Rod Dreher

We Have To Talk About Harvey

Wall Street = Skynet

By Rod Dreher • February 4, 2013, 2:31 PM

In a review of Greg Smith’s book about working at Goldman Sachs, Michael Lewis makes an arresting observation:

The dystopia often imagined in the world of artificial intelligence—in which computers somehow take on a life of their own and come to rule mankind—has actually happened in the world of finance. The giant Wall Street firms have taken on lives of their own, beyond human control. The people flow into and out of them but have only incidental effect on their direction and behavior. The firms may not be intent on evil; they aren’t intent on anything except short-term profits: they’re insensible. If anyone attempted to seize control of one of these strange machines and impose upon them a clear moral direction, the machine would hit its own button and he would be ejected.

Stop and think once more about what has just happened on Wall Street: its most admired firm conspired to flood the financial system with worthless securities, then set itself up to profit from betting against those very same securities, and in the bargain helped to precipitate a world historic financial crisis that cost millions of people their jobs and convulsed our political system. In other places, or at other times, the firm would be put out of business, and its leaders shamed and jailed and strung from lampposts. (I am not advocating the latter.) Instead Goldman Sachs, like the other too-big-to-fail firms, has been handed tens of billions in government subsidies, on the theory that we cannot live without them. They were then permitted to pay politicians to prevent laws being passed to change their business, and bribe public officials (with the implicit promise of future employment) to neuter the laws that were passed—so that they might continue to behave in more or less the same way that brought ruin on us all. And after all this has been done, a Goldman Sachs employee steps forward to say that the people at the top of his former firm need to see the error of their ways, and become more decent, socially responsible human beings. Right. How exactly is that going to happen?

Terrible but true. They are not only too big to fail, they are too big to be held meaningfully accountable at all.

Posted in Crime and Punishment, Decline and Fall, Economics. Tagged Goldman Sachs, Greg Smith, Michael Lewis, Skynet, Wall Street.

31 Responses to Wall Street = Skynet

MikeCLT says:

February 4, 2013 at 2:50 pm

Simon Johnson has an interesting column on Bloomberg discussing how the mega banks are too large and complex to be held accountable under the law. He cites a recent TV interview with Assistant Attorney General Lanny Breuer, the head of the criminal division at the Justice Department and the man responsible for determining whether anyone should be prosecuted for the financial crisis of 2008 in which Breuer admits as much.

Under Bush I about 3,000 people were jailed for bank fraud after the S&L crisis. Bush II put dozens of top executives in jail for corporate crimes after the Worldcom, Enron, Adelphia etc. fiascoes in the early 2000s. But 5 years after the largest financial fraud in history not one person from Wall Street has gone to jail. Even Governor Corzine and his minions at MF Global, whose firm stole over $1.5 billion from their clients, have not been held criminally liable. And the DOJ has said it is not contemplating any prosecutions. Remember this the next time you hear that the GOP is in Wall Street’s pocket. Its the Democrats who refuse to hold Wall Street accountable.

Here is the link to the Bloomberg article.

http://www.bloomberg.com/news/2013-02-03/who-decided-u-s-megabanks-are-too-big-to-jail-.html
The Wet One says:

February 4, 2013 at 2:52 pm

Thanks Rod. I appreciate it. Some of the things other than the usual target of so-con dismay cost millions of people their livelihoods and well being, plunge people into suicide, family breakdown and despair and corrupt all of society from top to bottom.

Some of the players on Wall Street fit that bill and absolutely nothing is done about them. Some so-con dismay ought to be directed that way as well. And while some say this is the outcome of “liberal” policies, I don’t know too many of such so called “liberals” who applaud this result. I surely don’t. And economic liberals are not most certainly not the “lefty” liberals whom are usually spoken of with such disdain and ire by conservatives of any stripe.

Anyways… Thanks again to shining a light on some of the other cancerous sores in society.
EliteCommInc. says:

February 4, 2013 at 3:31 pm

Suggested reading:

The Ascent of Money

All The Devils Are Here

Recless Endangerment

There are a lot of books on this matter and I think previous editions of john Mauldin also did a nice job of describing some criminal behavior of banks.
J. says:

February 4, 2013 at 3:34 pm

I have truly enjoyed MEP Hannan’s comments on this fiasco on the British side of the ocean:

http://www.youtube.com/watch?v=7ZpJeHN0_gw&feature=player_embedded
Patrick says:

February 4, 2013 at 3:43 pm

@ The Wet One:

“Some so-con dismay ought to be directed that way as well.”

