Don't Let the Bad Guys Get Away!

Hollywood loves a good chase. Last night at the Oscars, Tinsel Town sent a strong message to the rest of the country – the bad guys are getting away, and the cops aren’t even on their trail.

For a brief instant the Obama administration’s sorry efforts in holding bankers accountable for the financial collapse took center stage at, of all places, the Academy Awards.

Accepting his Oscar for “Inside Job,” his documentary about the financial collapse, Charles Ferguson used the opportunity to remind the audience of millions that not a single banker had gone to prison for fraud.

Ferguson was saying what the mainstream media has deemed a non-story, following President Obama’s lead in downplaying accountability while highlighting evidence of economic recovery.

But Ferguson joins a handful of prominent critics, including Bill Black, Simon Johnson, former Sen. Ted Kaufman, Dean Baker and Matt Stoller, who have been sending the same message in a variety of less prominent venues.

Meanwhile the president, far from insisting that his prosecutors develop fraud cases against top bankers, appoints them to top positions in his administration.

Typical is this recent column from the New York Times oped columnist Joe Nocera, who pooh-poohs the criminal aspects of the financial meltdown, blaming it on widespread “mania.”

Make no mistake; these are hard cases to make. In the 90s I covered the prosecution of savings and loan magnate Charles Keating, the poster child for bad behavior and political shenanigans for that earlier banking fiasco that also followed a rash of deregulation. Keating was convicted in both state and federal court. Though the convictions were overturned, Keating did serve four and a half years of his five-year state sentence.

Good prosecutors don't mind tough cases. They enjoy the challenge. But their bosses set their priorities and have to give them the support they need.

The Obama administration is barely even trying, afraid of alienating the bankers it’s trying to court. The cases that have been brought are either minor sideshows or they’ve been mishandled.

A local prosecutor told me that federal authorities have shown no interest in the painstaking work of building serious cases against bank executives, which would involve authorities going after minor players such as mortgage brokers, and working their way up the chain of responsibility.

In Inside Job, former New York state attorney general Eliot Spitzer has a suggestion for prosecutors – do unto the bankers what the prosecutors did unto him: go through their credit card receipts looking for evidence of illicit activity, like paying for high-priced hookers. Bust the bankers for their bad personal behavior and then obtain their cooperation in investigating financial abuse.

It may work; it may not. But at least prosecutors wouldn’t be sitting on their hands. They’d be doing their jobs – aggressively going after the bad guys.

 

 

Around the Web / Martin Column / Uncategorized - 02/28/2011

Around the Web: Bigger Than Wikileaks

While the Wikileaks dump of secret diplomatic got more publicity, the Federal Reserve’s reluctance release of data on details of what it was up to in the bailout is actually the bigger story.

It’s a giant step towards the direction of democracy in a financial system that hasn’t had any.

What are we finding out? For one thing, just how much dishonesty is built into our knowledge of the financial system. Because corporate leaders never expected the data to be released, they lied, mischaracterized or downplayed their reliance on the Fed’s largesse.

Aaron Elstein lays it out at CrainsBusinessNewYork.com in a blog post headlined `Whoppers from the Bailout Binge’, (ht the Audit, which provides an excellent roundup of Fed dump coverage).

“In some cases,” Elstein writes, “the actions taken by companies jarringly contrast with their executives’ public comments about the bailout program.”

Along with the stunning secrecy that has surrounded the process and the dishonesty of the corporate recipients of the taxpayers’ generosity, a couple of other main themes emerged from scrutiny of the Fed data.

First, not only did U.S. taxpayers come to the aid of large European banks, they also gave emergency loans to many of the biggest U.S. businesses, like GE, Verizon and even Harley-Davidson. All of these institutions were deemed too big to fail, or even suffer more than a some sleepless nights’ worth of economic distress in the financial meltdown. About the only entities not deemed worthy of saving in the meltdown were many of the taxpayers themselves ­ who foot the bill for the whole extravaganza. The institutions that dreamed up the toxic loans got a bailout the taxpayers should have read the fine print more carefully, dammit!

Second, the Fed’s $3.3 trillion rescue scheme was rife with conflicts of interests. Members of regional Fed boards sat in on decisions to help out their own institutions, and corporations like BlackRock acted as paid advisers to the process and also bought securities on behalf of clients as part of the Fed’s efforts.

To put what’s happening in perspective, Matt Stoller, former senior policy adviser to former Rep Alan Grayson, the fiery Florida Democrat who recently lost his re-election bid, wrote this fine piece in Naked Capitalism.

