Some of the headlines about the conviction of hedge fund manager Raj Rajaratnam are misleading or just plain wrong. The Rajaratnam guilty verdict won't "change the way Wall Street does business" - not where it matters most. Too Big to Fail banks will continue to endanger the economy because they know they'll be rescued again. And they'll keep on breaking the law, knowing that even if they're caught they'll be protected from prosecution.
And yet, instead of being grateful, bankers like JPMorgan Chase CEO Jamie Dimon will continue to publicly sulk about their own perceived mistreatment. That can be annoying, since the U.S. taxpayer saved their corporations, their careers, and their wealth from the consequences of their own mismanagement.
But in the end all this public posturing is just a form of territorial primate display, like mandrills showing their brightly-colored posteriors to zoo visitors. These bankers are reminding us that this country's economy and government are their territory and we're just trespassing on their mating grounds. To paraphrase an old Sam and Dave song, "It's their world, we're just living in it."
Any aggravation felt as a result of their actions can easily be overcome through a rigorous program of spiritual and emotional self-improvement - or so I'm told. Here's the real problem: If you combine the egocentric and self-absorbed vituperation from these CEOs with the fact that their institutions can continue to commit crimes without fear of prosecution, it means that Wall Street enjoys state of "undiplomatic immunity" that endangers the entire country.
Whether it's Dimon's whine du jour, Bank of America CEO Brian Moynihan's arrogant sarcasm, or Washington's love affair with the CEO of serial corporate lawbreaker GE, the arrest of a hedge fund manager or two is insignificant as long as Wall Street's real power brokers remain immune from investigation. The Rajaratnam conviction doesn't change the underlying reality:
Too Big to Fail is still Too Big to Jail.
Something Fishy
Rajaratnam sounds like a big fish. He ran a $7 billion hedge fund and was convicted of making $63 million from criminal behavior. But one bank alone, Dimon's JPMorgan Chase, has already given up three quarters of a billion dollars to settle charges after it systematically bribed government officials in Alabama. Dimon's Chase has set aside another $2.3 billion to settle additional lawsuits that are expected to arise from other illegal acts on its part.
Jack Palance's line to Billy Crystal in City Slickers was "I cr*p bigger than you." Dimon's JPMorgan Chase excretes legal settlements that are bigger than Raj Rajaratnam.
How big are the biggest banks in America? Bank of America has $2.27 trillion in assets. JPMorgan Chase has $2.2 trillion. Citigroup has $1.97 trillion. Wells Fargo has $1.2 trillion. Compared to them, Rajaratnam's hedge fund is just a rounding error.
Raj Rajaratnam isn't a big fish. He's a guppy.
Busting up the wrong gang
This conviction is "just the start," we're told. Other members of Rajaratnam's Galleon fund have been targeted, along with Silicon Valley executives and employees of other investment funds. And we're told that the SEC's investigation is broadening to address the idea of "expert networks" that link industry professionals (i.e., in technology) with hedge fund investors.
To be sure, "expert networks" are dubious at best and downright illegal at worst. Business Insider did a useful round-up of firms who advertise themselves with phrases like these: "a global knowledge broker connecting professionals seeking specialist knowledge with those possessing it" ..."connects the investment community and advisory firms with leading industry specialists around the globe in order to access key market information" ... "the premier provider of expert consultation, market intelligence, advisory services, investment, and events for the China market."
To the untrained eye, that sounds a lot like insider trading. And to the trained eye it sounds a lot like insider trading.
A very gray, very faint line divides "networking between the investment community and experts in the industry" and the illegal exchange of information between investors and experts. And it can be crossed in a heartbeat. In can be crossed in the course of a four or five-sentence answer that a "industry specialist" gives to a question from "a member of the investment community."
So it's worth investigating. But it's not the source of our economy's systematic danger ... or its systematic corruption. The Rajaratnam conviction may be "just the start" of something useful. But it's not going to fix our worst problems.
Big and Bad
We never learned our lesson from the 2008 crisis. Instead of ending Too Big to Fail, the government has encouraged it. It's been helping larger banks acquire small ones. There were 157 bank failures last year, and there are now roughly half as many banks in the U.S. as there were 20 years ago. And most industry experts agree that consolidation in the banking industry will continue.
What's much worse is the fact that the top banks are getting bigger, not smaller. The "Big Four" - Citigroup, JPMorgan Chase, Bank of America and Wells Fargo - had 32% of the market before the 2008 collapse. Afterwards they had 39%, and they continue to grow.
And these corporations are all serial outlaws. Each of them has been deeply implicated in widespread mortgage fraud that includes the forging of court documents, a crime for which the Attorneys General for fifty states are reportedly reducing a proposed slap on the wrist to a proposed gentle kiss on the back of the hand.
We've already described some of the crimes committed by Dimon's JPMorgan Chase. The number of criminal indictments that resulted? Zero. Another "Big Four" bank, Wells Fargo, systematically laundered drug money from the cartels that have murdered 35,000 people in Mexico. Number of criminal indictments? Zero. Citigroup violated SEC law regarding corporate disclosures, engaged in illegal rate activity toward credit card customers, and is under investigation for aiding and abetting a Ponzi scheme. Number of criminal indictments? Zero.
(A more detailed description of these banks and their rap sheets can be found here.)
Get Real
So forget all of those headlines that say Raj Rajaratnam's conviction will "change everything." The government is still targeting small fry and trying to convince the public it's getting the people who have ruined their lives. It's not. Justice won't be served, and we won't be protected from the next crisis, until executives from the major U.S. banks are seriously investigated for their roles in the criminal behavior that has already been admitted to and addressed with a wave of large financial settlements.
It's time to get real about Wall Street crime, before it brings down the economy again. And it's time to end Too Big to Fail.
