Yes, it’s slippery out there. Scraped off two cars, salted a sidewalk and picked up a trunk load of tamarind, chilis, plum sauce and mangoes this morning, and am busily ignoring the Vikings game while sorting out some links of possible interest to you and yours. Speaking of slippery….
There may be some justice coming to Wall Street, but my money’s on fines, not prison time.
“Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance. But for them, material nonpublic information is akin to a performance-enhancing drug that provides the illegal ‘edge’ to outpace their rivals and make even more money.”
I can’t think of a better reason for imprisonment over fines, but then again I’m just some ignorant fuckwit from the hinterlands who thinks you should actually have to earn your wealth instead of stealing it from those who do work. Dan Froomkin has more on our lawless financial sector, including this from William K. Black:
The things I think are critical and badly underreported are:
1. The astonishing amount of mortgage fraud (literally, millions of cases annually) and how it hyperinflated the bubble and led to the Great Recession.
2. The fact that these mortgage frauds were overwhelmingly due to consciously fraudulent lending practices in which the CEOs of seemingly legitimate entities used accounting tricks as their “weapon of choice” to report higher profits and get bigger bonuses. (George A. Akerlof and Paul R. Romer got it right in the title to their 1993 article:
Looting: The Economic Underworld of Bankruptcy for Profit.)
3. The disgraceful lack of prosecutions which has resulted from regulators virtually ending the practice of making criminal referrals and the pathetic March 2007 “
partnership” that the FBI entered into with the Mortgage Bankers Association (the trade association of the “perps”) that led the FBI and the Department of Justice to (implicitly) define out of existence fraud by the lenders (and to conceive of them as the “victim” — which they are, but only of their controlling officers). Bush administration attorney general Michael Mukasey in June 2008
notoriously refused to create a national task force against mortgage fraud based on his claim that mortgage fraud was analogous to “white collar street crime.”
4. The “echo” epidemics of fraud set off by the primary epidemic of accounting “
control fraud“. The fraud designed by CEOs in turn kicked off an epidemic of fraud among loan brokers and appraisers. Reporters should explore the concept of the
Gresham’s-style dynamic in which bad ethics were a competitive advantage and drove good ethics out of the marketplace.
5. The massive foreclosure fraud we are seeing now as another “echo” epidemic. To optimize their accounting control fraud, lenders gutted underwriting. That led to “fraud in the inducement” (vis a vis borrowers), endemic documentation problems, and an extraordinary numbers of defaults. The process required tens of thousands of real estate financing personnel to commit fraud on a daily basis as their core function. Some of these people are unemployed, but many are in the industry and are presently engaged in loan servicing. Now that their job is to foreclose on properties, there is no reason to expect that they would suddenly become honest, and they haven’t.
6. The ongoing massive cover up of losses on bad assets, particularly by the “too big to fail” institutions, which I call “
systemically dangerous institutions” (SDIs). Those institutions, along with Federal Reserve Board Chairman Ben Bernanke and Congress (at the behest of the Chamber of Commerce and with no opposition from the Obama administration) in April 2009 forced the Financial Accounting Standards Board (FASB) to
change the rules so that the banks do not have to recognize their losses unless and until they sell the bad assets. The implications of this cover up are large (and rarely reported). At the very least, it means that Treasury Secretary Timothy Geithner’s propaganda campaign about TARP saving the world at virtually no cost (perhaps even a “profit”) is nonsense — despite its success in influencing the
Washington Post and
Los Angeles Times. Consider:
A) The repayment of TARP funds does not mean the banks are healthy. Their asset values are often grossly inflated, which means their net worth is grossly inflated. That means that the claims that we have increased net worth requirements (and that
Basel III will further increase net worth requirements) are false. Net worth requirements have meaning only if the accounting is honest
B) The repayment of TARP funds does mean that the banks are freed from any meaningful restraint on senior officer compensation. Note that absent the accounting lies the banks would often be reporting losses (and failure to meet required capital requirements, or outright insolvency) and could not pay their senior officers bonuses and would be subject to mandatory closure under the Prompt Corrective Action (PCA) law.
