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Fraud*
According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

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Sunday, September 22, 2013

What Did Goldman Sachs Teach Us About the GFC?

Recently there has been a proliferation of articles on what the world has learned about the financial crisis on the anniversary of Lehman's bankruptcy.  What is startling to see is that not many writers even mention the fraud that was the basis of the crisis:  financial fraud, accounting control fraud, mortgage fraud, derivatives fraud, and so on.  L. Randall Wray lists the ways in which fraud defined the whole financial crisis.  The first item is quoted below:

Five Years After Lehman's:  Did We Learn Anything?
By L. Randall Wray - EconoMonitor
phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
The catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
The catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
The catch-phrase at the Whitehouse since the days of President Clinton is “What would Goldman think?”. Apparently all policy is subjected to the “Goldman test”—is it good for Goldman Sachs? If not, well, you know what—it gets dumped.
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons.
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information.
2. The crisis demonstrated that real reform can only be undertaken in the depths of a crisis. Once Wall Street had been rescued behind closed doors by the US Fed and Treasury (it took $29 trillion!), there was no hope of reform. The biggest institutions just got bigger. They are back to doing the same things they were doing in 2007. Even the very weak Dodd-Frank reforms will never be implemented—Wall Street put together armies to delay, water-down, and eventually prevent implementation of any changes that would constrain the financial practices that caused the crisis. Franklin Roosevelt did it the right way in the 1930s: declare a banking “holiday”, demand resignations from all top management, and refuse to allow banks to open until they had a plan that would lead to solvency. Almost all the New Deal financial sector reforms were enacted in the heat of the crisis. The important lesson that should have been learned: in the next crisis, we cannot let the Fed and Treasury meet behind closed doors to rescue the “vampire squids” that are destroying the economy. We must drive the stake through their hearts when they are weakest.
3. The crisis brought into public view the longer term trend toward “financialization” of the entire economy. The FIRE sector gets 40% of corporate profits and 20% of value added. That is, quite simply, crazy. Everything has become financialized—from college education (student loans are a trillion dollars) to homes, healthcare (Obamacare makes this worse), and even death (so-called death settlements and peasant insurance in which employers bet that workers will die early). Wall Street has financialized energy and even crops. It has turned worker’s pensions against them, by using their own retirement funds to bid up the price of gasoline at the pump and bread at the grocery store. Just wait until they use pension funds to drive up the price of water at the meter!
In a very important sense it is wrong to label what happened following Lehman’s bust a crisis. Life at the top has improved tremendously since 2007, as high unemployment has softened labor even as income and wealth gushed toward the top 1%.
Of course, for the bottom 99% it is a crisis, but not a financial crisis. And it did not begin in 2007, but rather in the early 1970s. It is a long-term jobs crisis. It is a long-term wage crisis. It is a long-term education, housing, and healthcare crisis, as necessities are priced beyond the reach of most workers.
So what needs to be done?
Where to begin? Over the medium term I’m pessimistic because I do not think much can be done until Wall Street crashes and we shut down the “dirty dozen” biggest global financial institutions. They will prevent any substantial reform. We need to downsize finance by two-thirds or three-quarters or even nine-tenths. Obviously, that cannot happen until the next crash. I’m reasonably optimistic that will happen in the not too distant future.
But when real economic reform becomes possible, what do we need? First, jobs. We cannot rely on the private sector to produce them. Jobless growth is the future, so we cannot rely on growth to produce the needed jobs. Government has got to get involved. Fortunately, there’s much that needs to be done—public infrastructure, ramping up education and healthcare, environmental restoration, aged care, and improvement of public spaces. We will need a permanent Job Guarantee (or Employer of Last Resort) program to ensure that all who want to work can participate. Second, and related to the first, we need decent wages—which means substantial increases for the bottom two or three quintiles. Again, this cannot be accomplished by relying on the private sector, which will always engage in “race to the bottom” dynamics. The government must play a role—by setting high standards for minimum wages, benefits, and working conditions. This is actually easy to do once the JG/ELR program is in place as its compensation package will become the de facto minimum.
- See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
. . . .
1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
 1. The crisis exposed the dangerous and lawless culture prevailing at the world’s biggest financial institutions. We now know, beyond any doubt, that it was fraud from bottom to top. For example, every single step in the mortgage backed securities business was fraudulent. The mortgage originations were fraudulent—with the originators lying to borrowers about the terms, and then crudely doctoring the paperwork to make the terms even worse after borrowers had signed. The property appraisers falsified the home values. The investment banks misrepresented the quality of the mortgages as they were securitized. The trustees lied to the buyers of the securities about possession of the proper paperwork. At the urging of the industry’s creation, MERS, the banks lost or destroyed the property records, making it impossible for anyone to know who owns what and who owns whom. The mortgage servicers “lost” payments and illegally foreclosed using documents forged by “robo-signers”, wrongly evicting even homeowners who owed no mortgage. Now those homes are being sold in huge blocks to hedge funds at cents on the dollar so that they can be rented back to the former owners now living on the streets. It is not too much to say that foreclosure and dispossession was the desired result of what President Bush had called the “ownership society”: move all wealth to the top 1%. I’ve just given one example—you will find a similar level of criminality in every line of business undertaken by the biggest banks, from manipulating bond markets to setting LIBOR rates, from manipulating commodities prices to front-running stocks and trading on insider information. 