Around the Web / Martin Column - 12/04/2010

Soldiers Lose Out to Yo-Yos

Here’s a snapshot that puts into sharp focus where we are politically this summer:

In a showdown between the U.S. military and the nation’s car dealers over protecting soldiers from predatory lending, the car dealers won.

Even though the commander-in-chief said he wanted the fighting men and women to be shielded by the proposed new consumer protection agency when they went to get a car loan, congressional Democrats Tuesday sided with the car dealers, who would prefer not to face any additional regulation, thank you very much.

After all, they argue, we didn’t cause the financial meltdown, so leave us alone.  But according to the Better Business Bureau, new car dealers rank fifth in complaints about lending practices.  Used car dealers do a little better; they rank seventh.

The military says its soldiers, focused as they should be on other matters, are particularly vulnerable to predatory lending.

Rosemary Shahan, president of a Sacramento-based nonprofit, Consumers For Auto Reliability and Safety, told the Chicago Tribune that auto dealers pack financing contracts with costly items such as extended warranties and insurance to cover loan payments if the vehicle is wrecked.

One of the more obnoxious forms of predatory lending is something called a yoyo loan. The buyer is told they can drive the car off the lot with a deal they can’t refuse – subject to loan approval. Then the dealer calls back and tells the buyer the initial loan wasn’t approved but they can have the vehicle at a higher interest rate.

The car dealers argue that they’re already subject to other forms of regulation. But they also have other means of persuasion: the National Association of Auto Dealers is among the elite top 20 campaign contributors since 1989, according to the Center For Responsive Politics, with more than $25 million in contributions. During 2009 and the first quarter of 2010, the National Automobile Dealers Association and another group that represents foreign-car franchises, the American International Automobile Dealers Association spent almost $3.5 million to lobby on financial reform and other issues, the Center For Public Integrity reported.

Call President Obama and let him know we need him on the front lines in the battle against predatory lending.

Consumer Financial Protection Agency / Financial Reform Legislation / Martin Column - 06/22/2010

Giving Toxic Waste a Bad Name

Face it, if we found out that a Vegas casino was run like our banking system, the worst strung out addict wouldn’t gamble there.

Even they wouldn’t be able to stand the stench.

Casino operators know you have to provide at least the appearance that the games aren’t crooked.

Casino operators know they can’t force people to spend their hard-earned money gambling on a toxic waste dump.

But the bankers and their political cronies who have been playing us for suckers forced us to pay to clean up the shambles, as well as the continuing costs of the broken economy.

Now the casino operators are trying to assure us that everything is hunky-dory, but that same foul scent is still wafting from their dumpsite. Goldman Sachs shrugs off  the Securities and Exchange Commission’s fraud charges, hiring the president’s former lawyer to fight them, while it rakes in eye-popping profits that beat even the most optimistic projections.

The man we hoped would clean up the mess, President Obama, appears at long last to be taking a more nimble, hands-on approach to financial reform than he did on health insurance reform. But the plans endorsed by him and the Democratic leadership contain too little actual reform and too much reshuffling of the same weak hand regulators have been bringing to the casino.

We’ll never win against the sharks the way the game is rigged now.

That’s the bitter lesson brought home by the revelations of the last month, from probes into the tragic bank follies of the Lehman and Washington Mutual collapses, and the  SEC lawsuit charging Goldman-Sachs with fraud.

As we learn more details of each of these debacles, they provide potent weapons  in the fight to overhaul the system that led to the financial meltdown.

Far from being an unforeseeable natural disaster, it was a predictable consequence of the system we still have in place today. In each case, the financial giants rigged the game with fraudulent bookkeeping and lack of disclosure while regulators looked the other way. And far from being isolated instances of improper conduct, the Lehman, WAMU and Goldman fiascoes are prime examples of how far the financial industry has fallen in common sense and ethical standards.

But the Democrat leadership has squandered its credibility on financial reform, offering legislation that largely preserves the status quo.

Rather than galvanizing public outrage against Wall Street into support for fundamental change to rebuild a financial system that truly serves our economy, the president and the Democratic leadership are caving in to Wall Street lobbyists and Republican obstructionists who pay lip service to reform while they block and dilute it.

Meanwhile, we’re treated to the truly disgraceful spectacle of each party accusing the other of having taken more campaign cash from Goldman-Sachs and the other major casino operators than the other.

