At LAST Some Grown Ups!?! Washington’s Blog at Naked Capitalism: Fraud Finally Being Discussed in Polite Company… Now Where are the Prosecutions?

11 Apr

This morning I woke up thinking to myself “Where are all the adults?” and this post at Naked Capitalism seems right up that alley…

Greenspan, slippery as an eel in a rushing river, has been sliding around this issue forever, and yet suddenly out of the blue he starts talking about regulators and enforcement?! And, *gasp* FRAUD???

Is this the same Greenspan who said there was no need of regulation in an open market?

Or the guy who said that the Housing Crisis/Economic melt down was an unforeseeable “once in a lifetime event”??

Excuse me, sir, but while that is probably true given the new reduced lifespan of Americans thanks to Monsanto, ADM and the promulgation of junk food in the American diet, it is not true of YOU!

You were born in 1926 which means you have lived through TWO of these “once in a lifetime events” and just as was true in the first round, so it has been true in the second: massive speculative gambling in the financial markets. Activities promulgated by large institutions ensnaring unwitting consumers in massive loads of unsustainable debt during a false “boom” created by that very same massive credit expansion led to a massive crash of values in all sectors…

The only difference is that last time this happened, during the time you were between 4 and 14 years old, the government at least put a few of the sharks responsible in jail,
and the fraud necessary to create such a calamity was at least admitted, identified, and curtailed. Ultimately, new rules were imposed to prevent, or at least reduce the ease with which such crimes could be repeated going forward. Rules, some might argue that seemed to be working fairly well until you came along…

Now Greenspan has the nerve to show up after all his endless talk of innocence and lamenting of his “lack of a crystal ball” – of his complete inability to have been able to foresee the inevitable result of massive corruption and collusion and talk about ENFORCEMENT? REGULATION?

WHAT REGULATION? What enforcement?

Are you talking about the FBI report of 2004 stating that there was MASSIVE MORTGAGE FRAUD being perpetrated by LENDERS and which WOULD RESULT IN AN ECONOMIC CRISIS if NOT CURTAILED??

When you say you could not see that coming, did you mean you did not hear about that FBI report to Congress? What, was it your day off? Your month in Barbados or something??? You were ‘out to lunch’?

Well, there is no question you are out to lunch – the only question is for how long the American people are going to sit idly by and watch you rape and pillage until there is absolutely nothing left of their country: their homes, their communities, their pensions, their public services – from police to fire to schools to sewers to roads to hospitals to trash collection to parks – and on and on the list now goes.

Let me just clear this up for you in case you had any doubt.

Either this man is hopelessly demented and senile or he is the biggest crook ever seen in US financial circles – followed only by his goons Summers, Bernanke and Geithner, and all of them belong behind bars, along with all the heads of ALL the major banks, and ALL of the heads of the now dead and defunct Sub Prime Lenders. Give me a BREAK!!!

Guest Post: Fraud Finally Being Discussed in Polite Company … Now Where Are the Prosecutions?

from naked capitalism by George Washington

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→ Washington’s Blog

As I have repeatedly pointed out, the economy cannot stabilize unless the fraud which led to the crisis (see this, this, this and this) is openly discussed.

As Shahien Nasiripour notes today today, Alan Greenspan didn’t think regulators should even pay any attention to fraud:

He didn’t believe that fraud was something that needed to be enforced or was something that regulators should worry about, and he assumed she [Brooksley Born] probably did. And of course she did. I’ve never met a financial regulator who didn’t feel that fraud was part of their mission, but that was her introduction to Alan Greenspan.”

But, this week, Greenspan admitted in testimony to the Financial Crisis Inquiry Commissioner that regulators do need to crack down on fraud:

This week, in response to a question from Financial Crisis Inquiry Commissioner Heather Murren, who asked Greenspan whether subprime lenders should now be supervised by the Federal Reserve, Greenspan said:

“Well, first of all, remember you have to distinguish between supervision and enforcement. A lot of the problems which we had in the independent issuers of subprime and other such mortgages, the basic problem there is that, if you don’t have enforcement, and a lot of that stuff was just plain fraud, you’re not coming to grips with the issue.”

In a paper on the financial crisis he presented last month at the Brookings Institution in Washington, Greenspan did not mention the word “fraud”, in any of its forms, even once in the 66-page presentation.

His prepared remarks this week, though, mentioned it three times.

“[I]t is one thing to promulgate rules, and quite another to successfully implement them. Rules to prevent fraud and embezzlement have failed as often as not. Parenthetically, in the years ahead, we will need far greater levels of enforcement against misrepresentation and fraud than has been the practice for decades,” he told the investigatory panel.

Greenspan also called for “enhanced” enforcement against “misrepresentation and fraud” going forward as one desired part of the government’s arsenal in trying to avoid future crises in which taxpayers are forced to bail out private companies.

And the Wall Street Journal is running an important story showing that all of the big bank primary dealers – not just Lehman – have engaged in fraudulent accounting for years:

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

The fact that the existence of widespread fraud is finally being addressed in polite company is a good first step.

But where are the prosecutions?

Neither happy talk nor propaganda will fix the economy. The governments of the world have spent trillions trying to wallpaper over the fraud, and have become insolvent doing so.

But it’s not working. Indeed, polls show that people no longer trust our economic “leaders”. See this and this.

Only honest talk – and holding the people who committed fraud accountable – will stabilize the economy.

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