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