Anything goes

Wall Street learns a lesson

By Mike Krauss

Bucks County Courier Times

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.