FacebookTwitterGoogle+RedditEmail

Another Whitewash for Wall Street

by MIKE WHITNEY

Maybe “whitewash” is too bland of a term to apply to the Financial Crisis Inquiry Commission’s (FCIC) report, but it certainly doesn’t break any new ground. Nor does it achieve its real purpose, which is to figure out what triggered the financial meltdown and (hopefully) restore confidence in the system. It fails on both counts, and it’s not hard to see why. The investigative panel was clearly instructed to point out the dangers of insufficient regulation rather than focus on the massive incidents of fraud that were perpetrated by the bankers and other financial kingpins. It’s a clever way of blaming the system instead of the people who were responsible.

Here’s an excerpt from the report that’s been widely circulated in the media. It exposes the FCIC’s real agenda and shows that the commission is little more than a cover up.

“We conclude this financial crisis was avoidable. The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble. While the business cycle cannot be repealed, a crisis of this magnitude need not have occurred. To paraphrase Shakespeare, the fault lies not in the stars, but in us.”

While this seems like an admission that crimes were committed, it’s really just the opposite. The authors are saying “We’re all to blame”, which is pure baloney. The “captains of finance” didn’t simply “ignore warnings” or “fail to question, understand, and manage evolving risks”. They deliberately stole a great deal of money from a great many people. Period. That’s a crime and they need to be held accountable. Unfortunately, the Commission uses the report to obfuscate the facts and confuse the public about what really needs to be done.

There’s a very good summary of the Commission’s approach via e mail on the naked capitalism website. It was written by Matt Stoller. Here’s an excerpt:

“I was on a conference call today with Phil Angelides and Brooksley Born, two commissioners of the Financial Crisis Inquiry Commission. During their unveiling of the FCIC report, they used words like deregulation, leverage, imprudent risk-taking, reckless behavior, failures at credit agencies, and failed regulators. Left out were words like crime, fraud, looting, or a specialized form of looting known as control fraud. At every point reporters asked about their referrals of criminal cases, which someone leaked before the report came out, they demurred. “We are not prosecutors”, said Angelides.

I asked about the criminal nature of the crisis. I said I didn’t want to know about any specific case, but whether they thought that fraud or crime was a core cause of the crisis. This is an important distinction, because the real question at hand is whether you trust the system to correct itself, or whether you believe that the people running the system are the problem and must be removed before we can fix the system. It’s obvious, as you’ll see, that Born and Angelides believe the former.

Neither Born nor Angelides would answer whether accounting fraud or crime was a primal cause of the crisis. The gist of the response was “it’s all in the report,” along with an attempt to pretend like they had discovered the systemic mortgage origination fraud that the FBI discussed in 2004. Born also repeated that they wouldn’t disclose specific cases of criminal referrals, even though I had specifically said that I was not interested in such disclosures. It was a filibuster, and an obvious one at that. I kept pressing, and asked them repeatedly to answer my question, and after the third follow-up Angelides finally said they had to go.

With that, the FCIC has completed the final act of oversight for the last Democratic Congress, and it held true to what Democrats in the last Congress believed. Everyone was at fault for the crisis, but no one is to blame. This was Bush’s line in 2008, that “Wall Street got drunk”, and Obama’s line throughout the Dodd-Frank mark-up. The Republicans went after the GSEs and “regulation”, and the Democrats sadly lamented the tragedy of the crisis. Again, everyone’s at fault, and no one is to blame. I saw high-ranking Democrat Carolyn Maloney brag yesterday about her vote for TARP in the hearing on foreclosures, noting that the Dow busted through 12,000 as a sign of prosperity. This is what they believe, in their bones. There was no theft, only tragedy….(“The FCIC, in Lockstep with the Officialdom, Refuses to Use the “C” Word”, Naked Capitalism)

So, the report is actually a cover up, a way of going over the events in excruciating detail without assigning blame. The whole 500-page rehash could be summarized in two words, “shit happens”. Maybe that’s the best the commission could do, but it’s going to take more than that to restore the public’s confidence in the system.

