Chickens Roost

We sure are glad we haven’t been holding our breath waiting for those who drove our economy off the cliff to be called into account. While there is still not a lot of action on that front, various folks are finally going after the bad guys. Federal and some state prosecutors -notably the New York State Attorney General- are on the move. And the shoes are beginning to fall in the civil courts.

The American Civil Liberties Union (ACLU) filed a suit last week (2012.10.15) against Morgan Stanley.  The investment bank loaned billions to New Century, an outfit that specialized in sub-prime loans. Morgan Stanley pushed New Century to generate more and more of those high risk loans, then packaged them up and sold them -at astronomically high margins- to pension funds and other “suckers” as they were referred to. These toxic loan packages, along with similar packages peddled by other investment banks, went sour and were the major factor in the collapse of the world economy. An exercise in ethical ignorance.

What made the New Century loans particularly smarmy were the mortgage company’s targets. Poor folks, mostly black, who were not sophisticated enough to understand what they were signing up for. According to published reports the ACLU’s class action suit on behalf of these folks is based on “claims that Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act.”

This suit joins a host of others by investors and government entities aimed at finally bringing to task the banks whose reckless behavior has caused incredible pain all around the world. In addition to the Morgan Stanley suit, Wells Fargo is facing an action claiming that their reckless lending practices ended up dumping bad loans on the taxpayers’ backs by sticking a government insurance program with the tab. Bear Stearns & Company, now a part of JP Morgan Chase, fell into the sights of the Justice Department earlier this month for reckless housing boom activities. One-by-one the guys who rolled the dice and hollered for help from the taxpayers when they came up snake eyes, have the law knocking on their door.

But where are the individuals, the executives who pushed to keep the bucks flowing from their subprime mortgage scams? Where are the big shots who took hundreds of millions in bonuses while the taxpayers suffered from the recession triggered by their reckless actions? People like Lloyd Blankfein, Goldman Sachs’ CEO who had his people betting against their own customers in a heads-we-win, tails-you-lose game that only Goldman Sachs could win. Unbelievable!

The same “Pants on Fire” Blankfein who mocked a Congressional Committee by denying knowledge of activities at Goldman Sachs when internal communications from the bank show clearly that he was in the loop. How come Blankfein has not been charged with lying to Congress, a felony? After all, we went after a baseball player for lying with little or no evidence, why not a banker with solid evidence?