• Monthly
  • $25
  • $50
  • $100
  • $other
  • use PayPal

ONE WEEK TO DOUBLE YOUR DONATION!

A generous CounterPuncher has offered a $25,000 matching grant. So for this week only, whatever you can donate will be doubled up to $25,000! If you have the means, please donate! If you already have done so, thank you for your support. All contributions are tax-deductible.
FacebookTwitterRedditEmail

Totally Corrupt America

Last March I reviewed Matt Taibbi’s important book Griftopia, an entertaining account of the through-going financial fraud that gave us the financial crisis.  Taibbi shows that the US “superpower” can match any third world backwater in the magnitude of greed and fraud that is endemic in business and government. Taibbi’s Griftopia was published last year. This year Henry Holt publishers have provided us with Gretchen Morgenson and Joshua Rosner’s Reckless Endangerment.

Morgenson and Rosner tell the story again, but with less drama and provocation. Possibly, it might be more acceptable to those gullible Americans who wrap themselves in the flag and refuse to believe that their country could ever knowingly do anything that is wrong.

I am not suggesting that Morgenson and Rosner pull their punches.  To the contrary, the authors deliver enough knockouts to be contenders with Taibbi as world champions in exposing the reckless  fraud that the US financial sector and its regulators now epitomize.

The financial crisis, which is very much still with us, did not result from accident or miscalculation; neither did it result because of a flaw in Alan Greenspan’s theory, as he told Congress when a feeble effort was made to hold him accountable.   It was the intentional result of people motivated by short-term profits who wanted to get theirs and get out.

As Reckless Endangerment shows, fraud characterized every stage of the process from the fraudulent borrower incomes and credit scores that mortgage issuers gave to unqualified buyers, through the securitization of the mortgages and their triple-A investment grade ratings by the rating agencies (Standard & Poor’s especially, but also Moody’s and Fitch) to the investment banks that sold what the banks knew was junk to investors around the world as investment grade securities.  Indeed, Goldman Sachs was simultaneously betting against the mortgage derivatives that it was selling to clients.

Investment banks, such as Goldman Sachs, which once considered it a matter of honor to represent the interests of customers, took advantage of the trust that had been built up in the past to commit fraud against customers in order to advance the banks’ short-term profits and the out-sized multi-million dollar managerial bonuses that these fraudulent profits produced.

Morgenson and Rosner provide a number of unique accounts of how those benefitting from fraud were able to defeat laws that were passed that would have held them to account. For example, the state of Georgia passed perfect legislation that held predatory lending to account. William J. Brennan Jr. and Georgia Governor Roy E. Barnes got the Georgia Fair Lending Act through the state legislature. It was a model for other states.  As the federal regulators had thrown in the towel, the state laws would have prevent the worst part of the financial crisis, it not prevented the crisis altogether.

The Georgia law only lasted a few months, because the rating agencies saw that their enormous profits from issuing fraudulent investment grade ratings were threatened by the law. The corrupt rating agencies mischaracterized the consumer protection act as a jihad by regulators. Standard & Poor’s declared that it would no longer allow Georgia mortgages to be placed in mortgage securities that it rated.

In other words, Georgia mortgages could no longer be securitized.  This announcement banned Georgia  mortgage lenders from securitization. Thus, the law was overturned, and fraud ran wild.

These kind of mafia strong-armed tactics in order to protect at all costs the short-term mega-bonuses that drove the totally fraudulent system have never been held accountable or punished.  Totally innocent people are held indefinitely and tortured by the US government for no other reason than to convince the gullible public that they are endangered by terrorists, but those who wiped out the home ownership and retirement pensions of millions of Americans now hold high and honorable positions on corporate boards and US regulatory agencies.

Federal regulatory agencies totally failed. Brooksley Born tried to use her statutory authority to regulate over-the-counter derivatives, but she was blocked by the Federal Reserve chairman, the US Treasure secretary, and the SEC chairman and forced to resign. As University of Chicago Nobel economist George Stigler predicted, regulatory agencies are captured by those who are intended to be regulated.  This was the case.

Regulators turned a blind eye to obvious criminal fraud, and were rewarded with lucrative positions in the financial community. The same for the US senators and representatives who repealed Glass-Steagal and other financial regulations.