The truth is they’re both beholden to the cash generated by the toxic dump of our financial system. The Democrats may be ahead in the fundraising game right now, but the Republicans are working hard to curry favor from Wall Street and catch up.

Meanwhile, the rest of us are left on the sidelines.

Fortunately we don’t have to stay there.
Several other Democratic senators have proposed amendments worthy of support.

Among the most articulate voices for a stronger version of reform is Sen. Ted Kaufman, D-Delaware. Along with senators Jeff Merkley, D-Oregon, Carl Levin D-MI, Sherrod Brown, D-Ohio and Jeanne Shaheen, D-N.H., Kaufman has proposed a bill that moves toward rebuilding the wall that used to separate traditional, federally guaranteed banking activities from high-risk speculative gambling. That wall was torn down when the Depression-era Glass-Steagall Act was repealed during the Clinton Administration. In addition, a conservative Democrat who faces a tough reelection fight, Blanche Lincoln, D-Arkansas, has proposed derivatives regulation that is substantially tougher than that which has been proposed by the Obama Administration.

Now is the time to clean up the casino. We have to channel our  genuine, justified anger into action to push our politicians to do the right thing, whether they want to or not.

Action / Glass-Steagel / Goldman-Sachs / Martin Column / President Barack Obama - 04/20/2010

Around the Web: From Maestro to Cornered Rat

When he used to appear before Congress during boom times, Alan Greenspan was worshipped as a hero. The Washington Post’s Bob Woodward wrote an insider’s, book-length Valentine dubbing him the maestro. That was a stark contrast to the bruising the former Fed chair took this week from the panel appointed to investigate the financial meltdown. The reviews of his performance were even tougher.

No wonder. Greenspan lamely tried to evade responsibility for the policies he orchestrated that led to the worst economic crisis since the Depression. CBS Econwatch blogger Jill Schlesinger labeled Greenspan’s appearance “ a trip to the land of denial.”

Brooksley Born, one of the commissioners on the Financial Crisis Inquiry Commission, bluntly told Greenspan that the Fed “failed to prevent the housing bubble, failed to prevent the predatory lending scandal, failed to prevent the activities that would bring the financial system to the verge of collapse.”

A little historical context: Greenspan helped undermine Born’s efforts to regulate derivatives when she was head of the Commodities Futures Trading Commission in the Clinton Administration.

Frederic Sheehan, who’s written several books lambasting Greenspan and the Fed, credited the panel with doing a decent job in preparing for his testimony. Sheehan noted that Greenspan wasn’t used to having to answer follow-ups and seemed stumped. When he used to appear before the Senate as Fed chief, senators “were afraid, they didn’t want to look foolish in asking simple questions. A lot of the really simple questions are the ones that are still unaddressed or need to be addressed but never were when he was Fed chairman, particularly about money and credit. He walked away from those questions again today.”
One common theme in reviewing Greenspan’s performance was incredulity at his assertion that he was caught by surprise by the mortgage crisis. Diane E. Thompson, an attorney with the National Consumer Law Center, said in an interview with Washington Independent’s Anne Lowrey that she and other members of the Federal Reserve’s Advisory Council started warning Greenspan about mortgage problems in the early 2000s.

Meanwhile Angelides has problems of his own. Members of his panel complained to the New York Times that he seemed more interested in headline-grabbing hearings than deep investigation, that the panel had wasted too much time getting started and had issued no subpoenas even though it has the power to do so. As David Dayen writes on Firedoglake, “If anyone was watching this but me and the WSJ, they would have seen a cornered rat. Born nailed Greenspan – although, given the relative lack of interest in the FCIC, the benefit to that will be merely psychic in nature.” Stay tuned….

Around the Web / Federal Reserve / Financial Crisis Inquiry Commission / Martin Column - 04/09/2010

Bursting D.C.'s Bubble

The battle for financial reform comes down to the ownership of one critical piece of real estate, one that has managed to avoid the crash that has ended the dreams of security for so many: the nation’s Capital.

“We’re at a critical moment point in our democracy,” Elizabeth Warren, the congressional bailout monitor, told those of us gathered on a webinar Wednesday. “Either the banks own Washington or the people do.”

Warren was referring to something that the Democratic Senate whip, Dick Durbin, said last year about the place where he works, in an rare moment of a politician telling the truth:  “The banks own this place.”

Elizabeth Warren, a tireless promoter of consumer protection and truth teller about the decline of the decline of fortunes of regular folks, prefers to view Durbin’s declaration as premature.

But a more definitive answer is not far off, according to Warren; it could come next month. The full Senate is expected to begin debate on financial reform when it returns from recess this month with a final vote in May.

