Thursday, April 14, 2011

Criminals, Thieves, and Accounting Time.

The first half of April always brings for me another birthday and tax filing. I can't be the only one who always pays taxes and always waits until close to the deadline to do so.

This year I have a new tax guy and unlike the old tax guy the forms are complete and I'm going to have them in on time. I think the new guy is good evidenced by having done Reggie's taxes for a long time without problem. He's a bit more expensive but after loosing sleep worrying about late taxes, it's worth it!

On the front page of the New York Times this morning was an article that analyzed how Wall Street, mortgage and bank executives ran the businesses they were hired to run for personal profit cheating their investors and now are getting away with it.  In Financial Crisis, No Prosecutions of Top Figures by Gretchen Morgenson and Louise Story it's all laid out before us.

Looking at the article you will be tempted not to read it. It's a big one, and takes about 20 minutes to read. But if you are one of the people who has or had investments or deposits in a bank, stocks traded on the exchanges, treasury bills or other financial instruments and have been confused about where all that money you lost went, it's worth your time. I'm talking about people like you and me, who got what education they could get, went to work and worked in whatever job we could get or chose, have always dealt fairly with employers, employees, local and national governments, and paid our bills, saved our money and expected to and did play by the rules.

As one of those people I want an accounting.

In the late 1980's after the savings and loan crisis over 1100 cases of fraud and wrong doing were referred to prosecutors and more than 800 bank officials went to jail. Today more than two years after the beginning of the recession and a financial mess huge in comparison, very few people are being held accountable.

The S.E.C. extracted a $550 million settlement from Goldman Sachs for a mortgage security the bank built, though the S.E.C. did not name executives in that case. The security was known by the top people to be slimy and their traders were told to push it at the same time with the company's money they bet against it.

Another exception is a civil lawsuit filed last month against top executives of Washington Mutual, the failed bank now owned by JPMorgan Chase. The Federal Deposit Insurance Corporation sued Kerry K. Killinger, the company’s former chief executive, and two other officials, accusing them of piling on risky loans to grow faster and increase their compensation. The outcome is not known as the suit is in its early stages.

I ask, how are all these thieves getting away with their crimes?

Unlike in the time of the S&L crisis, budgets for regulators to investigate and prosecute are small. The lessons of financial crises in the past were ignored again and in the aftermath no one is being held accountable. To me it seems those charged with regulation and prosecution are set up to fail by people we trust to represent us in Congress. The influence cultivated by big money firms has resulted in those in power being unwilling to proceed. Why have any rule or regulation to hold Wall Street and the Financial Markets accountable at all if regulators do not have the ability to actually do the job. That's a rhetorical question, obviously.

Red flags were flying high and straight prior to the crash. Efforts to investigate Countrywide, the nation's largest mortgage originator were stopped before any action could be taken.

"After the crisis had subsided, another opportunity to investigate Countrywide and its executives yielded little. The Financial Crisis Inquiry Commission, created by Congress to investigate the origins of the disaster, decided not to make an in-depth examination of the company — though some staff members felt strongly that it should. It was canceled because Republican members of the commission did not want any more hearings."

Sub-prime mortgages as well as fiscally inept ones being bundled and sold as securities, was without a doubt the reason for the eventual collapse of markets.

I suspect one thing the heads of these companies did learn is how to create marketable instruments so complicated no one knew what they were investing in. They further covered their tracks and in buying influence with Congress, manipulated what was investigated and what was not. This hid their crimes and made the fight to prosecute so expensive it was impossible to practically do.

In this halcyon time of early spring with the awakening of flowers and allergies we are again filling out tax returns. I do not hate paying taxes as I must make money to do so. I do hate having seen my meager savings become decimated in the past decade because of crooks who use their skills and access to cheat their investors, make huge personal income and get away with it.

It's a time for an accounting.


  1. Amen! And, of course, one wonders exactly WHY the Republicans in the commission wanted no more hearings...

  2. I'm hoping this is a story that won't go away. I retired December 31st, 2007, with enough money to bring a small income stream from conservative investments and allow me to will the principal to my children someday. Within months, I saw that plan go down the tubes.

    This phrase you used rings in my ears, "...paid our bills, saved our money and expected to and did play by the rules." I would only add, "...paid our taxes, every penny owed, on time and without any creative accounting mumbo jumbo."

  3. The American investers, and even the foreign ones who invest in these stocks, banks, etc., play by the rules. Those with access don't. That one simple thing gives theft simplicity for them. That is why they must be brought to account. If there is no teeth in regulation, even the most lax will be taken advantage of.

  4. It's crazy - those of us who actually follow the rules are the ones who are hurt.

  5. Great post, I am telling you.....I would vote for you for president!

  6. Well, so much for following the rules...

    The ultra rich make up the laws that congress passes in exchange for money. So no one has done anything wrong and if they have, well, they have the finest lawyers. Obama has filled his cabinet with financiers responsible for wrecking the economy.

    On the other hand, you can squeeze working people only so much before something gives. Protests everywhere and they're not stopping any time soon.

  7. I really do not understand how some can fly above the law...

  8. Jilda, I am at least a bit crazy, but fortunatley not crazy enough to run!

    Missy, I think they fly beneath the law.


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