Spineless Oversight Protects & Encourages Poisonous Snakes

Barry Grey in wsws:

Just last month, Neil Barofsky, the former special inspector general for the $700 billion Troubled Asset Relief Program (TARP), gave an interview on the occasion of the publication of his new book on the bank bailout in which he complained of the failure to hold to account any of the bankers responsible for the financial disaster. “It was shocking how much control the big banks had over their own bailout,” he said.

He went on to accuse Obama’s treasury secretary, Timothy Geithner, of a cover-up while president of the New York Federal Reserve of the banks’ manipulation of Libor, the most important global benchmark interest rate. “Geithner and other regulators should be held accountable,” he said. “They should be fired across the board… I hope to see people in handcuffs.”

The US Justice Department has just ended a one year criminal investigation of giant Wall Street investment bank Goldman Sachs and its employees and exonerated it despite a Senate report that said otherwise. Grey:

In its statement released Thursday, the Justice Department said it had conducted “an exhaustive review of the report [from Senate],” but concluded that “based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report.”

In April 2011, the Senate Permanent Subcommittee on Investigations released that supposedly DOJ "exhaustively reviewed" (hah!) 640 page report on “the role of major banks, federal regulators and credit rating firms in the collapse of the subprime mortgage market and ensuing financial crash of September 2008.” The probe took the Subcommittee two years to compile. The report was 640 pages long. 40% of it, 240 pages, were devoted to deceptive practices used by Goldman Sachs.

According to Grey:

In the course of its investigation, the Senate Permanent Subcommittee on Investigations amassed 56 million pages of memos, documents, prospectuses and emails. The section of its report on Goldman Sachs gave chapter and verse, provided dates and named names, to meticulously document how the bank defrauded its clients by selling them mortgage securities while betting against the same investments, without telling them it was doing so.

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The report alleged that Goldman bilked clients by selling them mortgage-backed securities without informing them that the bank itself was betting the investments would fail.

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It also called for an investigation into whether Goldman CEO Lloyd Blankfein had perjured himself in his public testimony before the panel.

The Chairman of the Committee, Senator Carl Levin of Michigan, claimed that the panel had found “a financial snake pit rife with greed, conflicts of interest and wrongdoing.” Levin recommended that charges be brought. He also added, “In my judgment, Goldman clearly misled their clients and they misled Congress.”

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On page 602, under the heading “Analysis of Goldman’s Conflicts of Interest” the following subheadings are listed: Shorting Its Own Securities; Failing to Disclose; Key Information to Investors.; Misrepresenting Source of Assets; Failing to Disclose; Client Involvement; Minimizing Premiums; Selling Securities Designed to Fail; Delaying Liquidation; Misrepresenting Assets; Taking Immediate Post-Sale Markdowns; Evading Put Obligation; Using Poor Quality Loans in Securitizations. Concealing Its Net Short Position."

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No one with a straight face can claim that Goldman did not violate federal laws in its money-mad drive to profit from the collapse of the housing market. The Senate report is a devastating indictment of criminal practices that pervade not only the actions of Goldman Sachs, but all of the major banks, hedge funds and financial institutions.

The role of the government in shielding the financial mafia—not a single leading US banker has been prosecuted since the crash of 2008—shatters all claims that the financial system can be reformed. ...

More from Grey:

Last March, Greg Smith, an executive director at Goldman, announced his resignation in an op-ed piece in the New York Times, in which he denounced the bank’s “toxic” culture of avarice and fraud. “It makes me ill how callously people talk about ripping their clients off,” he wrote.

There were more rewards for Goldman Sachs last Thursday that are consistent with those from two years ago by an also will-less SEC. Grey:

In April of 2010, the SEC brought a civil suit against Goldman for fraudulently marketing a subprime mortgage-based collateralized debt obligation (CDO) in 2007 called Abacus. Goldman sold the security without telling its clients that hedge fund billionaire John Paulson had asked the bank to set up the investment so that he could make a killing by betting the underlying mortgages would go bad and the security would lose money. The bank concealed the fact that Paulson had selected the mortgages and was “shorting” the CDO.

Rather than bring the case to trial, the SEC settled with the bank in July 2010, agreeing to a sweetheart deal in which the bank admitted no wrongdoing and paid a relatively minor fine of $550 million. The SEC has similarly settled cases with Countrywide Financial, the subprime giant that was saved from collapse by being sold to Bank of America, and major banks such as JPMorgan Chase, Bank of America and Citigroup.

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Also on Thursday, Goldman revealed in a regulatory filing that the Securities and Exchange Commission (SEC) had informed the bank it had ended a separate probe of a $1.3 billion subprime mortgage deal stemming from 2006, and had decided to take no action. This was an about-face by the SEC, which had notified the bank last February that it planned to pursue a civil action in relation to the Goldman security.

The SEC decision to drop the investigation comes as regulators are approaching a statute of limitations deadline for mortgage securities issued before 2007.

Once again deserved financial accountability is being snatched from the jaws of justice!

Matt Taibbi has been calling out Goldman Sachs for a serious while. Barry Popik writes:

“Matt Taibbi wrote in Rolling Stone of Jul 13, 2009: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.”

Matt Taibbi's latest disgusted statements on the "balls-lessness" of Obama’s Eric Holder’s US Justice Department and why the perpetrators, Goldman and others, of the greatest US financial crisis since the Depression are still being given a free pass.

Last year I spent a lot of time and energy jabbering and gesticulating in public about what seemed to me the most obviously prosecutable offenses detailed in the report – the seemingly blatant perjury before congress of Lloyd Blankfein and other Goldman executives, and the almost comically long list of frauds committed by the company in its desperate effort to unload its crappy “cats and dogs” mortgage-backed inventory.

