Financial Crisis, Problems of Enforcement - part 1

The Economy is Rotten… But We’ll Survive

(for the time being!)

A report on the latest Coudert Institute seminar

By now, the economy and it’s bi-product, the deficit should be old-hat news, but it has taken the country by storm… even revolutions in the Mid-east can’t drive the issue off the headlines.

The gibberish going on in Congress is Band-Aid medicine… No One wants to give up their entitlement… it’s OK if it’s the other guys benefits, but don’t take mine! There can be no real fix without increased revenue… which means taxation.

With its in-your-face approach to current events, last week’s session at the Coudert Institute was a shock treatment.

We’ve been diddled by the banks… and other big-time players!

This revelation came on a pleasant sunny afternoon in Dale Coudert’s garden…

….Laid out in plain language by Robert Monks, the author of Corpocracy and a lifelong expert on corporate governance together with Richard D. Greenfield, a banking, securities and consumer litigator.

• The financial meltdown was a man-made crisis, triggered by corporate greed. It started with reckless husbanding of the sub-prime mortgages.

• Back in 2001 banks had an investment ratio of 7 to 1…. By 2008 it had jumped to 50 to 1.

• There was no accountability

• Many of the Multi-national corporations are bigger than a country…Only the super 8 powers are larger. We’re talking about corporate giants like Citigroup, Exxon, Goldman Sachs.

• They are largely unaccountable to any country’s laws. They write their own rules. Their leaders are the Emperors of today; they vote salaries to themselves that are obscene. Their Board’s are composed of like-minded corporate cronies that create a buddy system.

• Shareholders can’t shake their control.

• In the USA, their favorite state for incorporation is Delaware, with laws that coddle their transgressions.

• They are not shy to incorporate in tax havens like, The Cayman Islands, Sky, Guernsey

• These modern-day villains fall under the banner of Wall Street…. No wonder it is considered the curse of the 21^st Century.

• No one has been punished. No one has gone to jail.

The Rouge's Gallery

Richards Fuld Jr. Lehman Bros. Sanford Weill CitiBank E. Stanley O'Neil: Merirril Lynch

Lloyd Blanfein Goldman Sachs

In no uncertain terms, Monks and Greenfield implicated the culpritidy of Lloyd Blanfein, Chairman of Goldman Sachs, who, at the onset of the crisis in 2007 received the largest corporate bonus ever of $67.9 Million. Aided by his old colleague Bob Rubin, recently returned to the firm after a stint as Treasury secretary under Clinton. (A recent quote in a financial paper) “The Treasury secretary who presided over the now-bursting bubble might be a logical subject for some of the discussion out there right now. But no: Robert Rubin is invisible these days, lost in the lazy media impulse to blame whoever’s in power now. Rubin along with Phil Gramm, helped kill legislation to make derivatives more transparent”

Sanford Weill, chairman of Citigroup, was one of the worst. His “culpritity” in the crisis that burst the bubble has his fingerprints all over it’s creation.…He spearheaded the sub-prime dilemma by blandly ignoring the risks: Mortgages going to unqualified borrowers, inflated land and real estate values. They traded these amongst themselves, bundling good loans into the bad and creating false profits and values.

Richard S. Fuld, Jr., the arrogant chairman of the now defunct Lehman Bros. The 4th largest investment bank in the USA…. A March 2010 report by the court-appointed examiner indicated that Lehman executives regularly used cosmetic accounting gimmicks at the end of each quarter to make its finances appear less shaky than they really were.

E. Stanley O’Neal, chairman of Merrill Lynch, now a subsidiary of Bank of America, on November 2007, announced it would write-down $8.4 billion in losses associated with the national housing crisis… He got fired for this.

The system had been rotten for years, ever since President Reagan started to strip away regulations, it left the banks and investment bankers to forage on their own. No one paid attention to the underpaid regulators, who were easily bought and brought into the banking system. The bank’s own mandated regulatory systems were ignored. It all imploded by 2007. All signs of their flagrant miss-management and cover-ups were ignored.

In 2009, President Obama considered these culprits too large to fail and bailed them out….. He paid bitterly for this in the 2010 elections.

$$$$$$$

The bad news was sweetened by an after dinner cabaret featuring my old friend Robert Hardwick and his trio accompanying Nancy Anderson and Patricia Cook, who sang songs with monetary themes…. A surreal ending to a heavy dose of reality.

The next morning’s session was down-to-earth…. I’ll tell you about this in my next letter.

P.S. Bob Monks and Dick Greenfield are no strangers to big money…Greenfield, as a class-action lawyer has made millions while the public he battles for make pennies. Monks is old money…Both are familiar with and on a first name basis with the culprits; they went to the same prep schools and colleges; sit on the same charities and eat at the same dinner parties.