ProPublica’s Jesse Eisinger has an excellent column today on dissent within the financial industry, writing that “Wall Street Is Already Occupied.” As Audit Boss Dean Starkman says on the Twitter, it’s “both plugged-in and wise.”
The financial industry is hardly a monolith, and lots of people within it know the system has gone awry. Like this Goldman alum:
“There have been repeated fines and malfeasance at literally all the investment banks, but it doesn’t seem to affect their behavior much,” he said. “So I have to conclude it is part of strategy as simple cost/benefit analysis, that fines and legal costs are a small price to pay for the profits.”
And Eisinger laments that none of the dissent has come from a position of power:
One notable absence in this crisis and its aftermath was a great statesman from the financial industry who would publicly embrace reform that mattered. Instead, mere months after the trillions had flowed from taxpayers and the Federal Reserve, they were back defending their prerogatives and fighting any regulations or changes to their business…
Over the next year, maybe that will change. Things are going to be tough on Wall Street. Bonuses will be down. Layoffs are coming. Europe seems on the brink of another financial crisis. Maybe from that wreckage, a leader will emerge.
Read the whole thing.
— The editorial board of the Star Tribune thinks the proles oughta shut up and thank the Pilgrims for their $8.50 an hour jobs as shopping cart attendants.
Retailers have been opening stores earlier and earlier to get an advantage on Black Friday and requiring workers to work late on Thanksgiving Day. Anthony Hardwick started a petition to get his employer, Target, not to do that. The Strib’s headline:
Take this job and … be glad you have it
And lede:
Two words for Anthony Hardwick: Buck up.
And the kicker:
Once again this Thanksgiving, Americans are shaken by uncertainty about the country’s financial future. Too many people are out of work, struggling to keep a roof over their heads and food on the table. Many are lacking health insurance and forgoing staples that in different times were a given.
So please, protesting retail workers, stop whining about having to work holiday hours.
Be grateful to have a job.
I’m sure Hardwick is glad to be employed. His point is that it’s insane to open stores at midnight after Thanksgiving. Five a.m. will do, thanks. But that’s too much to ask for the Strib.
— Steve Randy Waldman has a great post on just how big the bank bailouts really were:
During the run-up to the financial crisis, bank managers, shareholders, and creditors paid themselves hundreds of billions of dollars in dividends, buybacks, bonuses and interest. Had the state intervened less generously, a substantial fraction of those payouts might have been recovered (albeit from different cohorts of stakeholders, as many recipients of past payouts had already taken their money and ran). The market cap of the 19 TARP banks that received more than a billion dollars in assistance is about 550B dollars today (even after several of those banks’ share prices have collapsed over fears of Eurocontagion). The uninsured debt of those banks is and was a large multiple of their market caps. Had the government resolved the weakest of those banks, writing off equity and haircutting creditors, had it insisted on retaining upside commensurate with the fraction of risk it was bearing on behalf of stronger banks, the taxpayer savings would have run from hundreds of billions to a trillion dollars. We can get into all kinds of arguments over what would have been practical and legal. Regardless of whether the government could or could not have abstained from making the transfers that it made, it did make huge transfers. Bank stakeholders retain hundreds of billions of dollars against taxpayer losses of the same, relative to any scenario in which the government received remotely adequate compensation first for the risk it assumed, and then for quietly moving Heaven and Earth to obscure and (partially) neutralize that risk.
The banks were bailed out. Big time.
What we need is more dissent from the justice department. Until wall street is given a reason to behave, the law will continue to lose in the cost/benefit analysis. For instance:
http://digbysblog.blogspot.com/2011/11/supporting-troops-by-david-atkins.html
"Foreclosures on active duty troops is usually a big no-no, for a lot of reasons – for instance, when your credit rating is damaged by a foreclosure, it can impact your national security clearance. In addition, there’s enormous stress that the soldier goes through when his or her family is facing a threat of eviction, and it’s the kind of stress that makes him or her less equipped to be ready in a warzone."
But, as you may know, that doesn't stop banks from doing it. So there's a law:
"Much has been made of President Obama’s argument that the banks did nothing illegally, and various other scholars and officials have argued that prosecuting the banks is far too expensive and difficult. Yet, the SCRA is a simple law with teeth; it carries real jail time, and the parties have already confessed to the crime."
So what is the Obama Administration doing about it:
"Eric Holder’s Department of Justice isn’t making them admit anything. Otherwise, the penalties might come into play...Eric Holder and various US Attorneys around the country aren’t prosecuting bank foreclosures on active duty troops, even though they know it is happening. Bank regulators know about the problem. Congress knows about the problem. Certainly, the Pentagon knows about the problem."
But who cares about the problem? Once again, Schneiderman.