Congress is one place where the bubble hasn’t burst. The value of those congressional seats hasn’t gone down since the crash; it’s gone up. Representatives and senators are raking n more than ever from corporate lobbyists.

The banks are fully mobilized, unloading $1 million a day to block, neutralize and weaken reform. The webinar, sponsored by Americans for Financial Reform and Americans for Responsible Lending, was an effort to galvanize reform supporters into action.

As reluctant as I am to disagree with Warren about anything, on this one I’m with Durbin. From the evidence, it’s hard to see how Wall Street hasn’t gotten everything it wants from the politicians, even after the greatest financial meltdown since the Depression.

The question is whether we can take back that inflated piece of real estate and reestablish its true value.  Can we turn our frustration and rage over the bailouts and our elected representatives’ impotence into action?

There are marches – April 29th on Wall Street and May 17 on K street, where the lobbyists have their offices. And there are elected representatives to inundate with messages in favor of reform. Reform advocates can’t match the bankers’ cash, but they have people power on their side.

One questioner asked Warren at what point the Senate reform proposal from Sen. Chris Dodd, which was initially strong before Dodd watered it down, would become so weak it wouldn’t be worth supporting. Warren didn’t answer the question directly. “They’re not leaving much margin for error,” she said.

Unfortunately, when it comes to financial reform, the devil is in the details, and we have to insist on real reforms.

That means:

× Breaking up banks that are too big to fail (Dodd’s proposal doesn’t do that now).

× Creating a strong and independent financial consumer protection agency  (Dodd proposes to house it in the Fed, with other banking regulators able to veto the consumer protector’s decisions)

× Forcing banks to have more “skin in the game” (The Senate bill require bankers to keep money in reserve equal to 5 percent of loans they bundle and sell off; European regulators require twice that amount).

× Congress setting the amounts of capital financial institutions would have to keep on hand, rather than leaving it for the regulators to decide.

What we’ve learned in the past several months, from the report on the Lehman bankruptcy and the Fed’s recent disclosures on its involvement in Bear-Stearns takeover by J.P. Morgan, is that regulators weren’t asleep at the switch before, during and after the financial crisis. Rather, the regulators have actively colluded with the banks in an attempt to conceal the banks shady practices. Too much of what is being called financial reform is actually just maintaining the status quo while pretending to overhaul the system.

I don’t agree with a lot of what the Tea Party has offered. They don’t offer much in the way of positive proposals, and seem particularly weak in grappling with the issue of unchecked corporate power. But I think they’ve shown how a group of people (with some corporate funding) can shake up and shape a national debate. The Tea Party has no corner on frustration, anger, betrayal or the sense that something has gone deeply wrong in our country. There’s no reason we can’t channel that frustration and anger to plant the flag of real reform in the middle of real estate that, after all, belongs to us. Now’s the time to do it.
Here’s how to contact your senator and representative. Here’s the web site for Americans for Financial Reform.

Action / Consumer Financial Protection Agency / Martin Column / Too Big To Fail - 04/08/2010

What Would Pecora Do?

There have been lots of positive comparisons between Phil Angelides and Ferdinand Pecora, who led an earlier investigation of Wall Street excesses that led to the Great Depression.

Pecora was a no-holds barred former prosecutor who ran his hearings with meticulous preparation and theatrical flair, and his work galvanized public support for widespread reforms.

Some have been impressed by Angelides’ reputation as a reformer from his days as California treasurer, when he tried to use the power of the state’s investments for socially worthy causes and implemented some protections for shareholders. Angelides was widely praised after public hearings earlier this year for his understanding of high finance and his scolding of the head of Goldman-Sachs, Lloyd Blankfein, comparing him to a used –car dealer.

I’ve been less impressed by Angelides, who doesn’t seem to have a grasp on the opportunity he has to marshal support for real financial reform. And he’s too cozy with a Democratic leadership that’s been soft on Wall Street in the wake of the financial meltdown.

I’m also suspicious of Angelides, the politician and former real estate developer who unsuccessfully ran for governor against Arnold Schwarzenegger, because of his close ties to the Democratic Party elite. In addition, I’m wary of the impact of Angelides' main job running a coalition promoting green technologies. That’s certainly a laudable goal, but Angelides and his Apollo Alliance aren’t going to get very far without lobbying the Obama administration and the Democrats, who would not be happy with a hard-hitting report.
Whatever drama Angelides manages to muster at any given moment, I’m concerned that his multiple roles and background will cause him to soft-pedal his investigation. Those concerns were only heightened after Angelides surfaced as part of a curious SEC report last week that cautions firms about “pay to play” in the state investment business.
According to the SEC, when Angelides was running for treasurer in 2002 he hit up a top J.P. Morgan official to co-chair a fundraising event. It wasn’t just an honorary position. The price tag for the co-chairmanship? $10,000.

