Before we get into the fraudulent U.S. Deficit Crisis (and I have the highest regard for Simon Johnson's opinion), we need to look at how all the perpetrators of this crisis got off - and even the smaller fish who are swimming away now into relatively unpolluted waters ready to let loose again. All I can think is what do you expect out of an administration that chose Larry Summers and Timmy Geithner (both Rubin boys) to run his Treasury/economic recovery team? And how is this better than McCain again? Somebody remind me, please!
I saw The Postman again last night on free TV (Thanks, TNT!). I hope our citizens don't get down that low before the people understand fully the forces of evil (who have decided to take advantage of their good nature and civilized way of dealing with brigands), and band together to save the United States of America and not just the plutocracy at the top. (P.S. In the essays below, the writer doesn't use all caps to shout. He's just trying to say that if you don't read anything else, please read that.) (Emphasis marks and some editing inserted - Ed.)
EDITOR’S NOTE: There is only one reason why there are not over 1,000 prosecutions that would successfully land the perps in jail — the reason is that the perps are the ones actually in charge. This is not rocket science. It is complex but it is not abstract requiring the intellect of Einstein. It takes elbow grease but not brilliance to make the case for fraud. ANY COMMON CITIZEN — A POTENTIAL JURY MEMBER — CAN MAKE THE CONNECTION BETWEEN WHAT HAPPENED ON WALL STREET AND WHAT HAPPENED ON MAIN STREET. IT WAS ALL PART OF ONE TRANSACTION. THE MONEY CAME FROM WALL STREET TRANSACTIONS AND WAS USED IN BITS AND PIECES ALL THE WAY DOWN TO USING PART OF THE INVESTOR MONEY TO FUND MORTGAGE LOANS. WHAT DO YOU THINK WE SHOULD DO?_ _ _ _ _ _ _
Biggest Fish Face Little Risk of Being Caught By Joe Nocera February 25, 2011 Late last week, word leaked out that Mr. Mozilo, who had co-founded Countrywide Financial in 1969 — and, for nearly 40 years, presided over its astonishing rise and its equally astonishing fall — would not be prosecuted by the Justice Department.The War on Women
Not for insider trading. Not for failing to disclose to investors his private worries about subprime loans. Not for helping to create a culture at Countrywide in which mortgage originators were rewarded for pushing fraudulent loans on borrowers.
In its article about the Justice Department’s decision, The Los Angeles Times said prosecutors had concluded that Mr. Mozilo’s actions “did not amount to criminal wrongdoing.”
Just months earlier, the Justice Department concluded that Joe Cassano shouldn’t take the fall for the financial crisis either.
Mr. Cassano, you’ll recall, is the former head of the financial products unit of the American International Group, a man whose enthusiasm for credit-default swaps led, pretty directly, to the need for a huge government bailout of A.I.G.
There was a time when it appeared that there was no way the government would let Mr. Cassano walk. But it did.
And then there’s Richard Fuld, the man who presided over Lehman Brothers’ demise. Though he was the subject of an investigation shortly after the Lehman bankruptcy, it appears that prosecutors are moving on.
Most of the other Wall Street bigwigs whose firms took unconscionable risks — risks that nearly brought the global financial system to its knees — aren’t even on Justice’s radar screen. Nor has there been a single indictment against any top executive at a subprime lender.
The only two people on Wall Street to have been prosecuted for their roles in the crisis are a pair of minor Bear Stearns executives, Ralph Cioffi and Matthew Tannin, whose internal hedge fund, stuffed with triple-A mortgage-backed paper, collapsed in the summer of 2007, an event that anticipated the crisis. A jury acquitted them.
Two and a half years after the world’s financial system nearly collapsed, you’re entitled to wonder whether any of the highly paid executives who helped kindle the disaster will ever see jail time — like Michael Milken in the 1980s, or Jeffrey Skilling after the Enron disaster. Increasingly, the answer appears to be no. The harder question, though, is whether anybody should. • Aficionados of financial crises like to point to the savings-and-loan debacle of the 1980s as perhaps the high-water mark in prosecuting executives after a broad financial scandal. When the government loosened the rules for owning a thrift, the industry was taken over by aggressive entrepreneurs, far too many of whom made self-dealing loans using savings-and-loan deposits as their own personal piggy banks.
