Who Got The “Death Penalty”?

Twenty-five years ago Southern Methodist University (SMU) was found to be paying student members of their football team from $50 to as much as $725 a month from a slush fund maintained for that purpose. The sports powerhouse was on NCAA (National Collegiate Athletic Association) probation at the time for earlier violations. As a result, the NCAA slapped SMU with a cancellation of their upcoming season and all home games the next year, along with a handful of other penalties, an action dubbed the “Death Penalty.” 

So for adding cash payments to the other perks provided big time college football players, like scholarships, jobs they rarely if ever show up for, etc., etc., the NCAA shuts down the SMU football program long enough to derail it for twenty years. It is pretty hard to find any harm in what went on at SMU beyond the negatives that maintaining a semi-pro football team does to any institution theoretically focused on learning. In the SMU case a university that is an arm of a church. 

After due consideration the NCAA chose to ratchet down the level of punishment meted out to Penn State. After all Penn State didn’t break any NCAA rules; they just ignored report after report that they had a pedophile in a senior position in their football program. Starting with two janitors, who saw Jerry Sandusky rape a little boy in a Penn State shower room 14 years ago. One said he had seen some awful things while in the service in Korea, but nothing as horrific as that. But fear of Sandusky kept the janitor from going to the authorities, so he just told his boss. 

Sandusky was allowed to retire, but he kept his office in the sports complex and his access to the shower rooms. He kept right on taking boys to Penn State away games and keeping them in his hotel room. Ignoring one incident after another, the top officials at Penn State agreed among themselves to hush up the Sandusky “problem.” The football culture at Penn State is so powerful it erased all common sense and decency for nearly fifteen years. 

But they will play football at Penn State this fall; no NCAA “Death Penalty” for Happy Valley. The University will pay a massive $60 million dollar fine, and they will not be eligible for a bowl game for the next four seasons. The number of free riders will be cut by twenty; Penn State will only be allowed to have 65 football scholarship players on their roster instead of the 85 currently allowed. There are additional slap-on-the-wrist penalties but nothing that will cause too much pain. 

An immediate chorus of whines emanated from Penn State supporters. The most frequent, “It’s worse than the Death Penalty.” Nonsense! Who knows how many little boys this monster violated? Little boys carrying the lifelong “Death Penalty” Sandusky left on their very being. If Penn State’s penalty matched that of the victims of its football culture, there would never be another Penn State football game, not this fall, not ever.  

Banks Behaving Badly

“We’re doing what a bank is supposed to do.” That’s JP Morgan Chase CEO Jamie Dimon before a US Senate Committee after a two billion dollar gambling loss that has since grown to nearly six billion and is forecast to hit even higher numbers. Dimon was much harder on himself than were the Senators, or the members of a House Committee in a subsequent hearing. 

No surprise, members of Congress have good reason to be friendly. Dimon has pitched millions into Congressional war chests -more to Republicans, but lots to go around. The committee members understandably tossed softball questions. Dimon was decked out in cuff links with the presidential seal just so everyone would know where he was coming from. 

Unbelievably nobody called him on his, “We’re doing what a bank is supposed to do” line. This from a “Bankster,” as the Economist has labeled the out-of-control leaders of our financial sector. The billions lost on bad bets placed by one of its traders (AKA gamblers) in London are the least of the problems Dimon is facing. 

Chase is ensnared in the evolving Libor scandal that has a group of international banksters fixing interbank lending rates, impacting every loan rate imaginable. 

The incredibly complex Libor rate fixing scheme crosses civil and criminal legal lines. Dimon was fully aware of his bank’s involvement in this racket when he delivered his “What a bank is supposed to do” line; so we must assume that he thinks juggling interest rates worldwide is what banks do. 

That isn’t even the worst it. When Dimon was flaunting his control over those we send to Washington to do our business, he was fully aware that Chase had just shelled out a seventy-five million dollar fine for rigging a bid on a three billion dollar sewer bond deal that pushed Birmingham, Alabama into bankruptcy. A deal they cinched with a three million dollar bribe to Goldman Sachs. Chase and a host of other banksters have been rigging municipal bond auctions for decades.

This all came out when the Feds convicted three minor players from GE Capital they nailed rigging bond auctions. The Feds got their hands on recordings of telephone conversations between banksters making highly illegal deals to pass municipal bond business around among the banks. In addition to the bankster types from GE who are going to jail, scores of others from virtually every major bank in America and many international banks as well have taken a plea deal. 