Here’s a so-con who agrees with you 100%, though it doesn’t help that America is a Protestant country where the only sins are sexual ones.

Sadly, political discourse is driven by “the latest bad situation” rather than “the baddest bad situation.” I find banking much more alarming than gay sex, and yet banking is an old trouble and gay-sex-not-being-a-sin is relatively new.
reflectionephemeral says:

February 4, 2013 at 3:54 pm

It’s not a new phenomenon (though I am sympathetic to the argument that things are meaningfully different today than 30 or so years ago).

“We’re sorry. It’s not us. It’s the monster. The bank isn’t like a man.”

“Yes, but the bank is only made of men.”

“No, you’re wrong there—quite wrong there. The bank is something else than men. It happens that every man in a bank hates what the bank does, and yet the bank does it. The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it.”

– John Steinbeck, The Grapes of Wrath, 1939.
jjm says:

February 4, 2013 at 4:10 pm

But 5 years after the largest financial fraud in history not one person from Wall Street has gone to jail.

How was it a fraud? None of the Wall Street folks sold deal that didn’t have everything disclosed…deep within 100s of pages of legalese.

The issue we have is those on the right who say to those who get screwed – caveat emptor.

The real crime was that none of the things those on Wall Street did we’re illegal.
Fran Macadam says:

February 4, 2013 at 4:18 pm

Too big to fail, too big to jail.

The banks have been the accomplices and enablers of the Enrons and Worldcomms, yet due to arms-length banking rules, they can know about, enable and profit from cooperating with these frauds – which shield laws account for all the continued wrongdoing and the continuous duplicitous profit taking from cheating the rest of us – right to this moment.

It’s a bipartisan project supporting their scams; both Dems and GOP are bought and paid for by their largesse.
jjm says:

February 4, 2013 at 4:19 pm

Mike,

To my point, look at republican efforts to defund the CFPB. The reality is even giant German banks were taken for 100′s of billions by carefully crafted schemes. But, the republican line is that Joe and Jane Six Pack are supposed to read though hundreds of pages of disclosure to ensure they don’t get taken?

Maybe we need to put the government’s thumb on the side of Joe and Jane.
Myron Hudson says:

February 4, 2013 at 4:21 pm

Yesterday I saw an ominous-looking poster that said “Enjoy Small Privileges. Ignore Large Transgressions”.

This is what we are being asked to do. This article immediately called that to mind.
cka2nd says:

February 4, 2013 at 4:24 pm

reflectionephemeral,

Thanks for the reminder. Texas used to send New Deal Democrats to Congress who were the bane of the banking industry because they were of the generation that lived through the Great Depression and suffered the depredations of far-off bankers.

This is not to sound nostalgic for the Democratic Party, nor to excuse either it or the GOP, both of which are whorehouses for the financial elites.
Jon S. says:

February 4, 2013 at 4:47 pm

The first politician to suggest the reinstitution of Glass-Steagall gets my vote.
Charles Cosimano says:

February 4, 2013 at 4:53 pm

You want to find immunity in action? Go to Russia, criticize Gazprom. See how long you live. They know how to deal with prosecutors. (Gazprom is the corporation that controls Russian energy interests. It is run by Putin and is staffed largely by ex KGB)
Doug W says:

February 4, 2013 at 5:05 pm

The re-packaging of the loans may not have been illegal, but a lot of the no doc liar loans were clearly illegal. Read The Monster to see how Ameriquest was clearly breaking the law. And once Lehman Brothers bought them, they were just as culpable. The idea that what went on was legal is a ridiculous, and the fact that no one has end up in jail for this during a Presidency that claims it’s on the little guy’s side is worse than a joke.

http://www.amazon.com/Monster-Predatory-Lenders-Bankers-America–/dp/031261053X/ref=sr_1_1?s=books&ie=UTF8&qid=1360017450&sr=1-1&keywords=the+monster
Josh McGee says:

February 4, 2013 at 5:43 pm

Just horrible. Oh how I wish we were moving in a direction towards too small to devastate. We should bust them up until we’ve achieved that. A lot of people blame this on free markets / capitalism, but that system is (or should be) a system of profits AND losses. What we’ve constructed is a system where they (Big Banks and D.C.) keep the profits and we (regular folk taxpayers) pay the losses. Whatever that is, it is not a free market. Even if it were justifiable, it still wouldn’t be free. I think it’s horrible, I’ll say that much.

