“Round One,” The Banks vs. The Rest of Us

“Round One,” The Banks vs. The Rest of Us

Within a month Federal District Judge Jed Rakoff has launched what may be the beginning of the end for rapacious behavior on the part of our banking sector. Earlier this month he refused once again to rubberstamp an under-the-table deal the Security and Exchange Commission (SEC) made with a “Too Big To Fail” Bank, this time Citi. Unlike earlier deals that came before him, he is apparently not going to agree to any settlement without all the gory details being revealed.

As you may recall from our 11.15.11 OP-ED, Citi has been charged with fraud. With selling their customers a bundle of crappy investment vehicles while at the same time betting against them. Of course the crappy stuff turned out to be crappy and when they failed, Citi’s customers took a hit somewhere north of $700 million bucks and Citi collected on their bet. Judge Rakoff questioned the settlement -$95 million- and the fact that only one individual was charged with criminal behavior. In an earlier case (Bank of America) Rakoff signed off when the SEC upped the penalty. Two other Federal Judges signed off on similar deals with Goldman Sachs and J.P. Morgan Securities, as many judges have over the years.

After mulling over the Citi deal for a couple weeks, Rakoff took a very different tack. This time he rejected the premise that Citi could walk away with a fine and a promise to never do it again. He wants all the gory details out on the table. A path that drew a snarky headline, “Rakoff Cements Status as Populist Firebrand”, on the American Lawyer Magazine website’s report on his ruling. Basically saying that his failure to play “go along to get along” would end any chance of promotion for the judge.  But isn’t that what ethics is all about, doing the right thing without regard for self interest?

An end may be at hand to the age of repeated SEC “Peanuts and a promise” deals for those who pull off massive ripoffs. As Steve Denning noted in a recent Forbes article, What Shall We Do With The Big, Bad Banks, “Over the last 15 years, some 19 large major financial institutions have been found by the SEC to have broken anti-fraud security laws at least 51 times—laws  that they agreed ‘never again to breach’. The group of offenders included Citigroup, Bank of America, JPMorgan Chase, UBS, Goldman Sachs, Wachovia, and AIG. In this period, the Securities and Exchange Commission has never once brought a contempt of court citation against any of the banks for repeated offences.”

The leaders of these behemoths, the Lloyd Blankfeins and Jamie Dimons and their minions who hide behind these “Don’t Ask, Don’t Tell” deals with the SEC, may be called to task if it turns out that they were aware of the double dealings underlying the SEC charges. An outcome sure to be cheered by the State Attorney Generals across the country that have been pursuing the culprits who triggered the financial collapse we are enduring; looking for someone to jail.

Wouldn’t that be nice? Three cheers for Judge Jed Rakoff.

It’s the Culture, Stupid!

The Murdock media feeding frenzy continues unabated. And it may be just beginning. One defining aspect helps explain much. The nature of the media across the pond is different from that in the United States. Great Britain –and most of what’s referred to as the British Commonwealth– are subject to some form of the “Official Secrets Act.”

For all intents and purposes, these laws put all government activity and government folks (those elected, the bureaucracy, etc.) –so far as what they are doing on the job– pretty much out of bounds, safe from pesky reporters. There could have been no Watergate, no Pentagon papers had we suffered under these laws in the United States.

Media subject to these restrictions are reduced to a frantic effort to be the first to reveal any trace of scandal or other bit on the personal level that they can dig up –by hook or by crook as it now turns out. The kind of stuff we largely leave to the supermarket tabloids such as the National Star, one of Murdock’s first purchases in the United States.

The scion of an Australian publisher, Rupert Murdock was still in his early twenties when he landed in the dog-eat-dog culture of Fleet Street where London’s newspapers reside. The young Murdock inhaled it, savored it, embraced it, and made it his own; embarking on a lifetime culture of journalism as a competitive calling.

As he expanded his Empire across the globe Murdock acquired a wide range of US media: motion pictures, television, newspapers and news services. He was forced to become a US citizen –a prerequisite to the ownership of broadcast entities here– but his heart, his soul, the culture of his News Corp remains on Fleet Street.

No one has suggested that Murdock personally hacked into (among thousands of others) the mobile telephone of a missing youngster, or bribed police and other public officials. However, the culture he has projected since founding his organization may have driven dozens of his employees to engage in these repulsive practices over many years. “Get it first” morphed into “Get it anyway you can”. There are now suggestions that News Corp hacking efforts extended to the mobile phones of families of 9/11 victims in America.

These disclosures couldn’t have come at a worse time for Murdock. First his crown jewel, The News of the World, the leading tabloid in Great Britain, went under the bus in an attempt to save his bid for the 61% of British Sky Broadcasting (BSkyB) that his company does not already own. The enormously popular and profitable satellite service dominates television in Great Britain and Ireland. Until the scandals surfaced, it looked like British government approval of the deal was a slam-dunk. Now Murdock has been forced to drop that effort and his current 39% ownership may be in jeopardy.

Faced with government investigations and legislative hearings in Great Britain and the United States, Murdock’s Media Empire –the second largest on the planet– may suffer more losses. None could be more welcome than an end to a culture that has soured and revealed an evil side.