Conspicuously absent from the international dialogue on global financial disaster is the idea of criminal intent and/or negligence. Thus far, mainstream media pundits unanimously excuse the motivation behind the insinuation of evermore complex derivative math into the financial matrix as so much ignorance and therefore accident.
That was until this weekend, when federal authorities from New Jersey, Brooklyn and Manhattan issued subpoenas for 12 executives who were among the top management of Lehman Brothers prior to its filing for bankruptcy on September 15th.
I expect the investigation and subsequent charges to be filed, if any, will amount to a wrap across the knuckles and the projected impression that the perpetrators of the largest fraud in history (still ongoing) have now been brought to justice and punished appropriately.
This expected to replace the outrage simmering just below the public protest widely expressed in commentary and blogs that refuses to accept the idea that the whole debacle can be attributed to bubbles, errors in judgment and other blameless circumstances.
The “we didn’t know any better” argument that seems to underlie all of the public statements by G8 banking and government officials is playing very thinly to the ears of an impoverished public.
These subpoena’s are the first indication that there may be some public inquiry to assign blame, but as usual, it addresses only the individuals behind certain specific events and companies in the long chain that has been this disaster, and fails to scrutinize the layer of bureaucracy that facilitated the actions of the corporations within their regulatory structures.
It is precisely the absence of any such disection that threatens not only to prolong the downward spiral, but renders impossible the identification and prosecution of the perpetrators of those unlawful acts. Still open also are the byproduct legal loopholes through which these nimble felons regularly flee anonymously.
There have been references to “fraud” in numerous essays written in the last few weeks, but I have yet to find a serious discussion underway of who could/should be charged with what.
There has been a lot of discussion about the causes of our current economic pickle, and the PR machine for Wall Street that is the mainstream media authoritatively points to the “credit crunch” as a cause, or the “real estate bubble”, or the “commodities bubble”, or Asset Backed Commercial Paper, or myriad other “causes” which, when considered in the light of measured reason reveal themselves to be symptoms of a much greater infection, not causes.
Identifying the root cause is an exercise in onion peeling. But at the core, one cannot escape the emerging pattern revealing itself through the study of our economic history of the past two hundred years.
Linearly, one could argue that the banks collapsing is a result of the collapse of credit lending engendered by the collapse of the ABCP market as a result of the real estate bubble bursting which happened because of an excess of cheap credit offered by mortgage companies who knew they could package up a liability and sell it as an asset to a big bank.
But its precisely this muddled and superficial reasoning that is the objective and tool of this massive scheme’s complicated yet clear intent. Layer upon layer of financial machinery is designed to drown out the true root cause of this problem, to wit, the intentional and criminal intent of the world’s top elected officials and their banking counterpart accomplices to defraud the general public in pursuit of self-enrichment.
The criminal code of the United States is clear in its definition of fraud and in most cases relating to currency or bonds or anything to do with banking the penalty maxes out at 30 years for each offence. The operative words in determining criminal culpability in the penal code however are “authorized” and “intent”.
Since everybody in the molecular chain comprising this elaborate and many faceted fraud were probably duly authorized from the appropriate agent of government or banking just above, their level of awareness, participation or intent will not easily be elicited in a court of law. In the administrations of the U.S. Federal Reserve, Treasury, or any of the large banks still standing, just opening one’s mouth to yawn is occasion to invoke the fifth.
And who needs the fifth? If you crawl far enough up the food chain you invariably encounter sovereign immunity, which marks the end of the road in terms of gathering evidence for fraud against the United States management team.
Any evidence in this investigation is going to be circumstantial, and the architects of the fraud are fully cognizant of that fact. It may very well be that our satisfaction of justice will have to be limited to a conviction by the court of public discourse.
Ten years ago this month the chairperson of the Commodities Futures Trading Commission (CFTC), Ms. Brooksley Born, testified before the U.S. House of Representatives Committee on Banking and Financial Services in the collapse of Long Term Capital Management.
Ms. Born was had recommended to that committee that certain rules governing the transaction of futures trading be applied to the over the counter (OTC) derivatives market that allowed LTCM to leverage $1Billion in capital into $125 Billion in investments and have $1.25 Trillion in swaps contracts on its books.
Instead, the Committee on Banking and Financial Services decided to enact the Financial Markets Reassurance Act of 1998, which expressly forbade the CFTC from making any regulatory changes that applied to the OTC derivatives market.
In a letter to the Committee Chairman, James Leach, Deputy Secretary Lawrence H. Summers of the Public Affairs office suggested,
“While there are many issues to be studied, we urge the Congress to pass the Financial Markets Reassurance Act of 1998. This legislation will decrease rather than increase systemic risk, because it will reduce legal uncertainty with respect to certain OTC derivatives and hybrid instruments. In addition, the standstill legislation will allow the CFTC to take appropriate action in response to a market emergency. I would note that the conferees on the Appropriations for Agriculture have preliminarily decided to include a version of this bill.”
Summers went on to become Treasury Secretary and then the president of Harvard University. During his tenure as president, David Rockefeller bequeathed a $100 million donation to the school – an all time record. David Rockefeller was a director of Chase Manhattan bank, which was swallowed by J.P. Morgan. Now J.P. Morgan Chase is one of the biggest players in the OTC derivatives market.
You’ll never find any suggestion in mainstream media that Summers had the interests of the Rockefellers and Chase Manhattan Bank ahead of those of the citizens of the United States, who, as the country’s CFO, you’d think he’d have foremost.
These subtle connections among the US institutions of government, education and industry are the greased rails upon which this fraud train continues to hammer along, clickety-clack, with nary a grand jury judge or investigative journalist at any of the crossroads to impede progress. That train will just keep on going, gathering the world’s resources and assets and revenues to its limitless freight capacity so the rapacious guests who occupy the seats in the dining cars whose appetite knows no end will never have to end their banquet.
Until, that is, we figure out a way to derail it. Until that happens though, don’t let yourself be lulled into confusion by the perception managers at Faux News.