If someone commits fraud – and one has to believe fairly naive to believe that didn’t happen here – they should go to jail. If they tank their business for short term gain, we should let them fail. But this is a situation where we either:

a.) won’t allow them to fail for reasons of corruption/cronyism,
b.) believe (perhaps reasonably) the consequences for letting them fail would be so catastrophic it should not be an option and yet still won’t bust them up to reduce risk and avoid the scenario,
c.) privately like the idea of having a few monster players but just won’t admit it publicly, or
d.) some combination of the above

In that situation, if we are not going to have a market where all the players are small enough (and independent enough) we can allow them to fail without interference and can prosecute them for fraud if needed, then I absolutely believe the government should build in protections for society against systemic collapse and protections for individuals against systemic greed. Free markets are great on paper, but if in reality we find a market where we either can’t or won’t achieve it (i.e. allow it to be free to fail), we should regulate it. Of course, then we find the revolving door between Wall Street, the Fed, Treasury, and the SEC is also comical. It is like a situation where the drug cartels get to appoint the police chiefs and then go back to the cartel after they have served their term.

And folks like myself who prefer smaller to bigger realize we can’t do anything about it. In this situation, Mongo just pawn in game of life….

—————

I wish we could/would force the issuing bank to hold the mortgage. Banks used to keep the mortgages rather than selling them to be bundled, thus in the past there was no game of hot potato with the bad mortgages. This forces the issuing bank to live with the risk of the loan and pay closer attention to the risk they are underwriting. It seems like a lot of the issues that drove us to collapse could be somewhat remedied with a single law of one or two sentences. Alas, I guess you can’t put the toothpaste back in the tube….that industry is now too large to just have it disappear from the face of the earth.

—–

P.S.
To some of the commenters, I do think more than a few so-cons care about this issue. I think a lot of times they disagree with the solutions proposed without clearly stating they are nonetheless agreed on the problem. (For example, I think there was real shameful activity and real criminal activity here but do not believe regulating pay is a good idea, believing rather we should move to a scenario where they can run their business as they please and we can allow them to fail when they screw it up.). In other words, they may hate what they see in the Wall Street-D.C. corridor, but they are even more horrified by what they perceive OWS to be about. This is a problem of the so-cons – they have not formulated very good responses to all of this, thus allowing people to believe they don’t care.

Secondly, going back to an earlier post from Rod, even the smallest businesses are often hounded by regulations – even just starting one – so many so cons are projecting their own personal experience with the regular insanity of the regulatory world so they recoil against proposed regulations of almost any kind. I think this is a problem of the regulatory apparatus. If they wouldn’t spend so much time regulating mom-and-pop shops that really aren’t makers in markets (rather, they are takers just trying to get by) and instead just focus regulations towards those companies that are too big to fail, people would be more inclined to accept regulations. Matt Taibbi, no conservative, has made this general point before, much better than me….
Linda says:

February 4, 2013 at 5:48 pm

From what I have read, Goldman Sachs did not need the bailout. Goldman Sachs made huge profits on betting (derivates trading) individuals would default on subprime housing loans. The Federal Reserve convinced all top investment banks to accept bailouts to stabilize markets and cause the collapse of the weakest banks. Goldman Sachs did not wait long to repay the money to get out from other federal control. Goldman and other investment banks, including foreign banks, did receive money thorough the AIG bailout that paid investment banks 100% of the insurance bought on their derivatives trading.

The conservative blame everything on the stereotype liberals in most/many of the comments to Rod’s blogs (also too often from Rod) is unbelievable. Anyone that says it was liberals/Democrats that caused the 2008 Financial Crisis is living in a fairy tale bubble. A few Democrats deserve blame, but the majority of the blame goes to Republicans. It is a matter of greed. The current Tea Party and other Republicans want to remove the already too weak Dodd-Frank Act. Those that do not learn from history are bound to repeat it. The US has a long history of financial industry scandals which caused taxpayers to pick-up the tab. There are also some current Democrats that have assisted Republicans in protecting Wall Street during the crisis to current day. The blame game is not going to result in needed solutions. If you cannot see any positives from the other side, you are wearing blinders.

