"The struggle of man against power is the struggle of memory against forgetting."
So wrote Milan Kundera in The Book of Laughter and Forgetting. It is one of my favorite quotes and it popped into my head as I was reading about last week's settlement between JPMorgan and the SEC in which the banking giant agreed to pay a $25 million penalty and cancel $647 million in fees owed by Alabama's Jefferson County as the result of a complicated derivatives deal that blew up in the county's face.
As part of the settlement, JPMorgan neither admitted nor denied wrongdoing -- despite ample evidence that it had engaged in plenty of wrongdoing. Things like paying off local officials with millions to win no-bid contracts worth billions and convincing county officials to switch from fixed-rate bonds to bonds hedged with risky derivatives -- a switch that has driven Jefferson County to the brink of bankruptcy. "We have been victimized by our creditors," said a county official.
JPMorgan released a statement that it was "pleased to have reached a settlement with the SEC," and acted as if it was practically a disinterested party: "The charges relate principally to municipal transactions that occurred six and seven years ago. JPMorgan has since discontinued that business, and the employees in question are no longer employed by the firm."
So no wrongdoing admitted, and time to move on to the next lucrative money-printing scheme. How tidy. This is what passes for justice on Wall Street these days. If you commit a petty crime and hammer out a plea bargain, you'll have to admit wrongdoing as part of the agreement. But put on a suit and commit a billion dollar crime and you won't even have to admit you did anything wrong. It'll be as if it never happened. Which, of course, makes it much more likely that it will happen again.
We saw the same dynamic played out earlier this year in the legal saga surrounding the $3.6 billion in bonuses that was awarded to Merrill Lynch executives just before the failing firm was acquired by Bank of America (with a lot of help from American taxpayers, who bailed out BofA with $45 billion).
It appears that Bank of America executives failed to inform their shareholders that, as part of the acquisition, they were going to give billions to the executives who had been at the helm while Merrill lost $27 billion in 2008. Had the shareholders been told, the news would more than likely have put a crimp in the hastily arranged deal.
Many thought the matter was closed back in August when the SEC reached a settlement with Bank of America in which the banking giant would pay a $33 million fine but -- you guessed it -- admit no wrongdoing.
Of course, lots of wrong was done in that case too -- something that was implicit in the bank's willingness to pay the multimillion-dollar fine. Specific people had made very specific decisions surrounding the Merrill Lynch bonuses -- including not informing their shareholders.
But, instead of going after them, regulators went after the company, gave it a minor ding to its bottom line, and were ready to forget the whole thing.
Last year, the total of amount of fines levied by the SEC was the lowest since the corporate scandals of 2002 led to stricter enforcement regulations. So while the financial system was on a fast track to near-collapse, the SEC was taking its hand off the brake. And the perpetrators of that near-collapse are being allowed to avoid accountability. When crimes are uncovered then resolved with no acknowledgment that a crime was ever committed, that's a recipe for anarchy -- not for a healthy democracy.
It's really not that complicated: if you do the crime, you do the time. But the people who run the show like to make it seem like it is very complicated -- all the better to obscure the simple moral principle of right and wrong. Why should it matter whether you commit your crimes in a fancy boardroom or on the street? If you were reaping the (often enormous) benefits of your crime, why don't you have to admit wrongdoing when you're caught, and pay a commensurate -- not a token -- penalty?
As it happens, there are some heroes out there who have noticed that the ambiguous way our laws are being enforced has diverged from the unambiguous morality the laws are based on.
In the Bank of America case, the hero is U.S. District Court Judge Jed Rakoff. Instead of rubber-stamping the BofA/SEC settlement as everybody expected, Judge Rakoff refused to sign off on the deal, which he called a breach of "justice and morality" that "suggests a rather cynical relationship between the parties."
And Judge Rakoff demanded to know who exactly were the executives who knew about the bonuses and decided not to disclose them. Instead of a faceless company, shouldn't the culpability, Rakoff asked at a hearing, be on "the individuals who were responsible?"
