Gretchen Morgenson filed a must-read story on the range and some of the consequences of the private equity fetish for secrecy. The short version is that if the private equity industry had nothing to hide, they wouldn’t be hiding it.
Even so, Morgenson’s story is certain to be an eye-opener to readers fresh to this topic and has important revelations for even those who’ve been on this beat for a while.
Yves here. In our ongoing efforts to thrash Andrew Ross Sorkin when he shills shamelessly for banks (admittedly a Sisyphean task), we are turning the mike over to Bill Black, who also sees Sorkin as a pet project. We trust you’ll enjoy his shredding of another defense of financial firm misconduct in the New York Times’ DealBook.
I’m only starting to dig into the AIG bailout trial by reading the transcripts and related exhibits. That means I am behind where the trial is now. However, that gives me the advantage of contrasting what is in the documents with the media reporting to date. And what is really striking is the near silence on the core argument in this case.
If you see politics as a form of bloodsport, there’s nothing more fun that seeing a politician start attacking a reporter. That almost without exception means the charges have hit a weak spot, that the incumbent has little to no valid defense and instead starts lashing out.
In this case, it’s particularly amusing to see New Jersey governor Chris Christie as the would-be pugilist. We are seeing that while Garden State pols may be great on the offensive in bare-knucle fights, they have a glass jaw when put on the defensive.
Here, the combatants are International Business Times reporter, David Sirota, against various officials with close ties to Christie who administer state pension funds. Sirota has been making a mini-speciality of state pay-to-play scandals.
As we said in our companion post today on the AIG bailout trial, former AIG CEO Hank Greenberg may have a case after all. Mind you, we are not fans of Greenberg. But far too much of what happened during the crisis has been swept under the rug, in the interest of preserving the officialdom-flattering story that the way the bailouts were handled was necessary, or at least reasonable, and any errors were good faith mistakes, resulting from the enormity of the deluge.
Needless to say, the picture that emerges from the Greenberg camp, as presented in the “Corrected Plaintiff’s Proposed Findings of Fact,” filed in Federal Court on August 22, is radically different. I strongly urge readers, particularly those with transaction experience, to read the document, attached at the end, in full. It makes a surprisingly credible and detailed case that AIG’s board was muscled into a rescue that was punitive, when that was neither necessary nor warranted. And the tactics used to corner the board were remarkably heavy-handed.
Bill Black gives one of his best recaps ever of the “too big to jail” syndrome on Bill Moyers. For readers who missed the story, Black gave critical testimony in a Federal prosecution of small fry mortgage fraudsters. He helped persuaded the jury that in fact no fraud took place because the banks were willing to underwrite any predatory, poorly underwritten loan in the runup to the crisis. Black savages the posture of the Department of Justice in this case and in general.
Yves here. In this post, Bill Black does the yeoman’s work of stepping through one revelation in Fed whistleblower Carmen Segarra’s tapes from some of her discussions with more senior colleagues at the New York Fed. A critical section involves how Fed officials became aware of the fact that Goldman had slipped language into an already-closed transaction with the Spanish bank Santander that indicated that the Fed had been informed of the deal and had not objected, neither of which was the case. The staffers tried to rouse themselves to challenge Goldman on this misrepresentation, and lost their nerve.
But as bad as letting Goldman roll the Fed on the matter of non-existant non-objections is concerned, Black stresses the much more serious underlying failure: Goldman had created the impression that the Fed was kosher with Goldman helping Santander fool European bank regulators by pretending it was more solvent than it was. The effort to game banking regulations is an even bigger deal than the effort to pretend the Fed was all on board. Black blasts the clearly captured New York Fed “relationship manager” Mikel Silva in gratifying detail.
I’m giving to Yves Smith and Naked Capitalism. You should too. And you should dig deep. What we are doing, together, is nothing less than composing a symphony of what will be an intellectual revolution. What are we revolting against? The Age of Stupid.
What do Hillary, Bill and Chelsea Clinton, Anders Aslund, Steven Pifer, the Peterson Institute for International Economics, and the Brookings Institution have in common? Answer: they drink the mother’s milk of politics from the Ukraine. Lots of it.
A corrosive development is the ease with which lenders steal extract income which is not properly theirs from borrowers through what is at best incompetence and in far too many cases is fraud. This pattern has repeats itself again and again: in mortgage servicing, with debt collection, and more and more with student loan servicing.