“Relentless Wal Street Crime Spree”: Fines Are Not Adequate Deterrents To Corporate Misbehavior
When future historians look back at our era, they will doubtless be puzzled about how we allowed it to come to pass that faceless corporations were granted all the freedoms and protections of real people, but faced none of the consequences that real people face for criminal behavior. This puzzle is related to the problem I wrote about earlier this morning, in which social problems for normal people are solved with fines and jail time, but social problems caused by corporate “citizens” are given market solutions and self-regulation instead.
The latest case in point comes as six major banks guilty of manipulating currency markets were given the laughably small fine of $4.3 billion, and not a single one of the actual perpetrators is coming close to facing jail time.
On Wednesday, six massive international banks agreed to pay $4.3 billion to settle allegations from regulators in the United States, the United Kingdom, and Switzerland that their traders tried to manipulate the $5.3-trillion-a-day foreign-currency exchange market. But Wall Street watchdogs say the banks got off with a slap on the wrist.
From 2008 through 2013, traders at JPMorgan Chase, Bank of America, Citigroup, HSBC, the Royal Bank of Scotland, and UBS colluded to coordinate the buying and selling of 10 major currencies to manipulate prices in their favor….
In the real world, the crime spree being perpetrated by global corporations, particularly those in the financial sector, will never abate until the criminals perpetrating them are actually thrown in jail.
But critics say the banks, which were not forced to admit wrongdoing, deserved a much harsher punishment. “The global too-big-to-fail banks are again allowed to evade responsibility and accountability by using shareholders’ money to pay big fines, which will generate headlines but do little if anything to stop the relentless Wall Street crime spree,” Dennis Kelleher, the president of Better Markets, a financial reform advocacy shop, responded in a statement.
David Weidner, who covers Wall Street for MarketWatch, agrees. The settlements “appear to be just another cost-of-doing-business budget line for the banks,” he wrote. What’s more, financial reformers say, none of the employees involved in the rate-fixing will face criminal charges. “It’s corrupt, as usual,” says one House staffer. Regulators should “send crooks to jail.”
Fines are utterly inadequate to deter this sort of behavior. We understand this implicitly when it comes to check kiters and liquor store robbers. If you’re convicted of those things you go to jail. But if you collude to debase another country’s entire currency for your own profit, your company pays a small fine.
That’s going to look very weird and very corrupt in about 100 years. Or else it won’t–in which good luck to us all.
By: David Atkins, Political Animal, The Washington Monthly, November 15, 2014
“Our Invisible Rich”: Most Americans Have No Idea Just How Unequal Our Society Has Become
Half a century ago, a classic essay in The New Yorker titled “Our Invisible Poor” took on the then-prevalent myth that America was an affluent society with only a few “pockets of poverty.” For many, the facts about poverty came as a revelation, and Dwight Macdonald’s article arguably did more than any other piece of advocacy to prepare the ground for Lyndon Johnson’s War on Poverty.
I don’t think the poor are invisible today, even though you sometimes hear assertions that they aren’t really living in poverty — hey, some of them have Xboxes! Instead, these days it’s the rich who are invisible.
But wait — isn’t half our TV programming devoted to breathless portrayal of the real or imagined lifestyles of the rich and fatuous? Yes, but that’s celebrity culture, and it doesn’t mean that the public has a good sense either of who the rich are or of how much money they make. In fact, most Americans have no idea just how unequal our society has become.
The latest piece of evidence to that effect is a survey asking people in various countries how much they thought top executives of major companies make relative to unskilled workers. In the United States the median respondent believed that chief executives make about 30 times as much as their employees, which was roughly true in the 1960s — but since then the gap has soared, so that today chief executives earn something like 300 times as much as ordinary workers.
So Americans have no idea how much the Masters of the Universe are paid, a finding very much in line with evidence that Americans vastly underestimate the concentration of wealth at the top.
Is this just a reflection of the innumeracy of hoi polloi? No — the supposedly well informed often seem comparably out of touch. Until the Occupy movement turned the “1 percent” into a catchphrase, it was all too common to hear prominent pundits and politicians speak about inequality as if it were mainly about college graduates versus the less educated, or the top fifth of the population versus the bottom 80 percent.
