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Wall Street quietly paying billions in damages + Simon Johnson on financial "Doomsday"

by NBBooks Wed Mar 10th, 2010 at 12:09:49 PM EST

Cross-posted from Real Economics, and from DailyKos.

Danny Schechter, blogger in chief at Mediachannel.Org, and author of the 2008 book, PLUNDER: Investigating Our Economic Calamity, attended the Make Markets Be Markets Conference, and reports that Wall Street financial giants have quietly paid out $430 billion in damages and settlements in over 1500 civil lawsuits (NOTE: this is misleading; recent cases probably tied to the recent crash amount to $75 billion - see update below):

* Bank of America has spent $14.9 billion to settle 15 cases alleging various charges such as securities violations and mismanagement;

* Citigroup has spent over $13.9 billion to settle 12 cases alleging various charges including abusive lending practices and involvement in fraudulent activities;

* Merrill Lynch has spent $12.2 billion to settle cases involving various allegations including negligence and mismanagement of funds;

* Morgan Stanley has spent over $5 billion to settle 11 cases involving various allegations including failure to disclose material information to customers;

* Wachovia has spent over $9.5 billion to resolve allegations including misleading investors and conflicts of interest;

* UBS has spent $19.5 billion to settle 6 cases with various charges including misleading investors.

These cases indicate that there is massive fraud and wrong doing endemic to Wall Street and the financial system. But where are the government prosecutors? And why are they not bringing a similar flood of criminal cases?

At least one Federal Judge has become irate over the lack of response from the Department of Justice and taken matter into his own hands. This is the same judge that in September 2009 gave a tongue lashing to lawyers from the Securities and Exchange Commission for their failure to press criminal charges against Bank of America.  

William Black, one of the legal eagles who cleaned up the savings and loan disaster, explains how a criminal environment is created, then begins to dominate a financial institution:

Below, former IMF chief economist Simon Johnson, who wrote the landmark April 2009 Atlantic Monthly article on the new financial oligarchy, The Quiet Coup, addresses the Roosevelt Institute's Make Markets Be Markets conference, held last week. In a powerful eight-minute presentation, Simon shows how the 1980s Reagan Revolution transformed the U.S. financial system and set in motion a "Doomsday Cycle" that has not yet been stopped, but is still careening toward yet another economic cataclysm. If you think I'm applying hyperbole here, take the eight minutes to watch and decide for yourself.

(In case the embed of this Vimeo does not work, here's the link.)

Simon Johnson on the Doom Cycle (MMBM) from Roosevelt Institute on Vimeo.

Some UPDATES from the DailyKos diary: First, a tip of the hat to gjohnsit, who diaried this story yesterday, including one of the videos. Give him some mojo! In self defense, I will note that I actually came across the mention of the civil case settlements and penalties by following links from his posting on The Economic Populist, Why we are headed into Depression. Second, a tip of the hat to burrowowl, who points out that the $430 billion figure is misleading because it is a summary of all cases since the 1990s. Pescadoro Bill replies that the "emphasis should be more on the $75 billion recently spent to settle the cases."

Thanx for the simon johnson link, he laid it out well
by sidd on Wed Mar 10th, 2010 at 01:23:16 PM EST
I've embedded the videos for you, NB.  Hope you don't mind.

(The New User Guide explains how).

by Sassafras on Wed Mar 10th, 2010 at 06:33:52 PM EST
Oh, thank you, thank you! What was I doing wrong? I tried three times and gave up in frustration. First, I copied in the HTML directly from the DailyKos diary, where the videos were working fine. The preview showed all the HTML coding (for the videos, and not the rest of the diary, which looked fine). Then I went in and removed all the attributes, and the preview still showed all the HTML coding. I copied in the HTMl direct from the yourtube link for the Black video, and it looked correct, but still did not work. So I gave up and left the request for help. So, i do not mind at all; I'm very grateful.
by NBBooks on Wed Mar 10th, 2010 at 10:24:50 PM EST
[ Parent ]
There's a User Guide that explains the simple macros for embedding videos (among other useful things).
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Mar 11th, 2010 at 01:24:46 AM EST
[ Parent ]
Wall Street's Obama Investment   David Bromwich  HuPo

  A remarkable passage of John Heilemann and Mark Halperin's Game Change has not drawn the attention it deserves. Near the end of the book, the authors discuss a series of conversations in September-October 2008 -- just after the demise of Lehman Brothers -- between Barack Obama and the financial counselors of the Bush administration: Bernanke, Paulson, and others. The talks were initiated by Obama. Once the contact was there, he did not let go.

