Thursday, March 11, 2010


As I was reading through Michael Collins' "Why We Are Headed Into Depression" I was struck by some of the comments made by former regulator William Black during this Bill Moyer's interview.

One of the things that stands out is how the major players involved in transferring trillions of taxpayer dollars to Wall Street are guilty of deliberate deception and fraud. If we take a close look at the banks, the investment houses, the rating's agencies - and pretty much all the big players on Wall Street - it's clear that the American taxpayer is being swindled by their actions.

The role of Wall Street, and how to fix our current mess, is a complex puzzle for many. But once we dig into what's happened - and move beyond the simplistic "few bad apples" explanations - the activities of the parties' involved in our current market mess begs a follow up question: "Why Aren't These People in Jail?"

After outlining basic failures in accountability and disclosure Michael Collins from The Economic Populist points to the complicity and cover-ups in Washington (especially with Hank Paulson, the Federal Reserve, the Treasury Department, etc.). This allows Collins to illustrate how Wall Street's money, and other tools, have allowed them to buy taxpayer bailouts, favorable legislation, and legal cover.

And this didn't happen over night. It's been going on for years.

As I've noted elsewhere, from the S&L and other "private" sector debacles, to numerous Third World/banker bailouts in the 1980s and 1990s, to Continental & LTCM-like "reorganizations", the American taxpayer has been forced to stand on the side lines while Washington and Wall Street work together to swindle America. They're able to convince ordinary Americans that we live in a democratic free-market society when, the reality is, we're governed by a group of lobbyist protected, parasitic sociopaths who've hijacked our democracy in the name of market socialism.

Too big to fail bailouts, regulatory capture, and legal firewalls are the tactics Wall Street has used to take over our democratic processes.

Indeed, an on-going study done by Gary Null found that, over the past 20-plus years, more than $430 billion in legal settlements have been paid by Wall Street firms in 1,500-plus cases (details here). Why is this important? Because when they know that they've been caught with their hand in the cookie jar corporate America routinely uses "settlements" as firewalls to bury wrong-doing on their part.

Not only can settlements save money, but it keeps valuable case studies from making it on to the books and becoming "precedent" setting case law. Better than keeping case law off the books is how financial settlements often come with gag orders, which prohibit the parties involved from releasing or sharing information pertinent to the case. This is invaluable to corporate America over time since it's rare when you get a judge - as happened in this case - who looks under the hood when presiding over settlement cases.

While it's good to look at favorable legislation and the absurdity behind trillion dollar taxpayer bailouts, we might also want to take a look at how settlements may be creating the equivalent of market distorting legal firewalls. When they cover up activities that should being seeing the light of day, this is not good for America, or it's markets.

 - Mark

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