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We Speak on PBS Newshour About Why No Bank Executives Have Gone to Jail

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The cynic in me has to note that PBS Newshour decided to cover the issue of why no banksters have gone to jail on what has to be one of their lowest traffic days of the year. And I have a sneaking suspicion I got the call to go on the show because it was not exactly easy to find people willing to be taped late in the afternoon on the day before Thanksgiving (they did have to go to the trouble not only of arranging for a studio in Alabama, but also finding a makeup person, since I’m not in the habit of taking my TV warpaint with me when I travel).

I hope you like this segment. PBS prefers a format which keeps the guests from interacting directly. On the one hand, they do allow each speaker to make fairly long, uninterrupted comments, which is refreshing (at least on American TV). But on the other hand, the lack of back and forth can allow speakers to talk past each other and also tends to reduce the vigor and incisiveness of the remarks.

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130 comments

  1. Fiver

    This is the first time I’ve seen an interview, and it’s a real pleasure to see that Ms. Smith is as clear and articulate verbally as in writing. How I wish she was an SEC prosecutor.

    It’s just unbelievable these guys spew their hangdog “ain’t nuthin’ we culd do” line of BS even when the counterfacts have just been presented to their vapid, weaseled minds.

    I’d like to see a barrage of charges on the grounds of criminal negligence – tens of millions around the world, and tens of thousands in the US are DEAD as a result of this debacle. Not 1 of these people considered the consequences of what they were doing, on either side of the regulatory fence. NOT ONE. And the proof is that there are at minimum several million nobodies like me who could see an earthquake coming years before it struck – and knew why. They were criminally wreckless with lives and property on a stupendous scale. Hit them with any and every available weapon. If need be, do what they did with Capone – none of these loathsome cruds could withstand any real scrutiny.

    1. Susan the other

      Oh yes they did. And they just told each other IBG YBG. If that isn’t intent I don’t know what is. They sucked money out of pension funds like a tornado. That requires intent and focus. The comment that bothered me was the guy in Denver who said that the statute of limitations on fraud is running out. I think it is 2 0r 3 years after the fraud is discovered. This does require evidence. And we have been denied access to the evidence. Like Yves mentioned – some of it is right there in the software! (Oh, I didn’t do it, my software did it!) The banksters do the world’s biggest song and dance routine to avoid coming up with even the most basic paperwork – like notes. Clearly any trader talk about shitty deals does not indicate any lack of intent whatsoever.

      1. Francois T

        The statutes of limitations are being run out because Timmy Gangster, Brotha Obysmal, Larry the Derivatives Guy and compadres in crime hold this incredibly stupid and counter-factual belief that if only people would just move on, goddamnit(!!), (as in “you just don’t understand!) everything would become honky-dory peachy dandy once again.

        If the contempt I harbor toward these people could be converted into energy, no one would pay a utility bill ever again.

        1. Jimbo

          Maybe it was the tension between A.) The Crimes, B.) Committed by Geithner’s “friends,” C) The GIVING to them of trillion dollars of taxpayer money and D) The clear paradox of giving the perps of the worlds greatest financial frauds all that money and then investigating, indicting and prosecuting them.

          So much easier to Trash the Rule of Law. This will be Obama’s lasting legacy.

          1. Seth

            So much easier to Trash the Rule of Law. This will be Obama’s lasting legacy.

            Yes. See also torture, war profiteering, war crimes, illegal politicization of the Justice Department and other federal agencies…

            Pretty much a fluffer for the GOP.

        2. EH

          It would be an interesting strategy for OWS (or some other disgruntled group) to focus, lobbyist-like, on extending the statute of limitations for financial crimes. That the SOL is so short is just another feature of the 1% rigging of the system.

      2. Fiver

        I guess I wasn’t as clear as I thought. What I’m saying is that if even I could see what was coming, and the consequences of what a meltdown entailed, they could not possibly NOT see it – UNLESS they were criminally negligent.

        They can fess up that they did it knowingly, in which case it’s manslaughter (or worse). Or deny it, and it’s negligence.

        1. psychohistorian

          Another example of the statute of limitations abuse is with consumer goods like bicycle saddles. I have been approached by a number of attorneys having clients who have erectile dysfunction because they, NIOSH and I think that the architecture of the standard bicycle saddle is dangerous to some/many…..BUT since the statute of limitations is 2 years and it commonly takes folks that long or longer to show serious problems, magic, no lingering liability problems.

          Its a feature not a bug…….according to TPTB

        2. LeonovaBalletRusse

          The “1% rigging” was a PLAN to bring in the suckers at retail. Merrill Lynch spearheaded retail brokerage, retail reps pitched house *research* to get the suckers invested in the other side of the market from the house’s positions, Wall Street Week aided and abetted the swindle, the suckers got creamed, especially when they were ushered into Mutual Funds en masse, to provide the *play money* for the swells in the golden sandbox. This was a planned scam from day 1: the 1% for the .01% against *the rest*, the 99%.

          Congressional and Unitary Executive co-conspirators enriched themselves as *insider* profiteers and shills, as Agents of a Foreign Power: the 1% Fourth Reich, AGAINST the People of the United States and our Treasury, scamming us every which way, and setting us up for the kill with the elimination of Glass-Steagall and the act that made it legal for Pension Funds, Mutual Funds, and other Institutional Funds who were *fiduciaries* of *other People’s Money*, to *invest in derivates trades*. This was illegal in 1980, for an obvious reason.

          The Congressional and Unitary Executive co-conspirators were thus, ipso facto, TRAITORS to the U.S.A., our People and our Constitution. There is no statute of limitations on treason. The penalty for treason is *to be hanged by the neck until dead*.

          This failing, bring “The Tyrannicide Brief” for multiple ex-Presidents and the current President of the U.S.A., as a good start.

    2. Trin Tragula

      Not 1 of these people considered the consequences of what they were doing, on either side of the regulatory fence. NOT ONE. And the proof is that there are at minimum several million nobodies like me who could see an earthquake coming years before it struck – and knew why.