"Eric Schneiderman’s profile lately has been to go where federal regulators fear to tread, to actually do the jobs of the federal government when they fail to do so. In foreclosure fraud, he undertook the investigation that the feds would not. Now he is applying that to military foreclosures, although the authority here is a little murkier.
To sum up quickly, the banks have systematically violated something called the Servicemembers Civil Relief Act, which protects military members serving overseas from having to appear in court cases...In steps Schneiderman. But how? The SCRA is a federal law. Well, he’s using state consumer protection laws, and in New York they are considerable"
Why do we need so much dissent on the state and judiciary level (Judge Rakoff is another hero) to make up for the utter compliciancy on the federal level?
#1 Posted by Thimbles, CJR on Thu 1 Dec 2011 at 03:05 AM
Speaking of Rakoff.
http://www.iwatchnews.org/2011/11/30/7536/judge-citigroup-case-has-bucked-trend-rubber-stamping-sec-settlements
#2 Posted by Thimbles, CJR on Thu 1 Dec 2011 at 03:11 AM
Another loss in the cost/benefit analysis:
http://articles.latimes.com/2011/nov/27/world/la-fg-mexico-money-laundering-banks-20111128
"Money launderers for ruthless Mexican drug gangs have long had a formidable ally: international banks.
Despite strict rules set by international regulatory bodies that require banks to "know their customer," make inquiries about the source of large deposits of cash and report suspicious activity, they have failed to do so in a number of high-profile cases and instead have allowed billions in dirty money to be laundered...
Banking powerhouse Wachovia Corp. last year agreed to pay $160 million in forfeitures and fines after U.S. federal prosecutors accused it of "willfully" overlooking the suspicious character of more than $420 billion in transactions between the bank and Mexican currency-exchange houses — much of it probably drug money, investigators say...
Wachovia paid the $160 million in what is called a deferred-prosecution agreement; no one went to prison, and the fines represented a tiny fraction of the money the bank had filtered. In court documents cited by the U.S. Drug Enforcement Administration, Wachovia acknowledged serious lapses...
In a similar case, another banking giant, HSBC Bank, is being monitored by U.S. regulators after a probe last year focused on bulk cash that the bank's U.S. branch received from Mexican exchange houses, money suspected to be drug proceeds...
After U.S. federal prosecutors issued grand jury subpoenas, some believed that regulators might try to use the HSBC case to set an example and prosecute individual bankers. Instead, HSBC agreed to strengthen its compliance program and has said it is cooperating with investigators, without acknowledging wrongdoing, part of a so-called consent order."
This is the kind of stuff you find on narconews, reminiscent of the old BCCI scandal and they're getting off with a fine and a crossed finger promise never to do it again?
What the bejezus is going on?
#3 Posted by Thimbles, CJR on Thu 1 Dec 2011 at 04:14 AM
Another Chittum Special...
Quote a Soros-funded mouthpiece... Check.
Lambast right-leaning editorial... Check.
Now Ryan thinks he can run Target stores better than the management can. I guess that journalism major lets you determine the proper store hours to keep.
#4 Posted by padikiller, CJR on Thu 1 Dec 2011 at 08:07 AM
Hey padi, you know once you start talking about Soros, Acorn, and evil cabals of climatologists that you don't get to lecture ANYONE about black helicopters, right?
Meanwhile, confessions of a criminal banker.
And I will still blame Barney Frank, the CRA, and Santa Claus after reading about all that. Cause I'm special.
#5 Posted by Thimbles, CJR on Thu 1 Dec 2011 at 11:02 AM
'Now Ryan thinks he can run Target stores better than the management can. I guess that journalism major lets you determine the proper store hours to keep.'
Excellent. That formulation works in any context when it comes to pesky journalist who DARE to criticize large institutions. Just shut up Ryan. SHUT UP RYAN.
Using Ryan as a synonym for all journalists who get too big their britches, let's look back into history:
'Now Ryan thinks he can run Enron better than the management can. I guess that journalism major lets you determine how to properly use off-books accounting treatments.'
'Now Ryan thinks he can run Lincoln Savings & Loan better than Charles Keating can. I guess that journalism major lets you lecture bankers about selling uninsured junk bonds to retirees who think they're buying the equivalent of FDIC-insured CDs.'
'Now Ryan thinks he can run the White House better than Nixon, Haldeman, Colson etc. can. I guess that journalism major lets you lecture the world on political integrity and democracy.'
'Now Ryan thinks he can run Lehman Bros. better than the management can. I guess that journalism major lets you determine how much leverage is appropriate for an investment bank that's intertwined with much of the world economy.'
'Now Ryan thinks he can run WaMu better than the management can. I guess that journalism major lets you determine whether it makes sense to focus your mortgage portfolio on no-doc, Option ARM and subprime loans.'