In the notorious Hudson transaction, for instance, Goldman claimed, in writing, that it was fully "aligned" with the interests of its client, Morgan Stanley, because it owned a $6 million slice of the deal. What Goldman left out is that it had a $2 billion short position against the same deal.

If that isn’t fraud, Mr. Holder, just what exactly is fraud

Still, it wasn’t surprising that Holder didn’t pursue criminal charges against Goldman.

And that’s not just because Holder has repeatedly proven himself to be a spineless bureaucrat and obsequious political creature masquerading as a cop, and not just because rumors continue to circulate that the Obama administration – supposedly in the interests of staving off market panic – made a conscious decision sometime in early 2009 to give all of Wall Street a pass on pre-crisis offenses.

No, the real reason this wasn’t surprising is that Holder’s decision followed a general pattern that has been coming into focus for years in American law enforcement. Our prosecutors and regulators have basically admitted now that they only go after the most obvious and easily prosecutable cases.

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... Basically, if someone backs a dump truck up to the DOJ and unloads the entire case, gift-wrapped, a contrite and confessing criminal included, a guy like Eric Holder might, after much agonizing deliberation, decide to prosecute.

But here’s the thing: most of the crimes Wall Street people commit involve highly specific, highly individualized transactions that won’t fit Eric Holder’s bag of cookie-cutter statutory definitions. ...

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Or, even more often, the crimes have also been sanctified in advance by “reputable” law and accounting firms, who (for huge fees) offered their clients opinions that, if X and Y are signed in accordance with Z, and A and B are stipulated by the parties, and everyone’s sitting Indian-style and facing the moon when the deal is agreed to, then it’s not fucked up and illegal when Goldman Sachs tells you it’s a co-investor in your deal when it’s actually got $2 billion bet against you.

You know that look a dog gives you when you show it something confusing, like an electric razor or a lawn sprinkler? That’s the look federal prosecutors give when companies like Goldman wave their attorneys’ sanctifying opinions at them.

Taibbi tells it! Once again:

You know that look a dog gives you when you show it something confusing, like an electric razor or a lawn sprinkler?

Incompetence and cronyistic collusion. This is the Obama administration’s pathetic enforcement capacity. Apply the same or even greater spinelessness and collusion (and probable incompetence) to a Romney/Ryan administration.

Barry Grey:

These two actions are part of an ongoing government cover-up of financial fraud and criminality on a massive scale, both before and after the 2008 crash. They underscore the duplicity behind President Barack Obama’s announcement last January of the formation of a Justice Department task force to investigate banking practices in the mortgage industry.

The Obama administration, like its Republican predecessor, is at the center of a corrupt nexus between Wall Street and all of the branches of the government—the presidency, Congress and the courts. The financial oligarchy operates with impunity, standing above the law as it manipulates and swindles to capture an ever greater share of the social wealth. Every government agency, from the White House on down, is directly or indirectly on the bankers’ payroll.

Four years after the collapse of Lehman Brothers, not a single major bank or top bank executive has been prosecuted, even though their crimes have been amply documented and new bank scandals continue to break out on a weekly basis.

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Goldman Sachs was at the center of a scandal that erupted in late 2009 over the collusion of top federal officials in secretly using public funds as part of the 2008 bailout of American International Group (AIG) to cover billions of dollars in mortgage securities held by the banks and insured by the bankrupt insurance firm. Then-Treasury Secretary (and former Goldman CEO) Henry Paulson, then-New York Federal Reserve President Geithner and Federal Reserve Chairman Ben Bernanke funneled $62 billion to the big Wall Street firms, with Goldman getting the biggest share—$12.9 billion.

Part of the incestuous relationship between Wall Street and the government is the revolving door between Washington and Wall Street. Bank regulators build up their résumés for advancement to seven-figure-salary posts at financial firms by running interference for the banks.

This was exemplified last June in JPMorgan CEO Jamie Dimon’s appearance before the House and Senate banking committees. Dimon was summoned to explain the bank’s sudden announcement the previous month of a multi-billion-dollar trading loss, which the bank failed to report in its first quarter financial disclosure.

The Wall Street Journal noted in passing, evidently not considering it worth further comment, that sitting directly behind Dimon was JPMorgan’s general counsel, Stephen Cutler, who had joined the firm after serving as the enforcement chief of the SEC.

So last Thursday after the announcement of the DOJ decision a Goldman Sachs spokesman declared: “We are pleased that this matter is behind us.”

Behind them. Far from behind us, the 99% as we continue on as already wounded or doomed lambs to the bankster cabal slaughters.

Protecting and rewarding fraud encourages not ends it.

Barry Grey:

These actions exemplify the operation of the aristocratic principle in what passes for American “justice”. Bankers can lie, steal, cheat and defraud the public without limit, causing human suffering and social ruin on a global scale, with no fear of being held accountable. They are not subject to the laws that apply to mere mortals. They operate with impunity, a law unto themselves.

Of course, to secure this status, the financial lords must devote a portion of their fortunes to bribing politicians, parties, regulators and courts, from the president on down. But this hardly has to be concealed any longer since it has been essentially sanctioned by the Supreme Court’s ruling on corporate campaign donations.

It is surreal our government's continuing free pass to grotesque financial criminality, but our two-corporate-captured-party government stopped representing the citizenry and its needs a long time ago! Got to give it to Senator Levin and his Senate panel, though, managing to amass so much evidence! This free pass for Goldman belongs significantly at the feet of the Obama administration and its DOJ!

[cross-posted on correntewire and open salon]