Wednesday, May 23, 2012

How Financial Criminalization Crashed the Economy, and the Culprits Got Off Scot-Free

It is no exaggeration to say that since the 1980s, much of the American (and global) financial sector has become criminalized, creating an industry culture that tolerates or even encourages systematic fraud. The behavior that caused the mortgage bubble and financial crisis was a natural outcome and continuation of this pattern, rather than some kind of economic accident.
It is important to understand that this behavior really is seriously criminal. We are not talking about neglecting some bureaucratic formality. We are talking about deliberate concealment of financial transactions that aided terrorism, nuclear weapons proliferation, and large-scale tax evasion; assisting in concealment of criminal assets and activities by others; and directly committing frauds that substantially worsened the worst financial bubbles and crises since the Depression.
None of this conduct was punished in any significant way. On November 7, 2011, the New York Times published an article based on its own review of major banks' settlements of SEC lawsuits since 1996. The Times' analysis found fifty-one cases in which major banks had settled cases involving securities fraud, after having previously been caught violating the same law, and then promising the SEC not to do so again. The Times' list, furthermore, covered only SEC securities fraud cases; it did not include any criminal cases, private lawsuits by victims, cases filed by state attorneys general, or any cases of bribery, money laundering, tax evasion, or illegal asset concealment -- all areas in which the banks have numerous and major violations.2012-05-21-Screenshot20120521at8.29.30AM.pngIn Predator Nation, I provide detailed, well-documented accounts of behavior ranging from assisting Enron's frauds (Citigroup, Merrill Lynch), to fraudulently exploiting the Internet bubble (most of the major investment banks), to using for-profit colleges to exploit government student loan programs (Goldman Sachs), to assisting in money laundering and tax evasion on a large scale (at least eleven banks including UBS, Barclay's, and Lloyds), to using bribery and artificially complex derivatives to destroy the finances of a county government (JP Morgan Chase), to profiting from Bernard Madoff even while strongly suspecting him to be a fraud (JP Morgan Chase, UBS).
Total fines for all these cases combined appear to be far less than 1 percent of financial sector profits and bonuses during the same period. There have been very few prosecutions and no criminal convictions of large U.S. financial institutions or their senior executives. Where individuals not linked to major banks have committed similar offenses, they have been treated far more harshly.
Given this background, it is difficult to avoid the conclusion that the mortgage bubble and financial crisis were facilitated not only by deregulation but also by the prior twenty years' tolerance of large scale financial crime. First, the absence of prosecution gradually led to a deeply embedded cultural acceptance of unethical and criminal behavior in finance. And second, it generated a sense of personal impunity; bankers contemplating criminal actions were no longer deterred by threat of prosecution.
And just as the last twenty years of unpunished financial crime constituted a green light for the bubble, so, too, America's non-response to the bubble and crisis is setting the tone for financial conduct in the future.
The Obama administration has rationalized its failure to prosecute any senior financial executives (literally, not a single one) for bubble-related crimes by saying that while much of Wall Street's behavior was unwise or unethical, it wasn't illegal. Here is President Obama at a White House press conference on October 6, 2011:
Well, first on the issue of prosecutions on Wall Street, one of the biggest problems about the collapse of Lehmans [sic] and the subsequent financial crisis and the whole subprime lending fiasco is that a lot of that stuff wasn't necessarily illegal, it was just immoral or inappropriate or reckless....I think part of people's frustrations, part of my frustration, was a lot of practices that should not have been allowed weren't necessarily against the law.
The president and senior administration officials (such as Lanny Breuer, head of the Justice Department's Criminal Division) have portrayed themselves as frustrated and hamstrung -- desirous of punishing those responsible for the crisis, but unable to do so because their conduct wasn't illegal, and/or the federal government lacks sufficient power to sanction them. With apologies for my vulgarity, this is complete horseshit.
When the federal government is really serious about something -- preventing another 9/11, or pursuing major organized crime figures -- it has many tools at its disposal and often uses them. There are wiretaps and electronic eavesdropping. There are special prosecutors, task forces, and grand juries. When Patty Hearst was kidnapped by the radical Symbionese Liberation Army in 1974, the FBI assigned hundreds of agents to the case.
In organized crime investigations, the FBI and federal prosecutors often start at the bottom in order to get to the top. They use the well established technique of nailing lower-level people and then offering them a deal if they inform on and/or testify about their superiors -- whereupon the FBI nails their superiors, and does the same thing to them, until climbing to the top of the tree. There is also the technique of nailing people for what can be proven against them, even if it's not the main offense. Al Capone was never convicted of bootlegging, large scale corruption, or murder; he was convicted of tax evasion.
In this spirit, here are a few observations about the ethics, legalities, and practicalities of prosecution related to the bubble:
First, much of the bubble was directly, massively criminal.
