Privatized gain, socialized loss...
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John Bogle counted himself among the 1% of wealthiest Americans a couple decades ago. You might not guess that today, when you hear the 82-year-old founder of mutual fund company Vanguard rail against economic inequality. He can sound almost like an Occupy Wall Street protester: "Our markets have gone crazy, and there is 200 times as much speculation as there is investing," he says. It has been 15 years since the low-cost investing pioneer stepped down as CEO of Vanguard. It was Bogle who launched the first index mutual fund in 1976.
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives . “Pink slime” just had its fifteen minutes of fame.
In the following interview with the WaPo's Ezra Klein , Janet Tavakoli shares some more information on why every bank is about to shut down all foreclosures, in what she calls the "biggest fraud in the history of capital markets." Not very surprisingly, we are, so far, spot on in our 29th September projected timeline at this point: "We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy."
Risk-taking by banks played a critical role in the global crisis and Eurozone crisis. This column introduces a new eReport that focuses on four aspects of excessive risk-taking by banks, highlighting the causes and the cures. The eReport applies the best available theory and data, bringing together the main insights and views that have emerged from the crisis. For many, the global crisis was caused by the interlinked fragilities that arose in the banking and financial sectors; these themselves were created by mindless deregulation and permissive monetary policy.
For the country's biggest financial institutions, it's still worth it to break the law, because the government has no way to make the banks pay for acting illegally Reuters Move along, nothing to see here. That's been the Wall Street line on the financial crisis and the calamitous behavior that caused it, and that strategy has been spectacularly successful. Since Spring 2010, financial institutions' predatory practices have fallen off the front pages of newspapers, replaced by manufactured fears of over-regulation and -- thanks to an assist from the European continent -- an Orwellian belief that government debt lies at the root of our economic problems.
In 1989, the CEOs of the seven largest banks in the US earned an average of $2.8 million, almost a hundred times the annual income of the average US household. In the same year, the CEOs of the largest four UK banks earned £453,000, fifty times average UK household income. These are striking inequalities.
The whole purpose of a settlement is that a party pays damages to rid themselves of liability, and the amount they pay (and “pay” can include the cost of reforming their conduct) is less than what they expect to suffer if they were sued and lost the case (otherwise, it would make more sense for them to fight). But in the topsy-turvy world of cream for the banks, crumbs for the rest of us, we have, in the words of Scott Simon, head of the mortgage business at bond fund manager Pimco, in an interview with MoneyNews , lots of victims paying for banks’ misdeeds: “A lot of the principal reductions would have happened on their loans anyway, and they’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load… “Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that.’”
Exit from comment view mode. Click to hide this space Comments View/Create comment on this paragraph WASHINGTON, DC – Among the fundamental principles of any functioning justice system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. Breaking an oath to tell the truth is perjury, and lying in official documents is both perjury and fraud.
There were many factors that contributed to our recent financial bubble: deregulation, cheap money from the Fed, failure to enforce remaining regulations, crony capitalism, hubris, speculation, leverage, and fraud among other problems. While fraud wasn't the only issue, it was and is a significant contributor to the credit bubble. Restraining fraud is a necessary but not sufficient condition for a sound financial system.
It’s an issue we and others  have noted again  and again  : Years after the financial crisis, there have still been no prosecutions of top executives at the major players in the financial crisis  . Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task  . David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases.
Wall Street and the Financial Crisis: Anatomy of a Financial Collapse by the Majority and Minority Staff, Permanent Subcommittee on Investigations, US Senate 639 pp., available at hsgac.senate.gov Money and Power: How Goldman Sachs Came to Rule the World
In such a target rich environment, how on earth is it possible that Bank Fraud prosecutions are dropping? It is an outrage! I bitched about this when George W. Bush was President , and I will continue until we get someone in the White House who understands what the RULE OF LAW actually means . . . Previously: Security Fraud Prosecutions Down 87% Since 2000 (December 25th, 2008) Failing to Prosecute Wall Street Fraud Is Extending Our Economic Problems (December 15th, 2010)
Four years after rotten mortgages helped trigger a global financial crisis, Sherry Hunt said her Citigroup Inc. quality-control team was still finding flaws in new loans that included altered tax forms, straw buyers and borrowers who listed fictitious employers. Instead of reporting the defects to the Federal Housing Administration , the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney’s Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that didn’t qualify. Enlarge image Citigroup Whistle-Blower Says ‘Brute Force’ Hid Bad Loans
Reuters Robert Benmosche, chief of American International Group. 8:43 p.m. | Updated Goldman Sachs is picking up some of the pieces from the wreckage of the American International Group . On Wednesday, the Federal Reserve Bank of New York announced that it had sold assets with a face value of $6.2 billion to Goldman, which trumped four other investment banks for the securities. The auction — the second such sale this year — signals the renewed interest in mortgage-related investments and other risky securities at the center of the financial crisis.