'Now Ryan thinks he can run Sharper Image better than the management can. I guess that journalism major lets you determine what gizmos and gift notions to sell.'
#6 Posted by shlumpman, CJR on Thu 1 Dec 2011 at 03:48 PM
Can you say "non sequitur", shlumpman?
Ken Lay certainly would have been no worse of a "professional journalist" than Julie Amparano, Jayson Blair, Judith Miller, Dan Rather, Stephen Glass, Thom Pegg or Janet Cooke.
The fact that some business are mismanaged (or that some "professional journalists are incompetent or frauds) doesn't mean that Ryan's journalism degree empowers him to determine Target's optimum store hours.
#7 Posted by padikiller, CJR on Thu 1 Dec 2011 at 05:14 PM
All presidential edition!!
'Now Ryan thinks he can run U.S. foreign policy better than President Johnson can. I guess that journalism major lets you determine that it's not a good idea to get involved in a land war/guerilla action in Asia.'
'Now Ryan thinks he can run the U.S. intelligence operations better than President Bush management can. I guess that journalism major lets you determine that the evidence for WMDs in Iraq is thin or nonexistent.'
'Now Ryan thinks he can run U.S. foreign policy better than President Johnson can. I guess that journalism major lets you determine that it's not a good idea to get involved in a land war/geurilla action in Asia.'
'Now Ryan thinks he can run U.S. disaster response better than President Bush can. I guess that journalism major lets you determine that it's not a good idea to have the former judges commission of the Arabian Horse Association as head of FEMA.'
'Now Ryan thinks he can run U.S. health policy better than the Clintons can. I guess that journalism major lets you determine that the Clinton health plan was an unworkable mess.'
'Now Ryan thinks he knows better than President Harding as to how to act as a steward of federal resources. I guess that journalism major lets you determine that it's not a good idea to allow political cronies to control the Teapot Dome Naval petroleum reserves.'
#8 Posted by shlumpman, CJR on Thu 1 Dec 2011 at 05:32 PM
"The fact that some business are mismanaged (or that some "professional journalists are incompetent or frauds) doesn't mean that Ryan's journalism degree empowers him to determine Target's optimum store hours."
Yeah dude, that should be an issue between the store and its workers. So why did the Star Tribune's editorial page, which Ryan was criticizing, get involved on behalf of the employers?
Ps. Black Friday, or competitive consumerism day, is a stupid event. Making it start at midnight is insult to 'pepper sprayed by customer' injury.
#9 Posted by Thimbles, CJR on Fri 2 Dec 2011 at 05:02 AM
Yeah.. Black Friday is "stupid"..
It's not like people flock to stores at midnight or anything.
Once again, we're dealing with the mentality of those "advocates of government-endorsed redistribution of wealth" (who can no longer be called "commies" under Pravda's... er, I mean CJR's new comment censorship policy)...
These people think the "little people" are too stupid to be permitted to shop when they wish... Sign used car contracts on their own... Buy houses on their own... Etc..
I don't have a problem with Ryan's critique of the Strib.... I do have a problem with his determination that 5 am is the best time to open a Target store.
#10 Posted by padikiller, CJR on Fri 2 Dec 2011 at 08:07 AM
Again we hear from Padi, the oligarch lapdog, regurgitating the same words over and over again. I think he has commie tyretts.
#11 Posted by sergio, CJR on Fri 2 Dec 2011 at 10:15 PM
Again we hear from Padi, the oligarch laptog recurgitating the same nonesense. I think he has commie tyretts, or was molested by one in childhood.
#12 Posted by sergio, CJR on Fri 2 Dec 2011 at 10:18 PM
Rob Kuttner on Jon Corazine and the mf'ers at mf global:
http://www.huffingtonpost.com/mobileweb/robert-kuttner/jon-corzine-mf-global_b_1128342.html
The take away? We gotta make clear laws and we gotta start putting people in jail for violating them.
#13 Posted by Thimbles, CJR on Sun 4 Dec 2011 at 07:19 PM
Taibbi writes on the Rakoff decision and the cost/benefit analysis of following the law:
http://www.rollingstone.com/politics/blogs/taibblog/federal-judge-pimp-slaps-the-sec-over-citigroup-settlement-20111129
"The SEC in this case incredibly argued – out loud, on paper – that it could make regulatory decisions without considering the public interest. In particular, it argued that it didn’t need to consider the public interest when granting “injunctive relief,” i.e. an injunction barring future behaviors, as opposed to the stiffer and more immediate punishment of fines or criminal charges.
The SEC argued to Judge Rakoff that "the public interest ... is not part of [the] applicable standard of judicial review."
Translating: “When we decide to let thieving megabank off with just a promise to never do it again, we don’t have to consider whether or not this is in the public interest.”
