Bank Robbery

(11 am. – promoted by ek hornbeck)

Cross posted fromThe Stars Hollow Gazette

Cenk talks with “Rolling Stone” contributing editor Matt Taibbi about his new piece on the Obama administration’s lack of prosecutions for white collar crime. “If they pushed all these prosecutions, investors worldwide would see how epidemic corruption is on Wall Street,” Taibbi says. “They’re afraid of what the international reaction would be.” Cenk says while he doesn’t think President Obama is personally corrupt, “It’s the system that corrupts all these politicians.”

Strongly recommend this piece at the Huffington Post by Jeff Connaughton, a former aide to Senator Ted Kaufman. Jeff is one of the smartest guys on the Hill and is particularly strong on issues surrounding Wall Street and the regulatory system. In this piece, he takes apart the oft-stated mantra that what Wall Street firms did during and after the crisis was maybe unethical, but not illegal.

He takes particular aim at Barack Obama, who recently tossed that line out on 60 Minutes in what I thought was one of the real low moments of his presidency. Here’s Jeff’s take:

   Speaking in Kansas on December 6, (Obama) said, “Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender.” Just five days later on 60 Minutes, he said, “Some of the least ethical behavior on Wall Street wasn’t illegal.” Which is it? Have there been no prosecutions because Wall Street acted legally (albeit unethically)? Or did Wall Street repeatedly violate major anti-fraud laws (and should thus find itself in the dock)?

   The President is confusing “legal” with “difficult to prosecute successfully.”

The notion that what Wall Street firms did was merely unethical and not illegal is not just mistaken but preposterous: most everyone who works in the financial services industry understands that fraud right now is not just pervasive but epidemic, with many of the biggest banks committing entire departments to the routine commission of fraud and perjury – every single one of the major banks, for instance, devotes significant manpower to robosigning affidavits for foreclosures and credit card judgments, acts which are openly and inarguably criminal.

A good friend of mine sent me a link to a small story last week, something that deserves a little attention, post-factum.

The Bloomberg piece is about J.P. Morgan Chase winning a bid to be the lead underwriter on a $400 million bond issue by the state of Massachusetts. Chase was up against Merrill for the bid and won the race with an offer of a 2.57% interest rate, beating Merrill’s bid of 2.79. The difference in the bid saved the state of Massachusetts $880,000. [..]

Except in four out of five cases, it still doesn’t happen that way. From the same piece [emphasis mine]:

   Nationwide, about 20 percent of debt issued by states and local governments is sold through competitive bids. Issuers post public notices asking banks to make proposals and award the debt to the bidder offering the lowest interest cost. The other 80 percent are done through negotiated underwriting, where municipalities select a bank to price and sell the bonds.

By “negotiated underwriting,” what Bloomberg means is, “local governments just hand the bid over to the bank that tosses enough combined hard and soft money at the right politicians.” [..]

There is absolutely no good reason why all debt issues are not put up to competitive bids. [..]

[T]his is a bond issue, not rocket science. In most cases, all the top investment banks will offer virtually the same service, with only the price varying. Towns and cities and states lose billions of dollars every year allowing financial services companies to overcharge them for underwriting.