According to the report, the official didn’t co-chair the event but donated $1,000 to Angelides” campaign personally ­– and helped raise $8,000 more. In asking other J.P. Morgan brass to contribute to Angelides, the official noted that that the state of California was an important client for the firm.

Just how important became clear in the next couple of years, when J.P Morgan received about $37 million in fees from the state on more than 50 bond offerings totaling $15.8 billion – overseen by Angelides as state treasurer.

In the SEC’s curious take on the matter, neither Angelides nor J.P. Morgan is accused of doing anything improper.  Angelides isn’t even mentioned by name. The agency merely uses its report to caution finance officials about not running afoul of SEC regulations.

OK, so the SEC doesn’t think Angelides did anything wrong soliciting funds from J.P. Morgan and then giving them the state's business. But the report serves as a bitter reminder that those who we’re counting on to get to the bottom of the financial meltdown are steeped in the toxic brew of cash and politics that has seeped into the core of our government.

I hope I’m proven wrong about Angelides; that his intimacy with this unseemly world has left him with a sense of sustained outrage and not empathy for it.  But it will take more than a few zingers to convince me. I mean, let’s be serious. Would Ferdinand Pecora have solicited money from J.P Morgan? Not much chance. After Pecora grilled the son of the legendary banker, J.P. Morgan, Jr. described the investigator as having “the manners of an assistant prosecuting attorney who is trying to convict a horse thief.”

Financial Crisis Inquiry Commission / Martin Column - 03/23/2010

Angelides Panel Day 2: Bair, But No Flair

The first two days of the long-awaited Financial Crisis Inquiry Commission hearings have been largely rambling and listless, with commissioners leading witnesses around the same debates and issues that even casual observers of the meltdown and bailout have heard many times.

Those with patience were rewarded Thursday with some nuggets of straight talk from FDIC’s Sheila Bair and state regulators skeptical of the benefits of financial innovation.

Phil Angelides is getting some raves for his clash with the head of Goldman-Sachs Wednesday and his knowledge of how the financial system works. Angelides compared Goldman to a used car salesman selling vehicles with bad brakes, and chided the firm’s chairman for describing the financial meltdown as a natural disaster like a hurricane.

I’m not buying it.

One dustup in the middle of two days of hearings did nothing to illuminate the meltdown. Goldman’s thick-skinned and well-paid Blankfein has already stared down the president of the United States and Congress. I doubt he’s going to change course after Angelides’ comments.

Angelides, his vice-chair Bill Thomas and the other commissioners seem to have no sense of urgency or flair for how to hold a public hearing. Angelides and company are either unprepared or appear not to have the stomach to bring out the story in a compelling way or hold bankers and regulators publicly accountable.

We have a long, proud history in this country of public hearings that focused on key issues, electrified the country, and galvanized political change, starting with the hearings on which the current panel is based, the 1930s Senate probe into the financial shenanigans preceeding the stock market crash, headed by Ferdinand Pecora.

Michael A. Perino, a professor specializing in securities regulation at St. John's University School of Law who's writing a book about Pecora, told "Bill Moyers Journal" that Pecora took complex financial transactions and turned them into simple morality plays. “Pecora was, if nothing else, a brilliant lawyer. He knew how to ask questions. He was a pit bull. He would not let people get away with hemming and hawing and hedging their answers. And he would go after them, politely, of course. But he would go after them until he got the answer he wanted.”

In the early 1950s Sen. Estes Kefauver went after organized crime. Later in the decade, Sen. Robert Kennedy targeted corrupt union bosses.  In the 1970s, the country was riveted by the Senate hearings into the Watergate scandal, led by a superb lawyer named Sam Dash.

Each of those hearings, from Pecora to Watergate, was characterized by relentless preparation, tenacious questioning and savvy stage managing.

Dash unfolded the Watergate story like an episode of the old courtroom drama Perry Mason. It’s worth quoting Dash’s method at length for the stark contrast with Angelides.

