Archive for Corruption
Avoiding responsibility is just what the corporate form was designed for, wasn’t it? That’s why corporations will always go to the mat to protect their special rights and privileges as super-citizens. Those include not to facing jail time for repeated criminal behavior. Petty crime? Three strikes and you’re out. Corporate crime? Nobody’s counting. Justice for corporate crime is a different ball game.
“Banks have been on a criminal wilding,” Katrina vanden Heuvel writes, “allegedly laundering money for drug dealers, systematically defrauding homeowners on their mortgages, routinely committing perjury in courts and much more.” Their companies pay fines, yet virtually no one in charge goes to jail. Isn’t that special?
RJ Eskow ticks off a lengthy series of criminal behavior by large banking firms: Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland, UBS Financial Services. All repeat offenders:
We’re not exactly envious of the state of Oklahoma where Charlie Pierce ends his regular peek into the Laboratories of Democracy. Let’s just say there’s some serious experimentin’ he’s missed going on in the Tarheel State. A major donor Republican donor earlier this week put a fountain pen to his temple and told North Carolina’s GOP legislators that if he doesn’t get the tax and spending cuts he wants, their $25,000 donation gets it:
Raleigh businessman Bob Luddy, who chairs the board of the conservative Civitas Institute think tank and is an influential financial supporter of conservative candidates, emailed a sharp critique of the House budget to House Republicans, who are in the majority.
“The lack of prosecutions, quite frankly, does not indicate a lack of evidence,” Richard Bowen told Bloomberg’s “Market Makers” last week. The former Citigroup Chief Underwriter for Consumer Lending has testified before the Financial Crisis Inquiry Commission but contends that evidence he provided never made it to the Department of Justice for further investigation and prosecution.
A lengthy article on Bowen in New Economic Perspectives outlines some of what the whistle blower might have provided. Furthermore, that the FCIC, DOJ, and the SEC might not (or might not want to) understand how the accounting control fraud “recipe” at the heart of the financial crisis actually worked. Once you explain how the “sure thing” at the heart of the recipe works, writes William Black, “jurors understand quickly that the officers were acting in a manner that makes no sense for honest bankers but is optimal for officers leading frauds.”
Matt Taibbi (citing Yves Smith at Naked Capitalism) looks at corruption in the Private Equity business, and the seeming indifference of Andrew Bowden, the SEC’s Director of Compliance Inspections and Examinations. A study “found that over half of the companies they looked at were guilty of ripping off their clients” using hidden fees. Bowden mentioned the discovery in a speech within the last year. Since then … crickets:
By this month, Bowden had achieved a complete 180, telling a conference of PE professionals that their business was just “the greatest.”
This is Bowden on March 5th, on a panel for PE and Venture Capital issues at Stanford. Check out how he pooh-poohs the fact that his SEC has seen “some misconduct,” before he goes on to grovel before his audience:
Is a slightly less worshipful attitude too much to ask from people charged with oversight? Taibbi asks.
(Cross-posted from Hullabaloo.)
It is one of Sen. Elizabeth Warren’s signature lines: “The game is rigged.” Lina Khan at Washington Monthly fleshes out just how much. Forget the social safety net. Khan looks at how binding arbitration clauses in consumer contracts snip away what’s left of the legal safety net protecting consumers. Warren may have birthed the Consumer Financial Protection Bureau to give Average Joe a fighting chance, but binding arbitration still leaves the Man with all the power:
Last week the Consumer Financial Protection Bureau issued a report documenting the prevalence and effects of arbitration clauses in consumer financial products. CFPB’s report captures the effects of arbitration clauses in financial products and services, based on data from the American Arbitration Association, which handles the vast majority of consumer financial arbitration cases. A few main takeaways from the study [edited for length - TS]:
•Arbitration tends to work out better for companies than it does for individual consumers: in cases initiated by consumers, arbitrators awarded them some relief in around 20 percent of cases. By contrast, arbitrators provided companies some type of relief in 93 percent of cases that they filed.
•Even the degree of relief varies notably: within the slice of arbitration outcomes that CFPB could assess, consumers won an average of 12 cents for every dollar they claimed. By contrast, companies on average won 91 cents for every dollar they claimed. In total, consumers received less than $400,000 from arbitrators in 2010 and 2011. Companies won $2 million over that same period
•Notably, CFPB found evidence undercutting a favorite pro-mandatory arbitration trope: that nixing arbitration clauses would burden companies with greater litigation costs, which they would be forced to pass on to consumers in the form of higher prices for their goods. CFPB found that the banks that had to drop arbitration clauses from their contracts as part of an antitrust settlement in 2009 did not subsequently raise prices for consumers.
The CFPB is expected to propose rules “limiting mandatory arbitration clauses in these take-it-or-leave-it contracts,” Khan reports. Over 90 percent of consumers in contracts with a binding arbitration clause were unaware they could not sue “or had no idea.” On average, $27,000 of consumer money is at stake in these disputes. But paired with class action bans, these contracts leave financial organizations holding all the high cards in the game and “de facto privatizes” a legal process funded with tax dollars that, at least in theory, level the playing field.