Let’s be clear about what’s going on here. 

Between the Libor racket and the municipal bond rigging scam- the banksters have ripped off everyone in America to the tune of untold billions. JP Morgan Chase is not alone in these Mafia style rackets, but if that’s what Jamie Dimon thinks “banks do” then he has a different ethical standard than most of us hold.

What Would Sam Do?

It was as warm-down-homey as could be imagined at Wal-Mart’s Annual Meeting (12.06.01). Thirty miles from Wal-Mart World Headquarters in the University of Arkansas Basketball Arena, Robson Walton, eldest child of founder Sam Walton, strolled onto a mock-up of his daddy’s first store and brought his bother Jim and his sister Alice on stage for a chat about what it was like growing up and working with Sam Walton. A driven retailer Sam Walton remained a down-to-earth hard working guy who didn’t take himself too seriously, as indicated by a famous quote at a time when he was listed as the richest person in America: “I still can't believe it was news that I get my hair cut at the barbershop. Where else would I get it cut? Why do I drive a pickup truck? What am I supposed to haul my dogs around in, a Rolls-Royce?”

He seems a no-nonsense guy as well, a trait that makes one wonder how he would have reacted to the bribery mess Wal-Mart is now mired in. A mess it’s hard to imagine ever happening on Sam Walton’s watch. It appears that his son Rob, his heir and Chairman of the retail behemoth, along with the rest of the corporate hierarchy, turned a blind-eye to a growing culture of bribery in Mexico. Given the zillions of dollars that are alleged to be involved, it’s hard to imagine that someone pretty far up the food chain wasn’t signing off on this practice. It’s even harder to imagine that the company would be “investigating” years after these kind of allegations hit Mr. Sam’s desk.

And yet when the Walton siblings walked off the replica of Daddy’s first store and the Annual Meeting continued, that was the response every time the question of the bribery scandal was raised, “We’re investigating.” It doesn’t seem possible given the size of the scandal in Mexico and the passing of time since it came to their attention, that Wal-Mart’s leaders still have no results. It’s been six weeks since an in-depth article in the New York Times blew the lid off the scandal in a big way.

Seven years ago in 2005 a former Wal-Mart de Mexico executive sent an email with in-depth details of hundreds of bribes to Wal-Mart headquarters. Not a big investigative task. Either the cash left the hands of Wal-Mart de Mexico on the dates and in the amounts he claimed to the individuals he claimed, or not. That’s not a complicated investigation, nor one that takes a lot of time.

One can’t help but wonder what Sam Walton would have done. According to an Associated Press report on the meeting, Rob Walton said, his father "didn’t measure success by financial achievement, but rather by the lives we improve." We fail to see that goal advanced by any of this nonsense. Wal-Mart seems to have lost Sam’s moral compass, to be drifting, ignoring his ethical standards. We would guess that Rob Walton has all the money he could ever use. It would seem a perfect time for him to pick up the family flag and use his position to make his daddy’s company what Sam Walton would want it to be.

Say What?

We were pulled up short when a financial expert on a national radio show put forth the most nonsensical causal scenario for the 2008 economic collapse imaginable. It began with, “As we know, the cause of the collapse” –as if to imply that what followed was verifiable fact, set in stone. Actually what followed was nonsense. It was an effort by the reckless too-big-to-fail banks to shift the blame for their disaster to, well, anyone but them. It was even less plausible than the ongoing effort to pin the economic train wreck on some imaginary Clinton era mandate forcing banks to knowingly lend to people who they knew would never be able to repay the loans. Right; and even if this pipe dream were true, would it have taken eight plus years for those mortgages to sour?

While Bill Clinton had a role in running our economy off the cliff, it had nothing to do with any mortgage mandate. In 1999 Clinton signed into law a bill repealing the Glass-Steagall Act that had protected us from this kind of nonsense for sixty plus years. So Clinton played a minor part in passing a bill nicknamed the “Citigroup Relief Act.” At the time, Congressman John Dingell argued on the House floor that this bill would result in creating “too-big-to-fail banks and that should they get into trouble taxpayers would have to bail them out.” With help from another ill advised law, the 2000 “Commodity Futures Modernization Act” exempting the banks and others from State gambling laws it took less than a decade for Dingell’s prophecy to play out.