If Raj Rajaratnam's conviction fails to convince the public that the government's cracking down on bad bankers, they'll need another target for the public's wrath. Who knows? Maybe they'll arrest Martha Stewart again. Or they can get serious, and investigate the people whose crimes have done so much damage and may very well do more in the years to come.
As Martha might say, that would be a good thing.
____________________________________________________________
Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America's Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light.
He can be reached at "rjeskow@ourfuture.org."
Website: Eskow and Associates
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
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However, there are two Registers of Deeds who are demanding answers from MERS, BofA and the rest of them. Then need our help. The truth shall prevail: http://tinyurl.com/6k9gzlc
Also, here is my open letter to Attorney General Miller: http://tinyurl.com/3h5kfy9
William K. Black for Attorney General!
And nationalize the big fraud inducing banks!
I'd just like to point out to the banksters what Joplin sang:
"Freedom's just another word for nothin' left to lose."
The number of us who feel like there is nothing of value left, that we have not only lost too much, there will be a lot more loss if this situation is not reversed soon; the increasing numbers will be so free, revolution will be a welcome outlet.
http://www.archives.gov/research/guide-fed-records/groups/014.html
Records of the United States Railroad Administration [USRA]
A smaller nationalization established ConRail:
http://www.archives.gov/research/guide-fed-records/groups/464.html
Records of the U.S. Railway Association [USRA]
I believe that once both sides of the debate finally have had enough (we're getting close I think) then action will be taken. Mind you, I don't mean the politicians, I mean We the People.
Really, timing is everything. Congress should have held the banks hostage to financial reform. Holding the economy hostage for your ideology seems to be a popular strategy (see Boehner and McConnell on raising the debt ceiling) but it seems decidedly one way. Frankly, had the economy trashed in 2007 instead of 2008, I suspect we would have gotten financial reform in a serious way on day one. The learned lessons of the Great Depression allowed government to ease the pain but the pain was the only way to force the medicine that was truly needed. I fear that you are right.
Meanwhile, calls for Blankfein's resignation by shareholders was met by more arrogance, with a vow to stay firmly put. And why shouldn't he? He's reaping the benefits of all of Goldman's unethical practices with no fear of reprisal from the government.
Our Treasury, our Federal Reserve, and the President's closest advisers are all Wall Street insiders. Obama will continue to turn a blind eye if it keeps his campaign coffers loaded for the next election. And sadly, since this country's politicians are always campaigning, regulation of the financial sector will never be addressed until pitchfork-wielding peasants start swarming the Washington Mall.
they need to all go to jail and ust giver us deadbeats our homes. if we are such "deadbeats" how did we get 1/4 million dollar homes. check all appraisals and mortgage paper work all. i found straw buyers, and house flipping homes that should have not been used as a comp but in a n aren of no holes barred they were not thrown out .actually the underwriter were non existent during my loan approval except to steal my money. my 20% down was my savings my next egg my investment. realestate never lost value. for god sakes these are not homes.
Why CEOs Avoided Getting Busted in Meltdown: William K. Black - Businessweek
"May 11 (Bloomberg) -- The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.
We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
[snip]
Wealth Destruction
In criminology, we call these accounting-control frauds and we know that they destroy wealth at a prodigious rate. There’s no “if” about the losses -- the only questions are when they will hit, how big they will be, and who will bear them. The record income produced explains why those involved get away with it for years. Private markets don’t discipline firms reporting record profits. They compete to fund them. Fraudulent CEOs can control the hiring and firing and can create the perverse incentives that produce a dynamic in which bad ethics drive good ethics out of the marketplace.
Sophisticated accounting-control frauds not only sucked in employees who should have known better, but also loan brokers. The result is that the large fraudulent lenders -- those making a lot from liar’s loans -- produced an echo epidemic of deception.
Fraud, it turns out, begets fraud."
William K. Black on Holder and Mozilo...
http://www.businessinsider.com/attorney-general-holder-countrywide-chiefs-most-valuable-friend-2011-2
Attorney General Holder: Countrywide Chief's Most Valuable Friend
"...It was bad enough that the Bush Justice Department allowed a Gresham's dynamic to develop in which cheaters prospered and drove honest business people out of the industry. That is the single greatest factor that drove the current crisis. It is unconscionable that the Obama Justice Department allows those who became wealthy through fraud to do so with impunity. That dynamic will make the next crisis come sooner and far more destructively. Attorney General Holder should resign and he should be replaced by someone with the backbone, integrity, and brains to take on the most elite frauds regardless of their political power."
William K. Black should be the Attorney General, if not President.
http://www.bloomberg.com/news/2010-07-07/wachovia-s-drug-habit.html
Wachovia's Drug Habit - Bloomberg.com
"...The bank didn’t react quickly enough to the prosecutors’ requests and failed to hire enough investigators, the U.S. Treasury Department said in March. After a 22-month investigation, the Justice Department on March 12 charged Wachovia with violating the Bank Secrecy Act by failing to run an effective anti-money-laundering program.
Five days later, Wells Fargo promised in a Miami federal courtroom to revamp its detection systems. Wachovia’s new owner paid $160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009.
[snip]
‘No Capacity to Regulate’
Large banks are protected from indictments by a variant of the too-big-to-fail theory.
Indicting a big bank could trigger a mad dash by investors to dump shares and cause panic in financial markets, says Jack Blum, a U.S. Senate investigator for 14 years and a consultant to international banks and brokerage firms on money laundering.
The theory is like a get-out-of-jail-free card for big banks, Blum says.
“There’s no capacity to regulate or punish them because they’re too big to be threatened with failure,” Blum says. “They seem to be willing to do anything that improves their bottom line, until they’re caught...”
Over 20,000 deaths and just fines.