Read the whole article here
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf
So here’s my thoughts on what we should have learned, as we mark the five-year anniversary of the event that sparked the crisis. An interviewer asked me to identify the three most important lessons, which I thought a bit too ambitious, so here are three important lessons. - See more at: http://www.economonitor.com/lrwray/2013/09/18/five-years-after-lehmans-did-we-learn-anything/#sthash.W4IVGqHh.dpuf

13 COMMENTS:

wheresthefreemarket said...

Four Horsemen - Feature Documentary - Official Version

http://www.activistpost.com/2013/09/four-horsemen-feature-documentary.html?

wheresthefreemarket said...

'AIG Can Crush You Like a Bug'


By February 2011, AIG was cited for "material weakness" in its accounting. Yet none of AIG's officers were held accountable for Sarbanes-Oxley violations after making materially misleading public statements and signing off on false SEC filings.

On August 13, 2007, also more than a year before the AIG bailout, I appeared with Eugene Ludwig of Promontory Capital, Steve Forbes, CEO of Forbes, and CNBC's Carl Quantanilla to discuss AIG's failure to record accounting losses, hedge funds, and liquidity and insolvency issues. You may be able to view the video if you have access to CNBC Pro.

Mary Shapiro, former head of the SEC, entered the revolving door and now works for Promontory.

Eugene Ludwig stated the following in response to the ECB's assertion that credit markets were stabilizing after cash injections.

"I think the Central Banks around the world have the tools to be able to contain this credit correction, and it's clear they're prepared to use them. And what we've seen right now is they've used those tools and it's calming the marketplace." Incredibly, Ludwig claimed banks were "less directly involved in the subprime correction" and were "well-regulated" and "disciplined."

How did that work out for the banks, including Citigroup, Bank of America, and JPMorgan Chase in September 2008?

Not only was the above statement not true, banks were subject to their unwise interconnections with hedge funds and insurers as well as their own contributions to systemic risk.

http://www.huffingtonpost.com/janet-tavakoli/congressman-cummings-aig_b_3988664.html

wheresthefreemarket said...

Wall St. and the 'Triple-Fucking' of US Workers, Taxpayers
'All across America,' reports Rolling Stone's Matt Taibbi, 'Wall Street is grabbing money meant for public workers

In his latest feature-length piece for Rolling Stone magazine, the eloquently foul-mouthed financial reporter Matt Taibbi takes a close look at what he terms the "improbable triple-fucking of ordinary people" by exploring how Wall Street financiers and hedge fund barons have managed to convince those who control state workers' pensions to hand over hundreds of millions of dollars in public funds to hedge fund billionaires while simultaneously demanding huge cuts to the earned benefits of current and retired public employees.

http://www.commondreams.org/headline/2013/09/26-6

wheresthefreemarket said...

Bill Clinton on deregulation: ‘The Republicans made me do it!’