In time, nearly 1,000 savings and loans — a third of the industry — collapsed, costing the government billions. According to William K. Black, a former regulator who teaches law at the University of Missouri, Kansas City, “There were over 1,000 felony convictions in major cases” involving executives of the thrifts. Solomon L. Wisenberg, a lawyer who writes for a blog on white collar crime, said, “The prosecutions were hugely successful.” That is partly because the federal government threw enormous resources at those investigations. There were a dozen or more Justice Department task forces. Over 1,000 F.B.I. agents were involved. The government attitude was that it would do whatever it took to bring crooked bank executives to justice. The executives howled that they were being unfairly persecuted, but the cases against them were often rooted in a simple concept: theft. And as prosecutors racked up victories in court, they became confident in their trial approach, and didn’t back away from taking on even the most well-connected thrift executives, like Charles Keating, who owned Lincoln Savings — and who eventually went to prison. Today, Mr. Black says, the government doesn’t have nearly as many resources to pursue such cases. With the F.B.I. understandably focused on terrorism, there isn’t a lot of manpower left to dig into potential crimes that may have taken place during the financial crisis.
Fewer than 150 of the bureau’s agents are assigned to mortgage fraud, for instance. Several lawyers who represent white collar defendants told me that outside of New York, there aren’t nearly enough prosecutors who understand the intricacies of financial crime and know how to prosecute it. It is a lot easier to prosecute people for old-fashioned crimes — robbery, assault, murder — than for financial crimes. Which leads to another point: as Sheldon T. Zenner, a white collar criminal lawyer in Chicago, puts it, “These kinds of cases are extraordinarily difficult to make. They require lots of time and resources. You have some of the best, highest-paid and most sophisticated lawyers on the other side fighting you at every turn. You are climbing a really high mountain when you try to do one of these cases.” Take, again, the one big case that prosecutors have brought, against Mr. Cioffi and Mr. Tannin. The Bear Stearns executives had written numerous e-mails expressing their fears and anxieties as the fund began to sink. Prosecutors viewed those e-mails as smoking guns, proof that the men had withheld important information from their investors. Thanks largely to those e-mails, prosecutors saw the case as a slam dunk. But it wasn’t. For every e-mail the executives wrote predicting the worst, they would write another expressing their belief that everything would be O.K. Besides, expressing such fears publicly would have doomed the fund, because liquidity would have instantly vanished.
Instead of viewing Mr. Cioffi and Mr. Tannin as crooks, the jury saw them as two men struggling to make the best of a difficult situation. By the time the trial was over, the e-mails, in their totality, made the defendants seem sympathetic rather than criminal. It seems safe to say that the government’s failure to convict those two Bear Stearns executives has caused prosecutors to shy away from bringing other cases. After all, the case against Mr. Cioffi and Mr. Tannin was supposed to be the easy one. By contrast, a case against Angelo Mozilo would have been, from the start, a much harder one to win. Although the Justice Department never filed charges against Mr. Mozilo, one can assume that its case would have been similar to the civil case brought earlier by the Securities and Exchange Commission. (On the eve of the trial date last fall, the S.E.C. blinked and settled with Mr. Mozilo.) One of the S.E.C.’s charges was insider trading — that Mr. Mozilo sold nearly $140 million worth of stock after he knew the company was in trouble. But the defense countered by pointing out that Mr. Mozilo was selling his stock under an automatic selling program that top corporate executives often use — thus mooting the insider trading accusation. Like the Bear Stearns executives, Mr. Mozilo had written his share of e-mails expressing worries about some of Countrywide’s loan practices. He called one of Countrywide’s subprime products “the most dangerous product in existence, and there can be nothing more toxic.” The government argued that Mr. Mozilo had a legal obligation to share that information with investors. But this case, too, would have been awfully difficult to make. Countrywide’s descent into subprime madness was hardly a secret. It made all sorts of crazy adjustable rate mortgages that required no documentation of income; its array of products was also well known and disclosed to investors. Indeed, Mr. Mozilo was quite vocal and public in saying that the housing market was due to fall, and fall hard. But he always assumed that whatever its losses, Countrywide was so strong that it would be one of the survivors and would feast on the carcasses of its former competitors. No internal e-mail he wrote contradicted that belief. Was there outright fraud at Countrywide? Of course there was. That is a large part of the reason that Bank of America, which bought Countrywide in early 2008, has struggled so mightily with the legacy of all the Countrywide loans now on its books. But most of the fraudulent actions at Countrywide took place at the bottom of the food chain, at the mortgage origination level. It has been well-documented that mortgage brokers induced borrowers to take loans that they never understood, and often persuaded them to lie on their loan applications. That kind of predatory lending is against the law — and it should be prosecuted. But going after small-time mortgage brokers isn’t nearly as satisfying as putting the big guy in jail, especially a big guy like Mr. Mozilo, who symbolizes to many Americans the excesses and wrongdoing embodied in the subprime lending mess. The problem is that Mr. Mozilo, though he helped create the culture that made such predatory lending acceptable, never made the fraudulent loans himself. Legally, if not morally, he’s off the hook. A few days ago, I listened to a recording of a lengthy interview with Mr. Mozilo conducted by investigators working for the Financial Crisis Inquiry Commission and posted recently on the commission’s Web site. It was a remarkable performance; Mr. Mozilo expressed no regrets and no remorse. He extolled subprime loans as a way to allow lower-income Americans to get a piece of the American dream and “really build wealth” — just like people used to do during the housing bubble. He bragged that Countrywide, unlike the too-big-to-fail banks, never took a penny of government money. He said that Countrywide had helped put 25 million Americans in homes. His voice rising passionately, he said finally, “Countrywide was one of the greatest companies in the history of this country.” Which is a final reason Mr. Mozilo would have been difficult to prosecute. Delusion is an iron-clad defense.