C) No commercial entity would have ever signed the TARP deals on the terms that the U.S. drafted for itself. The U.S. provided not only fresh money but an unlimited de facto guarantee (along with permitting phony accounting). If the U.S. had negotiated competently it would have owned virtually all the shares of every TARP recipient (which, of course, was a political impossibility).
D) The accounting lies are stalling the recovery. Markets cannot clear promptly when one creates an incentive to hold massively overvalued assets for years.
E) The losses are still there, but the taxpayers are on the hook via Fannie and Freddie and the Fed (which has taken over a trillion dollars in toxic collateral at grossly inflated values).
7. The continued absence of effective regulation. It should be scandalous that Obama left in charge, or even promoted, the anti-regulators who permitted the Great Recession. The (failed) anti-regulator of Fannie and Freddie, for example, remains
FHFA’s acting director. This is significantly insane as a matter of both economics and politics. (The administration doesn’t even seem to realize the issue of integrity.)
8. The crises of state and local government and the lack of a rational basis for Republican and Blue Dog opposition to the proposed revenue sharing component of the stimulus bill. The compounding insanity of the administration failing to fight for its concept and failing to make explicit how badly its removal would harm the recovery, employment, and vital government services.
9. The insanity of accepting mass, long-term unemployment rather than having the government provide productive jobs for everyone willing to work (as the employer of last resort).
Long, but heartfelt and sincerely on the money. I have nothing to say about any political fixes, and am just pointing out that there’s no reason to think anything will get better so long as our leaders refuse to acknowledge the systemic nature of our problems.
More from Sirota.
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Don’t worry, the Zeeboids are already picking out baby names and are repainting the nursery. The chances of this kid being aborted are about as great as my chances of becoming a grandfather (hard to do when you don’t have any kids).
Pro-choicers have no dog in this poll, but apparently quite a few folks agree with me that this poll needs freeping so as to publicly expose the vile hypocrisy at work here.
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Video du jour: Hooters security roughs up Mexican grandma.
What I really stood out for me was that this woman’s family was vastly less obese than the other diners at this Chicago Hooters.
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Nineteen assholes who want the government to micromanage the internet. (Lucky Minnesota: we’re the only state with two Senators on this list!)
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Somehow Iowa Christians are able to teach Muslim private school students. Worse, they say they learn from their students!
If you know Katherine Kersten, please forward this link to her. (Yes, she’s got some fresh reality-bending axe-grinding up at the Strib today but you didn’t hear that from me.)
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Cheating part deux.
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David Brooks sets a new low mark for fatuous cluelessness, asking why aren’t there any magazines for middle managers in suburban office parks?
Maybe because middle management dweebs have almost nothing in common with each other except maybe a common wish that they were doing something else? Brooks seems to think that middle management is a calling like being a blacksmith or a Navy SEAL instead of a sucky employment pit white collar folks fall into and usually can’t crawl back out of again.
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Etc. (warning: may contain some politics):
Avedon Carol’s Sideshow
Hating on the TSA (once Bush was gone, tolerance for privacy invading bullshit disappeared faster than free Oxycontin at a Palin rally)
Effective immediately pilots no longer have to have their crotches fondled before flying you to your destination
Who hates TSA procedures most? Try TSA employees
Apparently intolerance for being groped by TSA has now extended to crying children (the solution is obvious)
Iowa newspaper on Michael “Y’all are funny” Swanson
Pope decides that gay escorts should wear rubbers when having sex with priests, bishops, archbishops, cardinals and popes
Shunning (works for me)
Geo. Washington story I’d never heard that is way more interesting than the cherry tree myth
Wolcott on Morning Glory
Great ideas that will never work: blocking cell phone use in cars (I love the thought but seriously….)
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Waiting until after Christmas to write about the year in death, R.I.P.