The ex-president seriously mischaracterizes his record

You know, the usual Bill Clinton interview. But Clinton’s comment
about his record on regulation is an actual newsmaker, because it’s a
giant whopper:

What happened? The American people gave the Congress to a
group of very conservative Republicans. When they passed bills with the
veto proof majority with a lot of Democrats voting for it, that I
couldn’t stop, all of a sudden we turn out to be maniacal deregulators. I
mean, come on. I know Senator Warren said the other day, admitted when
she introduced a bill to reinstate the division between commercial and
investment banks, she admitted that the repeal of Glass-Steagall did not
cause one single solitary financial institution to fail.

This is, to be kind, bullshit. Memory is a hazy thing, but I have a
hard time believing Clinton doesn’t know full well he’s not telling the
truth here (and with his record, he doesn’t get the benefit of the doubt).

Let’s go to the tape. Clinton installed Robert Rubin and Larry
Summers in the Treasury, which resulted in the Gramm-Leach-Bliley Act,
which officially did in Glass-Steagall and the Commodity Futures
Modernization Act, which left the derivatives market a laissez-faire
Wild West (not to mention a disastrous strong dollar policy
that was a critical and underrated factor in the bubble). He also
reappointed Ayn Rand-acolyte Alan Greenspan, who has as much
responsibility as anyone for creating the crisis, as Fed chairman—twice.

Now it’s true that Clinton faced an extremely hostile Republican
Congress for the last six years of his presidency. But his
administration actively encouraged the big deregulatory legislation, and
squashed its own dissenters, like Brooksley Born, who saw disaster ahead.

http://www.cjr.org/the_audit/bill_clinton_the_republicans_m.php

republicanmother said...

This all boggles the mind. 666 aptly describes the lying spirit behind these lawless organizations.

wheresthefreemarket said...

Bank Examiner Was Told to Back Off Goldman, Suit Says

After Ms. Segarra joined the New York Fed, she said she examined
several potentially controversial Goldman deals. For instance, in 2012
Goldman advised El Paso, an energy company, on its decision to sell
itself to Kinder Morgan.
Goldman owned a big stake in Kinder Morgan, which angered a number of
El Paso shareholders, who argued this gave Goldman an incentive to
undervalue El Paso. Goldman, though, maintained it had properly managed
the conflicts but was later admonished by a judge, who noted the
“disturbing behavior” that led to the deal.

As the deal was coming together, the lawsuit said, Ms. Segarra urged
Goldman to provide her with its firmwide conflict-of-interest policy.
But Goldman, the lawsuit said, told her that it had no such policy.

While Goldman, the lawsuit says, lacked a broad conflict-of-interest
policy, individual business units did have some procedures in place. For
Ms. Segarra, the absence of a firmwide policy was alarming because it
signaled that Goldman lacked the procedures to spot and police
conflicts, according to the suit.

In a March 2012 meeting, a group of examiners at the Federal Reserve Bank of New York agreed that Goldman Sachs
had inadequate procedures to guard against conflicts of interest —
guidelines aimed at stopping firms from putting their pursuit of profit
ahead of their clients’ best interests.

The examiners voted to downgrade a confidential rating assigned by
the New York Fed that could have spurred costly enforcement actions and
other regulatory penalties. It is not known whether the vote
materialized in a rating change. The former examiner who pushed for a
downgrade, Carmen Segarra, now contends in a lawsuit filed Thursday that
just weeks after the vote, her superiors asked her to change her
findings on Goldman and fired her after she refused.

The vote to downgrade, which has not been previously reported, could have been a big blow for Goldman.

“Goldman Sachs does not have a conflicts-of-interest policy, not
firmwide, and not for any divisions,” the examiner wrote to Michael
Silva, a senior executive at the New York Fed. “I would go so far as to
say they have never had a policy on conflicts.”

In the lawsuit, Ms. Segarra contends she was wrongfully terminated in
violation of a federal law that affords protections to bank examiners
who find wrongdoing in the course of doing their jobs. Mr. Silva, who is
chief of staff for the executive group at the New York Fed, is among
the defendants named in the suit.