February 26, 2011 The Revolution Will Be Globalized
America’s greatest strategic concern heading into the 2010’s was Iran’s nuclear program. U.S. policymakers must already view this recent history as the “good old days.” In fact, a nuclear bomb did go off after Tunisia's split atom sent shock waves across the Muslim world and Africa. Tunisians now celebrate their personal achievement in bringing down "the Arab wall of silence."
From Tunisia protests spread like a virus, infecting neighbor Algeria and hopping planes to Egypt, Mauritania, and Yemen. A dozen states had been hit by the time former Hosni Mubarak retreated to Sharm el-Sheikh. Two weeks later and, accounting for a variety of symptoms, 20 states display contact with Tunisia’s radiation. Does The U.S. Really Have A Fiscal Crisis? By Simon Johnson The United States faces some serious medium-term fiscal issues, but by any standard measure it does not face an immediate fiscal crisis. Overindebted countries typically have a hard time financing themselves when the world becomes riskier – yet turmoil in the Middle East is pushing down the interest rates on US government debt. We are still seen as a safe haven. Yet leading commentators and politicians today repeat the line “we’re broke” and argue there is no alternative other than immediate spending cuts at the national and state level. Which view is correct? And what does this tell us about where our political system is heading? Our main fiscal issues are three (see mytestimony to the Senate Budget Committee earlier this month). The most immediate problem is that our largest banks and closely related parts of the financial system blew themselves up in 2007-08. The ensuing recession and associated loss of tax revenue will end up pushing up our government debt, as a percent of GDP, by around 40 percent. Very little of this debt increase was due to the fiscal stimulus; mostly it was caused by lower tax revenue, because of the slump in output and employment.
The financial system poses a major risk to our fiscal outlook over the next few years. Unless you think that the Dodd-Frank reform bill really ended “too big to fail” and the associated excessive risk-taking culture, you should worry a great deal about the boom-bust-bailout-fiscal damage scenario that the Bank of England now refers to routinely as the “doom loop”. Of the national level politicians now pushing for spending cuts, almost none showed up to fight to contain the fiscal risks posed by our largest banks. The Brown-Kaufman amendment to Dodd-Frank – which would have placed a limit on the size and debt (relative to equity) was supported by 33 Senators, only a handful of whom were Republican. But, then again, the Obama administration also fought hard against Brown-Kaufman. Treasury Secretary Tim Geithner argues that the TARP bank bailouts will end up costing the tax payer very little. He is forgetting the broader fiscal damage done by the collapse of the real economy and the loss of 8 million jobs. Second, we need to control healthcare spending as a percent of GDP. The issue is most definitely not about cutting the current level of such spending or immediately reducing the benefits in Medicare (although if you have ideas for that, send them along). But in the projections, by 2030 or 2040, the growth of healthcare spending ruins us all – whether or not we get the government to pay for it. During the healthcare debate of 2009-10 there was very little attempt to explain this issue and discuss the options. The administration made a half-hearted move in this direction but backed away as soon as leading Republicans began to claim there were “death panel” proposals on the table. Third, our tax system is completely antiquated. For the same level of tax revenue relative to GDP, we could greatly reduce the distortions (e.g., disincentives to work) just by modernizing. The right and the left agree we should tax consumption more and income less, but neither is willing to make any kind of meaningful move towards a value added tax (VAT). The right seems afraid that this tax will be too effective and power an expansion of government. The left thinks a VAT is necessarily regressive (imposing more burden on poorer people), despite all the evidence that the impact of VAT depends on how it is designed – because you can choose what gets zero taxes (e.g., baby clothes) and high taxes (e.g., yachts). The only room for bipartisan consensus here seems to be what we got in December 2010 – a big tax cut. Cutting taxes is nice, but only it is consistent with keeping the budget on a sustainable path. How does the Republican initiative to cut spending fit in with these budget issues? Not very much is the generous answer. Their proposed cuts at the federal level are for discretionary nonmilitary spending, but this is small as a percent of the budget (and therefore of the economy). But the problem here is bipartisan – as it was with the tax cut last