Second, if you really wanted to get these people, you could. Maybe not all of them, but certainly many. Some bubble-related violations are very clear, with strong written evidence, as my book Predator Nation demonstrates. And if you flipped enough people, some of them would undoubtedly have interesting things to say about what their senior management knew. In fact, there are many techniques, venues, organizations, regulations, and statutes, both civil and criminal, available to investigate these people, punish them, and recover the money they took -- if you really wanted to. The federal government has used almost none of them.
Third, the moral argument for punishment is very strong, providing ample justification for erring on the side of aggressive legal pursuit. Whatever portion of banking conduct during the bubble was criminal, it was certainly substantial, and there is no doubt whatsoever that it was utterly, pervasively unethical, designed to defraud in reality if not in law. Since the crisis, the people who caused it have been anything but honest or contrite. They have been evasive, dishonest, and self-justifying, returning as quickly as possible to their unerringly selfish behavior. Their behavior caused enormous damage, both human and economic; the consequences of their wrongdoing are so large as to justify almost any action that could help to prevent another such crisis by creating real deterrence. There would also be intangible but large benefits to raising the general ethical standard of a vital industry, and one whose executives often become high-level government officials.
Given this background, let's now consider the question of criminal liability, as well as the feasibility of prosecution.
The list of prosecutable crimes committed during the bubble, the crisis, and aftermath period by financial services firms and senior executives includes: securities fraud (many forms); accounting fraud (many forms); honest services violations (mail fraud statute); bribery; perjury and making false statements to federal investigators; Sarbanes-Oxley violations (certifying accounting statements and financial controls); RICO offenses and criminal antitrust violations; Federal aid disclosure regulations (related to Federal Reserve loans); Personal conduct offenses (many forms: drugs, tax evasion, etc.).
In Predator Nation I consider each of these categories in detail, naming many names and providing many specific examples. But in considering only one category, securities fraud, we already face an embarrassment of riches.
Almost all the prospectuses and sales material on mortgage-backed securities sold from 2005 through 2007 were a compound of falsehoods. But it starts even earlier in the food chain. We also know that mortgage originators committed securities fraud when they misrepresented the characteristics of loan pools, and the nature and extent of their due diligence with regard to them, when they sold pools to securitizers (and accepted financing from them). Most or all of the securitizers (meaning nearly all the investment banks and major banking conglomerates) then committed securities fraud when they misrepresented the characteristics of the loans backing their CDOs, the characteristics of the resulting mortgage-backed securities, and the nature and results of their due diligence in the process of creating those securities. The securitizers also committed securities fraud when they made similar misrepresentations to the insurers of, and sellers of credit default swap (CDS) protection on, those securities.
The executives of both originators and securitizers then committed a separate form of securities fraud in their statements to investors and the public about their companies' financial condition. They knew that they were engaging in a Ponzi-like fraud that would eventually need to end, and as the bubble peaked and started to collapse, they repeatedly lied about their companies' financial condition. In some cases they also concealed other material information, such as the extent to which they, themselves, and/or other executives of their firms, were selling or hedging their own stock holdings because they knew that their firms were about to collapse.
Next, several investment banks committed securities fraud when they failed to disclose that they were selling securities that were designed to fail so that the investment banks, and/or their hedge fund clients, could profit by betting on their failure. The Hudson and Timberwolf synthetic CDOs sold by Goldman Sachs, and which were the focus of the Levin Senate subcommittee hearings, provide a very strong basis for prosecution. Goldman's trading arm had been dragooned into finding and dumping their most dangerous assets to naive institutional investors. Important representations in the Hudson sales material--that assets were not sourced from Goldman's own inventory -- were lies, and they were material lies, since investors had learned to be wary of banks clearing out their own bad inventory. E-mail trails show that top executives closely tracked the garbage disposals and were gleeful at the unloading of the Timberwolf assets -- as they should have been, for the assets were nearly worthless within months. There have been no prosecutions.
In some cases, we already have clear evidence of senior executive knowledge of and involvement in these frauds. For example, quarterly presentations to investors are nearly always made by the CEO or CFO of the firm; if lies were told in those presentations, or if material facts were omitted, the responsibility lies with senior management. In some other cases, such as Bear Stearns, we already have evidence from civil lawsuits that very senior executives were directly involved in constructing and selling securities whose prospectuses contained lies and omissions.
The list is long. In chapters three through six of Predator Nation, I survey the financial sector's behavior during the bubble, and provide dozens of examples of major criminal behavior. Again, there have been no prosecutions.

