten to fifteen years.

I am an 88 year old CPA ,licenced in Texas since May 1947.  I have published blogs under my name, Aubrey M. Farb.  My handle is Diogenes with the Green Eye Shade.

I have suggested to your firm that this is a subject that should be examined and reported on.  I have volunteered to assist them.  Unfortunately, I have not received any response, except to be put on their E-mail list.

Today, I happened to watch a repeat of a C-Span broadcast commemorating the career of David Halberstam.  One of the panelists was your managing editor.  His views on investigative reporting are admirable.  Please ask him to join me in exposing the dishonorable conduct of the major CPA firms. .

joan oconnor

Feb. 28, 2011, 6 a.m.

Wall Street firms own the White House,Congress and America.. That’s what it sure looks like to my family. Amazing how nothing has become of this. All of my husband and our investments, Almost Gone , we have taken a hugh dip in our savings. Now people who have had less then us, have actually became ill or have died. This is true.

Hard for the people with a healthy income can see what has happened to the middle class, but the people in the so call middle class can clearly see the effects of this devastation.  The abuse stills goes on….

joan oconnor Today, 7 a.m., emoted a great truth:  “Hard for the people with a healthy income can see what has happened to the middle class, but the people in the so call middle class can clearly see the effects of this devastation.  The abuse stills goes on….

Nice the way that is set up, isn’t it?  When “flood-up/trickle-down” economics incentivizes some immoral jerk to use inequitable free trade to eliminate your job after/while/and then some other (or the same) immoral jerk uses deregulation to plunder your life savings/leverage you out of your home, you just…disappear.

Your house is shuttered, providing long-time neighbors with a background pinch now and again as the glance at your home and remember you and your family…but you’re not there to provide your neighbors with that daily reminder that “This could soon be you!”.

Your plight continues or gets even worse, but the banking system - in their wisdom, unethical as it may be, in not letting your rent your own home back - ensures that your story is writ small on the Etch-a-Sketch that is the memory of your former friends and neighbors…

Which the bankers promptly shake with ye olde eviction notice lest your neighbors take their memories of the ruthlessness and immorality of the banks into the election booth and remember to vote anything - anything other than Republican.

Joan Oconnor—

“Wall Street firms own the White House, Congress and America.  That’s what it sure looks like to my family.  Amazing how nothing has become of this.  All of my husband and our investments, Almost Gone, we have taken a hugh dip in our savings.  Now people who have had less then us, have actually became ill or have died.  This is true.

Hard for the people with a healthy income can see what has happened to the middle class, but the people in the so call middle class can clearly see the effects of this devastation.  The abuse stills goes on….”

Gordie:  “Wall Street” isn’t just a bunch of FIRMS, they are a decadent sub-species who represent THE personification of Greed, Worldly Gain, Avarice, Gluttony and Materialism!  They live the high life at the detriment of others; they do no work, they ‘invest’.  What pitiful beings are they.  They have bought all three branches of the government, banks and the main stream media—so no one is listening…

In Matthew 6:19-21,24 it says (read carefully beyond the religious understanding):

“Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also.

No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can not serve both God and Mammon.”

BRAVO to Mr Ferguson and company for the most detailed play by play description of the economic meltdown and the players who created and prospered from their illegal dealings . “INSIDE JOB ”  won the Oscar for best documentary 2011 , The producer starts his acceptance speech with ” its been three years since the financial meltdown and not one executive from any Wall Street firm has been indicted or charged and THAT IS WRONG ” .  Thanks to all those involved in making this film and thanks for your courage for speaking out to millions !  Its a must see for all ! The banksters have not gotten away yet . Ask the police,teachers and firemen in Wisconsin and Ohio about the budget deficit , tax the top 2 % , cut the defense budget and leave our social security alone . And ask Mr Boehner where are the jobs ?

“... the argument is that acting stupidly and recklessly is no crime.

As I ride the subway every morning, I often fantasize about criminalizing stupidity and fecklessness. But alas, it’s not to be.”

Nonsense!  ‘Stupidity and fecklessness’ can be a crime if those acts cost lives.  There were people so ruined by greed, and stupidity caused some to become so despondent that they took their own lives.  (Those crooks weren’t stupid.  Greedy, yes.  Stupid, no.)

Maybe part of the problem is the lack of talent in the Justice Department.  If you know that you’re going to loose the case to a bevy of very well paid attorneys why bother?  Maybe there should be ‘selective service’ for attorney’s at the top of their law school class.

Jesse Eisinger

About The Trade

In this column, co-published with New York Times' DealBook, I monitor the financial markets to hold companies, executives and government officials accountable for their actions. Tips? Praise? Contact me at .(JavaScript must be enabled to view this email address)