      They saw it coming too – they saw a means to bring down corporate America’s rivals one and for all. This isn’t theft, it’s war.

    1. gs_runsthiscountry

      I doubt they will ask any relevant questions but many statements will be made for the benefit of constituents, as per usual.

      They, however, could ask Jon Corzine how and why he received a free pass on having a series 7 and 24 license?

      Or, maybe some bright staffer will prep their congressperson with the questions: “Mr Corzine do you know what a Total-return-swap is, if so, can you explain its accounting treatment”? Lastly, Mr Corzine “Who is Munir Javeri and where is he today”?

      “I’ll take, ‘probably not going to happen’, for 100 alex.”

      gs_

  2. kielanders

    Not ever having seen a picture, I thought Yves to be something in a vintage retired spinster school teacher, not a 32 y/o well spoken cute academic.

    …i need to get out more.

    Good segment.

    1. Yves Smith Post author

      OK, I can’t resist the bait.

      Did you really mean 32 or was that a typo or an effort to butter me up? That is the nicest thing I have heard in a long time if you really meant it.

      1. kielanders

        I meant it, not trying to butter you up.

        And don’t get any ideas; I’m 46, the last thing I need in my life is some young econo ‘party girl’.

        1. Yves Smith Post author

          Hah, I don’t get ideas. This is just a testament to the power of makeup. Of course, if you have even a passing acquaintance with Lady Gaga, you’d have seen more vivid examples.

          1. kielanders

            I know your type:

            Lure me back to your dorm room with promises of invigorating discussion about the advantages of the Austrian Usury Model over Keynesianism, ply me with a couple beer bongs, then accidentally flip on a video of Enron Financial Statement Porn that you just ‘happened’ to have in the DVD.

            I’ve been played too many times by you innocent little econ types. I’m not fallin’ for another one of you PBS Jet-Set.

          2. psychohistorian

            Personally, my good woman, the beauty of your intellect and your ability to use it, is way more meaningful to me that the body you were given and the care that you have taken to make it acceptable to the current convoluted social norms.

            And besides that, I hate makeup.

          3. Anonymous

            Great job in providing accurate analysis and commentary which is much needed to counteract abusive and exploitative financial practices under the guise of “free market capitalism”. The more your voice is heard, the more I suspect you will hear from those whose motives are much less well intended. Stay above it, and don’t fall for anything.

          4. F. Beard

            And besides that, I hate makeup. psychohistorian

            A little makeup I can stand; lipstick not so much since I don’t want it smeared on mine but jewelry just junks up a woman (or a man).

            As for getting a natural lovely complexion, I’ve read that a 21-day water-only fast will do wonders (and for your overall health too). Consult your doctor first.

  3. required

    Summed up, no criminality, just mis-incentives? Millions of people’s lives have crumbled as a result of systemic financial fraud, yet no one is guilty? A corporation is a person, but not a real person which can be prosecuted?

    Thank goodness we finally have a people’s president who will hold banks accountable for their criminality.

    yeah.

  4. David

    Yves,

    You came across very well. I noticed though that the other three guests and yourself were frequently blinking your eyes.
    Was that because the studio lights were very bright ?

    1. Yves Smith Post author

      It’s because, in a remote studio, the lights are usually aimed straight at your face, and you have to stare at a lens you can barely see.

    2. JTFaraday

      Little blinking owls. Designed to make you look like nerds who have just now seen the first light of day and couldn’t possible be taken seriously outside your ivory towers.

  5. Dan Allen

    Yves,

    You are the most articulate, correctly focused person I have heard. I hope policy makers find you.

    Best regards,
    Dan Allen
    Montpelier, Vermont

  6. ReaderOfTeaLeaves

    Well, at least the Newshour finally had a segment on the topic.
    I found Valoukis’s emphasis on the diffusion of responsibility galling.

    If it is so terribly, horribly difficult to determine who made decisions leading up to the insolvencies and bailouts, on what conceivable grounds are boards and management handing out extravagant bonuses? Isn’t the compensation supposedly based on performance? If it is possible to use performance — even in organizations where responsibility is diffuse — as the pretext for compensation, then why is it suddenly insufficient as legal evidence for attributing responsibility?

    Why such very different standards?
    Why no discussion of the fact that if the responsibility in these corporations is now so ‘diffuse’ that no one will be successfully prosecuted, then we might as well offer up last rites to the financialization of capitalism? Because without trust, the system is going to implode.
    And without prosecutions, trust will not be renewed.

    Several guests limited their comments to the legal process, as if the failure to prosecute will not have any economic consequences.
    That is delusional.

    1. Billy Bob

      “If it is possible to use performance — even in organizations where responsibility is diffuse — as the pretext for compensation, then why is it suddenly insufficient as legal evidence for attributing responsibility?”

      This has been my question for a long time. I remember Bernie Ebbers – erstwhile Master of the Universe called into a hearing – suddenly transformed into jus’ a ole gym teacher tryin’ to git by who din’ know what was goin’ on.

      1. LeonovaBalletRusse

        Ebbers Empire: right in the swank suburbs of Birmingham, Alabama. Alabama: von Braun and Huntsville, GermanAuto in Tuscaloosa and the swank suburbs of Birmingham, the Ludwig von Mises Institute in Mobile.

        Alabama: the *NOBILITY* elite nexus of Old and New Worlds, from Third to Fourth Reich in but two generations. Evidently, crime pays.

    1. Up the Ante

      .. and the case became Hide the Sausage, and ‘we’ is doing it to ‘ya.

      30 lawyers, a perfect clusterfuck.

  7. Lafayette

    Valukas and Smith made the best arguments.

    The cases are difficult to prove and the means of proof are there if you want to find them.

    Let’s remember that Microsoft was taken down mainly by Federal prosecutors demonstrating intent to exploit its dominant position in the Operating System market from emails that Bill Gates himself (and other MS executives) had written.

    The evidence is there, what is lacking is the will (or perhaps the means) to go after it. Mainly, the problem is will, because the means can be found.