Market analyst, Jonathan Weil, takes a similar view in an article on Bloomberg last week. Here’s what he says:

“The report’s conclusions were obvious: The financial crisis was man-made and avoidable. Regulators and credit-rating companies blew it. Banks and homeowners borrowed too much. Companies such as AIG and Lehman Brothers had horrible governance. Ethics and accountability broke down. The government panicked when the crisis hit in 2008. And so forth.

The lack of new insights dovetailed with the commission’s non-confrontational approach. More than 700 people granted interviews, most behind closed doors. Only seldom did the panel issue subpoenas….” (“Wall Street’s Collapse to Be Mystery Forever”, Bloomberg)

See? It’s just old wine in new bottles. So, what can we extrapolate from this?

Just what its authors intended, of course. Predatory lending is bad, ethics matter, corporate governance needs watching, and regulations need to be tightened. While this is all true, it doesn’t get to the heart of the matter: Who’s responsible? That’s what the public wants to know. They don’t want to know who sold what CDO to whom. They want justice. That’s all.

Besides, the window for passing new regulations has closed. Much of the Dodd-Frank Bill has already been gutted and, with a new GOP majority in congress, there’s no appetite for new rules to reign in Wall Street. Too Big To Fail banks and financial institutions have gotten bigger, securitization and derivatives remain largely unscathed, the banks will be allowed to write their own guidelines on how they intend to follow the Volcker Rule, and–just last week–the banks won a major victory that will allow them to continue to cook their books into perpetuity. Here’s a clip from the Wall Street Journal:

“The banks got what they wanted. Accounting rule makers on Tuesday dropped a plan to require banks to value loans using market prices.

That means investors will remain reliant on banks’ own views of the worth of their assets. Those judgments proved seriously flawed during the financial crisis and left many with insufficient capital. Taxpayers, who as a result were called upon to bail out numerous institutions, also are left more vulnerable….

Banks generally oppose the use of market prices because, they say, it makes their results more volatile. Their intense lobbying efforts against the proposal likely got a leg up after FASB Chairman Robert Herz, who had supported the plan, unexpectedly departed in August. FASB cited strong opposition it received in public comments in changing course.” (“Banks Have Their Way With FASB”, Wall Street Journal)

So, the banks can continue to deceive shareholders and investors just like before, and anyone who opposes them, like ex-FASB Chairman Robert Herz, will get the boot. This is a system that no longer has the capacity for course-correction, which is why another crisis cannot be far off.

Here’s one last blurp from Bloomberg’s Susan Antilla from an article “The Rich Rest Up as Markets Forget Crisis Lessons”:

“Investor protection is out. Remember all the talk about making the markets safe for investors? Well, get over it. Dodd-Frank instructed the Securities and Exchange Commission to set up five new offices, including one to handle whistleblower cases, and a committee to represent the interests of investors on issues like fees and disclosure. But on Dec. 2, the agency put those efforts on hold because of “budget uncertainty.”

A frozen budget has also forced the SEC to scale back its plans to get up to speed with the dynamics that resulted in the so-called flash crash on May 6, 2010, when the Dow Jones Industrial Average fell almost 1,000 points in a matter of minutes. The agency had planned to hire five math whizzes acquainted with the sorts of financial algorithms involved in the instant meltdown. Instead, it’s settled for one…..

Pandering to business is in. Darrell Issa, the car- alarm millionaire twice accused of auto theft (both charges were dropped), and now the California Republican who is chairman of the House Oversight and Government Reform Committee, sent letters to 150 companies and business trade groups in December asking them which regulations and rules might be restraining job growth. He didn’t really have to ask, because we all know that the answer, of course, is: “All of them.” (“The Rich Rest Up as Markets Forget Crisis Lessons”, Bloomberg)

And, Darrell Issa is not the exception either. He’s the rule, and now he can count on the support of the White House, too. Obama’s anti-regulation rant in the Wall Street Journal last week is a sign that the president is snuggling even closer to big finance. In fact, Obama deliberately timed his WSJ screed to torpedo the FCIC’s report and preempt renewed demands for regulation. What are friends for anyway?