But rather than naming those responsible, Bank of America claimed it was all the fault of its lawyers -- an excuse that, shockingly, the SEC bought, saying the fact that the bank's executives had relied on legal advice would present "substantial obstacles" to prosecution.
Judge Rakoff wasn't buying it -- he saw the slippery slope that thinking would lead to: "It would seem that all a corporate officer who has produced a false proxy statement need offer by way of defense is that he or she relied on counsel," he said.
Rakoff has a history of actually applying the law. Back in 2003, he rejected a settlement with WorldCom because the fine was too low.
When he first became a judge, prosecution used to focus more on individuals instead of companies. "The feeling then," he said, "was if a crime had been committed, it was important to discover who the persons were who made the wrongful decisions."
Judge Rakoff's display of spine appears to have rubbed off on the SEC, which now says it will aggressively pursue its case, taking Bank of America to trial. And there have been other ripple effects: after initially stonewalling a congressional committee looking into the Merrill acquisition, the bank agreed in September to hand over some, but not all, of the documents the committee had requested. And in October, it agreed to turn over to the SEC and the New York Attorney General's office documents revealing the legal advice it received regarding the Merrill deal -- an unusual waiving of attorney-client privilege. What's more, Brian Moynihan, the bank's onetime general counsel and a contender to succeed departing CEO Ken Lewis, will testify before the House Oversight Committee next week about his role in the Merrill takeover.
Of course, it's not just our "too big to fail" banks that have been allowed to do wrong without having to admit to any wrongdoing. The pharmaceutical industry and health insurance companies have been doing the "pay the fine but admit nothing" dance for years -- chalking up the millions (and sometimes billions) they have been fined as the cost of doing business.
But with the banking, drug, and insurance industries all finding themselves at a crossroads, now is a very good time to revoke the Get Out of Jail Free card those at the helm of these companies have been given for far too long.
We all know that there was a great deal of wrongdoing that led to the near-collapse of our financial system and to our badly broken health care system. The first step to reforming each of them is to acknowledge that wrongdoing -- and to seek the real punishment of the wrongdoers.
Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff
My problem is this, my wife has always paid her bills on time and most times before they are due. Because of my bankruptcy my wife has been held hostage to Citi-Financial because they assume that a account that my wife applied for was in fact a credit card account that I alone had. Which is not correct and she has sent numerous pieces of documentation to prove that their position is wrong. They have charged off the account even though she has NEVER missed a payment. A charge off indicates to the business community that this person is not worthy for any credit and lowers the credit score.
I would like to have any information to help restore my wifes financial credibility. The bottom line is that the system has ruined my credit and is attempting to do the same with my wife. Keep in mind that my wife and I have always maintained separate credit .
On one side we have politicians and their appointees (who make the decisions) as opposed to Government which merely executes politician approved processes.
On the other we have corporate executives, lobbyists and functionaries who get rich by maximizing profits, stock prices, and quarterly results while minimizing capital, labor and operating costs. That is the goal of unrestrained capitalism.
Because of the self serving and symbiotic relationship between the members of the Policorplex (which also includes the older and more limited Military Industrial complex), corruption is rampant.
The goal is not to serve the government/citizens/customers/investors, but the Policorplex.
As politicians, executives, functionaries and appointees flow back and forth between the two sides they enrich each other, reinforcing a thoroughly corrupt system.
The big question is :
How to get efficient, practical yet compassionate government that serves the best interests of the country and its citizens from people whose own interests and fortunes are often best served by doing the opposite?
This is why :
- you have wars with no clear objective or end in sight.
- oil exceeded $100/barrel and will certainly do so again.
- you have no meaningful health-care reform or a Public Option.
- the the Insurance, Banks and other Financial companies are still allowed to gamble with citizens and investors money in the casino that is Wall Street.
Let's see if any of these problems get fixed, not just band-aided.
Stop paying your credit cards. Wall Street megabanks collapse overnight.
Actually, that's happening already on an involuntary basis because of the banks' vicious ratejacking (they're headed to the same graveyard as Advanta Bank, once the 11th largest credit card issuer) and the unemployment they've created (the "Manchester Index" of unemployment pain is the highest it's ever been in the post-war era). Moody's and Fitch both agree that the chargeoff rate will run at 11% through the summer, which is as far ahead as they care to look.
