No Jail for Economic Crisis May Mean No Crime

[Master Shake]

This reads like a response to Taibbi.

http://www.bloomberg.com/news/2011-0...owenstein.html

Excerpt

While it may be harder to prove criminal guilt, it’s easier for people to believe that some bad actor is the cause of bad things. This is a persistent trait in the national character. Historian Richard Hofstadter identified it in 1964 as “The Paranoid Style in American Politics.”

He was writing mostly about McCarthyism, though he recognized that paranoia isn’t limited to the political Right. Nor is it always harnessed to an unworthy cause; convicting criminals, especially in high places, isn’t just worthy, it’s crucial to democracy.

The paranoid style, as Hofstadter defined it, has as much to do with “style” as paranoia -- it’s about “the way in which ideas are believed [more] than with the truth or falsity of their content.” It spawned a rhetoric that tilted every question toward conspiracy, so that random or unfortunate events were seen to compose a “baffling pattern.”

Thus, the “sharp decline” -- Hofstadter was writing about America’s perceived international strength, not the price of real estate -- did not “just happen.” It was inevitably brought about by “will and intention.”

We could follow this strain through the dismal historiography of JFK assassination buffs to the beliefs that Washington was implicated in Pearl Harbor and Sept. 11, to the anti-federalist fantasies of the far right.

Such inquiries adhere to what Nassim N. Taleb, author of “The Black Swan,” describes as the “narrative fallacy” -- the desire to impose on chaotic events a more deterministic set of causalities.

[brent217]

Re: No Jail for Economic Crisis May Mean No Crime

Wow, the gall. "Ya, there was lots of bad things done, but everyone was doing it, so noone can be prosecuted, cause everyone is mostly guilty, and we probably couldn't prove the guilt anyways. You should feel bad for even suggesting that the poor people that caused this mess go to jail."

[Thailandnotes]

Re: No Jail for Economic Crisis May Mean No Crime

Had to skip the Bloomberg article, too sickening.

"When the Securities and Exchange Commission accused Eric Sieracki of securities fraud in 2009, the former Countrywide Financial executive did what many others in trouble with Wall Street’s top cop have done: He hired a former SEC lawyer to defend him."

Revolving door between SEC, law firms spins at dizzying speed

http://www.iwatchnews.org/2011/05/13...dizzying-speed


"Besides naming the company as a defendant, the civil complaint accuses Tourre of concealing Paulson's role from investors in a synthetic securities deal known as ABACUS, 2007-AC1 — one in which investors didn't actually buy any securities.

Instead, they effectively bet that a specified bundle of home loans to marginally qualified borrowers would perform well, while Paulson took "short" positions, meaning it bet that those bonds would founder.

Paulson profited grandly from the nation's economic collapse, taking in a total of $3.7 billion from its bets. The SEC complaint says the firm paid Goldman $15 million to assemble the deal, which Tourre was principally responsible for structuring.

The marketing materials for the investment, known as a collateralized debt obligation, told investors that ACA Management LLC, an independent third party, selected the mortgage-backed securities. The Paulson firm wasn't mentioned.

"The product was new and complex, but the deception and conflicts are old and simple," SEC enforcement chief Robert Khuzami said in a statement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

The deal, one of about two dozen similar bundles in the ABACUS series, closed on April 26, 2007. Within six months, 83 percent of the mortgage-backed securities in the bundle had been downgraded and 27 percent were placed on negative watch by Wall Street ratings agencies, the complaint says.

By the following Jan. 29, it says, 99 percent of the portfolio had been downgraded, costing investors more than $1 billion.

Khuzami said that the Paulson firm, which isn't affiliated with former Treasury Secretary Henry Paulson, wasn't charged because it didn't mislead investors.

