Now we know the truth. The financial meltdown wasn't a mistake – it was a con

[Subdivisions]

The global financial crisis, it is now clear, was caused not just by the bankers' colossal mismanagement. No, it was due also to the new financial complexity offering up the opportunity for widespread, systemic fraud. Friday's announcement that the world's most famous investment bank, Goldman Sachs, is to face civil charges for fraud brought by the American regulator is but the latest of a series of investigations that have been launched, arrests made and charges made against financial institutions around the world. Big Finance in the 21st century turns out to have been Big Fraud. Yet Britain, centre of the world financial system, has not yet levelled charges against any bank; all that we've seen is the allegation of a high-level insider dealing ring which, embarrassingly, involves a banker advising the government. We have to live with the fiction that our banks and bankers are whiter than white, and any attempt to investigate them and their institutions will lead to a mass exodus to the mountains of Switzerland. The politicians of the Labour and Tory party alike are Bambis amid the wolves.

Just consider the roll call beyond Goldman Sachs. In Ireland Sean FitzPatrick, the ex-chair of the Anglo Irish bank – a bank which looks after the Post Office's financial services – was arrested last month and questioned over alleged fraud. In Iceland last week a dossier assembled by its parliament on the Icelandic banks – huge lenders in Britain – was handed to its public prosecution service. A court-appointed examiner found that collapsed investment bank Lehman knowingly manipulated its balance sheet to make it look stronger than it was – accounts originally audited by the British firm Ernst and Young and given the legal green light by the British firm Linklaters. In Switzerland UBS has been defending itself from the US's Inland Revenue Service for allegedly running 17,000 offshore accounts to evade tax. Be sure there are more revelations to come – except in saintly Britain.

Beneath the complexity, the charges are all rooted in the same phenomenon – deception. Somebody, somewhere, was knowingly fooled by banks and bankers – sometimes governments over tax, sometimes regulators and investors over the probity of balance sheets and profits and sometimes, as the Securities and Exchange Commission (SEC) says in Goldman's case, by creating a scheme to enrich one favoured investor at the expense of others – including, via RBS, the British taxpayer. Along the way there is a long list of so-called "entrepreneurs" and "innovators" who were offered loans that should never have been made. Lloyd Blankfein, Goldman's CEO, remarked only semi-ironically that his bank was doing God's work. He must wake up every day bitterly regretting the words ever emerged from his mouth.

For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation.

...snip...

http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges

[rurallib]

1. Anyone think that there will be any jail time for anyone?

I am not very optimistic.

[gateley]

2. There's no room - the jails are filled to capacity with pot smokers. nt

[laughingliberal]

3. It depends

I think if it was just us involved, no. The fact that this crap brought down the economies of other nations may mean the pressure gets applied by countries whose lawmakers aren't owned lock, stock, and barrel by Wall Street. Their overreach may wind up being their downfall.

[Webster Green]

4. More likely billions in bonuses.

Jail time? Nope!

[Bluebear]

7. No, we have to "move forward"

:eyes:

[Warpy]

9. I think there might be some effort to extradite them

to some of the countries that were badly hurt, like Iceland, Greece, even Dubai, along with all the countries that are barely hanging on thanks to their fraud.

This one is going to keep playing out for years.

[earth mom]

20. Those bastards will get away with it just like all the other scam artists.

:grr:

[Lost4words]

5. then there is all the UBS stuff that hasn't caused more than a blip media-wise

all the wealthy americans get to hide their wealth and not one charged, the only person to feel repercussions is the guy who reported the banks criminal activity. And he gets like 3 years. this is upside-down.

[Spike from MN]

17. Well, it looks like the UBS story just got a LOT more interesting.

Jailed Whistleblower: US Lawmakers Held Offshore UBS Accounts

<snip...>

JUAN GONZALEZ: Yes. Well, my column follows up, actually, on the conversation we had yesterday here on Democracy Now! on the issue of Bradley Birkenfeld, the UBS whistleblower. I interviewed Birkenfeld by telephone from his federal cell in Pennsylvania yesterday, and he provided some new revelations about the involvement of UBS in the largest tax fraud in American history.