First let’s get things straight. While there are minor players in the 2008 tragedy, the too-big-to-fail banks bear 99.99% of the blame. Had they not been on the brink of failure, in need of a taxpayer bailout, there would be no recession. They put themselves in this position by bundling mortgages that they referred to as “Crap,” strong-arming the rating services into stamping them AAA, and selling them to anyone dumb enough to buy them. These banks pushed the little folk in the mortgage pipeline for more and more sub-prime mortgages until the whole house of cards collapsed. Everyone got hit, including some of the too-big-to-fail banks, and just as John Dingell predicted we had to bail them out. That left the big banks in good shape and the rest of us literally holding the bag; an empty bag.

So what are the Wall Street bankers up to? Why this propaganda campaign to shift the blame for the horrific recession we are still struggling to overcome? That is pretty clear. They are engaged in the same risky stuff that got us into this mess in 2008 and they want to keep right on doing it. Ethics be damned, they think that pouring millions into the pockets of the Washington crowd will stave off sensible regulation like the Volcker rule. They may be right; an outrageous lie combined with the big bucks may do it in an election year.

Let’s hope they’re wrong.

The Clock is Ticking

If ever there was a moment illustrative of the need to restore Glass-Steagall, enforce the Volcker Rule, and repeal the foolish gambling exemption Congress gave Wall Street, it is now. JPM Chase CEO Jamie Dimon’s culture of Wild West saloon gambling was outed when the loss side of the bank’s bets was exposed by a huge bet gone bad in their London trading office (AKA gambling hall). The $2 billion loss is quickly ramping up and will likely be double that or more.

Fast forward to the JPM Chase annual meeting last week (05.15.12) where we find a visibly irritated and agitated Dimon facing questions on the multi-billion dollar losses and a shareholders’ challenge to his dual role as both Board Chair and CEO. He managed to hold on to his grip at the top with 60% of the shares voting to defeat the move to unseat and replace him as Chairman. While that sounds good, you must keep in mind that prior to corporate meetings companies routinely include as part of the meeting notice a request to hand over the voting rights to the management if you do not plan to attend and vote in person. Most shareholders comply and so you can figure that Dimon walked into the meeting with the votes in his pocket. You can bet he was shaken by the margin; to have 40% opposed is too close for comfort in that game.

Turning to the “snake eyes” that is piling up billions in losses, Dimon, according to the New York Times, came up with this gem: “We are going to manage it to maximize economic value for shareholders.” That has to be one of the wildest -let’s flip the conversation to my favorite subject- “Shareholder Value” moves in history. We’d guess that Dimon’s point is that shareholders benefit from the JP Morgan Chase gambling hall because they win more often than lose, and besides in the unlikely event that we drive off the cliff we are “too big to fail” and so the suckers (that’s us, taxpayers) will bail us out again. There’s no way we can lose.

Shareholder Value -as former GE CEO Jack Welch pointed out- is an outcome; as a strategy Welch famously dubbed it, ”the dumbest idea in the world." Dimon and his ilk love it as a strategy; it enables them to parlay their gambling culture into monster bonuses, with the ultimate backup, taxpayer bucks. Shareholder Value is a meaningless term the way Jamie Dimon and others use it these days. And it will come around to bite the taxpayers unless we force the too-big-to-fail banks back into their corners. We need to get them out of high stakes gambling. We need to make them choose: either create capital as an investment bank, or take deposits and make loans as a commercial bank. Anything less leaves all of us outside the game at their mercy. It’s time for Congress to act, restore Glass-Steagall, enforce the Volcker Rule and repeal the foolish gambling exemption Congress gave them. 

Collapse of an Empire

The ethical cesspool at the center of the media colossus Rupert Murdoch created over the years since he arrived on London’s Fleet Street, is beginning to suck him into its vortex. Last week (05.01.12) a Parliamentary Committee released a 121 page report detailing some of the smarmy activities and behaviors the Murdoch culture has spawned. As widely trumpeted in the media, it branded Murdoch “not a fit person” to run an enterprise like his.

Apologists for the Murdoch clan are quick to point out that the “not-a-fit-person” phrase was opposed by four of the nine members of the Committee, all members of Prime Minister David Cameron’s Conservative Party. While the Conservative members of the Committee dissented on the fit-person wordage, they agreed with most of the report. Cameron is connected to Murdoch’s organization in a number of aspects. Foremost is his former Communications Director, Andy Coulson, who moved directly to 21 Downing Street from one of Murdoch’s London newspapers. Coulson has been arrested but not charged. Prime Minister Cameron described his own ties to the Murdoch organization as “too cozy.”