For example, former US senator Phil Gramm who spearheaded the repeal of the Glass-Steagall Act, which separated commercial from investment banking, the repeal of which set up the financial crisis, was rewarded by being made vice chairman of the mega-bank UBS, a Swiss global financial services company.

What Taibbi, Morgenson and Rosner make clear is that while monster criminals continue to collect their multi-million dollar annual incomes, depressed single mothers, deserted by the men who fathered their child, are sent to prison for having small quantities of illegal drugs to boost their depressed spirits, and their children are put out to adoption.

This is “justice” in America where there is “freedom and democracy.”

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

More articles by:

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order.

bernie-the-sandernistas-cover-344x550
October 16, 2019
Patrick Cockburn
How Turkey’s Invasion of Syria Backfired on Erdogan
Chitrangada Choudhury – Aniket Aga
How Cotton Became a Headache in the Age of Climate Chaos
Jack Rasmus
US-China Mini-Trade Deal: Trump Takes the Money and Runs
Michael Welton
Communist Dictatorship in Our Midst
Robert Hunziker
Extinction Rebellion Sweeps the World
Peter A. Coclanis
Donald Trump as Artist
Chris Floyd
Byzantium Now: Time-Warping From Justinian to Trump
Steve Klinger
In For a Dime, in For a Dollar
Gary Leupp
The Maria Ramirez Story
Kim C. Domenico
It Serves Us Right To Suffer: Breaking Down Neoliberal Complacency
Kiley Blackman
Wildlife Killing Contests are Unethical
Colin Todhunter
Bayer Shareholders: Put Health and Nature First and Stop Funding This Company!
Andrés Castro
Looking Normal in Kew Gardens
October 15, 2019
Victor Grossman
The Berlin Wall, Thirty Years Later
Raouf Halaby
Kurdish Massacres: One of Britain’s Many Original Sins
Robert Fisk
Trump and Erdogan have Much in Common – and the Kurds will be the Tragic Victims of Their Idiocy
Ron Jacobs
Betrayal in the Levant
Wilma Salgado
Ecuador: Lenin Moreno’s Government Sacrifices the Poor to Satisfy the IMF
Ralph Nader
The Congress Has to Draw the Line
William A. Cohn
The Don Fought the Law…
John W. Whitehead
One Man Against the Monster: John Lennon vs. the Deep State
Lara Merling – Leo Baunach
Sovereign Debt Restructuring: Not Falling Prey to Vultures
Norman Solomon
The More Joe Biden Stumbles, the More Corporate Democrats Freak Out
Jim Britell
The Problem With Partnerships and Roundtables
Howard Lisnoff
More Incitement to Violence by Trump’s Fellow Travelers
Binoy Kampmark
University Woes: the Managerial Class Gets Uppity
Joe Emersberger
Media Smears, Political Persecution Set the Stage for Austerity and the Backlash Against It in Ecuador
Thomas Mountain
Ethiopia’s Abiy Ahmed Wins Nobel Peace Prize, But It Takes Two to Make Peace
Wim Laven
Citizens Must Remove Trump From Office
October 14, 2019
Ann Robertson - Bill Leumer
Class Struggle is Still the Issue
Mike Miller
Global Climate Strike: From Protest To Power?
Patrick Cockburn
As Turkey Prepares to Slice Through Syria, the US has Cleared a New Breeding Ground for Isis
John Feffer
Trump’s Undeclared State of Emergency
Dean Baker
The Economics and Politics of Financial Transactions Taxes and Wealth Taxes
Jonah Raskin
What Evil Empire?
Nino Pagliccia
The Apotheosis of Emperors
Evaggelos Vallianatos
A Passion for Writing
Basav Sen
The Oil Despots
Brett Wilkins
‘No Friend But the Mountains’: A History of US Betrayal of the Kurds
John Kendall Hawkins
Assange: Enema of the State
Scott Owen
Truth, Justice and Life
Thomas Knapp
“The Grid” is the Problem, Not the Solution
Rob Kall
Republicans Are Going to Remove Trump Soon
Cesar Chelala
Lebanon, Dreamland
Weekend Edition
October 11, 2019
Friday - Sunday
Becky Grant
CounterPunch in Peril?
FacebookTwitterRedditEmail