And even the 1 percent is too broad a category; the really big gains have gone to an even tinier elite. For example, recent estimates indicate not only that the wealth of the top percent has surged relative to everyone else — rising from 25 percent of total wealth in 1973 to 40 percent now — but that the great bulk of that rise has taken place among the top 0.1 percent, the richest one-thousandth of Americans.
So how can people be unaware of this development, or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds.
The exceptions are celebrities, who live their lives in public. And defenses of extreme inequality almost always invoke the examples of movie and sports stars. But celebrities make up only a tiny fraction of the wealthy, and even the biggest stars earn far less than the financial barons who really dominate the upper strata. For example, according to Forbes, Robert Downey Jr. is the highest-paid actor in America, making $75 million last year. According to the same publication, in 2013 the top 25 hedge fund managers took home, on average, almost a billion dollars each.
Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate.
Most Americans say, if asked, that inequality is too high and something should be done about it — there is overwhelming support for higher minimum wages, and a majority favors higher taxes at the top. But at least so far confronting extreme inequality hasn’t been an election-winning issue. Maybe that would be true even if Americans knew the facts about our new Gilded Age. But we don’t know that. Today’s political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.
By: Paul Krugman, Op-Ed Columnist, The New York Times, September 28, 2014
“Paying Back Campaign Donors”: Whose Presidential Campaign Will Your Pension Finance?
Wall Street is one of the biggest sources of funding for presidential campaigns, and many of the Republican Party’s potential 2016 contenders are governors, from Chris Christie of New Jersey and Rick Perry of Texas to Bobby Jindal of Louisiana and Scott Walker of Wisconsin. And so, last week, the GOP filed a federal lawsuit aimed at overturning the pay-to-play law that bars those governors from raising campaign money from Wall Street executives who manage their states’ pension funds.
In the case, New York and Tennessee’s Republican parties are represented by two former Bush administration officials, one of whose firms just won the Supreme Court case invalidating campaign contribution limits on large donors. In their complaint, the parties argue that people managing state pension money have a First Amendment right to make large donations to state officials who award those lucrative money management contracts.
With the $3 trillion public pension system controlled by elected officials now generating billions of dollars worth of annual management fees for Wall Street, Securities and Exchange Commission (SEC) regulators originally passed the rule to make sure retirees’ money wasn’t being handed out based on politicians’ desire to pay back their campaign donors.
“Elected officials who allow political contributions to play a role in the management of these assets and who use these assets to reward contributors violate the public trust,” says the preamble of the rule, which restricts not only campaign donations directly to state officials, but also contributions to political parties.
In the complaint aiming to overturn that rule, the GOP plaintiffs argue that the SEC does not have the campaign finance expertise to properly enforce the rule. The complaint further argues that the rule itself creates an “impermissible choice” between “exercising a First Amendment right and retaining the ability to engage in professional activities.” The existing rule could limit governors’ ability to raise money from Wall Street in any presidential race.
In an interview with Bloomberg Businessweek, a spokesman for one of the Republican plaintiffs suggested that in order to compete for campaign resources, his party’s elected officials need to be able to raise money from the Wall Street managers who receive contracts from those officials.
“We see (the current SEC rule) as something that has been a great detriment to our ability to help out candidates,” said Jason Weingarten of the Republican Party of New York—the state whose pay-to-play pension scandal in 2010 originally prompted the SEC rule.
The suit comes only a few weeks after the SEC issued its first fines under the rule—against a firm whose executives made campaign donations to Pennsylvania Gov. Tom Corbett, a Republican, and Philadelphia Mayor Michael Nutter, a Democrat. The company in question was managing Pennsylvania and Philadelphia pension money. In a statement on that case, the SEC promised more enforcement of the pay-to-play rule in the future.
“We will use all available enforcement tools to ensure that public pension funds are protected from any potential corrupting influences,” said Andrew Ceresney, director of the SEC Enforcement Division. “As we have done with broker-dealers, we will hold investment advisers strictly liable for pay-to-play violations.”