Sunday, May 13, 2012

Education For Death - Disney WWII Propaganda Cartoon

Nebraska Woman Offers Graphic Homophobic Rant During Lincoln's Anti-Discrimination Law Hearings (VIDEO)

Nebraska Woman Offers Graphic Homophobic Rant During Lincoln's Anti-Discrimination Law Hearings (VIDEO)

Posted: 05/11/2012 11:55 am Updated: 05/11/2012 11:44 pm
Homophobic Speech
Video footage of a surprisingly graphic, homophobic rant has gone viral in the lesbian, gay, bisexual and transgender (LGBT) blogosphere in the wake of this week's non-discrimination ordinance proposal hearings in Lincoln, Neb.
Originally featured on Towleroad, the clip features a woman identified as Jane Skrovota, who offers a series of bizarre observations on gay sex, HIV/AIDS, Hillary Clinton and even Judas Iscariot as she denounces the "Fairness Ordinance," a measure that would add sexual orientation and gender identity to the city’s non-discrimination law, in her testimony.
"P-E-N-I-S goes into the anus to rupture intestines," Skrovota notes. "The more a man does this, the more likely he'll be a fatality or a homicider."
After stating that "a huge percent of gay men in school grounds molest boys, partly because they don't have AIDS yet," she adds, "Hillary Clinton's roommate four years in college was a gay woman. To avoid going gay like Clinton did, college students need single rooms and single gender dorms...A college woman is seduced with illegal Rohypnol to go gay."
And finally, she proclaims, "Jesus was kissed by Judas, a homo, who tried to sabotage Jesus' kind ideas. Do you choose Jesus, a celibate, or Judas, a homo? You have to choose!"
UPDATE: Several readers have emailed to tell us that the woman's correct name is Jane Svoboda, not Skrovota as numerous media outlets have reported.
The city council is expected to vote on the measure May 14. Other authorities have been considerably less critical of the proposal. "Dynamic cities have three things: technology, talent and tolerance," former Lincoln Sen. David Landis is quoted by LGBTQ Nation as saying. "Those cities are magnets for creative people to come and live. The fairness amendment is consistent with the most leading-edge data on what is good for a city."
Take a look at some of the dumbest things ever said about LGBT people below: 
Pastor Wooden Says Gay Sex Causes Gay Men To Need Diapers
1  of  25

Bachmann Hit by Conservative Blogs over Swiss Citizenship Read more on Bachmann Hit by Conservative Blogs over Swiss Citizenship Important: Do You Support Pres. Obama's Re-Election? Vote Here Now!

Bachmann Hit by Conservative Blogs over Swiss Citizenship

When word got out that Rep. Michele Bachmann, R-Minn., had filed for an acquired Swiss citizenship back on March 19, she got slammed with an icy avalanche of criticism from conservative blogs, reports

By Thursday of this past week, the former GOP presidential contender announced she was withdrawing her citizenship in a country her husband holds dual citizenship with.

Bachmann’s trumpeting of her new citizenship didn’t sit well with conservatives.

Among her detractors was Mark Krikorian of the National Review.

“Dual citizenship isn’t simply a matter of convenience, a way to make travel easier or a sentimental tie to the Auld Sod,” Krikorian added in a piece headlined “Swiss Miss.” “It’s a formal declaration of divided allegiance, civic bigamy, if you will,” Krikorian wrote.

Bachmann’s husband holds dual citizenship as a matter of birth, and the U.S. government sees no problem with such status and does not require such dual citizens to renounce their citizenship outside the United States.

But the United States does discourage citizens, like Bachmann, from seeking and applying for dual citizenship and warns such citizens may lose their U.S. citizenship.

The State Department website states: "A person who acquires a foreign citizenship by applying for it may lose U.S. citizenship. In order to lose U.S. citizenship, the law requires that the person must apply for the foreign citizenship voluntarily, by free choice, and with the intention to give up U.S. citizenship."

When Rep. Bachmann announced that she was withdrawing her Swiss citizenship, she said it was to “make it perfectly clear” that she’s a “proud American citizen.”

A former Bachmann congressional staffer told “She didn’t think there was anything wrong with holding or applying for Swiss citizenship while serving as a member of the U.S. Congress. She didn’t think it might be perceived as a conflict of interest as a candidate for president or for re-election to her House seat.”

Some detractors, however, went beyond calling for an end to any appearance of conflict of interest, casting the dual citizenship adventure as a stake through the political heart of Bachmann.

“How she thinks that she can sit in the Congress of the United States after swearing allegiance to the country of Switzerland is beyond my comprehension,” wrote conservative blogger Lori Stacy on “Michele Bachmann needs to step down immediately and apologize profusely to all of our citizens and especially the residents of her district in Minnesota for carrying on this egregious offense of representing them since March 19th after becoming a citizen of a different country.”

Bachmann’s latest fiasco may mean a continued erosion of support she holds from patriotic tea party supporters.

Bachmann has already been criticized for raising millions of dollars nationally for her congressional seat, promising to remain a thorn in the Washington establishment. Instead of fulfilling that promise, Bachmann used millions of the funds she raised for a losing presidential bid many saw as an ego trip for her.

Read more on Bachmann Hit by Conservative Blogs over Swiss Citizenship
Important: Do You Support Pres. Obama's Re-Election? Vote Here Now!

Sunday, May 6, 2012

Paul Weyrich - Goo-Goo Syndrome (proper audio/video synchronization)

Paul Weyrich, father of the right-wing movement and co-founder of the Heritage Foundation, Moral Majority and various other groups tells his flock that he doesn't want people to vote.