    Just hire enough people to do the digging around in the muck for those nuggets of information that can convict … and get on with it.

    1. MontanaMaven

      We need a contemporary version of Nader’s Raiders from the Occupy movement. Unemployed lawyers and law students can ban together and sift through the evidence. Name for group? Black’s Bull Ball Busters?

    2. LeonovaBalletRusse

      Recently I’ve seen an advertisement for anyone to invent the means of de-shredding documents. Why is shredding of any such documents allowed, when it clearly is *destruction of evidence*?

  8. aletheia33

    great interview. as usual, she uses too few minutes to maximum effect.
    the usual crystal clarity cutting through both complexity and b.s.
    liked use of the masto story–good points there. especially liked “they’re going to roll.”
    inimitable.
    harry shearer is my favorite interviewer of yves. he is as incisive as she is and provides the background and takes the time needed to allow her to render the full picture as only she can.
    viewership may be lower than usual on thanksgiving; but those who do view may be the best of that show’s audience, the ones who stick to it in the midst of the frivolities.
    i did not have the patience to watch much of the other interviewees–talking heads obfuscating, equivocating, rationalizing as we’ve heard all of before.
    what i most want yves never to doubt is that her articulateness and integrity stand out sharply against the general run of what passes for commentary on television.
    not that i’m an expert on what’s on tv–i do not own a tv and mostly just tune in via internet when yves makes an appearance.

    1. LeonovaBalletRusse

      The usual suspects: three white male talking heads soft-pedaling the issues; and then there’s Yves, the antithesis.

  9. Jock Cuse

    Valukas of course is the author of the infamous Valukas report that whitewashed Lehman’s criminal repo 105 transactions. Dick Fuld must have a small shrine to Tony in his basement.

  10. Norman

    The cynic in me, having spent the past 72 years watching the country come to this point, leads to the belief that there is no hope that the proverbial “White Knight” will show up before the mad men blow the whole economy to pieces to satisfy their collective “egos”. Perhaps it’s just as well, for if there is a reincarnation of humans, perhaps the new breed will embrace equality instead of greed.

    1. Agreed

      Cannot agree w/you more. Stupidity and its cousin, missing the point,are the veneer of corruption. There is just too much misincentivizing for anyone to stop the destruction. We’ve been at it for almost 30 years and now stand poised on the brink of the abyss. The sooner it melts down and we start over the cheaper it will be for everyone, not to put too fine a financial point on it.

      Wouldn’t send PBS or NPR a donation either … the corporations will never let a shill outfit like this go dark. Consider the marketing leverage of corporate propaganda spewed by PBS/NPR under their former branding of being a real news organization. Hell, if the guest can’t keep to the script Judy Woodruff keeps rephrasing the question or begins asking leading questions until the hack comes up w/the corporate messenging.

      Enjoy the oldie concerts, the tenors, holiday shows and the occasionally doc it’s all marketing to imply this is the old independent PBS/NPR. Please don’t get me started on the Nightly Business Report lightweights.

      1. Lyle

        Nothing new here, read Last Call, and you find that the government never gave the resources needed to enforce prohibition in the 1920s. This is the dirty little secret that is not taught in school, criminal prosecutions are designed to make examples of folks. (After all deterrence is really making an example of a person). Anyway if you look other than for embezzlement how many got caught in the 1930?

      2. LeonovaBalletRusse

        Why can’t we start our own *real economy* without the 1%? Let them play in their gated inferno without access to our labor and *demand deposits*. Why can’t we just leave their system and create our own, a *parallel universe*?

        1. citizendave

          I’ve been saying the same thing, that we can create a parallel universe, a parallel society, with our own economic system. We would use community banks instead of the big retail banks. We would buy food from small family farm cooperatives. The pieces are already mostly in place. We need to persuade more people to steer their money away from the incumbent system, and hope the incumbents don’t ruin everything before we can build up the new system.

          When we let Wall Street use our money, they use it against us.

          1. different clue

            There are people working on approaches to that concept even as we type and read. Here are just a few names among hundreds that come to mind.
            Catherine Austin Fitts. Woody Tasch. David Korten. Ran Prieur. John Robb more and more lately. Jeff Vail. They can all be googled.

            Every dollar is a bullet on the field of economic combat.
            Lead the money around by the nose.
            I am not my keeper’s brother.
            Nobody owes the rich a living.

    2. JamesW

      “.. mad men blow the whole economy to pieces to satisfy their collective “egos”.”

      Afraid I cannot agree with your thinking: they’ve offshored the production assets and the capital assets, with Dubai looking like their future financial center of operations, they will crash everything for further labor deflation and their own profit, sociopaths really don’t have enough personality to have egos, sir.

      1. LeonovaBalletRusse

        Oh yes, Dubai is where they belong. Let them eat sand.
        “Hit the road, Jack! and don’t come around no mo’.”

        Let’s banish them all to Dubai, then begin anew: the real economy of the 99%.

  11. JanR

    “A lack of resources for prosecutors”, understaffed and underfunded, gee how fucking “convenient”.

  12. Ken B

    The thing that struck me about this discussion was the idea of diffuse responsibility. That is a systematic problem if true. Authority should be tightly tied to responsibility. The CEO at some point literally need to sign off on policy.

    I work at sea. After an incident at sea there is no dithering about who is responsible. It the person with the biggest office and highest pay, the captain. Why is it different for a CEO. Apparently CEOs have found a way to eliminate the downside responsibly while keeping the upside pay and perks.

    1. Justicia

      Yves’ answer to the “diffuse responsibility” dodge was spot on. Sarbanes-Oxley was intended to do away with the Ken Lay “I’m just the CEO, nobody ever told me” defense. It’s a disgrace that this law has become a dead letter.

      Watching this brought to mind the great Leonard Cohen lyric:

      I can’t run no more
      with that lawless crowd
      while the killers in high places
      say their prayers out loud.
      But they’ve summoned, they’ve summoned up
      a thundercloud
      and they’re going to hear from me.