Birkenfeld told me that the UBS bank that he worked for, the Swiss bank, actually had an office in Washington, DC, which the other bankers called the PEP office, which was for “politically exposed people.” And he claims it was an office that handled the offshore bank accounts of American politicians. He said he did not have the names of those politicians, because he didn’t actually work in that office and it was closely held, but it was well known that there were major American politicians, as well, that were hiding their money in Swiss bank accounts.

And he also said that UBS Americas, the US subsidiary, was directly involved in facilitating the recruitment of rich Americans to hide their bank—to hide their money in the Swiss parent company, that the UBS Americas would sponsor major society events and then invite the Swiss bankers over to mingle with the crowd of rich Americans, like Art Basel in Miami and other—the Boston Symphony events and others that the bank sponsored, and then invite the Swiss bankers over to recruit the rich Americans to put their money in Swiss banks.

So it will be interesting to see if federal prosecutors continue to follow up on this issue, especially of major politicians being involved in hiding their money from the federal government in Swiss banks.

http://www.democracynow.org/2010/4/16/ubs

Yeah, I'm sure the feds will get right on that UBS investigation. In the meantime, I wonder how much money will change hands to "scrub" the list.

[Hansel]

6. Yes, it was. nt

[Octafish]

8. DU was on to their gangster asses, just as soon as it was going down.

In fact, we tried to stop it:

Know your BFEE: Phil Gramm, the Meyer Lansky of the War Party, Set-Up the Biggest Bank Heist Ever.

Of course, no one in Corporate McPravda wants to take on the powers that be. They're their bosses.

Know your BFEE: Goldmine Sacked or The Best Way to Rob a Bank Is to Own One

Nostalgia for Nixon means institutionalized corruption.

Henry Paulson, Banker to the BFEE

It is most gratifying to see our chums in London picking up on the truth of the matter.
Perhaps things really have become obvious to Congress and the regulatory agencies of the executive.

[chill_wind]

18. Yes we were.

A lot of us, any way. Bad, bad taste in my mouth and I remain furious over the bailout heist, and the many parties to it, including quite a few special getaway car drivers in Congress.

[Individualist]

10. Not as long as we have pro-corporate government.

[Tippy]

11. How in the hell do those responsible for this

look at themselves in the mirror...How can Republicans fight reform...they don't have an honest bone it their bodies if they fight reform. Come 2010 if there is one republican elected it will be because of another election was stolen. I would like to see every dam on of them behind bars...The Religious Right is so wrong.....I better quit my BP is going up..

[Subdivisions]

12. The fact that they've destroyed so many lives doesn't even occur to them. n/t

[glitch]

16. Mirrors aren't a problem - vampires have no reflection. nt

[HughBeaumont]

21. Sociopaths give not one shit who they steamroll.

Far worse than love/hate; either one would imply it's personal. It's far worse.

They. Just. Do. Not. CARE.

[Odin2005]

13. But, but, "THANK GOD IT PASSED!!!" *sarcasm*

This makes me VERY, VERY angry! :grr:

[sandnsea]

14. It was not just Goldman Sachs, it was ALL of them

http://www.realestatejournal.com/buysell/mortgages/20061031-whitehouse.html

"At about the same time, in early 2005, Wall Street bankers were developing a new kind of derivative contract that would allow investors such as Mr. Whalen to make bets based on their misgivings. Called a credit-default swap, it had previously been applied mainly to corporate and sovereign bonds. Like an insurance contract, it pays off if a subprime-backed bond suffers a certain amount of losses to defaults. The holder, known as a protection buyer, makes regular payments to a bank or other counterparty for the insurance, and also has the right to resell the contract. If defaults prove higher than expected and the bond starts to look riskier, the value of the contract rises, and the holder can resell it at a profit."

[TreasonousBastard]

15. We knew it a year ago when Gretchen Morgenson did a series on it in...

the NY Times.

Rachel Maddow is not the only smart woman in media.

(But, the Times is corporate media, and the business section will give us all cooties, so no one read it except the few people who didn't care about the problem.)

[chill_wind]

19. kicking for all. n/t