Phone hacking, police bribery, and who knows what else were unearthed by the inquiry. “Who knows,” because many areas in the report are left untouched. The Committee did not venture into the domain of Scotland Yard and the prosecutors who are still building the criminal cases. As a result they did not explore the role of more than forty Murdoch editors, private investigators, and reporters, along with police officers who have been arrested so far. That group includes Murdoch darling Rebecca Brooks and ten others whose connections to the hacking scandal were reportedly referred to prosecutors last month by Scotland Yard.

All of this and the disclosures unfolding before a separate British judicial inquiry, raises the question, why are there no similar queries into the Murdoch Oligarchy in the United States? Rupert Murdoch and his clan are all US citizens; News Corp is a US corporation. While his trashy newspapers in the UK are often seen as the face of his holdings, they’re but a tiny segment. In America he has a couple dozen television licenses, so where is the FCC? Combined, these stations, Fox News, The New York Post, The Wall Street Journal and his entertainment entities dwarf any similar organization.

Where are the Congressional investigations? Given the detailed bribery charges in the UK, where are the FCPA (Foreign Corrupt Practices Act) concerns? If the SEC is hot on Walmart’s tail (properly) for spreading the wealth among Mexican officials, how about Murdoch’s minions greatly enriching Scotland Yard types? If a parliamentary investigation in the UK finds Murdoch “not a fit person” to run a handful of newspapers, what does that say about the television properties our FCC has awarded him? Are the bureaucrats and the political types in Washington afraid of his attack dogs at The New York Post and Fox News?

They’re Back – 
Run For Your Lives!

What do you think our leaders would do when confronted by the imminent collapse of a sector of our economy whose assets are equal to 56% of our GDP? Given what they did in 2008 –properly we think– we can safely assume they would prop up the institutions at risk. Are you surprised that five of the banks we rescued in 2008 now have assets equal to 56% of our GDP*? In 2006 -before the collapse- these same five banks’ combined assets equaled 47% of our GDP*.

Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Wells Fargo, five of the players whose reckless actions drove the world economy off the cliff, are lined up to do it again. Their assets grew more than 40% from 2006 through 2011*. Why? That’s no mystery, the banks know and investors know that if there’s another collapse we will bail the Zombies out again. With the taxpayers on the hook, big banks are gambling with the same risky stuff that led to the 2008 collapse –derivatives, swaps etc., the stuff the bankers refer to as “crap.”

If it goes all wrong, the bankers and their investors have the taxpayers ready to bail them out again. Where else would investors put their bucks, high returns no risk? Published reports say all three rating services along with a covey of regional Federal Reserve presidents, see a bailout for the Zombie Banks down the road. Meanwhile, your neighborhood community bank –the bank down the street on the corner– doesn’t have an investment (AKA gambling hall) division; putting them at a distinct disadvantage in finding investors and customers.

We know how to solve this problem, been there, done that. Eighty years ago when the wheels fell off our economy our nation faced the same dilemma. They busted up the big banks and made them choose the sector of the banking world in which they wanted to operate. The Glass-Steagall Act separated investment banks from the regular commercial banks that we ordinary folk deal with.

During the 1990s’ deregulation frenzy the investment banks –Goldman Sachs in particular– pressed hard to break down this wall. In 1999 they succeeded Glass-Steagall was repealed. Then they convinced the Congress to exempt them from the gambling laws and they were off to the races. Take any risk, bet on any crazy thing, as long as you could call it an investment – it is legal. Within a few years they distorted the derivative and commodity markets turning them into Zombie bank gambling halls. Here’s the catch. They know they can’t lose. They know the suckers (AKA customers) take the losses. Worse comes to worse the taxpayers will be stuck with the mess. The bankers and investors will be just fine.

We all know what happened in the decade following the repeal of Glass-Steagall. We had to bail the banks out and now they are fine; back doing the exact same things that drove us off the cliff. Meanwhile the rest of America –and the world– is working its way out the hole they left us in. They are not doing anything illegal; however, ethically it stinks. It’s time to break up the Zombie banks and put them back in their cages, investment banks on one side of the business and commercial banks on the other. If not, we’ll be bailing them out again. They are counting on it

 *Bloomberg 04.19.12