tagged w/ banks are the new robber barons
Elizaeth Warren goes after the bankers.
Posted by Charles Hugh Smith @ Of Two Minds
White collar crime is now the "business model" of Corporate/State America. The Status Quo does not just incentivize pathological behavior, it is itself a pathological system. CHS
Let's start by identifying the different types of white collar crime (WCC). One is WCC involving individuals against companies (e.g. theft of property from a company) and the government (e.g. Medicare fraud) and the other is WCC of individuals within companies (e.g. MBS debacle) and the government (e.g. taking bribes to favor contractors) against people in our society.
The latter is typically punished and prosecuted less frequently or not as severely than the former for different reasons, one of which is the bias to protect the institution and sweep things under the rug. For instance, a person is allowed to resign, but they're not prosecuted, so that bad press doesn't come down on the institution or the supervisors of the criminal actor.
The last type of WCC is person against person (e.g. credit card number thefts) outside of any business or government entity. This last type is usually the domain of organized crime in its typical sense (i.e. the Mob, Mafia, etc.), but organized crime can also be part of the other categories, which is why they are pursued relentlessly by law enforcement agencies. However, some people may not include organized crime in the definition of WCC.
The difference between these types of WCC is who the crimes are committed against. If you commit a crime against the government, a business, especially a big business, or the moneyed classes, you're screwed (typically). For example, Madoff was prosecuted quickly and punished severely, because he largely ripped off rich people.
However, many of his victims were not victims in the truest sense, because they knew he was running a scam. They were just hoping that some other sucker was going to take the fall and not them. Many of the investors knew Madoff's returns were impossible in the absence of fraud. Contrast that with the bankers who, via their politically connected banks, ripped off numerous pension funds and homeowners through various scams and none of them have been prosecuted.
White collar crime is prevented first and foremost by adequate controls/procedures/policies within a company that are enforced by management and the board (That's assuming that they are not the origin of the criminal behavior). Companies do not often prioritize risk controls, because their focus is on making money and providing a service/making a good.
When an organization becomes extremely large, it is very difficult to adequately manage it to prevent problems (I find it funny that big CEOs often say they need their huge payouts because of all of their responsibility, but when something goes wrong, the come up with all sorts of excuses that remove the blame from themselves).
The next thing is implementing a well-thought out regulatory scheme that has an adequate number of competent regulators that are free to do their job with a minimal amount of political interference. The last thing needed is a criminal justice system that prosecutes and punishes white collar criminals as harshly as they do blue collar criminals.
In the case of crimes within the government, there are also needs to be adequate controls. Indeed, WCC in government is probably the most pernicious, as the actors can use the power of the government to cover up their crimes and prevent prosecution. The old adage, "Who guards the guardians?", comes to mind.
There are a number of cultural and governmental impediments to prosecuting WCCs. One of which is the corrupting influence of money to neuter regulations and to co-opt politically appointed regulators and prosecutors.
Another is perception. Wealth in our country is equated with royalty or a high station in society, so people have a hard time seeing the white collar criminal as the deviant that he is. People have a hard time wanting to punish someone who looks nice, has nice clothes, drives a nice car, lives in a good neighborhood, went to a prestigious school, belongs to exclusive clubs, etc. vs. someone who does not have those things. If you're poor in this country, that's almost a crime in and of itself to some people.
Conversely, rich people have all sorts of credibility, whether its deserved or not. Why should I listen to an actor about a topic that's not related to acting? Sure, he may have some interesting things to say, but he shouldn't be given automatic credibility on the subject and yet many people do just that. Romney became rich bankrupting companies and selling their assets and yet people look to him to "run our economy"? What politician can ever say that they can run an economy? The Soviets tried to do just that and look what happened to them.
Another reason WCCs may not be prosecuted is that individuals, organizations, governments, and even society at large may be vested in the criminal activity either wittingly or unwittingly. Let's take an example of a large company that is disposing of hazardous waste illegally. In this case, a powerful executive wants to make a name for himself as a cost cutter that improves the earnings per share of the company and decides that he will have his subordinates illegally burn the hazardous waste in kilns at the factory, rather than having it disposed of properly.
One day, a kiln blows up, because it's not meant to burn hazardous waste, and the explosion kills a worker. According to the law, there are a number of serious crimes that have been committed, but in this case, nobody, including the company, is prosecuted. Why?
Continues....Posted by Charles Hugh Smith @ Of Two Minds
White collar crime is now the... more
As president of the New York Federal Reserve before and during the financial crisis, Treasury Secretary Timothy Geithner met repeatedly with Barclays officials, according to documents released by the bank and the New York Fed.
Though the subject of those discussions is unknown, they came at a time when Barclays was also talking to New York Fed officials about problems with an interest rate known as Libor, some five years before the bank agreed to pay $450 million to settle charges that it manipulated that interest rate.
The meetings raise questions about just how much Geithner, now the U.S. Treasury secretary, knew about the alleged manipulation of Libor, a critical interest rate that affects borrowing costs throughout the economy -- questions he'll have to answer at a Senate hearing later this month. They could also renew criticisms of Geithner as being too chummy with the banking sector he was charged with regulating in his role at the Fed.
