They saw the crash coming –

They saw the crash coming –

A good, short op-ed as the five year anniversary of the financial crash of ’08 rolls around.  One paragraph does a nice summary of what happened:

The pre-2008 warning was clear. How could we have missed it? “Everybody missed it,” Greenspan observed in 2010, “academia, the Federal Reserve, all regulators.” Which was not quite accurate. Everybody who could have done something missed it. (Emphasis by author)

The moral of what happened is that no one wants to listen to a Debbie Downer when things are good but, clearly, it must be done.  The crash could have been either completely avoided or heavily subdued with better regulation of the financial sector and, until we realize that fact, we will have more of these crashes to deal with in the future.

Jury finds Goldman executive liable for misleading investors – The Washington Post

Jury finds Goldman executive liable for misleading investors – The Washington Post.

Good to see someone paying for these crimes.  Still plenty of work needs to be done to make those responsible pay for such abuses but at least something is happening.  No one going to prison in this case, though.  Another instance of the class difference in the legal system:

The burden of proof in a civil case like this one is lower than the “beyond a reasonable doubt” requirement that the government must meet in a criminal case. In the Tourre case, the SEC had to convince the jury by the “preponderance of the credible evidence,” which essentially allowed the jury to find Tourre liable if it thought the evidence was slightly more against him than in his favor.

Goldman was charged alongside Tourre in 2010, but it settled the case for $550 million without admitting or denying wrongdoing. It has been paying Tourre’s legal fees.


Europe Moves to Penalize Those Responsible for Financial Crisis While America Continues to do Nothing

Generally, we are taught when someone does something wrong, they are penalized for their bad actions in some way, whether put into timeout as a child, given a failing grade for a lack of work in school, fired from a job for not showing up, or thrown in prison for violating the law.  Europe is doing just that when it comes to going after the powers responsible for the financial crisis the world is still pulling itself out of nearly five years later.

The CSM reports:

Last week the European Parliament and the European Union Commission agreed on rules which would see bankers’ bonuses capped at a year’s salary, only with explicit approval from shareholders this amount can rise to two years’ pay. It is this deal the finance ministers now have to vote on.

In a separate development, Switzerland, which is not part of the EU, held a referendum on March 3 which brought a resounding approval for limiting executive pay and banning payouts to new and departing managers.

Banning payouts to departing managers?  You mean, they actually think a CEO who runs a company into the ground doesn’t deserve millions of dollars in severance pay and compensation when fired?  Oh, those crazy Europeans and their rational thinking!

The ultimate point here is Europe has decided it’s best to learn from its mistakes and try to do what it can to avoid another economic catastrophe.  And as these policies show, they aren’t concerned about going after what we call in the United States the “job creators”.  They understand their countries are better off in the long run with the right regulations in place to fight income inequality and aren’t swayed by the propaganda machine these corporations release on society in order to keep their CEOs absurdly compensated regardless of whether they are successful or not.

And America is, of course, following the same path by passing laws that regulate what led to the crisis in 2008 and making sure our financial future is secure from this same type of crash.  The members of our great Congress are standing up to these folks at the top and are telling them we will not let you gamble and bet on losing scenarios just so you can make ridiculous profits at the expense of the majority of the population in which these Congresspersons serve.  They are doing their patriotic…what’s that?  They’ve done nothing?  This stuff is just going to happen again?  Fantastic.

In fact, not only is Congress doing virtually nothing to avoid another crisis, we are all standing by and watching corporate profits soar to new heights.  This article in the NYT says it all and is hard to swallow considering the employment climate the country continues to wallow in.  Some vomit inducing points from the article worth quoting at length:

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers…But although experts estimate that sequestration could cost the country about 700,000 jobs, Wall Street does not expect the cuts to substantially reduce corporate profits.

As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966.

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

So, remember the fight over those tax increases on the wealthy the country just had?  Yep, those guys are going to be just fine it seems.  In fact, I’m pretty sure those folks making over 400k a year could give plenty more and still be eating well.

It is rather amazing we can see these facts as a whole and still somehow believe the propaganda about how we can’t hurt the “job creators”.  Considering a little thing called reality, there is a question that needs to be asked here and now to those against the higher taxes on these folks.  If we are seeing these profits at record highs, where are the jobs they are supposedly creating?  Do they require even more money to create jobs?  Are these profits and this level of economic inequality not enough yet?  Do things need to be even more unequal?  Seriously?

