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"It Was Looting and It's High Time the Media Described It in Those Terms"

BDBlue's picture

RL has been beyond hectic, so I hope people will forgive me for outsourcing my blog post, but Yves Smith nails not only Wall Street but the media coverage of it (today it is the NYTs, but they're hardly alone in avoiding certain words like fraud and looting).

Yves Smith helpfully explains what looting is ("pay themselves more than their firms are worth and then default on their debt obligations"). She also hits a pet point of mine, which is there's nothing particularly new about what Wall Street was doing. It was basic fraud, the kind that scam artists have been pulling forever. The only thing that changes is the technology and the scale of the fraud. Two things that aren't unrelated, IMO.

But no one is willing to call this activity for what it was. In fact, some are still urging that we not squelch "financial innovation," which Martin Mayer described as

... a way to find new technology to do what has been forbidden with the old technology....Innovation allows you to go back to some scam that was prohibited under the old regime.

But we digress. Dick Fuld reportedly spends much of his days allegedly wondering why he didn't get a bailout. He should instead be thanking his lucky stars he is not in jail. Bankruptcy fraud is criminal, and fraudulent conveyance is subject to clawbacks. How could Lehman possibly have been producing financials that showed it had a positive net worth, yet have an over $100 billion hole in its balance sheet when it went under? No one has yet given an adequate answer on where the shortfalls were.

As I'm sure Yves Smith knows, the reason we haven't been given an adequate answer is that every answer that has any basis in reality leads to prison time for an awful lot of important people. And if we've learned anything in the last eight years, it's that while the elite like to build prisons (and support politicians who build them), they aren't so keen on seeing one of their own go to them. Prisons are for the guy who shoplifted from 7/11, not Dick Fuld.*

Then she explains where the NYT falls short and surprise! surprise! it's failing to adequately pin the tail on the agency:

Giving short shrift to the staggering level of strategic errors and lax risk oversight means the article fails to pin responsibility clearly for the mess on Kim and his fellow business heads. The article simply assumes the connection, but by talking about the profits without giving sufficient detail on the colossal errors, it makes Kim and his lot seem far more innocent than they really were.

* In this regard, Madoff is Wall Street's Blago. The example they will use to make it seem as if there is accountability for fraud. He will be Exhibit A that we jail important people in hopes we never ask to see Exhibit B.

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hobson's picture
Submitted by hobson on

This might be the key to the whole thing. Why is Madoff getting bail? Isn't he more dangerous to society than any single thug with a gun? I have thought since this thing became public that this is exactly the reason there hasn't been more investigation into the rating agencies that gave all those AAA ratings. McCain criticized Fannie Mae and Freddie Mac as among the biggest buyers of "triple A rated securities." He seemed to have forgotten that a triple A rating was supposed to mean that these were good investments.

Then we have this great statement from Bush yesterday about the auto companies. Everyone says you have to bail out the auto industry because no one will buy a car from a bankrupt company. Yet Bush seemed to be saying we're going to give the auto companies the money and the time to get a shave,, a haircut and a clean suit for their appearance in court in a few months. Meanwhile, no matter what happens, tens of thousands of people are going to be out of a job for a long time to come.

People really don't seem to get what is happening until they get hit in the face. Where I work, we are facing a disaster this holiday season. Yet people are openly wondering if they will get raises this year. They don't seem to understand that they rise or fall with the fortunes of the company they are working for. And the owner of the company is focused on getting through this season without falling into despair. So he isn't discussing with them what is going on though it should be obvious to anyone who isn't new.

Personally, I have finally given in to the idea of capital punishment. I feel that it would not be wrong to have some people publicly executed by firing squad. The talking heads are always talk about sending a message. I think that would send a message. At the very least, I think Madoff and others should be in a maximum security prison and should not see the light of day again. His right to an assumption of innocence is in a court of law, not a court of public opinion.

As a people, our exceptionalism seems centered in a lack of focus.

Submitted by lambert on

And who's in jail and who isn't.

That's the significance of marijuana legalization being the top question over at change.gov, IMNSHO.