By L. Randall Wray
Benzinga Columnist
December 23, 2010 12:43 PM
As I have written, when we peel back the layers of the real estate “onion” what we find is layer after layer of fraud. From the mortgage brokers to the appraisers and lenders, from the securitizers to the ratings agencies and accountants, from the trustees to the servicers, and from MERS (Mortgage Electronic Registry System) through to the foreclosures, what we find is a massive criminal conspiracy—probably the worst in human history. I realize that is a harsh claim but I cannot find any other words that fit.
In the old days, we used to hang horse thieves. The justification was that a man’s horse was necessary to his way of life, and in some cases, to his very survival. There can be little doubt that a home is equally important to maintenance of a middle class living standard today for most Americans. There is almost no calamity worse than loss of one’s home. It is the main asset that most Americans hold—essential to the educational success of one’s children, and to a comfortable retirement of our citizens. Americans typically borrow against their home equity to put their kids through college, to ease the financial distress caused by unexpected health care expenses, and to finance other large expenditures. The accumulated equity in the home is the only significant source of wealth for the vast majority of Americans. The home is necessary to one’s continuing connection to the neighborhood, school district, and network of friends. Theft of one’s house today is certainly equivalent to theft of a horse 150 years ago.
Pay close attention…We know who should be held accountable for this mess we are in today! How convenient for Greenspan to get out when he did…CRIMINAL!
This is a collection of soundbites from Prof. Michael Greenberger from the University of Maryland School of Law who was interviewed for a PBS FRONTLINE program concerning Brooksley Born, former chairman of the Commodity Futures Trading Commission, who attempted to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the 2008 financial collapse.
We have waited long and patiently for our Ferdinand Pecora moment – a modern equivalent of the episode when a tough prosecutor from New York seized the imagination of the country in the early 1930s and, over a series of congressional hearings: laid bare the wrong-doings of Wall Street in simple and vivid terms that everyone could understand, and created the groundswell of public support necessary for comprehensive reregulation. On Friday, that moment finally arrived.
There is fraud at the heart of Wall Street, according to the Securities and Exchange Commission. Pecora took on National City Bank and J.P. Morgan (the younger); these were the supposedly untouchable titans of their day. The SEC is taking on Goldman Sachs; no firm is more powerful.
Pecora exposed the ways in which leading banks mistreated their customers – typically, retail investors. The SEC alleges, with credible detail, that Goldman essentially set up some trusting clients and deliberately misled them – to the tune of effectively transferring $1 billion from them to a particular unscrupulous investor.
Pecora had the drama of the congressional hearing room and used his skills as an interrogator to batter the bastions of Wall Street, day-after-day, with gruesome and convincing detail. We don’t know where and when, but the SEC action points in one direction only: Lloyd Blankfein (CEO of Goldman) in the witness box, while John Paulson (unindicted co-conspirator) waits in the on-deck circle.
Either Blankfein knew what was going on – and is therefore liable before the law – or he was clueless and therefore incompetent. Either way, the much vaunted risk management and control systems of Goldman, i.e., what is supposed to prevent this kind of thing from happening, are exposed to be what we have long here claimed: bunk (as I argued with Gerry Corrigan, former head of the NY Fed and long-time Goldman executive, before the Senate Banking Committee when we both testified on the Volcker Rules in February).
“Too big and complex to manage” is actually the best defense for Goldman’s executives and they should offer to break up the firm into smaller and more transparent pieces as a way to settle the firm’s liability with the SEC. The current management of Goldman – along with the team that ran the firm under Hank Paulson – have destroyed the value of an illustrious franchise. Goldman used to stand for something that customers felt they could trust; now it is just a sophisticated way of ripping them off.
John Paulson obviously knew what he was doing in helping to create the “designed to fail” securities – and the consequences this would have. If he cannot be convicted of conspiracy to commit fraud, then the law in this regard needs to be tightened significantly. The Financial Crisis Inquiry Commission, chaired by Phil Angelides, is probably already planning to grill John Paulson about his taxes – the point Pecora made in this regard with J.P. Morgan junior was most telling and gripped the nation; it turned out that Morgan hardly paid any tax. I would respectfully suggest that the Angelides Commission also pull in Hank Paulson and pursue a similar line of questioning with him – when it focuses on how much money Hank Paulson made, and how little tax he paid, while building and overseeing an extortion scheme of grand proportions, America will scream.
We have something today that Pecora did not have – the pattern of behavior is already established, if not yet widely comprehended. Senator Levin’s recent grilling of WaMu revealed another layer of deliberate mistreatment of consumers within the mortgage industry. The Valukas report on the failure of Lehman exposed exactly how investors are misled by balance sheet manipulation in its most modern and insidious form. And we have learned more than enough about Goldman misleading investors over Greek debt levels.
Senator Ted Kaufman was right. Just a few weeks ago, he argued strongly from the Senate floor that there is fraud at the heart of Wall Street. Even some people who are generally sympathetic to his critique of modern financial practices thought perhaps that this specific notion was pushing the frontier. But now they get it – and today Ted Kaufman is more than mainstream; he is the public figure who made everything crystal clear.
When you deliberately withhold adverse material information from customers, that is fraud. When you do this on a grand scale, the full weight of the law will come down on you and the people who supposedly supervised you. And if the weight of that law is no longer sufficient to deal with – and to prevent going forward – the latest forms of very old and reprehensible crimes, then it is again time to change the law.
What I want to know is where is Andrea Mitchell? I would LOVE, LOVE to see Mr. Ratigan interview his colleague Andrea Mitchell in a segmant called…”Sleeping with the ENEMY”. She just happens to be married to Greenspan!
Everyone recalls the viral video exposing Lehman Bros. REPo 105 from The Dylan Ratigan show…he is on to something huge…To Be Continued…
I wonder if wifey Andrea Mitchell will report? NBC?
March 31, 2010, 9:29 PM EDT
By Jesse Westbrook
March 31 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan, ex-U.S. Treasury Secretary Robert Rubin and Charles Prince, who stepped down as Citigroup Inc. chief executive officer in 2007, will testify next week before the panel probing the financial crisis.
The Financial Crisis Inquiry Commission will hear from Greenspan on April 7, the panel said in a statement today. Rubin and Prince will testify the following day.
The FCIC, charged with determining what caused the worst U.S. economic slump since the Great Depression, is investigating the roles banks and regulators played in spurring or failing to prevent a crisis that led to more than $1.7 trillion in writedowns and credit losses at financial companies worldwide.
Testimony from Greenspan, Rubin and Prince shows the panel is shifting its focus to the Fed, where Greenspan served until 2006, and Citigroup, where Rubin became a senior adviser after serving in the Treasury post under President Bill Clinton. Citigroup got $45 billion in U.S. government bailout funds in 2008 after the collapse of the mortgage market froze credit.
U.S. Comptroller of the Currency John Dugan, whose agency oversees national banks, will also testify on April 8. Former Fannie Mae Chief Executive officer Daniel Mudd will appear April 9 along with former directors of the Office of the Federal Housing Enterprise Oversight.
The U.S. government rescued Fannie Mae in August 2008 after the housing slump threatened the survival of the government- sponsored company.
The FCIC, whose members were appointed by Congress, has been investigating the financial crisis since last year. It is supposed to deliver its findings to lawmakers in December.
–Editors: Gregory Mott, William Ahearn
To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
To contact the editor responsible for this story: Alec McCabe at amccabe@bloomberg.net.
“We didn’t truly know the dangers of the market, because it was a dark market,” says Brooksley Born, the head of an obscure federal regulatory agency — the Commodity Futures Trading Commission [CFTC] — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”
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