      (“Anthem”)

    2. Onoreno

      Just a thought occurring to me, is that since coporations really want to be treated as a person, perhaps there shouldn’t be an possibility of responsibility diffusion.

      If the evidence is present, it’s really irrelevant who knew what when. Evidence being present should be sufficient. Individuals within the corporation are brought to testify to the facts, and all behaviors and consequences are assigned to the corporate “person”.

      Interpetation and intent are lodged similarly.

      Would something like that really have been the spirit of Sarbanes-Oxley, rather than the letter and spin?

    3. LeonovaBalletRusse

      The de facto and de jure responsibility for whatever goes on under the corporate roof is the Chief Executive Officer at the top. If he *just follows orders* from a corrupt, complicit Board, too bad. The Nuremberg Trials set the international standard for criminal responsibility, and these laws were written by the *us*.

      Responsibility is not the same as liability, in case some believe that the *LLC* limits responsibility as well as liability.

  13. Blunt

    The most striking thing in the interviews was Calabria insisting at the 6 minute mark that we need to be deeply concerned with the “rights of the accused.”

    This man works at Cato? Apparently the rights of financial criminals have a separate order of concern than those established at Cato for people who may not be part of the elite? Let’s say homeless men of color walking near a location where a burglar alarm went off.

    Although I think what is repeatedly missed by those who mingle with the financial sector is the prevalence of the psychopaths as big players. You can probably include Corzine if you wish in that group. One of the most clueless and tin-eared politicians I ever saw. The old Republican congressman in Tn’s 1st district back when I was growing up who had a an election scare if he got only 65% of the vote was everso much better at massaging constituents and keeping his message on track than Corzine ever thought about being.

    Anyhow, not my point. My point are the psychopaths who seem to be drawn to the financial sector these days like lemmings drawn to cliffs. The difficulty with what happens after the implosions seems to be among those who aren’t psychopaths and have spent their lives working in the trade. What is it? Disbelief that such creatures have invaded the host profession and hollowed it out while looting firms and others to please themselves?

    http://www.commondreams.org/view/2011/11/24-0

    How do you prosecute people when you don’t want to believe that they are far more dangerous to you than are the imaginary men of color you fear will mug you and slay you between the driveway of your suburban McMansion and its doorway? That seems to be the problem, and hopefully Masto will be able to effect some change in that regard.

    1. LeonovaBalletRusse

      Blunt, sorry to disappoint you, but EVERY one who remains in a criminal enterprise earning *megabucks* knows the score, and complies in complicity. Assistants aspiring to riches know the score. The retail brokerage business rewards criminals, and the removal of Glass-Steagall turned *bankers* into brokers, so that banking could become a complex criminal enterprise with impunity.

    2. Iculus

      Actually Cato has been quite consistent on defending the rights of all accused, regardless of class or income. They’ve been on the forefront in protecting civil liberties. See http://www.cato.org/criminal-justice-law-enforcement. While I think there are lot of folks on Wall Street that need to end up in jail, we shouldn’t erode our justice system to do so.

  14. craazyman

    kielanders is correct Yves, you do look pretty hot there. Have you ever considered a calendar? Nothing prurient or fleshy, but provocative in an ideological & artistic way.

    This guy could do it:

    http://www.davidlachapelle.com/books/robilant-and-voena-jesus-is-my-homeboy/

    I’m thinking something like a Hieronymous Bosch maelstrom of bankster sins as the tableaux with a Delacroix-like Lady Liberty Leading the People motife (motiff??) mow-teef.

    That was a good inteview I thought, all around. Even though it’s the Petroleum Broadcast Service. I guess nobody can get too emotional on camera and start screaming or it would bust the vibe. :)
    Maybe a few scenes with economists in hell, too. ha ha.

    1. LeonovaBalletRusse

      “Delacroix – Lady Liberty Leading the People” – he wants to see you bare-breasted, Yves. Don’t fall for it. You’ll lose your dignity, which no one can trump at this hour.

  15. gs_runsthiscountry

    “The clock is ticking”

    The most salient point in the interview was Statue of Frauds and Statue of limitations. Ignore, obfuscate, and avoid the issue long enough, they can and will ensure nothing will be done.

    1. LeonovaBalletRusse

      Actually, the Statute of Limitations allows for the *date* at issue to be the date when the discovery of the crime occurs. Isn’t this so?

      1. gs_runsthiscountry

        I believe you are correct. You make an excellent point.

        But, are we talking State or Fed? Hypothetically, what would be the charges be, criminal liability, breach of contract, or? All would bring with them a different SofL time frame.

        I have an attenuated Blacks Law textbook, and I could not find an easy answer to your question.

        It would be nice to have a JD chime in on this one.

  16. BenE

    One of the problem seems to be that the TBTF banks have made their crimes legal before doing them. They got sympathetic judges in place to create legal precedents in their favor while shaping the system to make their continued existence critical to the economy thus making the government not prosecute them but actually give them gifts in the form of bailouts when they are criminally negligent.

    These guys need to be prosecuted not with the laws and precedents they have been tampering with for 30 years. These laws are not legitimate. If a criminal bribes officials to make his crimes legal. You should invalidate the laws which were a result of bribery before prosecuting the criminal with the legitimate laws that existed before.

    The question remaining in all this seems to be: In a landscape of illegitimate laws, where politicians are friendly with banksters and supported by a corrupted mainstream media and where any political party outside of the duopoly has no chance of being elected, how can justice be served?

  17. petridish

    I am sick to death of the weak, hackneyed excuses for this lawlessness–no money, no evidence, obfuscated responsibility, statutes of limitation, blah, blah, blah.

    These people should be charged with domestic financial TERRORISM. Surely if destroying buildings in New York City is terrorism, destroying the world economy is as well.

    No statute of limitations, no evidence needed, no access to legal representation, no habeas corpus, no charges required. Confiscate their assets, invalidate their passports and “Bradley Manning” them at some empty maximum security facility. You’d even get a few jobs for prison guards and torturers out of the deal.