“Having been a trial lawyer, I know that you begin a trial by starting at the very beginning,” Dash told NPR’s “On the Media” in 2003.  “It's like a detective story. In this particular case, there was the Watergate burglary; there were the cops that arrested the burglars. And then I would bring in a number of accusers like John Dean who had been counsel to the president who was pointing the finger at the president and [H.R.] Haldeman and [John] Erlichman, and so I was setting up this tension of the police work, the work of the people who were involved as co-conspirators, who were accusing, and then ultimately bring the accused – Haldeman, [John] Mitchell, and Ehrlichman – and in order to make sure that our story would be told in a consecutive and interesting fashion, every witness that I called had been prior called, before an executive committee.

“In other words I knew exactly what my questions were going to be and I knew exactly what the answers were going to be so that I could put it in a form that this would come out like a story, and I think it, it succeeded in the sense that the American people were glued to their television sets waiting for the next episode.”

In Thursday’s session we got the attorney general, Eric Holder, touting his successful prosecution of Ponzi schemer Bernard Madoff and other cases that had nothing to do with the financial crisis. His office continues to investigate 2,800 mortgage fraud cases, Holder said.

No commissioner asked Holder any follow-ups about the recent failed prosecution of Bear Stearns hedge fund managers who were acquitted of lying to their clients about the funds’ mortgage investments, or lessons that the Justice Department might have learned from that embarrassing defeat.

Nor did the commissioners ask SEC chief Mary Schapiro, seated close by Holder, about the SEC’s colossal failure in ignoring repeated warnings about Madoff’s crooked deals.

What’s particularly frustrating is that Angelides appears to have the seeds of a theme: how banks and regulators ignored warnings of trouble prior to the meltdown. He has asked a couple of times about a 2004 FBI report that warned of a looming explosion of mortgage fraud. Surprisingly, though Angelides had raised it Wednesday with the bankers, when Angelides asked Holder about it Thursday, Holder replied that he wasn’t familiar with the warning but said, “We’ll look into that.”

That’s some indication of just how seriously the country’s top law enforcement officer is taking the hearings.

The commission’s second day of hearings focused on regulatory efforts of the SEC and FDIC as well as state efforts at financial regulation.

Amid strong lobbying by the big banks, state regulators have been largely pre-empted from financial regulation. Whether or not to give states back that authority is a key point of contention in on-going debate over financial reform; financial institutions continue to bitterly oppose it.

Sheila Bair, FDIC chair, whose strong voice for reform has sometimes been drowned out by those of other members of the Obama economic team, got a chance Thursday to reiterate her view of the failures that contributed to the crisis.

“Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities,” Bair said. Record profits across the banking sector, Bair added, also served to limit “second-guessing” among the regulatory community.

The Texas securities commissioner, Denise Crawford, also offered a sharp perspective not usually heard either on Wall Street or in Washington. “The great minds of Wall Street are probably right now coming up with new securitization products,” she told the commissioners. “It's not just mortgages. It's the entire structure of Wall Street and the super-wealthy that create the demand for new speculative products.”

Financial Crisis Inquiry Commission / Martin Column - 01/14/2010

Wall Street's Back – And Has Detroit by The Throat

While financial institutions drastically reduce lending again to private lenders and businesses, they’re also tightening the vice on cash-strapped public agencies from California to New Jersey.

This aspect of the financial meltdown has gotten less attention than the bonuses and the bailouts: how AIG and other Wall Street giants sold cities, towns, school boards and other public agencies high-risk investments and complex financing schemes during the boom. Now that the economy, the government agencies’ credit ratings and all those risky investments have gone bust, Wall Street is hounding cash-strapped governments from California to New Jersey for its money.

Derivatives / Goldman-Sachs / Martin Column - 12/04/2009

Rating Wall Street's New Sheriff

By Martin Berg

In the 1930s, the Senate Banking committee appointed a no-nonsense assistant district attorney named Ferdinand Pecora to lead an investigation into the causes of the stock crash of 1929.

Pecora held hearings that were equal parts public spectacle and tough scrutiny of the financial industry’s abuses. His investigation, closely followed by an angry American public, led to a raft of reforms of the banking system, most notably the Glass- Steagal Act, which kept the federally guaranteed business of making loans and taking deposits separate from other, riskier aspects of banking and investing.

Now Congress has appointed a financial inquiry commission to explore our recent financial meltdown.

The panel will not be headed by a hard-nosed prosecutor but by a real estate developer who became Democratic California treasurer from 1999 to 2007 and then an unsuccessful gubernatorial candidate, Phil Angelides.

Uncategorized - 11/18/2009