YouTube phenom Ann Minch has formed a debtors' revolt similar to Mexico's "el Barzon" movement which took only a few years to kick a 60+ year ruling party out of power. http://www.debtorsrevoltnow.com
My book "Debt Hope: Down and Dirty Survival Strategies" is a roadmap through the mess for an individual with debt problems, whether they're medical, mortgage or credit card. It's available as a .PDF from http://www.myhopeseries.com or on Amazon for the Kindle.
Take a page from Wall Street's book: keep your money and don't admit any wrongdoing.
The Party Of No.
No Oversight
No Accountability
No Responsibility
The Catholic Church tortured and executed more than 50,000,000, men and women . These people were slaughtered for the crime of heresy charged against them by Papal Rome during the 605 years of the Inquisition. The gene for independence and ability to stand up to authority has been "cleansed" right out of the population by sociopaths such as these since the dawn of history. These bankers are exercising an age old tradition, total domination and obliteration by a weakened and threatened people.
Can we stop it or just be forced to listen to oppressive contempt from those that have no trouble destroying anyone and anything for what they want in this world??
And there is a glaring contradiction from Wall Street when they say they deserve such huge payouts.
They hold themselves to highest standards of income, but at the same time they insist upon justifying the lowest standards of professional competence and ethics upon themselves.
It is hard to believe that there weren't "winks and nods" when highly trained, astronomically paid professionals rated mortgage-backed bonds as "low-risk" and then sold them to investors during the real estate bubble. A complete neophyte-lay person may not have forseen what would inevitably happen when faced with a graph showing the insane rate of rising real estate prices, knowing that middle class incomes were not rising at the same rate, and that the interest rates of many of these mortgage backed bonds where rigged to rise years later. However, Wall Street professionals neck deep in the details, who say that they deserve their astronomical incomes, cannot claim the excuse that it was a surprise. We hold doctors, who are paid much less, to much higher standards.
Face it, there is a culture of corruption & deception on Wall Street. Preceding the crisis and perhaps during the bailout, financial press failed to aggressively hold the "superstars" under skeptical scrutiny. The market turned into a black box, where the statements of salesmen & hucksters, were regarded as truth.
This brings me to government run healthcare. Absolute power corrupts absolutely. This truism couldn't be any more apt in application to what our government is trying to do. Pundits get so caught up in their belief system that they don't reflect on repercussions. Wanting the government to get larger, more powerful, only invites the corruption and inefficiencies that necessarily culminates from the power granted to it. It is completely irresponsible to ignore that medicare is over 10x the cost that was proposed, and many times even based on inflation. The current house bill has per capita cost at 7300, more than we're currently paying. Odd when the premise was to reduce our healthcare costs, this is a travesty. The corruption is only beginning. So much focus on bad insurance companies, and zero focus on bad grand sized government.
What about Phil Gramm, Jim Leach and Thomas Bliley who helped repealed Glass-Steagall ? Have they admitted wrongdoing ? What about President Clinton ? Has he apologized for signing the Gramm-Leach-Bliley bill?
What about Alan Greenspan ? Has he apologized for being the architect of the credit bubble ? What about President Bush and Hank Paulson for letting the credit bubble grow and for having bailed out their failed buddies in the banking industry ? What about Ben Bernanke for having printed over a trillion dollars and exposed us to the risk of hyperinflation ?
What about Barney Frank and Chris Dodd who kept covering up the failures of Fannie and Freddie ? Have they admitted to any wrongdoing ?
How amusing that you can plunder your way to the top at the expense of everyone below
and cause catastrophic failure with no accountability.
The financial world seems to operate on a no fault mind set
avoiding legal jeopardy by simply claiming incompetence.
If you or I are behind the wheel of a car and we make a mistake
and someone is harmed by this momentary accidental incompetence, you are still
at fault and liable for the damages.
These executives should be charged with criminal negligence
and have every last bit of their assets seized.