Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Bank of America Settlement: The Latest Travesty in the U.S. Banking System

Politics / Credit Crisis Bailouts Jul 21, 2011 - 07:16 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleShah Gilani writes: If there's one thing the recent Bank of America Corp. (NYSE: BAC) settlement proposal demonstrates, it's this: Calling the easy treatment that big banks have been enjoying in recent court and regulatory actions "a travesty of justice" is like calling the Grand Canyon a ditch.


In fact, the truth is this: Given the activities U.S. banks have been involved in during the past two decades, and the actions they've taken, we'd be justified in labeling these institutions as "criminal enterprises." The billions of dollars in penalties the banks have had to pay during this stretch are evidence of such activities, but are really only token payments given the magnitude of the damage these enterprises have caused.

And until banks stop acting as criminal enterprises, and outside agencies thoroughly investigate and fully prosecute banks and their executives for criminal activity, we will continue to move towards a government of the banks, by the banks and for the bankers.

The Bank of America Settlement
The Bank of America settlement offers us a real-life illustration of what I'm referring to.

BofA is close to settling with 22 large investors over failed mortgage-backed securities (MBS). But it may only have to pay $8.5 billion to investors who claim that Countrywide Financial Corp. - which BofA acquired in 2008 - lied to them about the value of the mortgage-backed securities they purchased.

If you do the math, the Bank of America settlement would result in payments of less than 5 cents on the dollar. But what's even more grotesque about this proposal is that it would "wall off" the bank from any other suits or losses on the pools in question - even though hundreds of other investors were also harmed by the sunken securities.

We'll soon see if a court approves the settlement. All hell will break lose if that happens.

And it should. But that's just one case.

The big picture is downright ugly.

Beating the Wrap
The clearest manifestation of the financial industry's power is its ability to consistently avoid criminal charges for egregious acts and barter its way out of serious harm by accepting civil charges and paying off its keepers so this sector's players can continue to run free.

The numbers are staggering when you consider:

•The hundreds of millions of dollars that banks were fined for their dot-com-bubble "pump-and-dump" scheming back in 2000.
•The $550 million that Goldman Sachs Group Inc. (NYSE: GS) paid to settle allegations that it defrauded its own client in a single deal that came to light last year.
•The $100 million Citigroup Inc. (NYSE: C) had to pay to settle allegations of misconduct stemming from its sale of auction-rate securities.
•And the hundreds of millions in fines JPMorgan Chase & Co. (NYSE: JPM) paid to settle allegations that it defrauded investors in a single collateralized debt obligation (CDO) sale, for bribing public officials in Jefferson County, AL, over a muni-bond scandal, and for bid-rigging to win business in 31 states.

That's a pretty dramatic list. And, yet, I'm not even scratching the surface.

There's not enough space in this story to list all the fines that every major bank in the United States has had to pay to settle "allegations" of wrongdoing.

But rather than subjecting the institutions and their executives to criminal charges and trial for engaging in patently illegal activities, the very system that is supposed to be policing this activity and protecting taxpayers is letting clever lawyers dance over our justice and regulatory systems - with a wink and a nod from their partners at the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC).

It's all about "deferred prosecution agreements."

Years ago, the Justice Department devised this idea for dealing with juvenile offenders and those involved in minor drug offenses: If the defendants kept their noses clean and adhered to agreements stipulating good behavior for a specified period of time, the prosecution would be deferred.

Of course, it didn't take long for clever lawyers to lean on the DOJ, and eventually the SEC and other judicial and regulatory agencies, to give their clients - big banks - deferred prosecutions.

"The corporate crime defense bar has this down to a science," Russell Mokhiber, editor of the Corporate Crime Reporter, told The New York Times. "I interview them all the time, and they boast about how they've gamed the system."

Deferred-prosecution agreements are secret. The internal investigations are "private" and there's no transparent "discovery" process that can be checked by outsiders or used by other claimants who want to sue these banks and their executives.

Without admitting or denying wrongdoing, it's hard for any other aggrieved parties to use the levied fines as evidence that criminal activity took place, even though it's a given.

How and why the DOJ, federal courts, the SEC, and Congress are protecting these crooked moneymaking machines needs to be addressed openly and honestly.

If it isn't addressed, the situation will only deteriorate from here.

And where we are now isn't pretty.

The Quiet Coup
If you want to get an idea of how financial services, and in particular the banking industry, have hijacked the U.S. economy, just look at how they've grown.

Take a look at "The Quiet Coup," an article by Simon Johnson, a professor at MIT's Sloan School of Management and former chief economist at the International Monetary Fund (IMF), that was published in The Atlantic Monthly.

In that article, Johnson points out that from 1973 to 1985 the financial sector never earned more than 16% of domestic corporate profits. But in the 2000s, that figure rose to 41%.

Compensation in the financial sector during that period surged just as appallingly. That is, from 1948 to 1982, average compensation in the financial sector ranged between 99% and 108% of the average for all domestic private industries. Starting in 1983, however, it began to shoot drastically higher - and reached 181% in 2007.

Bankers enjoy extraordinary rich personal compensation. But more importantly, the money their institutions make is spread across the political spectrum, greasing the wheels that grind out favorable legislation crafted by both Democrats and Republicans.

The Final Word ... Until Next Time
The amount of money that banks have spent on lobbying and campaign contributions, to elevate political hacks to positions of power in Congress (and later to pay off these same hacks by hiring them as private-sector consultants, investment bankers, and board members) would fill volumes, turn stomachs, and prove once and for all that America is run by bankers.

Simon's article clearly defines the ramifications of the banking industry's power - especially when he says that:

"The crash has laid bare many unpleasant truths about the United States. One of the most alarming is that the finance industry has effectively captured our government - a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF's staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we're running out of time."

We started by examining the Bank of America settlement, and have concluded with this final word. The message we come away with is clear: If we continue to let banks run amok - and allow them to avoid any consequences - it won't be long before the next financial crisis hits.

And when it does, it will be even bigger than the one that we continue to suffer through.

Source :http://moneymorning.com/2011/07/21/t...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in