    I think that’s called that a win-win.

    1. Blunt

      Petridish, I found myself agreeing with you although my politics and sense of humanity screamed “NO” even as I was frantically nodding to your prescriptions of retribution for the bastards.

      I love it when someone appeals to my dark-side in regard to MOTUs.

      And after the parts you prescribe I am hopeful of a return to that fine old British custom of distributing body parts for fastening above the doors of certain places where the memories of such crimes might do well to be called to mind daily.

      1. Jason Boxman

        Indeed. The gentler side of me would like to see their illegitimate gains confiscated, followed by a parade in which they scurry through the streets, naked, in shame. Thereafter, they can ‘pull themselves up by their bootstraps’, like the rest of us should be doing, if only we weren’t so lazy and stupid.

        Other days, I wish for something far darker. But I’d happily settle for the former.

  18. Capt. Jack

    Well done Yves. You don’t need war paint….lol.

    Bill Black didn’t have problems prosecuting. Hang in there folks.

    I truly believe we will be seeing referrals for criminal prosecution soon. Before the end of the year.

    The very hour it happens I will be delighted to report it and will include the court transcript.

      1. mansoor h. khan

        Susan the other,

        This a physics vs. math problem.

        Physics = rate at which raw materials can be turned into finished goods = rate of economic growth

        math problem = compounding of interest on debt outstanding = currency supply

        That is the problem with the our banking system. Bankers know that if they don’t continue to lend the system will collapse. Net loan growth cannot be negative for too long. They are literally forced to continue to lend regardless of loan quality.

        Since loans outstanding = currency supply

        but if currency supply is decreasing for a sustained period of time then we will have a depression event (which is not pretty for the people or the bankers).

        Way out: currency should always be spent into existence and never lent into existence.

        see:

        http://aquinums-razor.blogspot.com/2011/11/here-is-how-bankers-game-works.html

        http://aquinums-razor.blogspot.com/2010/11/modern-monetary-theory-there-is-another.html

        Mansoor

    1. LeonovaBalletRusse

      As Bill Black insists, the current head of Justice must be fired forthwith, and Geithner’s *got to go*, then we can proceed. But this is too politically hot for Oreobama.

      We must replace him with a champion for the 99% (Bill Black, Yves/Susan?) at the Democratic Convention 2011. Then Obama can be indicted for treason, along with his predecessors in Executive Office.

  19. Cynthia

    I grudgingly predict that Jon Corzine will dodge the prosecutorial bullet, all because he, like so many other crooked banksters before him, has been given the privilege to operate under the protective shield of the Obama Administration.

    And I don’t know about anyone else here, but I’m really sick and tried of so-called conservatives chirping about “Free Market Capitalism” and casting aspersions on the OWS protestors as “Lazy Hippies”.

    Apparently, they can’t get it through their thick skulls that if we don’t prosecute Wall Street and the financial markets for theft, embezzlement, and malfeasance, there is no free market and there is no Capitalism.

    As I have said before, we have the worst of both worlds; crony capitalism and selective socialism — a two-headed hydra that devours free markets, true charity (at both the individual and the societal level), and the moral impetus for individuals to be self reliant or to save and invest.

    1. Gentlemutt

      “crony capitalism and selective socialism — a two-headed hydra that devours free markets, true charity (at both the individual and the societal level), and the moral impetus for individuals to be self reliant or to save and invest.”

      You probably implied it, but insert “and fair” as in “free and fair markets” and you got me 100%.

  20. BFrazier

    I was so glad to hear your state that the appropriate approach is the same as towared organized crime. What the banksters have done is no less than racketeering, and in fact is racketeering, and those are the laws tha should be brought to bear against them.

      1. financial matters

        There are also RICO charges in the Madoff case…

        http://www.newsday.com/business/madoff-associates-hit-with-60b-rico-suit-1.2529755?obref=obinsite&qr=1

        Madoff associates hit with $60B RICO suit
        By ANTHONY M. DESTEFANO Dec 10, 2010

        Picard is seeking a total of $19.6 billion in the civil racketeering case, an amount that would be tripled under the federal RICO statute.
        ——————-

        http://www.nakedcapitalism.com/2011/05/us-trustee-estimates-significant-servicing-errors-at-10x-level-claimed-by-banks-and-parroted-by-federal-regulators.html#comment-391049

        5/14/11

        US Trustee Estimates Servicing “Errors” at 10x Level Claimed by Banks (and Parroted by Federal Regulators)

        It’s increasingly obvious that a concerted coverup is in progress. I gather they forgot to send the memo to the US Trustee.

      2. financial matters

        and this…

        http://market-ticker.org/akcs-www?post=168144

        MERS/MBS/Foreclosure Goes RICO
        Karl Denninger

        It’s about damned time.

        This is worth a read, even though it’s VERY long. The bottom line is that all the Tickers I’ve written on this subject, from bad conveyances into REMICs, to the tax issues, to the fraudulent documents, to the fact that the MBS are “empty boxes”, up and down the line – it’s all in here.

        Anyone who thinks this is a “nothingburger” after reading this has rocks in their head.

        This is a rather lengthy filing, 124 pages worth. It asserts virtually everything that I’ve written about for the last three years related to REMICs and MBS (that the notes were not conveyed and now can’t be under the law), and alleges Racketeering.

        http://www.scribd.com/doc/38654717/Class-Action-vs-Mortgage-Electronic-Registration-Systems-Gmac-Deutsche-Bank-Nation-Star-Aurora-Bac-Citi-Us-Bank-Lps-Et-Al

        1. LeonovaBalletRusse

          The finally found the right thread to pull. This whole thing will unravel in record time, because the malefactors will bail for pleas like rats from a sinking ship.

          The truth will out. “Nothing shall be hid.”