And as if that wasn’t bad enough, there was one last ironic knife in the throat at the end of the NYT article.  Know how those same people who were against the tax increases also want to do away with the Fed and want no outside intervention in the economy from any type of government entity?  Well, it seems the Fed helped those same people:

The Federal Reserve has also played a crucial role in propelling the stock market higher, economists and strategists say, even if that was not the intent of policy makers. The Fed has made reducing unemployment a top priority, but in practice its policy of keeping rates very low and buying up the safest assets to stimulate the economy means investors are willing to take on more risk in search of better returns, hence the buoyancy on Wall Street amid the austerity in Washington and gloom on Main Street.

Of the broader market’s 13 percent rise in 2012, about half was a result of the Fed’s actions, Mr. Harris of Bank of America Merrill Lynch estimates.

In other words, the government, the entity the people should turn to when they are being screwed by big corporations, has continued to help those corporations while doing nothing for the people or to protect the majority of the population from further recessions induced by bad behavior.  When we are being deprived by the corporate world and the government is standing by watching this occur, who exactly do we turn to?

Europe clearly knows how this should work.  America (particularly the right wing), however, still doesn’t get it.

Why the CEOs Responsible for the Financial Crisis Aren’t in Prison

We’ve all been exposed to the phrase “too big to fail” when it comes to the financial crisis of 2008.  But how about adding “and too risky to prosecute” to the end of that phrase?  This seems to be one of the reasons stated as to why there are no Wall Street CEOs being held accountable for defrauding the country into economic catastrophe.

Frontline released another informative piece on the financial crisis in their series documenting the most important aspects of how it occurred.  It’s appropriately titled “The Untouchables” as the people who came out the richest through their swindling somehow came out the cleanest, legally.  There are various reasons documented as to why there have been no successful prosecutions but the last one given by Lanny Breuer, the man formerly at the Justice Department in charge of bringing these cases, is absolutely stunning.  Here is the exchange from the transcript:

MARTIN SMITH: You gave a speech before the New York Bar Association. And in that speech, you made a reference to losing sleep at night, worrying about what a lawsuit might result in at a large financial institution.


MARTIN SMITH: Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?

LANNY BREUER: Well, I think I am pursuing justice. And I think the entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.

Did you catch that?  Read it closely again.  And again.  And again.  If steam isn’t coming out of your ears like a Looney Tunes character after eating a barrel full of jalapenos topped with another barrel of hot sauce, read it again because you missed what he said.

In short, we can’t bring the prosecutions against the CEOs because there might be (remember, a completely unproven statement) “some huge economic effect”.  This strangely plays into the conservative idea of these people not being rich but being “job creators”.  And, of course, we can only psychologically accept that title if we erase the fact they destroyed 6.8 million jobs from September 2008 to December 2009.  I guess they are job creators, it’s just that sometimes the amount of jobs they create is a negative number.

So to recap, huge financial institutions instituted bad policies then made massive amounts of money by betting against those decisions knowing full well they would fail at some point.  Then, as expected, they failed and took the entire economy with them.  Now, we can’t even attempt to hold them accountable for what they have done because…there might be another economic crash…for prosecuting the wrongdoers who crashed the economy.  In other words, a crime is committed, an effect occurs, people are caught red-handed, then those people can’t be prosecuted because another effect might happen.

Imagine applying this logic to any other crime.  You could basically get out of jail time for virtually any horrendous crime.  Hypothetical example: man with children cheats on wife; wife finds out; argument ensues; man kills wife; man does not even get arrested because of the potential financial effect on the kids in his household; man marries mistress; repeat.  Or: great math teacher sexually abuses student; teacher gets caught on school security cameras abusing student; teacher doesn’t get arrested because of the potential for falling math scores in the school; repeat.  See how insane this sounds?  Yet, it is exactly what is happening.

Which brings us to the most important question: if the guys who committed the crimes that crashed the economy got rich and didn’t pay for what they did, what’s going to stop them from doing the exact same thing again?  Wait, I remember the answer.  We just deregulate the economy completely because the people at the top of these companies will be led by the “invisible hand” into doing only great things for us in the long run.  Just like in 2008…