However, the complaint charges that Goldman and Tourre "knew that it would be difficult, if not impossible," to find investors for a synthetic CDO if they disclosed that a short player, such as Paulson, had a significant role in selecting the securities. Thus, they sought a third party for that role and approached ACA, calling it "important that we can use ACA's branding" in an internal e-mail.

http://therealnews.com/t2/index.php?...4&jumival=5010

[flintlock]

Re: No Jail for Economic Crisis May Mean No Crime

While what Hofstadter talks about has always been a philosophy of mine ( that people look for a bogey man in order to bring some order to and a simple explanation for complex things), I think what happened regarding the financial crisis was absolutely a criminal and well planned event by those with the ability to pull it off.

To take it further, this mass fraud is a result of a general decline of ethics in America, which conflicts with some of the intelligentsia, who would have us believe that ethics don't matter. We simply cannot police each and every transaction in the world. When fraud and lies become the norm there really is not much we can do to prevent it. Only harsh sentences could hope to sway this trend. Doesn't look like that is going to happen.

[goodrich4bk]

Re: No Jail for Economic Crisis May Mean No Crime

Here is an interesting quote from the article:

"They did not secretly conspire to trade ratings for cash -- they didn’t need to. The relationship was open, and the suasion was gradual and systemic. Over time, under the influence of market pressure, and also due to their own rising comfort with the housing market, the rating companies became steadily less vigilant.
To call them criminal is to call the culture criminal, which is a point of rhetoric, not law."

I agree with the author that much of the "wrong" was not "illegal". But why stop there? Why not acknowledge that the reason why many of these "wrongs" were not "illegal" is because the wealthy elite control the making of such laws in the first place. In regulating the markets, Congress routinely defines sanctionable behavior so ambiguously as to give almost any perp not caught red-handed a complete defense. Why?

Some argue that such is the natural problem in regulating behavior that is otherwise "normal" and desirable. After all, you don't want to jail somebody who is just selling a defective product that they reasonably believed was sound, do you? My God, if that were illegal who would sell anything at all, or so the argument goes.

In contrast, we don't seem to have a difficult time at all in criminalizing otherwise "normal" behaviors of the lower classes. In San Diego several years ago, a homeless man was sentenced to 25 years to life (third strike) for asking a group of girls sitting on a public park's picnic table for a slice of their pizza. His first two strikes were for stealing a bike and shoplifing --- neither one violent but, rather, a "serious" felony which counted as two strikes. The girls testified that he stood around them, wouldn't leave, and that they felt "intimidated" into giving him the pizza. Moms called the cops, the cops turned him over to the D.A., and the D.A. and judge put him in prison for 25 year to life --- all based upon behavior that was arguably "normal", ie., when one is homeless and hungry it is normal to ask somebody with a table of food if they will give you some.

So that is the question we should be asking. If these behaviors were not criminal, why not?

[Master Shake]

Re: No Jail for Economic Crisis May Mean No Crime

Here is an interesting quote from the article:

"They did not secretly conspire to trade ratings for cash -- they didn’t need to. The relationship was open, and the suasion was gradual and systemic. Over time, under the influence of market pressure, and also due to their own rising comfort with the housing market, the rating companies became steadily less vigilant.
To call them criminal is to call the culture criminal, which is a point of rhetoric, not law."

I agree with the author that much of the "wrong" was not "illegal". But why stop there? Why not acknowledge that the reason why many of these "wrongs" were not "illegal" is because the wealthy elite control the making of such laws in the first place. In regulating the markets, Congress routinely defines sanctionable behavior so ambiguously as to give almost any perp not caught red-handed a complete defense. Why?

Some argue that such is the natural problem in regulating behavior that is otherwise "normal" and desirable. After all, you don't want to jail somebody who is just selling a defective product that they reasonably believed was sound, do you? My God, if that were illegal who would sell anything at all, or so the argument goes.

In contrast, we don't seem to have a difficult time at all in criminalizing otherwise "normal" behaviors of the lower classes. In San Diego several years ago, a homeless man was sentenced to 25 years to life (third strike) for asking a group of girls sitting on a public park's picnic table for a slice of their pizza. His first two strikes were for stealing a bike and shoplifing --- neither one violent but, rather, a "serious" felony which counted as two strikes. The girls testified that he stood around them, wouldn't leave, and that they felt "intimidated" into giving him the pizza. Moms called the cops, the cops turned him over to the D.A., and the D.A. and judge put him in prison for 25 year to life --- all based upon behavior that was arguably "normal", ie., when one is homeless and hungry it is normal to ask somebody with a table of food if they will give you some.

