In a truly excellent, painstaking study, Mark Taibbi of Rolling Stone (of all magazines- really took my respect for RS up a few light years from an abysmal low where I considered it to be a poor relative of FOX News
) wrote a very revealing and painstaking piece called The Scam Wall Street Learned From the Mafia about a court case, (USA v. Carollo),
that didn’t get much play in mainstream media, partly because of its complexity, and partly because of the “language barrier” of finance.
This relates to a very nasty range of banking practices from 2006, but it’s like a How To manual for ripping off America’s public money. It’s a very long article, but if you’re an American, this is compulsory reading, because this is where your taxes are going- Straight into people’s pockets. It also explains a lot about the very shifty behavior of American politicians of all stripes and at all levels.
In a truly great bit of clear writing, Taibbi simplifies and explains the process of cities raising bonds:
In most cases, towns and cities, called issuers, are legally required to submit their bonds to a competitive auction of at least three banks, called providers. The scam Wall Street cooked up to beat this fair-market system was to devise phony auctions. Instead of submitting competitive bids and letting the highest rate win, providers like Chase, Bank of America and GE secretly divvied up the business of all the different cities and towns that came to Wall Street to borrow money. One company would be allowed to "win" the bid on an elementary school, the second would be handed a hospital, the third a hockey rink, and so on.
By further skimming rates, the banks also collected a lot of extra money from their unwitting bankrollers. There was never any chance of the bonds getting a reasonable market rate. The banks would shave points off the returns. A fraction of a percentage point in this sort of money means millions in total, collected over years. Add up the number of municipal bonds on issue, and you get billions upon billions. There’s no real estimate available, but Taibbi cites a few instances of proven admissions by the banks:
Given the complexities of bond investments, it's impossible to know exactly how much the total take was. But consider this: Four banks that took part in the scam (UBS, Bank of America, Chase and Wells Fargo) paid $673 million in restitution after agreeing to cooperate in the government's case.
(Chase paid just $75 million for its role in the bribe-and-payola scandal that saddled Jefferson County, Alabama, with more than $3 billion in sewer debt), it's safe to assume that Wall Street skimmed untold billions in the bid-rigging scam. The UBS settlement alone, for instance, involved 100 different bond deals, worth a total of $16 billion, over four years.
Fun, huh? Now Bloomberg on the same subject
, from yet another angle:
For some reason, Wall Street never seems to get the message that bribing government officials -- and paying each other off-- to get access to lucrative municipal-bond underwriting business is illegal. Wall Street has never learned this lesson because the miniscule price it ends up having to pay for misbehaving has absolutely no deterrent value whatsoever.
To put both articles another way, Wall Street pays peanuts for its crimes, if and when they’re discovered. Any private citizen would get jail. The sacred bull of Wall Street, occasionally described by me as the Golden Calf that speaks at both ends, is literally aping well-known Mafia practices, targeting corrupt officials and rigging public contracts.
The Mafia analogy is right on the money, excuse the pun. If you read Roberto Saviano’s literally death-defying
major expose of the Naples organised crime groups generically called the Camorra, a truly startling book called Gomorrah
, you won’t need to be told how easy it is to simply go around laws and not get caught. Corruption is the key to successful organised crime.
The main difference between the banks and the Mafia is that they effectively have licenses to act the way they do. Only irrefutable evidence can get an actual indictment up and running, and that takes forever.
The Wall Street "culture" is the big problem.
In conjunction with the Mafia-like behavior, we have:
The revelations about Goldman Sachs and its “muppet” terminology for clients
from retiring GS executive Greg Smith. This is rampant, and has been for years. I remember writing an article about some Wall Street brokerage firms which had “client-no-sue-us” clauses in their contracts for their clients. Meaning people couldn’t even sue in defense of their own personal property.
The interesting coincidence that American cities are going broke by going guarantors
for public works projects.
The finance sector’s unholy effects on everything in American life from health insurance debt collection in ERs
to college fees
An intriguingly similar pattern in Wal Mart bribing Mexican officials
This rabid money grubbing behavior is more or less according to the script of Saviano’s book regarding the Camorra’s foreign business in Europe, which includes everything from toxic waste “disposal”, (meaning turning Naples into a garbage dump and poisoning the famous farmlands with dioxins, etc.) to syndicated multi million dollar pharmaceuticals scams. Never mind how many people get killed in the process. This is obsessive behavior and it's a dead ringer for the normal daily work of major organised crime groups.
A few questions:
1. You have to wonder how so many financiers can so easily find and target so many corrupt people and get so many other people looking the other way.
2. Why is it that any form of law enforcement seems so hopelessly slow in tackling crimes which were obviously well known to thousands of people across hundreds of financial institutions?
3. How do financiers get so many reliably corrupt contacts? Because they’re real “people” people, or because they know people who can find them?
4. How do US politicians seem to be so much in synch with so many people carrying out criminal activities on a routine basis for so long?
According to Taibbi, you can get the ear and perhaps more from a US politician for around 5 figures, even as low as $10,000. These guys aren’t all Republicans, either. Former governor Bill Richardson was in trouble for alleged bribery under similar circumstances.
If you were to describe Wall Street as no more or less than the un-arrested Bernie Madoffs and Ken Lays of the moment, you’d be pretty right as a description but hopelessly optimistic in defining the problems.
These are scum. They’re the biggest abusers of human rights and property on Earth. They’ve thoroughly trashed the US economy, crippled Middle America, and destroyed any number of millions of lives. There is no possible reason within the bounds of any sort of honest logic for protecting the finance sector from the law. Yet successive Congresses and successive administrations have failed to do one single solitary thing to deal with this problem.
This is a true social disease, and it’s been spreading for a long time. It’s been “syphilis of the soul” for the American way of life. First the balls go, then the brain. Al Capone died of it. Prior to the 1980s, there were no billionaire criminals. Organized crime made more money as movies than in real life. White collar crime, apart from some comparatively very low level scams, was a new idea.
These guys simply can’t be making that sort of money out of mere drug deals and people smuggling. They also go where the money is, and that money has been in finance since the 1980s. The disease is now a plague, actively encouraged by a toxic anti-human culture which simply doesn’t obey laws on principle. This methodology is quite safe. Banks can rip off people for billions, and at no real penalty. It's like giving parking fines to mass murderers.
Some more honest logic-
Those who do not enforce the law or actively prevent enforcement are effectively aiding and abetting organised crime. Is this collusion? It sure as hell looks like it. It’s Christmas for Wall Street every day.
I hate to paraphrase this sacred phrase this way, but what else could you call it-
“Government of the criminals, by the criminals, for the criminals.”
…Because government obviously isn’t working for anyone else any more, even in theory.