The GOP lawsuit aims to stop that promise from becoming a reality. In predicating that suit on a First Amendment argument, those Republicans are forwarding a disturbing legal theory: Essentially, they are arguing that Wall Street has a constitutional right to influence politicians and the investment decisions those politicians make on behalf of pensioners.
If that theory is upheld by the courts, it will no doubt help Republican presidential candidates raise lots of financial-industry cash—but it could also mean that public pension contracts will now be for sale to the highest bidder.
By: David Sirota, Senior Editor, In These Times, August 15, 2014
“Is Corruption A Constitutional Right?”: Public Pension Contracts Would Be For Sale To The Highest Bidder
Wall Street is one of the biggest sources of funding for presidential campaigns, and many of the Republican Party’s potential 2016 contenders are governors, from Chris Christie of New Jersey and Rick Perry of Texas to Bobby Jindal of Louisiana and Scott Walker of Wisconsin. And so, last week, the GOP filed a federal lawsuit aimed at overturning the pay-to-play law that bars those governors from raising campaign money from Wall Street executives who manage their states’ pension funds.
In the case, New York and Tennessee’s Republican parties are represented by two former Bush administration officials, one of whose firms just won the Supreme Court case invalidating campaign contribution limits on large donors. In their complaint, the parties argue that people managing state pension money have a First Amendment right to make large donations to state officials who award those lucrative money management contracts.
With the $3 trillion public pension system controlled by elected officials now generating billions of dollars worth of annual management fees for Wall Street, Securities and Exchange Commission regulators originally passed the rule to make sure retirees’ money wasn’t being handed out based on politicians’ desire to pay back their campaign donors.
“Elected officials who allow political contributions to play a role in the management of these assets and who use these assets to reward contributors violate the public trust,” says the preamble of the rule, which restricts not only campaign donations directly to state officials, but also contributions to political parties.
In the complaint aiming to overturn that rule, the GOP plaintiffs argue that the SEC does not have the campaign finance expertise to properly enforce the rule. The complaint further argues that the rule itself creates an “impermissible choice” between “exercising a First Amendment right and retaining the ability to engage in professional activities.” The existing rule could limit governors’ ability to raise money from Wall Street in any presidential race.
In an interview with Bloomberg Businessweek, a spokesman for one of the Republican plaintiffs suggested that in order to compete for campaign resources, his party’s elected officials need to be able to raise money from the Wall Street managers who receive contracts from those officials.
“We see [the current SEC rule] as something that has been a great detriment to our ability to help out candidates,” said Jason Weingarten of the Republican Party of New York — the state whose pay-to-play pension scandal in 2010 originally prompted the SEC rule.
The suit comes only a few weeks after the SEC issued its first fines under the rule — against a firm whose executives made campaign donations to Pennsylvania governor Tom Corbett, a Republican, and Philadelphia mayor Michael Nutter, a Democrat. The company in question was managing Pennsylvania and Philadelphia pension money. In a statement on that case, the SEC promised more enforcement of the pay-to-play rule in the future.
“We will use all available enforcement tools to ensure that public pension funds are protected from any potential corrupting influences,” said Andrew Ceresney, director of the SEC Enforcement Division. “As we have done with broker-dealers, we will hold investment advisers strictly liable for pay-to-play violations.”
The GOP lawsuit aims to stop that promise from becoming a reality. In predicating that suit on a First Amendment argument, those Republicans are forwarding a disturbing legal theory: Essentially, they are arguing that Wall Street has a constitutional right to influence politicians and the investment decisions those politicians make on behalf of pensioners.
If that theory is upheld by the courts, it will no doubt help Republican presidential candidates raise lots of financial-industry cash — but it could also mean that public pension contracts will now be for sale to the highest bidder.