Brief History of Financial Crisis Primary Cause – Derivatives Trading – Glass-Steagall made things worse, but it far from the biggest cause.

The CFTC Chairperson Republican Wendy Gramm (wife of foreclosure Phil Gramm (R-TX), long time banking chair) had rules passed to prevent oversight of derivatives in 1993. A few weeks later she accept around a million dollar job at Enron.

In 1994 Clinton selected Brooksley Born, Democrat to be the CFTC Chairperson. Due to litigation against Bankers Trust Company by Procter and Gamble and other corporate clients, Born lobbied Congress and the President to give the CFTC oversight of off-exchange markets for derivatives in addition to its role with respect to exchange-traded derivatives. Alan Greenspan, Larry Summers (Dem to blame, Obama’s terrible choice too) and other regulators strongly opposed any regulation or oversight. Born warned that derivatives “pose grave dangers to our economy.” Born was treated terribly. Everyone thought Greenspan was a financial knows everything God. Everyone followed Greenspan over the cliff, including his recommendation that home buyers get adjustable rate mortgages (around 2003). I read a book that details how Greenspan was wrong about almost all of his recommendations.

The Commodity Futures Modernization Act of 2000 (CFMA): most over-the-counter (OTC) derivatives transactions between “sophisticated parties” would not be regulated as “futures” under the Commodity Exchange Act of 1936 (CEA) or as “securities.” Democrats had voted against the CFMA until Phil Gramm snuck the CFMA into a many thousand page must pass appropriations bill on the last day Congress was in session before Christmas. Many members of Congress had already left. Gramm did not bring the CFMA to the floor for discussion before it was passed, which means most members of Congress did not know it was in the appropriations bill.

Clinton has apologized and acknowledged regret for the CFMA. Greenspan never apologized. He told Congress in 2008 that he thought the companies could be trusted to protect their stockholders. Greenspan never had any concern for consumers. He ignored the reports of predatory housing loans starting in the late 1990s – no action.

Bush II and his Republican controlled Congress had the opportunity to correct the problem after Enron used derivates to manipulate the energy market in California. Several Democrats warned about the risk of continuing to allow unregulated derivatives.

Bush II appointed Walter Lukken to the CFTC. Lukken was the attorney hired by Republican Lugar to write the CFMA. The Sarbanes-Oxley Act was passed without correcting a major root problem (derivatives) – similar to the Dodd-Frank Act that did not correct the root problem of too big to fail.

Several Democrats, especially Maria Cantwell (D-WA) and Carl Levin (D-MI) were headed on the right path during Congressional Hearings about derivatives trading (speculation) causing the huge increase in oil prices (still happening). They proposed a bill to correct the Enron-loophole in the Senate, but no action was taken on the bill. Senator Cantwell was very involved with the Enron scandal investigation.

If you do not like making derivatives traders wealthy while we pay more for gas, food, and other commodities, take action. Research information from the only CFTC Commissioner, Bart Chilton, that has tried to fight the uphill battle to protect consumers (CFTC’s stated mission, but it has been to help Wall Street). Read some of his speeches and testimonies: http://tinyurl.com/b3jtvnn

Cantwell put a hold on Lukken being nominated as Chairperson of the CFTC. He functioned as “acting” Chairperson until Obama became President. Lukken now has an influential multi-million dollar in the financial industry.

Cantwell and Senator Bernie Sanders (I-VT) attempted to block Obama’s bad nomination for the CFTC, Gary Gensler – joined Goldman Sachs in 1988 and spent 18 years there. He became a partner at the age of 30, youngest in Goldman Sachs history at the time. Gensler said all the right words, but I do not trust him or most CFTC employees, especially the large number of attorneys with huge egos. Gensler was Senior Adviser to Senator Paul Sarbanes (D-MD), one of the authors of the Sarbanes-Oxley Act.

A Democrat Commissioner, Michael Dunn, retired in 2011 for a lucrative job as a lobbyist. He voted with the Republican Commissioners to prevent enacting some requirements of Dodd-Frank. Like the Republicans, he denied speculation was causing increase in commodity prices, even though the evidence is overwhelming. I have not read about his Democrat replacement; however, the CFTC has still not implemented all requirements of Dodd-Frank that were due in 2011.