In an interview, Ms. Segarra said that when she was fired, her bosses
told her they had lost confidence in her judgment. Within the Fed, some
people who worked with Ms. Segarra echoed those concerns, according to
people familiar with her time at the agency but not authorized to speak
on the record. Ms. Segarra, these people said, sometimes developed
“conspiracy theories.”

http://dealbook.nytimes.com/2013/10/10/bank-examiner-was-told-to-back-off-goldman-suit-says/?

wheresthefreemarket said...

Derivatives and the Government Shutdown: Wall Street Bets One Thousand Trillion Dollars of Everybody Else’s Money

Derivatives Market Worth Over 16 Times Gross World Product

Given that capitalism has entered a terminal stage of acute and
escalating crises, the Dallas editorialists may be right; anything could
set off another spasm of financial mayhem in a system that is ever more
unstable. However, it is the “markets” – a euphemism for the financial
capitalist class – that are the ultimate source of instability, the
folks who play Russian roulette 24-7 and have dragged humanity to a
place where an actual Armageddon is only a twirl of the chamber away. In
this game, everybody’s head is in play.

It is proper that the corporate press speak of the impending fiscal
threat – a minor one, in the maelstrom of crises that beset the system –
in gambling terms. An increase of interest rates by a few basis points
(fractions of a percent) on trillions of borrowed dollars amounts to
quite a chunk of public money, to be paid directly into the accounts of
these very same private “markets” that are supposedly biting their nails
with anxiety over the budget. The Dallas Morning News and its fellow
corporate propaganda spores spread the myth that the “markets” (bankers,
hedge funds, etc.) crave stability, when the vital statistics of the
real world of finance capitalism scream the opposite.

The Lords of Capital (the “markets”) are pure gamblers who have
transformed the global financial marketplace into a machinery of
perpetual uncertainty, in which all the wealth of the world is bet many
times over by people who don’t actually own it, in a casino whose
operators scheme against each other as well as their patrons, most of
whom are not even aware that they are in the game – much less, that it
is Russian roulette.

The notional value of derivative financial instruments is now estimated at $1.2 quadrillion – that is, one thousand two hundred trillion dollars.
This statistic is fantastic in every sense of the word, amounting to
16.7 times the Gross World Product, which is the value of all the goods
and services produced per year by every man, woman and child on the
planet: $71.83 trillion.
Derivatives are valued at six times more than the total accumulated
wealth of the world, including all global stock markets, insurance
funds, and family wealth: $200 trillion.

The great bulk of known derivative deals are held by banks that are considered too big to be allowed to fail, with the top four banks accounting for more than 90 percent of the exposure: J.P. Morgan Chase, Citibank, Bank of America, and Goldman Sachs.

http://www.globalresearch.ca/derivatives-and-the-government-shutdown-wall-street-bets-one-thousand-trillion-dollars-of-everybody-elses-money-derivatives-market-worth-over-16-times-gross-world-product/5353867

wheresthefreemarket said...

N.Y. Fed Moves to Seal Documents in Ex-Bank Examiner’s Suit

By Jake Bernstein, ProPublica





A federal judge in Manhattan is pondering whether to grant the
request of the New York Federal Reserve to seal the case brought by
former senior bank examiner Carmen Segarra. As reported by ProPublica
last week, Segarra filed a lawsuit against the New York Fed and three
of its employees alleging she had been wrongfully terminated last year
after she determined that Goldman Sachs had insufficient
conflict-of-interest policies.

On Friday, the Fed asked for a protective order to seal documents in
the case as well as parts of the complaint. In a letter to U.S.
District Judge Ronnie Abrams, New York Fed counsel David Gross said the
information should be removed from the public docket because it is
“Confidential Supervisory Information,” including internal New York Fed
emails and materials provided to the Fed by Goldman.

“These
documents show that at the time (Segarra) left the employ of the New
York Fed, she purloined property of the Board of Governors of the
Federal Reserve System,” Gross wrote, citing Fed rules that prohibit
disclosing supervisory information without prior approval of the Fed.

Gross argues that the Fed’s obligation to keep bank supervisory records
secret outweigh the public’s right to know. “The incantation of a 2018
public right to know’ cannot ever be a license to discharged employees
that they may violate Federal law simply by filing a complaint in
Federal court,” Gross wrote.
Segarra and her lawyer could not be reached for comment.