   Here is the relevant paragraph of Game Change (pp. 380-81):

  Obama was talking regularly with Fed chair Ben Bernanke and daily, sometimes more often, with Paulson. The treasury secretary was astonished by the candidate's level of engagement. On one occasion, Obama kept his plane on the tarmac for a half hour after the final event of his day, with a long flight ahead of him, so he could finish a conversation with Paulson. On another, Obama called Paulson late at night at home and spent two hours discussing the intricate details of regulatory reform. As much as the substantiveness of the discussions struck Paulson, so did their sobriety and maturity. I'll be there publicly for you at any time, Obama told him. I'm going to be president, and I don't want to inherit a financial system that's collapsed.

   Obama has been true to his word. He has been there for them publicly at any time. He has supported their story of the collapse (a story with without villains, and almost without actors) and accepted their recommendations on the proper limits of the remedy.


   One explanation of the Obama-Paulson talks is suggested by Thomas Ferguson's "investment theory of party competition." Indeed, that theory unassisted will account for much of what we have seen in the new president's fiscal and economic policies. Big money tends to buy the winning candidate, and the buyers get what they paid for. The banks and the investment houses convincingly supported Obama over McCain, and in the process spent more money than has ever gone to a single candidate. It is only because the Republicans are covetous of taking Wall Street back from Obama that they have stayed clear of the usual target of populism, the conduct and mores of Wall Street itself.


   When Obama says of Lloyd Blankfein and Jamie Dimon, "I know both those guys; they are very savvy businessmen" -- with artless pride in the fact that he moves in their circles -- we are a long way from John Kennedy during the steel crisis of 1962, after U.S. Steel announced an across-the-board price increase: "My father always told me that all businessmen were sons-of-bitches, but I never believed it till now." No, Barack Obama would never say such a thing because he would never think such a thing. It is not that he is in their pocket. They are in his heart.

Apparently "being there" publicly for them extends to providing them with air cover from Justice as well as from regulators for acts for which they agreed to pay damages in civil court, acts that are, arguably,prima facie fraudulent.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 11th, 2010 at 12:39:15 AM EST
But I don't think Obama is Chance the Gardener.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Mar 11th, 2010 at 12:41:12 AM EST
[ Parent ]
savviness is all about screwing the little guys.

obama's respect for that obsolete, criminal mindset is one thing for an aspiring mixed race careerist. for a president it's a crying, ignoble shame.

respecting a con-men cabal is not a sign progressives can read anything hopeful into, alas.

it also send a clear message to other aspiring middle class careerists, of any racial blend, whom you have to serve to be granted symbolic power in this system.

just as bush came to show us how intelligence is not a requisite for being voted the most powerful fool on the planet, now we have obama to show us that rhetoric can be straight from heaven, while underneath said rhetoric something a lot more predictably pedestrian, well you decide.

do we want to believe in obama because we can't handle the idea that we've been conned so well?

or because the alternatives were a fast run to WWIII?

it's funny, because when i first heard obama, my gut said 'don't be fooled, this is just the best 'hollow man' yet', then during the campaign, i got sucked into the phenomenon. gee wow, america's going post-racist!

groupthink struck, iow.

now the record and the rhetoric have become so discontinuous, that i realise that while bush was bad, a president like obama, (as helen warned many times), by raising hopes so high in so many economically disadvantaged folks, is risking a huge backlash of disappointment.