By: David Sirota, Staff Writer at PandoDaily; The National Memo, August 15, 2014
“An Incongruous Spectacle”: Dave Brat’s Win Over Eric Cantor Exposed The Unholy Tea Party-Wall Street Alliance
The Tea Party wave that built around the country in 2009 and 2010 was fueled by many things—resentment over foolhardy homeowners getting mortgage relief, backlash against the Affordable Care Act, and anxiety over federal spending. But if its rhetoric was to be believed, the movement was also driven by a healthy dose of old-fashioned anti-Wall Street populism—anger over the TARP bailouts, the AIG bonuses, the Obama administration’s failure to prosecute any of the bankers who’d brought us close to ruin.
Something funny happened, though, as the pitchforks made their way to confront the money changers at the temple: Wall Street and big business co-opted them. It turned out that some elements of the Tea Party movement were much more opposed to Obama than they were to self-dealing CEOs and bankers, and perfectly willing to join with the latter to fight the former. This quickly produced the confounding spectacle of a purportedly populist uprising that was working hand in hand, and in many cases funded by, the business elite. And the nexus for this alliance was the Republican leadership in Congress. When Republicans were trying to block the Dodd-Frank financial reform bill, they took Frank Luntz’s devious advice to label the bill a “bailout” for the banks—deploying Tea Party rhetoric to attack a bill that was in fact bitterly opposed by the bailed-out banks. In recognition of this effort, Wall Street in 2010 swung its campaign spending sharply toward GOP candidates, including many running under the Tea Party banner.
And when the Tea Party wave reached Washington, after the Republican rout in the midterm elections, who put himself forward as the new arrivals’ standard bearer within the House leadership? None other than Eric Cantor—the top recipient of financial industry money in Congress, the longtime protector of one of the most notorious Wall Street favors of all, the tax loophole for the carried-interest income of private-equity and hedge-fund managers. It was an incongruous spectacle, but so muddled had the right’s populism become by that point that the opportunistic Cantor was able to brazen his way through it. It was he who goaded the insurgent congressmen to make the raising of the debt-ceiling limit in June of 2011 their big stand against Obama: “I’m asking you to look at a potential increase in the debt limit as a leverage moment when the White House and President Obama will have to deal with us,” Cantor told the rank-and-file in a closed-door meeting in Baltimore in January 2011. It was he who undermined Speaker John Boehner’s effort to reach a grand bargain with Obama to pull the nation back from the brink, by riling up rank-and-file conservatives against the deal. It was a brilliant display: in one fell swoop, Cantor was able to protect the financiers’ carried-interest loophole (which Obama sought to close as part of the deal) at the same very time as he was serving as the champion of the Tea Party insurgents.
Now, Cantor’s game is up. Many, such as my colleague John Judis and the New Yorker’s Ryan Lizza, have already noted the right-wing populism in the rhetoric of Dave Brat, the economics professor who upset Cantor in Tuesday’s primary. But what is particularly significant about Brat’s victory is that he deployed this populism against the very man who had perfected the art of faking it. “All the investment banks in New York and D.C.—those guys should have gone to jail,” Brat said at one Tea Party rally last month. “Instead of going to jail, they went on Eric’s Rolodex, and they are sending him big checks.” Liberals have for some time now been decrying Cantor’s hypocrisy in posing as the tribune of the common man, but here was a fellow Republican calling it out (without, it should be noted, the assistance of any of the self-appointed Tea Party organizations that have been so willing to make common cause with their anti-Obama allies on Wall Street). Yes, some conservatives have for the past few years been making noise about “crony capitalism,” but somehow their examples of this scourge most often tended to be Democratic-inflected rackets, such as the failed solar energy company Solyndra, rather than Republican-tinted ones such as, say, the private lenders who were making a killing acting as taxpayer-subsidized middle-men in the student loan market.
This is why we should be grateful for Dave Brat, beyond the schadenfreude of seeing a widely disliked congressional leader brought low. Yes, Brat’s win will add new kindling to the Tea Party cause just as some were declaring it burned out, thus further reducing the odds of legislative progress in areas such as immigration reform. But his win has, at least momentarily, also brought some clarity and integrity to the insurgency. Here was anti-Wall Street populism in its pure form: aimed, for once, at the right target.
By: Alec MacGinnis, The New Republic, June 12, 2014
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