  21. Conscience of a Conservative

    Just makes sense that a store will experience an uptick in shoplifting if the customers believe violators won’t be prosecuted or at worst face a fine equal to 1/5 the stolen property. I’m sure it explains why our banking system is broken. It’s not about over-regulating but ensuring the rule of law is enforced.

  22. Jackrabbit

    I can’t help feeling that this segment was meant to be a set up. A boring and conventional review of why nothing can be done about the wrong-doing that nearly collapsed our financial system. Not enough resources! Diffuse responsibility! Systemic problems (perverse incentives)!

    Thank you, thank you, thank you Yves. Your incisive comments cut through this Turkey and revealed (to this reader, at least) the “truthiness” that it was stuffed with.

  23. Economics Considered

    It seems a pertinent question to ask what’s different now versus a very substantial number of trials AND convictions in the savings and loan meltdown. Especially with the addition, even, of Sarbanes-Oxley. ??

  24. citizendave

    One wonders if there was any discussion of diffusion of responsibility when it began to look like the wheels could come off, like in August of ’07, or whenever somebody in the firm’s legal department began to get nervous about the financial risk and the moral hazard. The TBTF culture seems to carry the assumption that they are above the law, but just to be sure, it’s easy to imagine they would talk about what measures could be taken to minimize the risk of prosecution of individuals if it all blew up.

    The counter to the idea of diffusion of responsibility could be the concept of being an accessory to the crime. If there was a group with common motivation, and all were present when the crime was committed, but only one pulled the trigger, the rest could be prosecuted as accessories. Seems to me that people have been prosecuted for failing to try to stop a crime being committed by someone else.

    Maybe we can’t establish exactly who is most responsible, but we know that something bad happened, and we know decisions were made that led to the dire consequences. And if corporations can be persons for purposes of free speech, is it a stretch for a corporation to be a person who committed financial malfeasance?

    So maybe we could take the approach of dividing the firm into two groups, starting with those who clearly were NOT culpable: custodial staff, lowest-level administrative staff. Everybody else is guilty. The guilty parties all understood at some level that what they were doing was wrong, but they did nothing to try to stop it.

    We have seen no sign of contrition. They seem to have been emboldened by their success at evading prosecution. They seem to have dedicated themselves to doing better next time. Their near-death experience in the Crash didn’t slow them down, it taught them to operate with greater precision. They will continue until something forces them to stop. If they can’t be reigned in with legal constraints, they will continue until the system crashes again. If it crashes, they’ll be poised to buy at fire sale prices.

  25. Economista Non Grata

    Great job Ms. Smith…! I guess that we will always have to deal with some of the “banking shills”, These official looking , well credentialed types. Their intentions are, not to defend the wrongdoing, but rather to create an atmosphere of uncertainty with the intent of minimizing the seriousness of the crimes that were committed. However, you held your ground very well, especially in citing the state cases..

    Best regards,

    Econolicious

  26. Mark K

    I found it laughable that Mark Calabria rebutted Yves’ point about the state Attorneys General having fewer resources than Federal prosecuters by alluding to the tobacco settlement, saying that the AGs could get private law firms to sign on for a piece of the action. Yves was talking about – indeed the whole segment was about – *criminal* prosecutions.

    Oh, yeah, lots of money to be made there.

    1. Yves Smith Post author

      Yes, that really cheesed me off. The fearsome state attorneys general! Please. For the most part, only New York, and then because it has the Martin Act and is better staffed than other states.

  27. spooz

    Ray Suarez is a good interviewer, I’ve been following him since his days as a Chicago reporter in the 1980s.

    Anton Valukas is a typical mouthpiece, no offence to the JDs out there.

    Yves points about the DOJ being absent because of lobbying efforts and suggestion of using the “follow the money” approach starting with low level operatives in the control fraud and working up should have been taken further.

    Mark Calabria makes a point at the end about systemic problems not being fixed with Dodd-Frank. Saw this piece by Lisa Pollack on The Butterfly Effect in the financial industry in today’s Financial Times alphaville which concludes:

    “What about the more bespoke products? What about the trades were one of the parties isn’t a G-14 dealer? What if the banks are busy with some new financial alchemy that the regulators either don’t know about or are allowing to happen when society will end up paying the price after all?
    We desire micro-level data even as we regulate at a macro-level. And on the micro-level, individuals may not understand the consequences to society of flapping their wings.”

    http://ftalphaville.ft.com/blog/2011/11/22/758071/the-butterfly-effect-spotted-in-the-financial-industry/?updatedcontent=1

  28. Maurice

    It is my hope that USA media blackout of Yves Smith is rapidly dissolving!
    I was surprised and excited to see Yves on Newshour. I think she did very well here.

    At some point, I would not mind seeing a fuller rebuttal of the lame, mealy points made by Valukas and Calabria. I am familiar with US media policy of balancing savants with idiots. As usual, this just serves to water down and obscure any analysis.

    It was odd that Valukas is not very familiar with the revolving door phenomenon, especially at SEC and Treasury. Given he is a seasoned DC govt official, his opposing view comes of as dissembling.

    Calabria’s point about states’ taking on tobacco companies may be valid in a narrow sense, but seems incongruent with fighting crooked finance. I think the economy was also in far better shape when certain states took on BigTobacco. Given how cash strapped and distracted state governments are, it seems very unlikely that there could be a similar effort taken in that vein. Also, the states have outsourced or taken up projects in conjunction with Wall St. I would expect some reluctance to prosecute given how big chunks of states’ finances are in the hands of BigFinance.

    So I would like Yves take on these and other arguments of the panels’ appointed idiots.

  29. be'emet

    missing in action: surely there are ambitious lawyers out there who know how to seed their practice by proceeding on their own nickel. How is it that fraudsters are not yet overwhelmed by litigation? proof can’t be that complicated.

    1. LeonovaBalletRusse

      The web is woven of *protection rackets*, and fixed so “If I fall, you fall”–ranks are TIGHTLY closed for the *protection* of one and all in complicity.

      Don the Phrygian cap. Convey the message: “We’re mad as hell, and we’re not gonna take this any more!” (Beale), and mean it.