So that is the question we should be asking. If these behaviors were not criminal, why not?

You make an excellent point. What the banksters did was clearly unethical, venal, and corrupt, but may not have been illegal because they control the system.

FWIW, I think Lowenstein, while making some valid points, is way too easy on whether of not there was willful fraud and illegality. I posted it to present an opposing POV and generate discussion.

[c1ue]

Re: No Jail for Economic Crisis May Mean No Crime

The essential point is this: whatever the laws may be, even what prosecutions exist (and there are very few) are settled out of court with no guilt on the indicted party.

This is a clear regulatory capture situation: not only are prosecutions being wrapped up without conviction, the settlement process itself is used to prevent civil litigation.

Or in other words, the whitewash extends beyond even control of government to prevention of private remedy.

Banana Republic-like.

[farmer1]

Re: No Jail for Economic Crisis May Mean No Crime

While what Hofstadter talks about has always been a philosophy of mine ( that people look for a bogey man in order to bring some order to and a simple explanation for complex things), I think what happened regarding the financial crisis was absolutely a criminal and well planned event by those with the ability to pull it off.

To take it further, this mass fraud is a result of a general decline of ethics in America, which conflicts with some of the intelligentsia, who would have us believe that ethics don't matter. We simply cannot police each and every transaction in the world. When fraud and lies become the norm there really is not much we can do to prevent it. Only harsh sentences could hope to sway this trend. Doesn't look like that is going to happen.

Right on - its one of the ironies of the human condition - no way someone in political or government power can control everyone's behavior without it becoming tyranny. If you let people do there own thing there has to be some proactive self control - something we’ve lost as a culture. Part of its due to the concept of externalities - the externality cost of cheating a little bit gets borne by society while the benefit of cheating a little bit goes directly into my pocketbook. Only a belief in God can control this urge.

[Scot]

Re: No Jail for Economic Crisis May Mean No Crime

You make an excellent point. What the banksters did was clearly unethical, venal, and corrupt, but may not have been illegal because they control the system.

We'd like to believe the crisis came because a few elite "banksters" acted illegally or unethically. They're not like us and attacking them is no threat to our egos. But the truth is thousands of average people working as agents in the origination industry along with thousands of average people looking to buy homes fudged the numbers. Had borrowers and agents been more committed to honestly reporting financial information connected with new mortgages, the crisis might have been averted.

[Thailandnotes]

Re: No Jail for Economic Crisis May Mean No Crime

There was mortgage fraud and now there is foreclosure fraud. To say there is no criminality is a cruel joke. State and county AG's are complaining that there are so many fake documents in public registries that clear title to houses and land parcels will be lost, perhaps forever. When DocX put out a price sheet for producing fraudulent documents that about rapped up the debate.

Iowa state AG Miller is being slammed. And for good reason...

“Another campaign contribution to Miller that has also to date gone unreported in the media is a $10,000 donation on October 19 from Linda Killinger, the wife of Kerry Killinger, a former CEO of Washington Mutual. *Kerry Killinger is currently being sued by the FDIC after the collapse of Washington Mutual, the largest bank failure in history. *Linda is also named in the lawsuit.”

As for whether there was large scale criminality at the TBTF banks, it's worth rereading Mike Whitney's Counterpunch article from a year ago. Link below.

There's seems to be a debate as to whether it's legal to loan someone money when they clearly won't be able to repay. It's not: Lenders are required to file a Suspicious Activity Report when borrowers try to make false claims of wealth or income. Instead, lenders encouraged such activity. Mozilo should be bankrupt and in jail.

http://www.counterpunch.org/whitney04232010.html

[flintlock]

Re: No Jail for Economic Crisis May Mean No Crime

Only a belief in God can control this urge.