i do think, to be fair, that he has done, and tried to do some good things, but his appeasement of enemies that would gladly rip him limb from limb is not proving to be an effective strategy for helping americans, other than the savvy 1%.

there are some parts of his mental architecture that are still appealing, and i do still harbour some doubts about whether he's much smarter than i am, and than i think he is acting.

i also think that like berlusconi, he's a complete one-off, a freak wave, an historical accident, and there's no one remotely as politically skilled in the field to take his place after his time is over.

i mean, can you really imagine a president romney now?

he does still command considerable political capital though, and occasionally shows brief flashes of potential to be so much more than the role of Great Mollifier he's acting now.

remembering mccain gives me cold sweats...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Mar 11th, 2010 at 03:22:56 AM EST
[ Parent ]
I have no idea why someone who is mixed race might be more susceptible to careerism than someone who is white, but...

It's no secret that Wall Street holds the key to American politics. Obama did what he had to do. The alternative was having Republicans run the gov't. You have to ask yourself, would things look any different.

The US Supreme Court recently gave corporations the right to free speech, allowing them unfettered access to the corridors of power by doing so, and the Democrats want to pass legislation that will be bullet-proof against the Supreme court. They need to turn one of the 5 votes around, and that's probably Kennedy.

Now, if McCain had won, this would be a moot point. He would have appointed conservative supreme court justices.

American politics run through Wall Street and will continue to do so until the day that the country somehow manages to revamp its campaign finance and campaign system.

But, I note that Europe is not so different. There seems to be a cleave in Europe with financiers and ex-finance guys in gov't battling it out. So, one of them wants an EMF, while the other kills the idea, and what more, announces his faith in New York's rating agencies. There are two sides of the same coin.

Obama doesn't get elected without Wall Street behind him.

For insight into this dynamic, you should see how Warren Buffet and Sumner Redstone operate. both are Democrats with Democratic principles when it comes to social welfare, but they will not abide by one who even remotely threatens the flow (and lack thereof) of capital. Control is established through the media.

by Upstate NY on Thu Mar 11th, 2010 at 10:38:20 AM EST
[ Parent ]
Comment responses
I have no idea why someone who is mixed race might be more susceptible to careerism than someone who is white, but...

i can...further to fall, higher odds to beat, both can focus the mind quite well.

great reply, full of good points, thanks Upstate.

perhaps it was not necessary to include that factor, if it seemed crass in any way, i apologise.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Mar 11th, 2010 at 08:26:38 PM EST
[ Parent ]
I really think race figures in only with the number of Americans who would never vote for Obama anyway. Race explains a lot about American politics, but the lines are transparent. Don't forget the famous utterance by Toni Morrison: "Bill Clinton is our first African-American President."

In that context, Obama's actual race is much less a factor than his perceived race.

by Upstate NY on Fri Mar 12th, 2010 at 10:09:02 AM EST
[ Parent ]
An outstanding collection of links NB! The link to Simon Johnson brings up a whole series of presentations at the Roosevelt Institute entitled "Making Markets be Markets" which is well worth watching.  Wish there was a transcript. Judge Stanley Sorkin is one of my heroes in the recent debacle and he points out the need for appointing people who really want to regulate and asks why no public outrage, a theme that is repeatedly invoked by the present collection of Wall Street veterans. Bowman Cutter and Jim Chanos are cutting and informative in the Roundtable. Everyone on the panel is a heavyweight. It is instructive to see so many well known Wall Street and ex-government people, from Soros to Stiglitz, be so unanimous on the need for a change from the course we are on.

Bill Moyer's interview with William K. Black about his Theory of Corporate Fraud is dynamite. (Transcript here) Black was a regulator during the S&L debacle in the '80s and vividly illustrates just how far the USA has fallen as a nation. Hint, the 500 white collar fraud investigators in the FBI that Bush transferred to investigating 911 and Al Quaeda have still not been replaced. Black would be an excellent choice to lead an investigation of the fraud that Geithner and Bernanke are covering up.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Mar 13th, 2010 at 12:20:44 AM EST

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