Why Isn't Wall Street in Jail?

[rjaypeters]

From the Rolling Stone:

Introduction:
"Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's f*cked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

Conclusion:

"The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality."

http://www.rollingstone.com/politics/ne ... 216?page=1

[Diogenes]

From the Rolling Stone:

Introduction:
"Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's f*cked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

Conclusion:

"The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality."

http://www.rollingstone.com/politics/ne ... 216?page=1

And people wonder why we need social discipline as well as fiscal discipline.

[rjaypeters]

Discipline? On whose part?

Heck, I'd be happy with just enforcing the law.

[Diogenes]

Discipline? On whose part?

Heck, I'd be happy with just enforcing the law.

Same thing in my opinion.

[choff]

Now that you see stock exchanges on different sides of the Atlantic merging, the possibilities for eluding the new national stock exchange regulations will be endless. Another bubble in 5 years, a bigger bailout.

[Diogenes]

Now that you see stock exchanges on different sides of the Atlantic merging, the possibilities for eluding the new national stock exchange regulations will be endless. Another bubble in 5 years, a bigger bailout.

I noticed that. I suspect you are right. If we can make it that long.


Invest in lead boys! I recommend watching Zombie films for training purposes.

[choff]

Now that you see stock exchanges on different sides of the Atlantic merging, the possibilities for eluding the new national stock exchange regulations will be endless. Another bubble in 5 years, a bigger bailout.

I noticed that. I suspect you are right. If we can make it that long.


Invest in lead boys! I recommend watching Zombie films for training purposes.

"Night of the Living Progressives"

[rjaypeters]

"Don't Let Goldman off the Hook: The damning new Senate report proves Wall Street still can't be trusted to police itself." By Eliot Spitzer

Relevant quotes: "I want to focus on the two most critical conclusions that jump out from these documents. The first has been remarked upon but bears repeating. The second, I do not believe has been discussed at all and is perhaps the more important.

First: The banks traded for their own interests directly against the interests of their clients."

"The second, undiscussed issue is the danger of a self-regulatory market. Remember, the entire predicate to the laissez faire, de-regulatory philosophy that led us to the precipice was that the magic of the market and self-regulation would make the government's intervention unnecessary. Rules relating to capital requirements, leverage ratios, conflict of interest, or any of a myriad of other subjects should be left to the banks themselves."

Back to the original question: 'Why aren't these people in jail?' Probably because we have a two-value legal system in these United States. Wealthy people don't go to jail, poor people do.

EDIT: Sorry, I was so mad I forgot the page reference:

http://www.slate.com/id/2292070/

[hanelyp]

'Why aren't these people in jail?'
Because those people, whatever you may think of their ethics, have a healthy aversion to the risk of breaking the law.

I can see points where the law needs revision. To start, we need to get rid of any expectation of bailouts to protect traders and banks from stupidity. If a bank needs assistance to cover deposits, that is prima-facia evidence of insolvency. Related, banks making high risk loans and selling them to fanny and freddy was a problem, as was fanny and freddy laundering the risky mortgages and selling them off.

[rjaypeters]

My mistake, I didn't give the reference for others to read the article. I put it above.

Regarding breaking the law and Goldman Sachs:

"It knowingly sold junk to its clients so Goldman could prosper on the other side of the trade. Such is the conclusion of bipartisan investigators. Sen. Levin has suggested that federal prosecutors should investigate whether Goldman executives committed perjury when they testified about this before Congress. Whether charges are brought or not, the Goldman testimony fundamentally misled the public."

Let alone the fiduciary duty to act in the customers' interest ahead of one's own interest.

[TallDave]

Bleah, Rolling Stone. What a joke.

The risks that led to the mortgage crisis were not caused by traders trading, they were created -- very deliberately, as a matter of intentional policy -- by policies promoted through quasi-governmental entities like Fannie and Freddie, in order to promote a social agenda of affordable housing debt. This isn't even a matter of debate -- we have the actual working papers in which they promoted securitization explicitly for this reason. We have the actual hearings in which Barney Frank said there was no risk to doing this sort of thing.

Yes, regulators often suck at regulating -- welcome to law enforcement -- and Taibbi digs up some fine examples. But the notion this mess was primarily caused by de-regulation is deeply stupid. Regulation is precisely how this monster was created: together the lobbyists and regulators birthed a Byzantine system that could be gamed by creating "too-big-to-fail" entities that promptly fell victim to the inevitable moral hazard that arises whenever risk is foisted onto taxpayers -- free markets require winners and losers. Canada didn't over-regulate, and their simple, antiquated reserve requirements and lack of megamergers saw their banks sail through the storm with hardly a worry.

Whining about how much shareholders decide to pay their execs is fairly pointless -- it's their money. AIG shareholders made bad management decisions and so they lost all their equity. That's the justice of the market, not having those execs dragged off to prison for what were generally bad, but not illegal, transactions engaged in with consent from all parties. The problem arises when gov't allows them to drag taxpayers into it, or become so large -- for the sake of "stability" -- that their failure threatens the entire economy.

The real question, though, is why virtually all goverment agencies get away with financial accounting that would land any private firm in prison. Certainly no private company would ever be allowed to count retirement contributions as income like the Feds have been doing for the last 50 years or so.

[rjaypeters]

The real question, though, is why virtually all goverment agencies get away with financial accounting that would land any private firm in prison. Certainly no private company would ever be allowed to count retirement contributions as income like the Feds have been doing for the last 50 years or so.

That would be the subject of an interesting thread. However, it is not the subject of this one.

I don't propose to discuss the subject of executive compensation, except on the thread that talks about it.

Yeah, Phil Gramm and Jim Leach, who started de-regulation, e.g repeal of portions of the Glass-Steagall Act, deserve some credit along with Barney Frank, too.

What about fiduciary duty? You know, putting the clients' interest ahead of one's own because the clients trust the firms managing the client's money and selling them products, e.g. mortgage back securities? Oh, that's right, the client's are sophisticated enough to know the executives are going to screw the clients, so it's okay when it happens. Caveat emptor.

Isn't violation of fiduciary duty at least cause for civil law-suits?

Why aren't these people in jail? Did the executives or did they not lie or give misleading testimony at Congressional hearings? Aren't there penalties for perjury to Congress?

[rcain]

"AYBABTU"

[rjaypeters]

"AYBABTU"

I'm sorry, I'm unable to decipher acronyms that do not have an "F" in them*. What does AYBABTU mean?

*Must be my military background.

[crazyeddie]

AYBABTU = All Your Base Are Belong To Us

an odd internet meme from 2000-2002

http://en.wikipedia.org/wiki/All_your_b ... long_to_us