After Dunn left, the CFTC did try implementing positions limits. On September 28, 2012 in International Swaps and Derivatives Association vs. CFTC a US District Judge ruled against the “position limits” provision of Dodd-Frank. Limiting position limits is designed to prevent excessive speculation or manipulating prices by preventing a trader/business from controlling a large share of a commodity.

http://tinyurl.com/bg46uqe

In November CFTC appealed the ruling
http://tinyurl.com/bken5t5
jjm says:

February 4, 2013 at 5:55 pm

And once Lehman Brothers bought them, they were just as culpable.

Not if they disclosed what was going on, which is exactly what they did, in painstaking detail.

Was what they did illegal? No. Should it have been? Yes!
Linda says:

February 4, 2013 at 6:01 pm

jjm says:
February 4, 2013 at 4:10 pm

“How was it a fraud? None of the Wall Street folks sold deal that didn’t have everything disclosed…deep within 100s of pages of legalese”

For just one example of fraud, you need to listen:

Sen. Levin Grills Goldman Sachs Exec On “S***y Deal” E-mail

http://tinyurl.com/38uefyp

There are other examples of misleading customers to buy derivatives that were only a good deal for the traders. Some mortgage providers mislead customers on housing loans. On and on – greed – fraud.
spite says:

February 4, 2013 at 6:03 pm

Instead of bailing out these banks, they should have let them go under. All the fear of collapse has led to these their survival, its looks they will become even bigger monsters in the future.
SDS says:

February 4, 2013 at 6:05 pm

…I remember only Ron Paul calling in the wilderness about this for years… Something about “crony capitalism”….

…But not enough folks cared…..
M.B. says:

February 4, 2013 at 6:10 pm

Terrifying. My friends and family are already tired of this anecdote, but when my husband and I were first looking for a home (at the height of the bubble), we spoke to two separate mortgage brokers who told us that it wasn’t worth their time to work with us if we weren’t going to be purchasing a home (i.e. loan) of over $600,000.

We were early/mid thirties, both making around $50k year (maybe a little less), working in publishing and nonprofit/arts management, and we were specifically looking to put down 15-20% and get a fixed-rate, non-bubble loan on a house in our price range. Both brokers assured us that we should put 5% down, that in two years time we’d be making $80k each, that in 6 months time our home would have appreciated significantly so we could refinance blah blah blah. The thing is, I don’t think even THEY really believed the spiel, but both (we went to the second because we didn’t trust the first) were almost tangibly slavering to exploit a couple of chumps with a little bit of a downpayment saved up (us). It was gross.

Fortunately, my husband and I felt uncomfortable enough about the situation to bow out of the market for another few years and now, unlike many of our friends, we have a home that was purchased within our range (after the crash), and it doesn’t hurt to pay the mortgage, and we are not underwater.

It drives me crazy when people say that those who were sold on bubble loans were just gullible, stupid, or greedy. My husband and I are both educated and employed and hardworking people, and we quite literally could not find a mortgage broker willing to acquire for us anything BUT a totally sketchy and ridiculous loan. And meanwhile everyone was telling that we’d be fools not to get in on the housing market.

Anyway, no real point to my story except that I actually don’t believe such avarice and insensible greed is merely an automatic function built into today’s financial institutions–there is a significant human element. The mortgage/securities scam was an immense moral lapse on the part of millions of individuals who were blinded by the idea of making a buck off the backs of the non-financial-industry public. Goldman-Sachs president right down to lowly brokers. Trickle effect indeed.
Adam says:

February 4, 2013 at 6:34 pm

When finance as a percentage of GDP is more than double it’s historical average, you can bet the result is not good for the average citizen. It is simply a tax by another name, one that is not instituted for any kind of “greater good.” And it is not a Republican or Democratic downfall, as each party has contributed to the finacialization of this country. Whether it is the breakup of Glass-Steagall, the Commodity Futures Modernization Act of 2000, or attempts by both parties to artificially inflate home ownership, each has done it’s part to allow rent seeking at astronomical levels. Add to that easy money policies and under taxation of capital, which increases the amount of dollars chasing yield, as well as the use of debt to make up for stagnating income of wage earners and inflation of everyday expenditures, and you get bubble creation that inevitably comes home to roost. This is as old as Andrew Jackson chastising the banks for socializing the losses and privatizing the profits. We need a re-calibration of our form of capitalism that recognizes the the inherent danger of fast money policies that protect the wealthy at the expense of everyone else. That isn’t an attack on the rich as much as it is a realization that capital is under taxed, leading not to capital formation to induce true innovation, but to the creation of fake financial instruments that are simply casino style games of chance. It is also an understanding that the corporate tax rate may be too high, but loopholes allowing the off-shoring of income to tax havens outside of the country also do nothing to spur innovation at home. Banking and finance are two different animals and need to be treated as such. Labor is also down in the dumps, a lot of it self inflicted by unions that over played their hands. We need a better balance, especially if our economy is based 75% on consumer spending. We can’t continue to strangle the majority of our consumers(mostly wage earners) and hope to maximize the potential of our economy.
jjm says:

February 4, 2013 at 6:36 pm

The thing is, I don’t think even THEY really believed the spiel

I think you’ll find many of them owned 10 houses, mortgages to the hilt becaus they were 100% convinced it could never end.

You don’t get a catastrophic bubble because people at the center think it’s a scam, you get a catastrophe when the people at the center believe it with all their heart.
Doug W says:

February 4, 2013 at 6:40 pm

Not if they disclosed what was going on, which is exactly what they did, in painstaking detail.

But not if the underlying loan contains fraud. Ameriquest was changing peoples’ income and changing the actual terms of the loans people signed, making the loan documents fraudulent. Does not matter how precisely Lehman Brothers spell out all the terms to their CDOs if the underlying assets used to construct it were fraudulent. Something built on lies is fraud.
Spring-Heeled Jack says:

February 4, 2013 at 7:00 pm

So Wall Street isn’t the Devil, it’s Azathoth.

Lovely.
jjm says:

February 4, 2013 at 7:56 pm

Doug & Linda,

As an example they stated clearly in the prospectus “the loans contained herein are stated income loans and as such we can offer no guarantee as to the accuracy of the information provided.”

Why might you ask would an investor buy such a security? Well it was a truth universally accepted that housing prices could never fall on a nationwide basis. As long as you believed, as almost everyone did, that housing prices could never fall – it was a perfect safe deal.
jjm says:

February 4, 2013 at 8:01 pm

Something built on lies is fraud.

You may wish the law was thus, but it is not.
J says:

February 4, 2013 at 9:34 pm

Brief History of Financial Crisis Primary Cause – Derivatives Trading – Glass-Steagall made things worse, but it far from the biggest cause.

To quote one of my acquaintances on the matter:

“The repeal of Glass Steagall as a cause of the crash would only make sense if a depository bank collapsed or had to be bailed out because it had been allowed to merge with an investment bank.

“But that didn’t happen in 2008.

“What happened in 2008 was that bonds (mortgage backed securities) that were supposed to be super safe triple AAA rated turned out to be extremely unsafe, which meant that depository banks became insolvent or failed to meet reserve requirements — not that investment banks took down depository banks.

“The deregulation that mattered — that caused the collapse were both Republican initiatives:

“1. The Garn-St. Germaine Act signed into law by Ronald Reagan, which effectively destroyed the “thrift” or savings bank and savings and loan sector, eliminating the difference between them and commercial banks and leading directly to BOTH the 1990s savings and loans crash and bailouts and the 2008 crash and bailout.

“2. George W. Bush’s Securities Exchange Commission deregulated the issuance and rating of mortgage backed securities.”
Linda says:

February 4, 2013 at 10:28 pm

Doug W says: “The re-packaging of the loans may not have been illegal, but a lot of the no doc liar loans were clearly illegal. Read The Monster to see how Ameriquest was clearly breaking the law. And once Lehman Brothers bought them, they were just as culpable. The idea that what went on was legal is a ridiculous, and the fact that no one has end up in jail for this during a Presidency that claims it’s on the little guy’s side is worse than a joke.”

The housing loans with fraudulent support were illegal. You are not correct about individuals not going to jail under Pres Obama. An example of FBI convictions for one year:

FBI Financial Crimes Report to the Public 2010-2011

“Through FY 2011, FBI investigations resulted in 1,223 informations and indictments and 1,082 convictions of mortgage fraud criminals. The following notable statistical accomplishments are reflective in FY 2011 for mortgage fraud: $1.38 billion in restitutions; $116.3 million in fines; seizures valued at $15.7 million; and $7.33 million in forfeitures.”

