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August 31, 2013

Still No Shame on Wall Street for Crashing Financial System & Causing Economic Wreckage Worldwide

Seems like every day now there’s another story about Wall Street’s financiers and their paid mouthpieces complaining about the latest investigation into or fine for their wrongdoing and law-breaking.  JP Morgan Chase and its CEO Jamie Dimon are the prime examples for this lately because they are the supposedly being picked on by so many investigations.  The whinnying is reaching hysterical proportions, with some now complaining that it’s the regulators who are acting “lawlessly” for finally, years-later enforcing the law.  The Financial Times’ Tom Braithwaite and Kara Scannell have a terrific piece in today’s paper detailing this:  “Banks Get Ready to Feel the Penalty Pain.”

This article shows once again that these bonus-bloated executives and their well-paid lawyers, lobbyists, PR-spinners, purchased politicians, academics and sundry other hired guns simply have no shame.  They all seem to think that the law should only be enforced on Main Street and not on Wall Street.  

Let’s not forget that these global too-dangerous-to-fail Wall Street megabanks were on a crime spree for more than a decade; no one enforced the law against them; they created, packaged, sold and distributed trillions of dollars of worthless securities; caused the biggest crash of the global financial system since 1929 and the worst economy since the Great Depression; and yet, not one executive of a major, powerful, well-connected Wall Street firm has been held accountable. 

Like everywhere else, wrongdoing, lawlessness and crime unpunished is not only un-deterred, but rewards and incentivizes more wrongdoing, lawlessness and crime, which is exactly what we’ve been seeing as one Wall Street megabank scandal after another explodes into the headlines (as JP Morgan’s egregious “London Whale” gambling proves).  Worse, such a hands-off, double standard of justice for the elite Wall Street financiers also breeds and reinforces a high-risk and destructive culture of entitlement, hubris, arrogance, shamelessness and mendacity, which is the only possible explanation for Wall Street thinking that the law being applied to it is itself “lawless.” 

Interestingly, it is rarely if ever mentioned that all these fines are paid with shareholders money or insurance.  Not like anyone at the megabanks is actually being held accountable or required to pay a fine with their own money.  Not to mention that they all get to keep the hundreds of billions of dollars they paid themselves in the decade before they almost caused a second Great Depression.  If you want to feel bad for someone, it should be the millions of Americans still unemployed, millions more who want to work full time but can’t find full time work, or the millions more of small businesses who had to close due to the wreckage Wall Street spread across this country from coast to coast.  Shockingly, this Wall Street caused financial collapse and Great Recession is ultimately going to cost the US more than $12.8 trillion

The truth is that Wall Street had a decade long party where greed and lawlessness filled their pockets with bonuses and, when it all blew up, they stuck Main Street with the bill.  That is not only seen in the misery of unemployment and foreclosure numbers, but also in the massive deficit numbers, which were largely caused by tax payments plummeting at the same time the costs for social programs skyrocketed as the Wall Street-caused Great Recession ruined our economy. 

It is also seen in the policies of the Federal Reserve Board (Fed).  Not only have there been zero interest rates since the financial collapse, but the Fed has pursued innumerable extraordinary programs and policies attempting to reduce the damage done by Wall Street’s irresponsible conduct.  Just one example is the Fed’s purchases of trillions of dollars of treasuries and mortgage bonds, so called “quantitative easing” or “QE” programs.  This is lately referred to in the headlines innocuously as “tapering” and has everyone hyperventilating.  But, no one ever mentions that all these actions by the Fed, which have cost the country trillions of dollars, have been necessary due to Wall Street’s lawlessness in crashing the economy and the Fed’s attempts to prevent the economy from getting even worse.

One last point about Wall Street’s disgraceful complaining about the fines they have paid or might pay for their law-breaking:  they are a pittance compared to the damage Wall Street has done and inflicted on our country.  For example, the $6 billion fine JP Morgan Chase reportedly might pay to settle the lawsuit by Federal Housing Financing Agency (FHFA) is big only if you look at it from $0 up.  But, it looks very small if you look at it from $33 BILLION down, which is the amount of toxic securities it allegedly sold to the government housing agencies of Fannie and Freddie (which the FHFA represents). 

Everyone complains about taxpayers having to bailout Fannie and Freddie as it wrote down and lost money on billions in toxic securities, but no one mentions that Wall Street fraudulently sold those billions of toxic securities to Fannie/Freddie, including $33 billion allegedly from JP Morgan!  A $6 billion settlement compared to $33 billion liability looks pretty good for JP Morgan when put in that context.  (Unlike most lawsuits where liability is often a small fraction of the claimed amount of damage, JP Morgan’s liability here is actually $33 billion because the FHFA gets to require JP Morgan to repurchase all the defective mortgages it sold to the FHFA based on broken so-called “reps and warranties.”)

That is true for almost all the fines and settlements that you read about every day: they are but a very small amount of the damage the too-dangerous-to-fail Wall Street financiers did.  But, you won’t see that context or detail when the claimed “big” fine is imposed and Wall Street’s high-paid spinners complain about the poor, victimized elite of Wall Street. Boo hoo.  



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