  30. coboarts

    I love the way that CATO was saying something to the effect that the taxpayer is helping these bailed out companies, so regulators don’t want to do anything that would undermiine their success.

    - so the wrongdoers must be kept in place or the tax payer gets…

    Thank you for the George Carlin link.

  31. Jamie

    Criminal fraud = Mere irresponsibility?
    Oh, ok. I get it.
    Reasonable doubt = Redefining perverted human behaviour.

  32. Lew Glendenning

    The banks should be RICOed, as they have committed fraud and other crimes over many years.

    Individuals who can show damages can bring RICO law suits and get triple damages.

    A class-action RICO would be a nice advance.

  33. indio007

    It’s a shame you have to school people on very elementary ways of prosecuting a criminal enterprise.

    Linda Green (and others) was not acting on her own. Someone ordered her to do what she did. Someone ordered them and so on and so forth.

    Just like busting a drug selling enterprise you start with the low level worker and go up the chain to the big fish.

    DA’s have been doing this for what 30 years now?
    It’s the acting dumb and pretending to be helpless is what galls me.

    The evidence of the crime is a self-authenticating public record. They don’t even need witnesses to enter it in as trial evidence!

    Whatever happened to ignorance of the law is no excuse? It doesn’t matter if they don’t know uttering a false document is unlawful. It’s their duty to know.

    Yves how’s it feel to be , figuratively , the only adult in the room?

  34. timotheus

    Given the built-in limitations of PBS (Petroleum Broadcasting System indeed, good one), I thought it provided some useful perspective for people trying to understand why prosecutions are lacking. Yves was tops, of course, but I thought it significant that there was no hint of the usual phony, two-sided, Dem/Rep divide. No one even bothered to try to say these guys are innocent or should be left alone. Contrast that with the debate over torture (the fact that there even is a “debate” is disgusting, but I digress) — there you have a whole sector including presidential candidates insisting that we do it more and harder next time. The banksters are completely isolated, and this will have an impact in the long run.

  35. ep3

    geez, yves, those two guys took all the time, by speaking slowly. and then it was nice how the cato institute got represented and the left wing didn’t

  36. LeonovaBalletRusse

    OK, maybe Simon Schama was write about “Sharpening the Guillotines.” Enough is enough.

  37. LAS

    When banks/mortgage initiators don’t execute their own stated procedure for tranferring assets to a trust as put down on paper per the pooling and service agreements thay have themselves drawn up and signed – that seems pretty evidential to me.

    When financial firms make financial products for the express purpose of betting against them – that also seems pretty evidential to me.

    Robo-signing documents, liars loans and ever so much more seems pretty evidential… The arguement that there’s no envidence or weak evidence does not hold water. In fact there’s contracts and paperwork up the wazoo. Firms and/or individuals certainly can be held responsible.

    After all this time, it is willful not to recognize the wealth of prosecutions that are possible.

    What the heck is wrong with these men that they wince at doing what’s right? They act like a bunch of captive prisoners. They’ve given up their own power of initiative to make nice with the mafia bosses. As much a problem as the bad guys are the old farts who hold a position and make it inert.

    1. LeonovaBalletRusse

      The longer the prosecution is delayed, the more evidence that can be *lost* or destroyed. We are dealing with criminal rackets here.

  38. alex

    I think Yves did a great job, but on this particular subject (criminal prosecutions) Bill Black would have been really devastating.

    Yves has tremendous expertise due to her business experience and (despite her protestations to the contrary) knowledge of economics. But when it comes to criminal prosecution of control fraud Bill Black is the go-to guy. He generally says something like:

    “I was there. The current mess has all the hallmarks that the S&L crisis did, but is 70 times as large. I was there, and we obtained over 1000 criminal convictions.”

    Anybody who attempted to rebut that, or say “this one is different” would look like a blithering idiot. It would be like someone telling Roald Amundsen that the South Pole isn’t really that cold. Who ya gonna believe?

    P.S. Nevertheless very nice to see Yves on a more mainstream (hence widely visible) outlet. And in the US no less! From the way she used to get more coverage in the foreign press, you’d think she was an exile talking about the regime back home. But in America TPTB are clever – you can be an exile right in Manhattan! It’s also nice to see that OWS is having an affect on the discourse.

    1. Glenn Condell

      Re the 1000+ then vs zip prosecutions now, I wonder if what we have is a financial cousin to the change we have seen in how elite authority handles protest and dissent. From the standpoint of power, the protest movement of the late 60s was an existential threat principally due to the genuine independence of media (partial though it may have been) who reported faithfully from the other side of the fence and held official feet to the fire. There were a helluva lot of other obstacles to be sure, but at least the (media) window between the rulers and the ruled was still relatively transparent, rather than the deliberate (and increasingly desperate) opacity which obtains now.

      Now we have Pravda and Isvestia in place of the Times and WaPo, an elite-meme factory in cable TV, a panoply of official sounding think tanks owned by Kochs and Scaifes, a licence system for gatherings, ‘free speech zones’ a good mile from the action, infiltrators and ‘embedded’ journalism, all operating in and contributing to a cultural space which at all levels marginalises and traduces any notion that isn’t sanctioned from above. There is no ‘smoking memo’ for all this, most humans after all act in herds, happy to take the path of least resistance and let others do the thinking and deciding. So for OWS to have made the impact it has says a lot for it’s determination as well as its strategy.

      The committed and very proper prosecutory response to the S/L was, like the largely admirable actions of senior American journalists in the cauldron of Vietnam war protests, precisely what any respectable bible of democracy would recommend. But like the last great gasp of independent MSM journalism in the late 60s and early 70s, the Black crusade may have been so succcessful that it signed a death warrant for future prosecutions of elite financial fraud.

      Just it is impossible now to imagine the Times, WaPo or any of the broadcasters being a central plank of dissent, so it seems kind of hilarious to think that the SEC, or Congress, or the White House (or the media that enables them) nowadays would cast their lots in with the interests of the people. They have been deliberately defanged and corrupted by money, but again this has occurred in a culture-wide re-education over decades, a phenomenon that reveals itself in performances like those of Mr Valukas and Mr Calabria.

