The Senate panel did a good job grinding up Goldman Sachs execs into hamburger meat. And the 10 hours of live TV coverage certainly made for good entertainment.
(Of course, as illustrated by Goldman Sachs's $1 stock increase on a horrible day for the market, "entertainment" was pretty much all it was, but that's another story).
But now it's time to put a few more folks in the hot seat. Namely, the folks who are arguably MOST RESPONSIBLE for the financial crisis that we're still struggling to recover from.
Sure, Wall Street greed played a role. So did giddy house buyers and scummy mortgage brokers. So did Angelo Mozilo and all those bank CEOs. So did Bernie Madoff and Allan Stanford. So did Ben Bernanke and Alan Greenspan, those Fannie and Freddie CEOs, AIG, and the hundreds of banks that have since rolled over and gone belly-up.
But the big message of the aftermath of the crash is this:
Almost everything that happened was perfectly legal (and even encouraged by the government). And most of the rest was completely missed by the folks who were supposed to be watching the action and enforcing the laws.
So it's time to ask WHY all that stuff was legal.
Don't forget: Bear markets for stocks and houses are huge bull markets for the prosecution business. Thus, for the past two years, every prosecutor and regulatory agency on earth has been combing through the wreckage with the aim of filing fraud charges and throwing people in jail.
And what have they found?
Pretty much nada.
Sure, they got Bernie and Allan, but only after their Ponzi schemes collapsed. (In the intervening years, meanwhile, they not only missed these crimes, but actively squelched opportunities to bust them).
But they haven't found anything else.
NO MAJOR PLAYER in the financial crisis has gone to jail. There have been no "Enron Task Forces". The one criminal case connected to the crash, the trial of two Bear Stearns portfolio managers, ended in an acquittal. After 18 months of searching through 20 million Goldman Sachs emails, the best the SEC has been able to come up with is a (weak) civil fraud charge.
So what can we conclude from this?
Prosecutors haven't found wrongdoing because, under the laws in effect at the time, there wasn't any wrongdoing.
And that highlights the REAL crime here: The laws in effect at the time.
So it's time to call a few more people to the stand.
The folks who made the laws that allowed all this stuff to happen, for example. And the folks responsible for the agencies that missed the only criminal behavior that HAS been found. The Senators who approved the lax "mark-to-market" accounting rules (which allowed banks like Lehman to print huge phantom "profits" for bonus and stock purposes, and then, on the way down, lie about the value of their crap assets until they collapsed in a heap). The folks who championed all those neg-am option-ARM mortgages (Alan). The folks who decided Glass-Steagall was an unnecessary anachronism (Bill?). The people who decided derivatives shouldn't be regulated (Alan, Bob). The man who ran the SEC while it whiffed on Madoff and Stanford (Chris). The man who ran the SEC when it decided to eliminate leverage rules, allowing the banks to gamble themselves into oblivion (Chris). The folks who got Fannie and Freddie into the sub-prime business (Daniel, etc.). And so on...
Now that they've had time to reflect, it would actually be instructive to hear these folks reflect on the thinking and pressure that led them to make these (terrible) decisions. This information won't be useful now--the milk has already been spilt--but it might be useful 50 years from now, when the good times are back and we're obsessed with complete deregulation and de-enforcement again.
And it would certainly be entertaining!
Don't miss: 10 Burning Questions The Senators Should Have Asked Goldman Sachs
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1. Congress, who allowed passed the laws allowing disaster to happen.
2. Mortgage bank executives.
3. Securitization market institutions.
4. Credit rating agencies.
5. Hedge funds and speculators.
6. The Fed and the Treasury.
Others here have it right. The "Authorities" will do nothing to prosecute this because they cannot afford to.
Over the past year, stocks have resurged, capturing more than 2/3rds of the losses they accrued during the 2008 collapse. How? The general public hasn't been buying stocks. Company insiders have been selling like mad. Large institutions haven't been buying.
Meanwhile, banks have been speculating in commodities (JPM Chase and several others now rent tankers to hold billions of barrells of oil they've bought on speculative purchases) with money they've been borrowing from the Fed at 0%. It's no stretch to suggest they've been doing the same with stocks, catapulting the equity market to the strongest rally EVER.
If the banks are prosecuted and stripped of their ability to speculate, that market rally ends, and reverses. You'd see an instant stock market collapse and the decimation of retirement accounts all over again.
As evidence, I point to the broad market sell-off that happened when Goldman Sachs was threatened with a civil suit, and again with a criminal investigation. These actions should have only affected Goldman, but instead, we saw Google, Alcoa, and pretty much every other stock market darling drop on April 16th and again on the 30th.
Politicians cannot and will not allow a general collapse in equities because they believe it's more important for the economy to look good than it is to reinstate honesty and fairness back in the marketplace.
And they're right. If the market collapsed again, every fool in the US would blame Obama and the Democrats for "killing the economy", not laud them for enforcing the rule of law.
If on the other hand, Obama and the Dems made the public fully aware of the situation and the consequences, then they took on the banks, they could maintain populist appeal AND wreak justice upon Wall Street.
It is undeniable that politicians in Washington D.C. have been bought and sold for years by financial lobbyists in favor of Wall Street's interests at the expense of U.S. tax payers for many generations to come.
A most glaring abdication of duty by U.S. politicians indeed! (i.e.,.Paulson, Richard Shelby, Chris Dodd, Barney Frank, Geitner, Bernake, and both the Clinton and Bush Administrations, etc...).
One must ask the question who was responsible for supervising and overseeing the behavior of AIG and Wall St. firms while U.S. politicians basically rolled the dice in providing subsidized housing (i.e., Fannie/Freddie via Clinton's State of the Union Address)?
From the U.S. tax payer viewpoint, the actions of U.S. politicians and Wall St. are totally indefensible and is the apotheosis of utter incompetence, greed, and arrogance!
The smell of this egregious behavior by Wall St. and the U.S. permeates from Shanghai to Dubai!
Henry Blodget (born 1966) is an American former equity research analyst, now barred from the securities industry because of fraudulent activity..
http://en.wikipedia.org/wiki/Henry_Blodget
HP needs to do a better job of disclosure in regards to its contributors. The fact that Henry Blodget has been banned from the securities industry for life because of his fraudulent behavior should be prominently displayed in his bio and by-line.
that being said, I can't understand the thinking presented in the article:
Blame the law when you break the law? Clearly a waste of keyboard energy to even argue what the author is throwing out there.
Anyway, there is such a thing as redemption and perhaps he's doing what he thinks he should in order to achieve it. No reason to condemn the man when his arguments make perfect sense.
Wake up America! You are being duped!!!