According to The Huffington Post's review of Geithner's calendar during his time at the New York Fed, originally obtained by The New York Times, Geithner repeatedly spoke from April 2007 to October 2008 with senior executives at Barclays, including at an Oct. 10, 2008, morning meeting with Bob Diamond, the former Barclays CEO, who stepped down last week amid the ballooning Libor controversy.
Atimeline of events released by Barclays ahead of Diamond’s testimony before British Parliament last week also indicates that an Oct. 10, 2008, meeting took place between bank officials and unnamed Fed representatives. According to Barclays, the meeting that day was part of a series of discussions between the bank and the New York Fed during the financial crisis about the process of determining Libor.
Libor is set every day by a group of banks, including Barclays, JPMorgan Chase and Citigroup. It is based on the interest these banks say they have to pay to borrow money for short periods of time. Regulators are investigating charges that several banks, in addition to Barclays, misreported their borrowing costs to manipulate Libor higher or lower, depending on their needs, possibly affecting the borrowing costs for millions of individuals and businesses. During the crisis, the banks might have reported lower borrowing costs in order to avoid the appearance that they were suffering financial hardship.
The details of what was discussed during Geithner's October 2008 meeting with Diamond are not listed on Geithner’s calendar nor are the topics of his other discussions with Barclays officials. Some meetings likely concerned the bank's September 2008 takeover of Lehman Brothers at the height of the financial crisis. But the meetings raise further questions about how much Geithner and other U.S. financial regulators knew about alleged manipulation of Libor by Barclays and other banks years before Barclays admitted to wrongdoing in a $450 million settlement with British authorities and the Justice Department last month.
A Barclays spokesman, Chris Semple, said the bank could not confirm whether the Oct. 10 meeting noted on Barclays’ timeline was the same as the one listed on Geithner’s calendar. In its pre-testimony materials, Barclays wrote that the chronology “shows clearly that our people repeatedly raised with regulators concerns arising from ... Libor settings over an extended period.”
On its timeline, Barclays lists a total of 12 meetings with Federal Reserve officials from August 2007 to October 2008.
The degree to which federal regulators had advance warning about issues with Libor is a question that U.S. lawmakers are starting to ask, as well. On Tuesday, the Senate Banking Committee announced it will call Geithner and Federal Reserve Chairman Ben Bernanke to testify about the Libor scandal.
That announcement followed a letter sent Monday by Republican Rep. Randy Neugebauer of Texas, chair of the House Financial Services Committee's oversight and investigations panel, to New York Fed chair William Dudley, requesting transcripts of all communications between Barclays and the Fed concerning Libor from August 2007 to November 2009. “Some news reports indicate that although Barclays raised concerns multiple times with American and British authorities about discrepancies over how Libor was set, the bank was not told to stop the practice” of manipulating the rate, the letter said.
A spokesman for the Treasury Department did not immediately respond to a request for comment.
According to Geithner's calendar, five discussions with one or more Barclays executives were scheduled from April 2007 to October 2008. They include a breakfast on the morning of April 3, 2007, with Chet Feldberg, then chairman of Barclays America; an afternoon meeting on May 14, 2007, that included former Barclays CEO John Varley; and the Oct. 10 meeting with Diamond.
The calendar also indicates that Geithner also participated in conference calls with unnamed representatives of Barclays and a person identified as Paulson (possibly Treasury Secretary Hank Paulson) on the afternoon of Sept. 13, 2008, three days before Barclays announced its takeover of parts of Lehman Brothers at the height of the financial crisis.
Only one meeting on Geithner’s calendar during that 2007-2008 stretch is listed as focusing on Libor specifically -- a meeting titled “Fixing Libor” that was scheduled for the afternoon of April 28, 2008, between Geithner and eight other Fed officials, Brian Peters, Debby Perelmuter, Jamie McAndrews, Meg McConnell, Patricia Mosser, Sandy Krieger, Simon Potter and William Dudley.
No Barclays representatives were scheduled to attend that meeting.
In a statement dated Tuesday on its website, the New York Federal Reserve said, "In the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor. In the spring of 2008, following the failure of Bear Stearns and shortly before the first media report on the subject, we made further inquiry of Barclays as to how Libor submissions were being conducted. We subsequently shared our analysis and suggestions for reform of Libor with the relevant authorities in the UK."
http://www.huffingtonpost.com/2012/07/10/timothy-geithner-barclays-libor_n_1662389.html?utm_hp_ref=canadaAs president of the New York Federal Reserve before and during the financial crisis,... more
Here's a leader who speaks my heart. Stop the wars, the subsidies, the living high on our money and giving it all to the banks that use it to give themselves bonuses! INVEST in real jobs of the future and our environment and stop this class warfare where the rich think THEY are owed something and CORPORATIONS RUN THIS COUNTRY. I haven't said much on this but I am getting damned tired of this petulant BS. Congress has a couple of true leaders in its ranks. It's time they were listened to.
And remember this Congress, you hurt the working people of this country at your peril. Oh, and social security is not an entitlement. I WORKED to put MY money into it, and I want it back.Here's a leader who speaks my heart. Stop the wars, the subsidies, the living... more