      The CEOs and CFOs they indirectly represent implicitly deserve their stratospheric salaries because of the massive financial responsibilities they expertly discharge; but if the wheels fall off, well, sorry, but whocoodanode?

      As Ken said above: ‘The thing that struck me about this discussion was the idea of diffuse responsibility. That is a systematic problem if true. Authority should be tightly tied to responsibility. The CEO at some point literally need to sign off on policy.’

      Spot on. They are hiding behind complexity, as if confusion as to means is sufficient to obscure motive and opportunity.

      Real leadership seems to have become passe. Our leaders in all meaningful activities are the sort of people genuine leadership is required to prevent. One conclusion might be that there are simply far more opportunistic grifters than genuine leaders, but it is surely more accurate to say that systems have been successfully put into place to ensure that the former get far more traction than the latter. Say, Larry Summers over Brooksley Born. Or Rahm, Paulson, Geithner, Bernanke, et al over scores of other more citizen-friendly options.

      People like Scott Walker and Chris Christie would be selling used cars or insurance if their nose for patronage weren’t so finely attuned, but really it’s the patronage requiring plausible public cover and some sympathetic hands on government levers which matters, not the crowded field of breeze-sniffing hacks (in academe and media, as well as politics) awaiting the tap on the shoulder from above.

      This financial clusterfuck was seen coming a mile off by economically illiterate nobodies like me, so the idea that the Masters of the Universe were sideswiped by events does not hold water. They not only saw it coming, many of them planned it, even more bet on it, making an absolute motza from the misery of their own clients among others, and at the bottom of it all, they knew that the decades of effort to corrupt regulation and government had paved a path for them to be bailed out handsomely on the taxpayer’s dime.

      All that remains is for the phalanx of apologists to look convincingly flummoxed by all that goddamn complexity, making lines of responsibility so unhelpfully ‘diffuse’. No rampaging Bill Black this time around, thanks very much. Combine with underfunded and understaffed regulatory agencies, and voila, a recipe for avoiding S&L 11 (x10).

      The successful entrenchment of this ‘elites get off scot free’ strategy is one of the few genuine American success stories of recent times, and it’s defeat must be one of the prime objectives of OWS and its affiliates.

      1. JTFaraday

        “Real leadership seems to have become passe. Our leaders in all meaningful activities are the sort of people genuine leadership is required to prevent.”

        Too many Americans approach everything like they’re applying for a job, and this spills over into politics just like it spills over into everything else. Certainly true of Christie and especially Walker, who has a HS diploma.

        Indeed, running for office IS a source of jobs for people. If your dig into local politics where the applicants aren’t buying their way into office to the same extent, you can definitely see this operating. This doesn’t exactly make for independent thought, let alone acting on independent thought.

        There’s some truth to the 18th century notion that dependent politicians doesn’t make for particularly good politics.

    2. LeonovaBalletRusse

      Bill Black is the champ; he connects the dots: S&L scandal, Enron, 2008. The Bush Dynasty is complicit in every case.

  39. Keith Howard

    On watching the Newshour segment the following simple-minded notion came to me:

    If corporations are persons, and persons have responsibility for their actions, then corporate persons must be culpable and punishable. But how, and upon whom, should punishment be inflicted? Rather than looking to the people running the enterprise, perhaps the penalty should fall on the ultimate owners of the corporate person — the stock holders. If these owners are finally responsible for the criminal and/or fraudulent behavior of their corporate chattel, what would be a reasonable way to punish the stock holders?

    I’d be curious to hear informed discussion of this question. Best,
    KH

    1. LeonovaBalletRusse

      Keith, you have a very interesting take. Since the McKensie hotshots got all the CEO’s to divide voting stock from non-voting stock, it shouldn’t be hard to determine where the culpability lies. The delicious irony of it! Cold Justice.

  40. kemo sabe

    Thank you Yves, You were terrific! I was pleasantly surprised that PBS invited you on News Hour. Keep up the good work!

  41. LeonovaBalletRusse

    Yves, you had the most intelligent face up there, and the most honest. You are the sharpest dagger in the opera.

  42. wafranklin

    The presence of the schmuck from CATO is garbage. Those rightwing propaganda mills should never be put in the public light. Their only purpose is to muddy the water about anything to do with agendas of their masters.

  43. wafranklin

    The presence of the schmuck from CATO is garbage. Those rightwing propaganda mills should never be put in the public light. Their only purpose is to muddy the water about anything to do with agendas of their masters. They are scum.

  44. 60sradical

    Great job, Yves!!!
    I’d love to see you go on a rant about the federal reserve and it’s 12 private banks, involving all the horribly real stuff—fractional reserves, money from nothing, etc.
    Most economists and virtually all Americans are clueless regarding deep financial structure. For me, the lingering heart of darkness is the elite inner sanctum(old white male dominated) of the global banking system.
    Thanks once more. And you are a cutie.

  45. Kunst

    Once again, we see why the right wing hates PBS and NPR, the only news outlets that provide intelligent and in-depth coverage of serious issues.

    1. Foppe

      It may be that the right dislikes NPR, but I would venture that the left should not like it either. Its reporting is just as much ‘he-said-she-said objective’ as pretty much every other major news outlet in the US.

    2. Jackrabbit

      I doubt they expected more than some righteous outrage from Yves along with seconding the SEC accountant’s call for more resources. For the short time she was on air, Yves came through with outstanding points that demolished the excuses for not pursing individual wrong-doing.

      Absent Yves great game-changing performance, viewer take-away would’ve been just what the industry wants people to believe:
      1. that the legal issues for prosecuting individuals are complex but prosecutors HAVE had some success going up against companies (Goldman settlement);
      2. that the justice that OWS seeks is impractical and/or extra-legal;
      3. that the REAL solution lies more in industry-led reform of perverse incentives.

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