The sharks are running the fish hatchery.
(Cross-posted from Hullabaloo.)
You know, when I saw that headline in the Guardian, I thought I was looking at a decade-late review of the 2004 Vin Diesel film, The Chronicles of Riddick. If you missed Chronicles on cable, the film’s Big Bad (h/t to you Buffy fans) is a murderous group of interstellar religious fanatics called the Necromongers. They rampage across the galaxy, like ISIS in space ships, converting or killing everyone in their paths. They also “believe heavily in a philosophy that says ‘you keep what you kill’, believing that ending another’s life entitles you to their property and position.” Having screwed investors, thrown families from their homes, brought the planet to its economic knees, and demanded tribute (bailouts) lest they take us all down with them, that pretty much describes Wall Street’s philosophy these days, too. Which is why, as Suzanne McGee writes, “’You eat what you kill’ is the motto on many a trading desk.”
What Wall Street doesn’t believe in is its own bullshit, business school catechism about how in a meritocracy pay is a function of celestial mechanics that must not be perturbed lest we offend the Market gods – pay is an elegant function of one’s contribution to the enterprise’s bottom line. How do we know they don’t believe this?
… Wall Street’s profits aren’t what they used to be. Pretax profits fell 4.2% in 2014 to $16 billion, according to New York’s office of the state comptroller. If you think that sounds like a relatively modest decline, consider that 2014 profits were 33% below 2012 levels, and a whopping 74% below 2009, when Wall Street posted record results as markets zoomed back to life after the crisis and banks profited from ultra-low asset values and interest rates.
So what? Well, in spite of the falloff, bonuses rose for the second straight year, with “a 30.1% decline in profitability, and a 15% increase in bonus payments” in 2013, followed by a more modest 2% increase this year.
The U.S. press dutifully spent the last two days focused on why the White House did not send any high-level officials to join other world leaders at this weekend’s Charlie Hebdo photo-op in Paris. Meanwhile, few registered that 2,000 people died in Nigeria over the weekend at the hands of Boko Haram. Twenty died and many more were injured when a maybe ten year-old suicide bomber attacked a Nigerian market. Matt Schiavenza of the Atlantic notes that the story appeared on page A8 of Saturday’s New York Times. The massacre of civilians made page A6. Schiavenza explains why:
The main difference between France and Nigeria isn’t that the public and the media care about one and not the other. It is, rather, that one country has an effective government and the other does not. The French may not be too fond of President Francois Hollande—his approval ratings last November had plunged to 12 percent—but he responded to his country’s twin terror attacks with decisiveness. Not so Nigeria’s Goodluck Jonathan. Since assuming the presidency in 2010, Jonathan has done little to contain Boko Haram. The group emerged in 2002 and has consolidated control over an area larger than West Virginia. And it’s gaining ground. Perversely, the seemingly routine nature of Nigeria’s violence may have diminished the perception of its newsworthiness.
Jonathan’s failure to confront Boko Haram, of course, is nothing new. Nigeria has long been cursed with a corrupt, ineffective government, one perennially unable to translate the country’s vast oil wealth into broad-based prosperity. During his campaign for re-election—Nigerians go to the polls on February 14—Jonathan has vowed to tackle his country’s problem with graft. …
You know, one way to read that is, Goodluck Jonathan means to tackle his country’s lack of broad-based prosperity with more graft—just as the corrupt, ineffective government the U.S. is cursed with has taught him by example. With the Republican congress and GOP-controlled state legislatures misleading the way, we’ll all be saying “Je suis Nigeria” in no time.
The upside? Maybe the world press will start ignoring our mass killings.
(Cross-posted from Hullabaloo. h/t Josh Holland)
So many of those stories, if not about personal redemption proper, are about cynics and misanthropes rediscovering a connection with the rest of humanity. With an economy out of whack, and with a justice system glaringly separate and unequal — one rigged for the rich and powerful, and another for the rest — there are probably enough Scrooges and Potters in this country to keep the Ghosts of Christmas busy 365-1/4 nights a year.
But with Ghosts of Christmas in short supply, Lynn Stuart Parramore of AlterNet’s New Economic Dialogue Project project believes bringing back a sense of shame in these Dickensian times might help hasten the revolu … um, redemption:
History shows that in cases when the law or public consensus has rendered an act reprehensible, society has contrived an impressive array of shaming devices — the dunce cap, the pillory, ducking chairs to plunge the guilty into rivers and ponds and tarring and feathering. The idea, of course, is to not only punish the culprits but also to deter other potential wrongdoers from following suit.
What would be appropriate for CEOs who pinch the wages of their employees while earning hundreds of times more than the lowest paid among them? A scarlet G for “greed” sewn to their lapels? Don’t laugh: Some judges have been known to get creative with sentencing when the ordinary route of punishment doesn’t seem to work. A Los Angeles Times op-ed noted that a judge in La Habra, California, ordered a slumlord to live in his own rundown building under house arrest for two months, and a Cleveland judge sentenced a man who had bullied a neighbor and her handicapped children to stand on the side of the highway carrying a sign describing his crimes. Perhaps a judge equipped with the latest CEO pay disclosures could sentence some corporate titan found guilty of stealing wages to live on the salary of his lowest-paid employee for a time. There is something rather satisfying about ideas like that.