I believe this too. (If not belief in God then at least some belief system). And its irrelevant whether or not God actually exists. Its been the BELIEF that there is an ultimate accountability that kept societies together for so long. Societies used to fall primarily from external causes. Invasions, plagues, natural disasters, etc. Today they are more likely to fall from internal causes.

[Master Shake]

Re: No Jail for Economic Crisis May Mean No Crime

I believe this too. (If not belief in God then at least some belief system). And its irrelevant whether or not God actually exists. Its been the BELIEF that there is an ultimate accountability that kept societies together for so long. Societies used to fall primarily from external causes. Invasions, plagues, natural disasters, etc. Today they are more likely to fall from internal causes.

From Tom Wolfe's famous essay, Sorry, But Your Soul Just Died.

Which brings us to the second most famous statement in all of modern philosophy: Nietzsche's "God is dead." The year was 1882. (The book was Die Fröhliche Wissenschaft [The Gay Science].) Nietzsche said this was not a declaration of atheism, although he was in fact an atheist, but simply the news of an event. He called the death of God a "tremendous event," the greatest event of modern history. The news was that educated people no longer believed in God, as a result of the rise of rationalism and scientific thought, including Darwinism, over the preceding 250 years. But before you atheists run up your flags of triumph, he said, think of the implications. "The story I have to tell," wrote Nietzsche, "is the history of the next two centuries." He predicted (in Ecce Homo) that the twentieth century would be a century of "wars such as have never happened on earth," wars catastrophic beyond all imagining. And why? Because human beings would no longer have a god to turn to, to absolve them of their guilt; but they would still be racked by guilt, since guilt is an impulse instilled in children when they are very young, before the age of reason. As a result, people would loathe not only one another but themselves. The blind and reassuring faith they formerly poured into their belief in God, said Nietzsche, they would now pour into a belief in barbaric nationalistic brotherhoods: "If the doctrines...of the lack of any cardinal distinction between man and animal, doctrines I consider true but deadly"—he says in an allusion to Darwinism in Untimely Meditations—"are hurled into the people for another generation...then nobody should be surprised when...brotherhoods with the aim of the robbery and exploitation of the non–brothers...will appear in the arena of the future."

Nietzsche's view of guilt, incidentally, is also that of neuro–scientists a century later. They regard guilt as one of those tendencies imprinted in the brain at birth. In some people the genetic work is not complete, and they engage in criminal behavior without a twinge of remorse—thereby intriguing criminologists, who then want to create Violence Initiatives and hold conferences on the subject.

Nietzsche said that mankind would limp on through the twentieth century "on the mere pittance" of the old decaying God–based moral codes. But then, in the twenty–first, would come a period more dreadful than the great wars, a time of "the total eclipse of all values" (in The Will to Power). This would also be a frantic period of "revaluation," in which people would try to find new systems of values to replace the osteoporotic skeletons of the old. But you will fail, he warned, because you cannot believe in moral codes without simultaneously believing in a god who points at you with his fearsome forefinger and says "Thou shalt" or "Thou shalt not."

http://www.orthodoxytoday.org/articl...-Just-Died.php

[c1ue]

Re: No Jail for Economic Crisis May Mean No Crime

Nietsche had some interesting ideas, but the concept that religion morphed into nationalism is complete nonsense.

It is true both are belief systems, but to say that the 'death of God' is responsible for unleashing human mayhem is to ignore what the wars of the Reformation brought forth centuries before 1882.

Watchmen has it more correct: humans are savage.

[Master Shake]

Re: No Jail for Economic Crisis May Mean No Crime

Nietsche had some interesting ideas, but the concept that religion morphed into nationalism is complete nonsense.

It is true both are belief systems, but to say that the 'death of God' is responsible for unleashing human mayhem is to ignore what the wars of the Reformation brought forth centuries before 1882.

Watchmen has it more correct: humans are savage.

He didn't say that religion morphed into nationalism, but that man seeks meaning and absent a God to believe in, he will seek substitutes. Also, for some at least, the belief in an Almighty arbiter of human behavior and ultimate justice may place a "governor" on savagery.