Published 2013.02.22 in CommPRO.biz

3,800 to Zero
 
Following the Savings & Loan Crisis a couple decades ago, roughly 3,800 bank executives were jailed. The more severe crisis we are slogging though, has for all intents and purposes, produced zero convictions, no jail time for the Wall Street executives who triggered it. You may have heard that one of three financial rating agencies that awarded AAA ratings to the toxic mortgage packages the big banks referred to as “Crap,” Standard & Poor’s, faces $5 billion in Securities Exchange Commission (SEC) fines. However, not one S&P executive faces prosecution.

The appalling failure of federal and state entities to hold responsible those who threw us into the most damaging recession in seven decades is shameful. In reviewing the litany of excuses offered for this travesty, this much is clear: it is difficult to prove fraud. And, George W. Bush’s Treasury Secretary Hank Paulson created a bailout atmosphere seemingly designed for the ethically challenged monster banks. Our leaders, Treasury Secretary Jack Lew, Attorney General Holder, and the President himself, can’t seem to deal with the legal challenges. It’s a situation crying out for creativity.
 
Al Capone, whose criminal “Creds” ran from hooch to hookers with lots of killings thrown in, laughed in the faces of the authorities just as the bankers have been laughing since the bailout. The banks sucked up the taxpayers’ bucks in billion dollar gasps, like the dying beasts they were. Once they were on sound footing, instead of using our money to help the economy, they went right back to the same crazy risky stuff that caused the recession. And why not? They know they can stick the taxpayers with their losses. When the authorities couldn’t pin Capone’s criminal activities on him they got creative and tried him for tax evasion, netting Capone 11 years in Alcatraz.
 
Senator Carl Levin watched Goldman Sachs CEO, Lloyd Blankfein, smirk his way through testimony before his Senate Committee and then turned his findings over to the Justice Department. Levin, a Harvard Law graduate and experienced prosecutor, was clearly disturbed when Justice failed to take action. The DOJ also declined to prosecute egregious criminal behavior on the part of HSBC, citing a fear that to do so might take the bank down and threaten our economy.
 
It’s time for creativity. The Supreme Court says corporations are people, so let’s prosecute their living parts. Let’s charge top executives and boards of directors who know –or have a fiduciary responsibility to know– what their corporation is up to. Sending the Board and the “C” Suite off to the slammer is not going to sink the ship. One thing we know for sure: there are lots of topnotch managers who could take over and probably do a better job than those they replace, especially when replacing the nitwits who green-lighted the HSBC mess. Unlike a massive fine that becomes a “Cost of Doing Business,” the prospect of a jail term should put a halt to the greed-fueled behavior all too common in our banking sector.

Too Big To Jail?

Last week (2012.08.22) William B. Harrison Jr. penned an OP-ED in The New York Times defending bankers. Harrison retired as Chairman of JP Morgan Chase in 2006 when he was rolling the dice with the best of the big banksters at the height of the Casino-i-zation of our banking sector. 

Harrison’s OP-ED would be laughable if he were not talking about a tragedy. A tragedy impacting nearly everyone in the world except the too-big-to-fail banks and the banksters who run them. They are back at their gaming tables doing fine since we bailed them out; safe in the knowledge that when they lose, we’ll be forced to bail them out again.

Harrison is wildly out of step with Sanford I. “Sandy” Weill, who suggested in a CNBC interview (2012.07.25) that it is time to break up the big banks. Not a new idea, but coming from Weill it exploded in the news cycle. Weill is the father of the very monster zombie banks that he now wants broken up. In 1997 he merged  Travelers Insurance Group and Citibank, creating the largest financial institution on the face of the earth. 

Like Harrison, Weill retired in 2006. However, unlike Harrison’s convoluted apologia, Weill takes a totally different tack. He wants the gaming tables out of our banks. Weill wants bankers focused on watching our money and making loans. It took a lot for Weill to step up and suggest that times have changed and it’s time to break up the big banks.

When Roger Clemens denied steroid use before a Congressional Committee, they went after him tooth and nail. The evidence against Clemens was pitifully weak and he was acquitted. Two years ago four Goldman Sachs executives appeared before a Committee led by Senator Carl Levin. 

Under oath they dodged and twisted and turned, but made statements that internal Goldman memos and emails showed were untrue; they lied. It’s difficult to prove that the “Wild West Wall Streeters” committed fraud. However, the arrogant banksters who lied under oath to Congress surely broke the law.

Senator Levin turned their testimony over to the Justice Department. While it’s tough to prove fraud, how tough can it be to show that the Goldman crowd lied? There’s a long paper trail to backup the charges. Where is the zeal displayed in prosecuting Clemens? Gone. The Department of Justice has advised the Sachs executives that they will not be prosecuted.   

There’s more. Six months ago Sachs, Wells Fargo and Chase all got SEC “Wells Notices” indicating the agency’s intent to look into their well-documented role in the current downtrend. In an abrupt about face the SEC let Sachs off the hook; they’re singing “Anything Goes.”

Well the lying dudes and the doubling dealing traders at Sachs are having a Cole Porter moment but not Sergey Aleynikov. He has been charged by NY State with stealing computer code when he worked at Sachs. This, only six months after Sergey was acquitted of the same charges in Federal Court. As one blogger noted, “The only way to get arrested when you work at Goldman Sachs, is to be accused of stealing from Goldman Sachs.”