Wall Street learns a lesson
It is a matter of public
record, established by the Senate Select Committee On Investigations, federal
and state attorneys, regulators like the Securities and Exchange Commission and
tireless investigative reporters like Pam Martens and Matt Taibbi: the serial
fraud and violations of banking and securities law that crashed the American
and global economy continue to this day. Wall Street and the global banking
cartel party on.
Is anyone surprised?
On the novel theory that
no individuals rigged the mortgage market, the municipal bond market, the
commodities markets, intentional interest rates and foreign exchange markets,
the response of federal law enforcement officials, most notably the U.S.
Department of Justice and Attorney General Eric Holder, has been to enforce
fines on the banks, but not the banksters.
The banksters skate away
scot-free, no indictments or prosecutions such as occurred in the Savings and
Loan and Enron scandals, their millions and billions of effectively stolen
wealth untouched.
The Obama administration
taught the banksters a lesson: anything goes. Small wonder it continues.
As a nation, we need to
consider the corrosive effect of this lesson on the ancient standards of honest
dealing in the market place and between citizens that is the bedrock of a moral
and just society.
Christians and Jews will
be familiar with the Book of Deuteronomy — which means “Second Law” and was
attributed to Moses, who delivered the first law, the Ten Commandments — in
which there is an exhortation to maintain honest and true weights and measures.
It is why thousands of
American state or local governments have departments of weights and measures:
to insure you get the gallon of gas or a pound of beef you pay for.
But now, we have cause to wonder. We wonder for example if the Wall Street firms managing our IRAs, pensions and public funds are looking out for us, or themselves.
Billions of dollars of
public pension funds are now managed by Wall Street firms. Increasingly, the
fees and commissions paid are being kept secret.
As David Sirota and others
have reported, state officials in Kentucky have kept secret the agreements
between the Kentucky Teachers’ Retirement System and the Wall Street firms that
are managing the system’s money.
Last month, Illinois
officials denied an open records request for information identifying which
financial firms are managing that state’s pension money.
In Rhode Island, the then
treasurer and now governor, a former hedge fund manager and darling of Wall
Street, declared that financial firms have the right to “minimize attention”
around their compensation.
And just in case elected
officials actually want to represent those who elected them and provide the
information about how their money is managed and at what cost, Wall Street is
ready.
In Iowa, the private
equity firm KKR warned officials that if they release information about the
fees that Iowa taxpayers are paying to Wall Street, the financial industry may
retaliate by excluding Iowa from future private equity investments.
Wall Street has learned a
lesson: anything goes. The lesson is not lost on America’s best and brightest
young people.
As reported by Pam Martens
in Wall Street on Parade, “a graduate of George Washington University Law
School, applying for a job at JP Morgan, attempted to set himself apart from
the competition by advertising at the very top of his resume that during a
previous job in power procurement at Southern California Edison, he had
‘identified a flaw in the market mechanism Bid Cost Recovery that is causing
the CAISO [the California grid operator] to misallocate millions of dollars’ In
case that was too subtle, the young job applicant went on to note that he had
‘showed how units in reliability areas can increase profits by 400%.’ ”
In plain language, how to
rig the market.
It worked. The person who
would become this young man’s boss at JP Morgan, Francis Dunleavy, advised his
colleagues, “Please get him in ASAP.”
Martens reports, “Within
three months of JP Morgan hiring the law grad in July 2010, he was actively
engaged in developing manipulative bidding strategies for JP Morgan in
California electric markets. A few months later, the plan was deployed. By fall
of the same year, JP Morgan was estimating that the strategy “could produce
profits of between $1.5 and $2 billion through 2018.”
This is the lesson the
nation’s “best and brightest” are now taught. On Wall Street and at the highest
levels of responsibility in the nation, anything goes.
