Crooked Capitalisam
Why Wall Street must be brought to justice
It’s getting hard to defend capitalism these days.
It’s hard because of the appalling lack of criminal charges against the corporate kleptomaniacs of Wall Street, who brought down the global economy in 2008 through massive fraud.
Not only has no senior Wall Street executive gone to jail, the lack of prosecutions means it’s likely going to happen again.
The reason is “moral hazard,” the human tendency to take undue financial risks when you know you will not suffer the consequences of those risks.
Wall Street executives now know they face no “moral hazard” from peddling securities globally whose underlying values are worthless (as was the case with subprime mortgage securities) because they suffered no moral hazard when they did.
They were even bailed out with public money while continuing to receive their bonuses.
Instead of having their executives face prison, Wall Street banks instrumental in the 2008 crash have agreed to or are negotiating “no contest” civil fines and settlements with the U.S. Securities and Exchange Commission, in which they do not even have to admit wrongdoing.
The SEC’s claim that these fines are significant is absurd.
Goldman Sachs, for example, was fined $550 million in 2010 over one securities deal known as Abacus 2007-AC1, a settlement the SEC touted as its largest ever.
But as reporters Peter J. Boyer and Peter Schweizer of The Daily Beast note in their May 6 article, “Why Can’t Obama Bring Wall Street to Justice?” that amounted to 4% of the $12.1 billion in bonuses Goldman Sachs paid its executives in 2007, the year in which the Abacus deal was made.
And SEC settlements come out of corporate profits, not out of the pockets of executives. Boyer and Schweizer suggest several reasons for the lack of prosecutions. They note Wall Street was a major financial contributor to Obama’s presidential campaign
Full article at:
http://www.torontosun.com/2012/05/09/crooked-capitalism
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