If you stand back and really think about what this argument means, it’ll make your head spin. What the SEC is saying here is that according to the incestuous values of the small community of high-priced revolving-door lawyers who both head the SEC enforcement office and run the defense teams of banks like Citi, a $95 million fine with no admission of wrongdoing for a $700 million fraud is, in fact, “fair” and “reasonable.”
The settlement only becomes problematic, the SEC implies, if you ask them to square their judgment with “the public interest.”
The SEC, in other words, is admitting that they have a standard for “reasonableness” and “fairness” that somehow does not coincide with the public interest. This surreal formulation translates as, “We’re doing the right thing – we’re just not doing it for the public.”...
The Rakoff ruling shines a light on the way these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.
If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there’s simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business, as Rakoff notes:
As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup's position in this very case.
That line, “a cost of doing business imposed by having to maintain a working relationship with a regulatory agency,” is one of the more brutally damning things you’ll ever see a judge write. Rakoff is saying that these fines are payoffs to keep the SEC off the banks’ backs. They’re like the pad that numbers-runners or drug dealers pay to urban precinct-houses every month to keep cops from making real arrests. That's what he means when he refers to "maintaning a working relationship." It's heavy stuff."
#14 Posted by Thimbles, CJR on Sun 4 Dec 2011 at 10:01 PM
Just on a whim, I decided to watch a little of my well worn copy of "Inside Job" and suddenly I had an epiphany during the "taking care of business" segment. The collective Attorney General agreement to protect the banks, the agreement Rakoff vetoed, they did a similar deal 4 years before:
http://www.sec.gov/news/press/2003-54.htm
And got promises from the major banks listed to keep their analytical side separate from their sales side so they don't sell crap rated gold to investors anymore. It would be interesting to see how the fines and promises extracted from that 2003 agreement affected AT ALL the bubble that started as the ink was still drying. Let's also remember that Donaldson, the guy who did this agreement and signed off of the Consolidated Supervised Entity program which expanded leverage limits to the major banks, was replaced in 2004 with Christopher Cox for being too tough a regulator.
Maybe papers need to do more of this reporting:
http://www.nytimes.com/2011/11/08/business/in-sec-fraud-cases-banks-make-and-break-promises.html
These agreements don't work. As taibbi writes:
"The Rakoff ruling shines a light on the way these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC's only role is to take a bribe each time the offenders slip up and get caught.
If you never have to worry about serious punishments, or court findings of criminal guilt (which would leave you exposed to crippling lawsuits), then there's simply no incentive to stop committing fraud. These SEC settlements simply become part of the cost of doing business"
Man, I keep hearing that theme over and over.
#15 Posted by Thimbles, CJR on Mon 5 Dec 2011 at 02:22 PM
Propublica weighs in on the Rakoff decision:
http://www.propublica.org/article/why-a-federal-judge-trashed-the-secs-settlement-with-citigroup
And also on my well worn copy of inside job, there was a reference to a Citibank now Citigroup case of drug money laundrying:
http://hsgac.senate.gov/110999_report.htm
And so I decided to check to see if there was any relation between the Wachovia/Wells Fargo meximess and citigroup. And though the Citigroup connection wasn't very strong, the articles that surfaced about Martin Woods, a whistleblower, and his treatment by the Wachovia for doing his job were fascinating.
#16 Posted by Thimbles, CJR on Mon 5 Dec 2011 at 03:39 PM
Here's the reporting of the case by Bloomberg:
http://mobile.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html
And here's the better reporting of the situation of Martin Woods and his personal experience of the culture at Wachovia by the Guardian here:
http://m.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs
"By this time, Woods says, he found his personal situation within the bank untenable; while the bank acted on one level to protect itself from the federal investigation into its shortcomings, on another, it rounded on the man who had been among the first to spot them.
On 16 June Woods was told by Wachovia's head of compliance that his latest SAR need not have been filed, that he had no legal requirement to investigate an overseas case and no right of access to documents held overseas from Britain, even if they were held by Wachovia.
Woods's life went into freefall. He went to hospital with a prolapsed disc, reported sick and was told by the bank that he not done so in the appropriate manner, as directed by the employees' handbook. He was off work for three weeks, returning in August 2007 to find a letter from the bank's compliance managing director, which was unrelenting in its tone and words of warning.
The letter addressed itself to what the manager called "specific examples of your failure to perform at an acceptable standard". Woods, on the edge of a breakdown, was put on sick leave by his GP; he was later given psychiatric treatment, enrolled on a stress management course and put on medication."
And let's remember, this bank paid a fine, admitted no wrong doing, and walked away.
#17 Posted by Thimbles, CJR on Mon 5 Dec 2011 at 03:48 PM