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Problems in the Kingdom of Capitalism 4 comments
The first, By Arianna Huffington (here) describes how JP Morgan (JPM) connived to mislead Jefferson County, Alabama to further its own profit. Some of that actions cited include bribery of county officials. The SEC has reached a settlement with JPM for a $25 million fine and the cancellation of over $600 million in fees the county owed JPM for switching their assets from stable fixed interest bonds into high fee arrangements with bonds hedged by derivatives. The new investments blew up and virtually bankrupted the county.
So JPM was let off the hook for this larceny by canceling the fees they had claimed for robbing the county and a $25 million wrist slap. No wrong doing was admitted.
Arianna also discusses at length the shady details of the Bank of America acquisition of Merrill Lynch.
In the second article (here), George Soros describes his view of what is wrong with capitalism and how he thinks it should be fixed. The short note at The Huffington Press contains a link to a longer article at Project Syndicate (here). He says that a new conference along the lines of the Bretton Woods Conference of 1944 which defined the structure of international capitalism that has been extant for the past 65 years. This new conference would, according to Soros, have to redesign the international financial system from the ground up.
So we have a case of one article that describes how financial firms have gamed the financial system and a second case that says, essentially, that it's not the games that need to be corrected, it is the system.
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This post has 4 comments:
Yes the Huffington Post comments are right on the money. This whole charade of "admit no wrong", pay a relatively nominal fine even if it is in the millions or billions, and walk away to do it yet again is precisely the problem.
First, the criminal companies can easily recover the fines through additional fraud and wrongful acts in the future and you can bet that they do. Secondly, the executives and company personnel know that they will not go to jail and will not lose substantial personal assets and perks. Therefore they have every incentive to keep doing it, over and over again. The reality is that financial criminals actually do more harm and damage to a much larger segment of society than do even violent criminals who do horrific crimes but affect only a relatively small number of people even thought the harm they do is extreme for the small number of people.
These cases of financial malfeasance should be handled just like Watergate. First get the Plumbers who actually did the work, then get the corporate executives who authorized it (white house staff), then get the leader (Nixon) who is responsible for the whole organization.
The penalties and personal asset loss of financial criminals needs to become so severe as to literally make the risk of getting caught simply not worth the risk.
I'm afraid the only solution is for the government to view business as the mafia and to police the business world as if it is organized crime (which it is). Only fear of REAL legal retribution will clean up the business world.
We tried an alliance between the government and business -- and it produced state capitalism, a form of statism, or fascism. Now we have to separate business and government -- no longer in the same bed together, no longer covering for each other.
Punish business crime like we should be punishing street crime. Use the Rico Laws to strip white-collar criminals down to skin and bones -- and send them away to live with Madoff.
On Nov 10 01:04 AM untrusting investor wrote:
> John,
> Yes the Huffington Post comments are right on the money. This whole
> charade of "admit no wrong", pay a relatively nominal fine even if
> it is in the millions or billions, and walk away to do it yet again
> is precisely the problem.
>
> First, the criminal companies can easily recover the fines through
> additional fraud and wrongful acts in the future and you can bet
> that they do. Secondly, the executives and company personnel know
> that they will not go to jail and will not lose substantial personal
> assets and perks. Therefore they have every incentive to keep doing
> it, over and over again. The reality is that financial criminals
> actually do more harm and damage to a much larger segment of society
> than do even violent criminals who do horrific crimes but affect
> only a relatively small number of people even thought the harm they
> do is extreme for the small number of people.
>
> These cases of financial malfeasance should be handled just like
> Watergate. First get the Plumbers who actually did the work, then
> get the corporate executives who authorized it (white house staff),
> then get the leader (Nixon) who is responsible for the whole organization.
>
>
> The penalties and personal asset loss of financial criminals needs
> to become so severe as to literally make the risk of getting caught
> simply not worth the risk.
>
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