So, the FCIC report can be consigned to the dustbin where it belongs and all the blather about subpoenas, indictments, arrests or prison sentences can end once and for all. It doesn’t take 500 pages to remind people that the law does not apply to the rich and powerful. They already know that.

MIKE WHITNEY lives in Washington state. He can be reached at: fergiewhitney@msn.com.

 

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
May 26, 2017
Friday - Sunday
Anthony DiMaggio
Swamp Politics, Trump Style: “Russiagate” Diverts From the Real White House Scandals
Paul Street
It’s Not Gonna Be Okay: the Nauseating Nothingness of Neoliberal Capitalist and Professional Class Politics
Jeffrey St. Clair
The ICEmen Cometh
Ron Jacobs
The Deep State is the State
Pete Dolack
Why Pence Might be Even Worse Than Trump
Patrick Cockburn
We Know What Inspired the Manchester Attack, We Just Won’t Admit It
Thomas Powell
The Dirty Secret of the Korean War
Mark Ashwill
The Fat Lady Finally Sings: Bob Kerrey Quietly Resigns from Fulbright University Vietnam Leadership Position
John Davis
Beyond Hope
Uri Avnery
The Visitation: Trump in Israel
Ralph Nader
The Left/Right Challenge to the Failed “War on Drugs”
Traci Yoder
Free Speech on Campus: a Critical Analysis
Dave Lindorff
Beware the Supporter Scorned: Upstate New York Trump Voters Hit Hard in President’s Proposed 2018 Budget
Daniel Read
“Sickening Cowardice”: Now More Than Ever, Britain’s Theresa May Must be Held to Account on the Plight of Yemen’s Children
Ana Portnoy
Before the Gates: Puerto Rico’s First Bankruptcy Trial
M. Reza Behnam
Rethinking Iran’s Terrorism Designation
Brian Cloughley
Ukraine and the NATO Military Alliance
Josh Hoxie
Pain as a Policy Choice
David Macaray
Stephen Hawking Needs to Keep His Mouth Shut
Ramzy Baroud
Fear as an Obstacle to Peace: Why Are Israelis So Afraid?
Kathleen Wallace
The Bilious Incongruity of Trump’s Toilet
Seth Sandronsky
Temping Now
Alan Barber – Dean Baker
Blue Collar Blues: Manufacturing Falls in Indiana, Ohio and Pennsylvania in April
Jill Richardson
Saving America’s Great Places
Richard Lawless
Are Credit Rating Agencies America’s Secret Fifth Column?
Louis Proyect
Venezuela Reconsidered
Murray Dobbin
The NDP’s Singh and Ashton: Flash Versus Vision
Ron Leighton
Endarkenment: Postmodernism, Identity Politics, and the Attack on Free Speech
Anthony Papa
Drug War Victim: Oklahoma’s Larry Yarbrough to be Freed after 23 Years in Prison
Rev. John Dear
A Call to Mobilize the Nation Over the Next 18 Months
Yves Engler
Why Anti-Zionism and Anti-Jewish Prejudice Have to Do With Each Other
Ish Mishra
Political Underworld and Adventure Journalism
Binoy Kampmark
Roger Moore in Bondage
Rob Seimetz
Measuring Manhoods
Edward Curtin
Sorry, You’re Not Invited
Vern Loomis
Winning the Lottery is a State of Mind
Charles R. Larson
Review: Mary V. Dearborn’s “Ernest Hemingway”
David Yearsley
The Ethos of Mayfest
May 25, 2017
Jennifer Matsui
The Rise of the Alt-Center
Michael Hudson
Another Housing Bubble?
Robert Fisk
Trump Meets the New Leader of the Secular World, Pope Francis
John Laforge
Draft Treaty Banning Nuclear Weapons Unveiled
Benjamin Dangl
Trump’s Budget Expands War on the Backs of America’s Poor
Alice Donovan
US-Led Air Strikes Killed Record Number of Civilians in Syria
Andrew Moss
The Meaning of Trump’s Wall
FacebookTwitterGoogle+RedditEmail