While Abrams considers her decision, Segarra’s lawsuit and appended
documents have been removed from Pacer, the online records system for
federal courts. The complaint and related documents are available via links in ProPublica’s story and have been published elsewhere online.

Gross states in his letter that Segarra previously made a $7 million settlement offer. The Fed rejected it.

The New York Fed has historically been one of the most opaque financial
regulators and maintains that it is not subject to the Freedom of
Information Act because it is not a public agency.

http://www.truthdig.com/report/item/ny_fed_moves_to_seal_documents_in_ex-bank_examiners_suit_20131014

wheresthefreemarket said...

Washington’s Open Secret: Profitable PACs

Most Americans believe it’s illegal for politicians to profit from their public office but, as Steve Kroft reports, that’s not the case.

http://www.ritholtz.com/blog/2013/10/washingtons-open-secret-profitable-pacs/

laserDliquidator said...

Hey guys - where are you all?

Last Friday (Oct 18th) we sued Goldman Sachs, Bain Capital, Mitt Romney and Gang for Racketeering.

In Los Angeles Federal Court.

http://www.democraticunderground.com/10023892846

JEHR said...

Laser, thanks for leaving the link. I wish you all the best in your suit.



As a poster on this site for more than three years, I have to say that I have become totally disillusioned with the lack of prosecution by the DOJ, with the President's belief that no fraud was committed by lenders or mortgages brokers (biggest lie ever!) and with the continuous payment of money for fraud in civil suits (some of that money comes from the Federal Reserve (QE). The government is bought and paid for by the billionaires.



Again, I hope your win

wheresthefreemarket said...

Hillary Clinton’s Lucrative Goldman Sachs Speaking Gigs

Hillary
Clinton spoke at two separate Goldman Sachs events on the evenings of
Thursday, October 24 and Tuesday, October 29. As both Politico and the New York Times
report, Clinton’s fee is about $200,000 per speech, meaning she likely
netted around $400,000 for her paid gigs at Goldman over the course of
six days.

Last Thursday, Clinton spoke for the AIMS Alternative
Investment Conference hosted by Goldman Sachs, a closed event
exclusively for Goldman clients. AIMS is an annual conference that
explores the latest strategies and products available to financial
advisers. At the event, Clinton offered what one attendee described to
me as “prepared remarks followed by questions.”

On Tuesday, Clinton spoke at the Builders and Innovators Summit, devoted to discussing entrepreneurship and how to help innovators expand and grow their businesses. According to Politico,
Clinton conducted a question-and-answer session with Goldman CEO Lloyd
Blankfein. Goldman Sachs declined to comment on the subject of her
remarks or why Mrs. Clinton in particular was invited to the events.

Keeping close to the investment world, Clinton also made visits to private-equity firms KKR in July and the Carlyle Group
in September. At KKR’s annual investor meeting in California, Clinton
answered questions from firm co-founder Henry Kravis on the Middle East,
Washington, and politics. At Carlyle Group, Clinton made a speech to
shareholders moderated by Carlyle founder David Rubenstein.

Clinton’s office did not respond to a request for comment.

http://www.nationalreview.com/corner/362637/hillary-clintons-lucrative-goldman-sachs-speaking-gigs-alec-torres

wheresthefreemarket said...

Attorney For Goldman Sachs CEO Is Eric Holder's 'Best Friend'

The crony connections just keep on coming over at Eric Holder’s Department of Justice.

Last week, the Justice Department announced that it will not prosecute Goldman Sachs or any of its employees in a financial probe.

Could that be because the attorney for Goldman Sachs CEO Lloyd Blankfein was none other than Attorney General Eric Holder’s “best friend” and former personal attorney, Reid Weingarten?

Or because in 2008, Goldman Sachs employees donated $1,013,091 to Barack Obama?
Or because Goldman Sachs is the former client of Eric Holder’s and Assistant Attorney General Lanny Breuer’s law firm, Covington & Burling?

http://www.economicpolicyjournal.com/2014/01/attorney-for-goldman-sachs-ceo-is-eric.html

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