The Occupy Wall Street protests that started in New York just a few short weeks ago have now ballooned across the country into a full-fledged movement, with events happening so far in approximately 400 cities in 48 states and a local group even springing up in Pensacola and at UWF.
The thrust of the protests is aimed at corporate greed and shady Wall Street practices.
A protest movement begins
Granted, all protests movements will have elements that begin to look like a circus, and those movements that start on the left tend to feel somewhat like music festivals such as Burning Man or Bonnaroo at times.
However, while these protests occasionally feel a bit disjointed and clunky, I think they can be seen as a shot across the bow to the “banksters” and white-collar criminals that caused the worst financial crisis in history, bringing the world’s economy to the brink.
So, in solidarity with this movement, I have decided to write a series on the issues highlighted by the Occupy Wall Street movement, specifically examining the criminality and unethicality that has become so pervasive on Wall Street, the nexus of collusion between Wall Street and Washington, and where the American people stand after decades of such shady policies and practices.
In this first installment I hope to demonstrate that what took place in the lead up to the financial collapse of 2008 was, in fact, criminal.
Crimes were committed
Fraud is fraud, whether it’s committed by a small-time crook or a major Wall Street player. And securities fraud is a crime punishable by a prison sentence.
However, not a single Wall Street criminal has spent a day in jail for the role he or she played during the financial crisis.
When it comes to Wall Street crimes, the U.S. Justice Department has consistently shown it is not interested in throwing the criminals in jail.
Instead, it opts for the Securities and Exchange Commission, the federal regulatory agency tasked with enforcing securities laws, to negotiate fines and settlements to be paid when laws are broken.
Securities laws are extraordinarily complex, as are the schemes and crimes often perpetrated by Wall Street. So without descending into a lawyerly diatribe of the legal minutia, I will focus in this piece on some of the specific settlements Wall Street and its ilk paid out associated with the financial crisis.
The Financial Crisis Inquiry Commission, a government appointed commission tasked with investigating the causes of the financial crisis, said in their 2010 report that the crisis was caused by “systemic breaches in accountability and ethics at all levels.”
Furthermore, it stated, “financial institutions made, bought, and sold mortgage securities they never examined, did not care to examine, or knew to be defective.”
In the next installment of this series I will attempt to better explain just how some of the Wall Street schemes worked, but suffice it to say for now, extremely volatile and risky mortgages were at the heart of the collapse.
In most cases, banks sold mortgages to people they knew couldn’t afford them and then sold off those mortgages to investment firms which repackaged them into “mortgage-backed securities,” allowing other investors to make boat-loads of quick money on disguised toxic assets while hyper-inflating the financial bubbles.
However, in many of the cases, the investors had no idea their money was going into extremely high-risk toxic deals, and very often these investors were gambling the retirement nest eggs of state workers’ pension funds, such as teachers, police officers, firefighters, etc.
Fines instead of prison
In June of this year, JPMorgan Chase, a multinational banking corporation, paid the SEC a settlement of $151 million on charges that the bank intentionally misled investors in a risky mortgage bond deal.
In 2010, Goldman Sachs, a multinational investment banking and securities firm that had its greedy hands in almost every cookie jar of the financial crisis, reached a $550 million settlement with the SEC for also defrauding investors with toxic mortgage-backed securities.
Though it was the largest single penalty any Wall Street firm had ever paid to the SEC, it still only represented about 4 percent of the profits the company made in 2009.
These are just a smattering of the settlements paid for crimes committed.
But this doesn’t even begin to compare to a settlement deal currently in the works and being finalized by many states’ attorneys general and the Department of Justice, letting all the banks involved with the toxic mortgage frauds off the hook for a measly $20 billion.
The deal would allow all the major banks that engaged in these dirty practices, such as Citigroup, Bank of America, JPMorgan Chase and Wells Fargo, to be essentially granted immunity from criminal prosecution for what collectively amounts to a drop in the ocean of windfall profits they made swindling the American people.
To put this in perspective on just how small this settlement is compared to the crimes committed, the Florida State Board of Administration, which handled investments for state workers’ pensions, lost $62 billion alone in 2008, largely by investing in high-risk mortgage-backed securities.
That’s one pension fund’s investments from one state with losses that total three times what this settlement deal is offering (although it is starting to look like the FSBA was not totally unaware of the risk).
And to put this settlement deal into even broader perspective, the International Monetary Fund estimates losses from the mortgage-backed-securities-fueled financial crisis to be in the trillions.
When the entire cabal of bankster criminals is allowed to get off for only $20 billion, there’s simply no incentive for Wall Street not to continue the status quo and keep orchestrating criminal and unethical financial schemes.
The Department of Justice needs to stop acting like a bunch of feckless cowards and start asking for settlement amounts that actually fit the crimes. And then they need to seek criminal prosecutions that come with jail time.
Mark my words, if we started throwing these Wall Street crooks in prison rather than fining them a pittance, you would see a radical drop in securities fraud and unethical behavior.
It’s time to start indicting these bastards on criminal charges and throwing their asses behind bars.
The Occupy Wall Street movement has succeeded in the very least identifying the targets, and I applaud their efforts to bring these issues to light.
Stay tuned for future installments in this series.
W. Paul Smith