year. None of the leadership on either side is willing to talk openly about how our biggest banks caused great fiscal damage. No one is willing to explain why our healthcare costs continue to rise. And no top politicians currently champion real tax reform. The Republicans have seized a moment. To them, this is not really about fiscal responsibility; this is about an opportunity to shrink the size of government. But the Democrats have played perfectly into their hands. The heart of their mistake was the president’s refusal to explain clearly how the financial system produced a recession that has pushed up our national debt. Both sides of our political elite have contributed to the sense of fiscal crisis. And as we continue down this path – dangerous big banks, out of control health care spending, significant tax cuts, small changes in nonmilitary discretionary spending, and irresponsible rhetoric on both sides – we are well on our way to a real crisis.
February 25, 2011
Republicans in the House of Representatives are mounting an assault on women’s health and freedom that would deny millions of women access to affordable contraception and life-saving cancer screenings and cut nutritional support for millions of newborn babies in struggling families. And this is just the beginning.
The budget bill pushed through the House last Saturday included the defunding of Planned Parenthood and myriad other cuts detrimental to women. It’s not likely to pass unchanged, but the urge to compromise may take a toll on these programs. And once the current skirmishing is over, House Republicans are likely to use any legislative vehicle at hand to continue the attack. The egregious cuts in the House resolution include the elimination of support for Title X, the federal family planning program for low-income women that provides birth control, breast and cervical cancer screenings, and testing for H.I.V. and other sexually transmitted diseases. In the absence of Title X’s preventive care, some women would die. The Guttmacher Institute, a leading authority on reproductive health, says a rise in unintended pregnancies would result in some 400,000 more abortions a year. An amendment offered by Representative Mike Pence, Republican of Indiana, would bar any financing of Planned Parenthood. A recent sting operation by an anti-abortion group uncovered an errant employee, who was promptly fired. That hardly warrants taking aim at an irreplaceable network of clinics, which uses no federal dollars in providing needed abortion care. It serves one in five American women at some point in her lifetime. The House resolution would slash support for international family planning and reproductive health care. And it would reimpose the odious global “gag” rule, which forbids giving federal money to any group that even talks about abortions. That rule badly hampered family planning groups working abroad to prevent infant and maternal deaths before President Obama lifted it. (Mr. Obama has tried to act responsibly. He has rescinded President George W. Bush’s wildly overreaching decision to grant new protections to health providers who not only will not perform abortions, but also will not offer emergency contraception to rape victims or fill routine prescriptions for contraceptives.) In negotiations over the health care bill last year, Democrats agreed to a scheme intended to stop insurance companies from offering plans that cover abortions. Two bills in the Republican House would go even further in denying coverage to the 30 percent or so of women who have an abortion during child-bearing years. One of the bills, offered by Representative Joe Pitts of Pennsylvania, has a provision that would allow hospitals receiving federal funds to refuse to terminate a pregnancy even when necessary to save a woman’s life. Beyond the familiar terrain of abortion or even contraception, House Republicans would inflict harm on low-income women trying to have children or who are already mothers. Their continuing resolution would cut by 10 percent the Special Supplemental Nutrition Program for Women, Infants and Children, better known as WIC, which serves 9.6 million low-income women, new mothers, and infants each month, and has been linked in studies to higher birth weight and lower infant mortality. The G.O.P. bill also slices $50 million from the block grant supporting programs providing prenatal health care to 2.5 million low-income women and health care to 31 million children annually. President Obama’s budget plan for next year calls for a much more modest cut. These are treacherous times for women’s reproductive rights and access to essential health care. House Republicans mistakenly believe they have a mandate to drastically scale back both even as abortion warfare is accelerating in the states. To stop them, President Obama’s firm leadership will be crucial. So will the rising voices of alarmed Americans. _____________________