Good for The Huffington Post’s Shahien Nasiripour for giving us a closer look at Wachovia’s settlement for defrauding an Indian tribe—the Zunis—with toxic CDOs.
Surely this is a story that deserves more coverage. This is what we’ve suspected happened all along in the crash: That Wall Street had it’s “oh, shit” moment in 2006 and 2007 and unloaded as much of its toxic assets onto unsuspecting investors as it could, lying to them to make the deals. Here’s a giant bank defrauding a tiny, impoverished Indian tribe in the New Mexican desert by conning them into buying cratering subprime CDOs—at a 70 percent markup to what Wachovia itself had valued them. Wachovia marked the assets at 53 cents on the dollar when it closed the deal and then sold them for 90 to 95 cents four months later as the housing crash accelerated.
The Wall Street Journal has essentially ignored the story, giving it two paragraphs in a brief on C2 (UPDATE: Scratch that. The Journal broke the SEC Wachovia story on Monday, but it didn’t have any details about who the victims were). The Washington Post wrote 540 words. Reuters, Bloomberg, and the AP wrote short stories. The New York Times was much better, putting 700 words on B3.
But the HuffPo homes in on one aspect of the news that ought to raise eyebrows: The lowball number that Wachovia (now owned by Wells Fargo) has to pay. The SEC agreed to an $11 million settlement.
Here’s how Nasiripour puts it:
Or put another way: For $11 million, one of the world’s biggest investment firms was able to violate basic investor protection rules, defraud its customers, not admit wrongdoing, avoid a trial and likely pocket the profit off similar deals.
The investors lost millions. The firm pocketed millions more in profit, more than offsetting the fine.
Compare that to the Financial Times’s bloodless lede, which was typical of much of the coverage:
Wells Fargo has agreed to pay $11.2m to settle civil charges that its Wachovia Capital Markets unit improperly sold two complex securities backed by residential mortgages just as the housing market was beginning to unravel.
The Huffington Post is also good to get at the idea that Wall Street dumped its trash on the rubes:
In late 2006 and early 2007, as financial firms rushed to close deals and dump inventory on investors eager to cash in while the good times lasted, Wachovia Capital Markets, a unit of the Wachovia Corporation, sold securities tied to a pair of complex financial products linked to home loans.
The Wachovia/Zuni story gives us a peak into how the predatory selling happened as banks realized that the music had stopped, as Chuck Prince put it. The best place to look for crimes in this Wall Street crash is in the time when banks realized that the gig was up and scrambled to cover their rears.
And that raises another question here, which the Times’s Edward Wyatt focused on in his story: The SEC also didn’t make Wachovia admit wrongdoing, and didn’t name any individuals responsible.
How is it that the SEC can settle with a giant bank for defrauding an Indian tribe, but not sue any individuals involved for carrying out the fraud? Why hasn’t the Department of Justice charged anyone involved with a crime?
And why didn’t anyone in the press talk to the Zuni Tribe to get their side of the story? As far as I can tell, just about every story I read included a comment from both the SEC and from Wachovia/Wells Fargo.
Not a single one had a comment (or an indication of no comment) from the Indians who got cheated.
You ask this question time and time again, @Ryan:
How is it that the SEC can settle with a giant bank for defrauding an Indian tribe, but not sue any individuals involved for carrying out the fraud? Why hasn’t the Department of Justice charged anyone involved with a crime?
I don't know if yours is a rhetorical question or not, but I see no cause for puzzlement. What people have forgotten, it seems, is the profound politicization of the DoJ during the Bush Administration. All of those ideologues from Regent University School of Law and Liberty University are still there, having "burrowed" themselves into the infrastructure of Justice, and seemingly forgotten.
"Not long ago, it was rare for Regent graduates to join the federal government. But in 2001, the Bush administration picked the dean of Regent's government school, Kay Coles James , to be the director of the Office of Personnel Management -- essentially the head of human resources for the executive branch. The doors of opportunity for government jobs were thrown open to Regent alumni."
Scandal puts spotlight on Christian law school - The Boston Globe
and
[A]ccording to the [joint investigation by Justice Department's Office of Inspector General and Office of Professional Responsibility], there was a deliberate attempt to skew the selection process beginning in 2002, when responsibility for the selection process was taken away from career employees and given to political appointees. For instance, candidates who listed a membership in the Federalist Society, a conservative legal group, were approved for interviews at a far higher rate than those candidates with ties to liberal groups.
IG Report: DOJ under Bush favored GOP-conservative job candidates - POLITICO Live - POLITICO.com
There's the answer to the question you ask at least once a week: Why hasn’t the Department of Justice charged anyone involved with a crime? Because the Department of Justice is infested with rightwing ideologues of the Christianist and Federalist species.
Holder and the Obama Administration has done exactly nothing about it, either. Obama has very weak executive skills, and he has failed to purge much of the executive branch of ideological bushies.
That's why. Shouldn't some enterprising journo take a followup look at the DoJ? Wouldn't that be interesting? Where is Charlie Savage when we need him?
#1 Posted by James, CJR on Fri 8 Apr 2011 at 08:29 PM