Prosecuting Wall Street

  • metta

    Posts: 39165

    Sep 17, 2012 3:36 PM GMT
    Prosecuting Wall Street

    Why has Wall Street not been held accountable for crimes connected to the deepest recession since the Great Depression?



    http://www.aljazeera.com/programmes/peopleandpower/2012/09/2012912134638276495.html
  • maxferguson

    Posts: 321

    Sep 18, 2012 2:52 AM GMT
    Interesting article. I read it this morning too.

    One person who has a surprising take on the matter is Jamie Dimon, CEO at JPMorgan. I tend to agree with it.

    The ultimate problem is that the risk banks take is not aligned with the reward they get. An example would be prop trading with federally insured deposits. Prop trading is fine, so long as the bank endures all of the potential downside. However, with federally insured deposits, it can max out the risk knowing it won't have to foot the bill. The aim of the Volker rule is to solve this problem. A better approach would be to let banks take all the risk they like, but with their own money, by separating the capital received via deposits and the capital of the bank. Having reporting controls that make sure it is very easy to identify who evaluated, approved and took the risks is also important. When people know they're on the spot, they have a tendency to behave.

    Ultimately, Dimon insists that large banks need to be allowed to fail - large institutions more precisely. It is vital to the health of the system, because if we don't, then everyone foots the bill. If we do, then the losses are limited to the shareholders, and nobody forced them to invest. With respect to banks, Dimon asserts that each bank should have a "living will" of sorts that explains how to dismantle the various legal entities without damaging the economy or costing the taxpayers (JPM has such a will). Further to that, Dimon asserts that all registered investment banks bear the costs that do overflow from the bankruptcy of one bank via a communal fund. That way, each bank has an incentive to conduct itself within reasonable risk parameters when dealing with other banks.

    As for Goldman Sachs, Lloyd Blankfein is scum and should go to jail.
  • maxferguson

    Posts: 321

    Sep 18, 2012 2:59 AM GMT
    Another person who should be in jail is Ben Bernanke. No politician in history can shine a candle to the damage he has done to the U.S. economy. The point of QE 1, 2 and 3, and Twist 1 and 2 was to stimulate consumer borrowing. But because households were (are) levered up to their debt capacity, they are impossible to lend to the amount of money that was printed. Hence, banks were sitting on a pile of cash from selling their treasuries to the Fed. They can't lend, and it certainly doesn't make any sense to just sit on it, so demand for financial assets increased (hence the stock market 'rallies'). This has served as the single largest transfer of wealth in the history of the U.S.

    In the end, the banks, society, and regulators all know how the banks are going to act, it's what happens around them that changes what they do to achieve that. In this case, the unintended consequence was inflating the price of financial assets, much of which is owned by the wealthy. On that note, he may have saved a lot of people's pensions from (sooner) collapse. A good pension fund would have realized this, rode it up and gotten the hell out, and funded their liabilities a lot longer.
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    Sep 18, 2012 4:07 AM GMT
    http://bettermarkets.com/reform-news/cost-crisis-caused-wall-street-no-less-128-trillion-dollars

    [url]http://bettermarkets.com/sites/default/files/Cost%20of%20the%20Crisis%20Fact%20Sheet.pdf[/url]
    "Wall Street ...cost the American people more than $12.8 trillion"
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    Sep 18, 2012 10:22 AM GMT
    Where is Obama and Holder on this?
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    Sep 18, 2012 10:48 AM GMT
    Poor article.

    To prosecute, you have to have a crime. Fraud and other criminal activity was much rarer than people think.

    We had a bubble. Now we have regulatory overkill designed (mostly poorly IMO) to prevent that last bubble, but the next bubble will be in a different place. They always are.
  • maxferguson

    Posts: 321

    Sep 18, 2012 7:49 PM GMT
    showme saidPoor article.

    To prosecute, you have to have a crime. Fraud and other criminal activity was much rarer than people think.

    We had a bubble. Now we have regulatory overkill designed (mostly poorly IMO) to prevent that last bubble, but the next bubble will be in a different place. They always are.



    Bingo. Have you ever read "The Black Swan of Cairo"? It's along those lines of regulatory overkill and unintended consequences. If you google it, it shows up as a pdf. It's a great read.
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    Sep 18, 2012 7:52 PM GMT
    showme saidTo prosecute, you have to have a crime. Fraud and other criminal activity was much rarer than people think.


    Wrong. To prosecute, you have to be able to build a case. Fraud was rampant in Wall Street—but showing it's illegal is quite another matter.
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    Sep 18, 2012 11:30 PM GMT
    To prosecute, you'd have to have a government that wasn't complicit. certainly not compliant, and probably not cohorting either.
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    Sep 18, 2012 11:46 PM GMT
    TigerTim said
    showme saidTo prosecute, you have to have a crime. Fraud and other criminal activity was much rarer than people think.


    Wrong. To prosecute, you have to be able to build a case. Fraud was rampant in Wall Street—but showing it's illegal is quite another matter.


    In my experience, you're wrong. Lots of wrong financial models and assumptions, but little fraud.
  • metta

    Posts: 39165

    May 04, 2014 5:28 AM GMT

    Wall Street Pro's Admit Many Are Corrupt




    1743450_10152043893613163_1750792854_n.j
  • tj85016

    Posts: 4123

    May 04, 2014 5:34 AM GMT
    ^^

    pretty much
  • jaroslav123

    Posts: 600

    May 04, 2014 7:17 AM GMT
    It's simple. Because we're so used to capitalism and the free-market, that the economic meltdown - although extreme - seems a perfectly normal event. Thus when we hear of bankers/stock-brokers who broke the rules or the law in order to increase gains, we simply nonchalantly shrug our shoulders thinking "well, what else would you expect".

    Welcome to humanity.
  • metta

    Posts: 39165

    Jul 18, 2015 6:44 AM GMT
    Drugs, sex and no 'moral compass' on Wall Street


    the people in charge before the crisis still run Wall Street. And he says the mentality hasn't changed much.