Dickens himself might approve.
(Cross-posted from Hullabaloo.)
Since the GOP took over in North Carolina in 2011, we’ve been warning about efforts by industry and ALEC to privatize public schools and public infrastructure:
Public private partnerships are a hot, new investment vehicle. PPPs are a way for getting public infrastructure — that you, your parents, and their parents’ parents paid for and maybe even built with their own hands — out of public hands and under the control of private investors who are more than happy to sell your own property back to you at a tidy profit. A turnpike here, an airport there, or your city’s water system.
Psst. Hey, bud. C’mere. I got this bridge in Manhattan …
In fact, the Macquarie Group is “buying” a bridge in Manhattan. As the nature of public-private partnership deals (P3s) for new highway expansions became clear, both the left and the right have found a common adversary: kleptocrats stripping America for parts.
David Dayen wrote yesterday at Salon about Sen. Elizabeth Warren’s opposition to investment banker, Antonio Weiss, President Obama’s nominee for Treasury Department undersecretary for domestic finance. One of Weiss’ biggest clients is Brazilian private equity fund 3G. Dayen describes deals that would make Paul Singer blush. (Okay, maybe not.) They seem almost designed to reward failure:
The deals also exhibit the modern hallmark of corporate America: financial engineering. Decisions are made to satisfy shareholder clamoring for short-term profits rather than any long-term vision about building a quality business. The manager class extracts value for their own ends, and the rotted husk of the company either sinks or swims. It doesn’t matter to those who have already completed the looting.
Bill Moyers’ guest, historian Steve Fraser, deconstructs how the second Gilded Age differs from the first. Then, people banded together and rose up to challenge their newfound serfdom. But these are “acquiescent times,” says Fraser. We live in a fable of capitalism as “a democracy of the audacious who will make it on their own, while in fact most of the people are headed in the opposite direction.”
There is way too much in this conversation to unpack this morning. Fraser’s key obstacle to our exiting the second Gilded Age? Capitalism and freedom have become so conflated that we lack the language to question the current system and to explore alternatives.
BILL MOYERS: You talk about the vocal right. And there’s a powerful movement that seems to like the way the country is going. That seems to think this is the way it ought to be and that Occupy Wall Street and Steve Fraser, and others, they just represent the malcontents of a system that is really working for them.
STEVE FRASER: Yes. It is the consummate all embracing expression of the triumph of the free market ideology as the synonym for freedom. In other words, it used to be you could talk about freedom and the free market as distinct notions. Now, and for some time, since the age of Reagan began free market capitalism and freedom are conflated. They are completely married to each other. And we have, as a culture, bought into that idea. It’s part of what I mean when I say the attenuating of any alternatives.
STEVE FRASER: … there’s a philosopher who said that language is the house of being. It’s where we live. And if you’re living in a language that’s been denuded of some of its key furniture like certain concepts like that, you’re homeless. You have no way, you have no way to challenge even when you’re faced with wholesale larceny. I mean on the part of the major banking institutions. I mean what — let’s call a spade a spade. These were thieves. And yet the we lack the kind of linguistic wherewithal, which is much more, it’s spiritual, to confront it.
Thanks a lot, Milton.
(Cross-posted from Hullabaloo.)
Nicholas Kristof provides an opening this morning to spend more time discussing education with his celebration of Conor Bohan, founder of a college scholarship program for Haitian students: the Haitian Education and Leadership Program (HELP).
“Education works,” Bohan said simply. “Good education works for everybody, everywhere. It worked for you, for me, and it works for Haitians.”
It’s a noble effort. But it’s the attack on public education in this country that gets under my skin. Kristof explains why:
Over time, I’ve concluded that education may be the single best way to help people help themselves — whether in America or abroad. Yet, as a nation, we underinvest in education, both domestically and overseas. So, in this holiday season, I’d suggest a moment to raise a glass and celebrate those who spread the transformative gift of education.
A few days ago, we saw the news of the horrific Pakistani Taliban attack on a school in Peshawar. The Taliban attacks schools because it understands that education corrodes extremism; I wish we would absorb that lesson as well. In his first presidential campaign, President Obama spoke of starting a global education fund, but he seems to have forgotten the idea. I wish he would revive it!
Education corrodes extremism is a pretty concise explanation for why Wall Street has joined forces with the religious right in this country in a cynical effort to undermine public education under the rubric of “choice.” For the Big Money Boyz, the “education market is ripe for disruption.” Education reform is about mining public education and transferring as much as possible of that steady, recession-proof, government-guaranteed stream of public tax dollars to the investor class by expanding charter schools. For the religious right, it’s about shielding their kids from knowledge they perceive as in conflict with their religious views. Like other fundamentalists, they want to keep modernism at bay. Because freedom. And because they resent having their tax dollars fund public education and not their religious schools.