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Money Talks, Criminals Walk

February 24, 2011

Chairman of Goldman Sacs, Lloyd Blankfein and a dear friend of his from DC.

For any of you out there who missed it, Matt Taibbi of Rolling Stone Magazine published a piece about a week ago that outlined in stark detail the magnitude of criminality on Wall Street and in our regulatory agencies tasked with policing these monsters.  The complete regulatory capture of our government by the egregiously powerful Titans of the financial industry is sickening.

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

The most despicable case of SEC collusion and cover-up for Wall Street felons was an insider trading scam involving Morgan Stanley chairman John Mack.

The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn’t likely to fly, explaining that Mack had “powerful political connections.” (The investment banker had been a fundraising “Ranger” for George Bush in 2004, and would go on to be a key backer of Hillary Clinton in 2008.)

Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank’s regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn’t take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm’s lawyers, Mary Jo White, was on the phone with the SEC’s director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as “smoke” rather than “fire.” White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.

Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive — not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target’s firm is being represented not only by Eliot Spitzer’s former top aide, but by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC’s enforcement division — not Aguirre’s boss, but his boss’s boss’s boss’s boss. Mack himself, meanwhile, was being represented by Gary Lynch, a former SEC director of enforcement.

Aguirre didn’t stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. “It all happened so fast, I needed a seat belt,” recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal.

Rather than going after Mack, the SEC started looking for someone else to blame for tipping off Samberg. (It was, Aguirre quips, “O.J.’s search for the real killers.”) It wasn’t until a year later that the agency finally got around to interviewing Mack, who denied any wrongdoing. The four-hour deposition took place on August 1st, 2006 — just days after the five-year statute of limitations on insider trading had expired in the case.

“At best, the picture shows extraordinarily lax enforcement by the SEC,” Senate investigators would later conclude. “At worse, the picture is colored with overtones of a possible cover-up.”

That’s right, your government would rather spend over 3/4 of a million dollars paying a wrongful termination settlement than enforce the law against a Wall Street banker.  Read the whole piece, it’s utterly jaw dropping, and check out Taibbi’s interview with Democracy Now. (Player won’t embed here.)

Our system of laws is broken.  Completely.  The amount of money swirling around in Washington has warped the political and judicial process beyond repair.  These criminals have destroyed the lives of millions of innocent people, and they will never be held accountable for it.  They own everything and everyone on Capitol Hill and Pennsylvania Ave.

President Obama could put an end to the revolving door between Wall Street and our regulatory agencies, if he wanted to.  He could flush the corrupt bankers and finance industry shills from his cabinet, if he wanted to.  He could ensure that the agencies under his command enforce the law against these crooks, and at the very least end their careers if not send them to prison, if he wanted to.

But he doesn’t want to.

Because money always talks, and they have all of it.

(Original poster here)

4 Comments leave one →
  1. February 24, 2011 5:11 pm

    How could Obama do that, exactly? I mean, without getting soundly trounced in the next election, and falling to yet another connected Republican? Didn’t financial reform already come up, and wasn’t it unceremoniously shown the door because Republicans wouldn’t support it, and Democrats were askeered to go ahead with it without bipartisan support when they didn’t actually need it?

    If Obama somehow rammed it through now without Senate or House support, he’d be falling on his sword. He wouldn’t even last until he could be defeated in the next election.

    • February 27, 2011 2:16 pm

      I see your point, but I’m not convinced playing the “center” is going to do a damn thing for him in the election. If unemployment is still pushing 10 percent he’s going to need a lot more than pretty platitudes. My point in all this is that the money in our political process has created an atmosphere of criminality. They don’t enforce the laws we have, and passing new ones is nothing but theater. If this administration wasn’t owned and operated by Wall Street it wouldn’t necessarily be that way.

      • February 27, 2011 9:56 pm

        If you think this administration is owned and operated by Wall Street, wait’ll you get a look at the Republican administration that’s waiting to take over. Obama has disappointed a lot of people, but most of them don’t understand how Congress or the Senate work. If Obama tries to get bipartisan support for his initiatives, he gets rolled because not even all Democrats will support him – some are more worried about their re-election prospects than what’s good for the country. If he bypasses the organs of government and imposes his will by presidential decree – which is not as easy as it sounds – he’s a dictator. He wouldn’t be playing the center if his own party weren’t such a bunch of cowards, and so inept at politics it’s hard to understand how anyone ever elected them in the first place. The media loves to associate the phrase, “snatching defeat from the jaws of victory” with the Democrats, but by God, they’ve earned it. They had no spine when a spine wasn’t even necessary to get things done because they had an untouchable majority just as long as party discipline reigned – now they’re just hopeless, like Gumby without the wires.

      • March 2, 2011 9:14 am

        Sorry I haven’t been around much the past few days. Small family crisis this past weekend…

        I agree with you completely about the ineptitude of Democrats in Congress, but that is not what this is about. President Obama was not forced to pack his cabinet with financial industry shills by some Senate committee, he’s done that all on his own. Enforcing the laws we have against insider trading and fraud is not ruling by decree, it’s doing the job of the executive branch as outlined in the constitution. I understand completely how our Congress works (or doesn’t), and getting new reforms passed is a daunting task under the best conditions, but we already have some pretty stringent laws and regulatory agencies that aren’t being used at all, and that is why these criminals will get away with the biggest fraud in the history of man. There’s no argument that this administration is a vast improvement from the last, and certainly better than any alternatives coming from the teabagging right, but when it comes to standing up against the entrenched money in Washington whether it’s Wall Street, Military Contractors, Big Pharma, you name it, they simply roll over and do what they’re told. Until the President decides to stand up to these ass holes and fight for regular working people, he’s just another corporatist schmuck with some liberal sensibilities that he’s willing to indulge as long as no rich people get too uncomfortable.

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