Specific examples, includes banks involved with subprime housing loans: http://tinyurl.com/76ss7uw

I have read about various other convictions, including at the state level. I have noticed that it often takes many years after an illegal action to get the conviction. The CEO management at the big investment banks (Lehman Brothers, Goldman Sachs, etc) probably learned considerable information to help prevent criminal convictions from the many detailed Enron documents posted on the Internet.

While employees (traders) have been convicted it does not make the big media splash that a CEO conviction would receive. Criminal “intent” has to be proved. Goldman Sachs agreed to a fine settlement with the CFTC for failure to adequately address risk, monitor and supervise traders that made fraudulent trades, and other management stuff.

http://tinyurl.com/an8qs57

Oct 2012, Former Goldman Sachs Group Inc. director Rajat Gupta was sentenced to 24 months and fined $5 million for insider trading.

The CFTC also ordered a bigger fine for MF Global, which I have not yet read.
JJM says:

February 5, 2013 at 1:26 am

I’d like to make clear that the person that is posting as “jjm” above is not me, the commenter named “JJM” who comments mostly on Larison’s work.
Glyn Tutt says:

February 5, 2013 at 4:40 am

Are we all just scared about the unknown?

I hear you well and clear Mr. Dreher! Over here in Europe there appears to be three styles in the world of politics; a) the British approach of dig in, this is going to be a long haul b) the Eurpoean Central Bank’s overly optimistic view that ‘We’ll more than likely be the Central Bank for teh next Global Currency of last Resort’ and c) the French view that big business needs to stop expecting government to help them continue exploiting the french people for profit and supposéd general social benefits.

So who is right?

As an Englishman I do feel for the British stance – let the markets have their way, but at the same time let’s pass a few laws that will help safeguard the nation from extreme profiteering and disregard for the money which is being waged on the so called global market investment stage. A typical position for your former colonial master – buy time and see which side will begin to show the best odds.

The European stance (and here I refer mainly to the ECB rather than those impotent liberal bodies known as the European Parliament and European Commission) is an interesting one as it is now very clear that Germany entered the Eurozone with a highly devalued rate of exchange – making the last 10 years or so a boom for their economy due mainly to the lower cost of German products for the ‘export’ market within the Eurozone. France appears to be riding the storm on the Eurpoean stage as the 2nd laregst economy in the Eurozone purely and simply because it is still an economy with a large agricultural element – making lots of french products (wine for example) cash crops (more about France later). So with 2 strongish economies still fuelling the Eurozone agenda, the only threats seem to be countries like Greece and Portugal … or Britain with a recent announcement to hold a referrendum on Europe in 4 or 5 years time. Most Europeans I talk to wish that they did not use the Euro and percieve that the European Central Bank is fuelling the ever increasing gap between richer and poorer countries … and the people within them. So the British stance of wait and see will probably be paid off when the Germans have their national elections in October this year.

Now, back to the French. Last year saw the election of a left-wing President, with an overall majority (slim, but still giving him the overall vote) in the Assemblé Génerale. But François Hollande has proven once again that even though he may pertain to be a prominent politician of the ‘Partie Socialist’, once in Presidential office he will assume the role of Monarch of the Fifth Republic and take a more balanced view of political opinion. Examples of this more pragmatic approach is demonstrated in his acceptance that European Economic policy is driven mainly by the northern, conservative states (including Germany) and that he does not really have much to say whilst his country is borrowing at levels that Greece and Portugal would have considered affordable only a few years ago. He also understands that the vast majoirty of his electorate now see the folly of borrow now to pay for tommorrow through their worry about maintaining retirement at 60 and the daily cost burden of public services through employee/employer deductions and the relative high cost of French products compared with similar items produced in other European countries.

One this is for sure – the bail out of banks and financial services is less likely in Europe with falling Government Revenues and being faced with increasing public debt (and commiting political suicide) in favour for managing the expectations of the generations born after 1965 in terms of retirement, property prices, access to loans and ultimately the balance between Government policy towards the financial industry and domestic stability.

If you ask me personally – I’d say stuff the financial institutions (even if i and many others may loose out), let them fail along with their employees who benefit more from the returns than their investors and clients and let’s set up a new world order based on politicians who have less links with so called industry and big business and more interest in improving the lot of the majority – good honest working men and women who aspire only to see their children educated and have enough to look after their parents in old age. In other words, the ‘system’ should work for the people, not the people for the state.

How far away are the goals of our political and industry leaders in this simple aspriation?

Is it time for another cup of tea in Boston?