This weekend in transit I read analyst Mike Mayo’s new book: “Exile on Wall Street” which I enjoyed and recommend as a good inside glimpse of the financial community. On a plane I was also able to finally watch the HBO movie “Too Big to fail”. I had heard this film was too sympathetic to the investment bankers that orchestrated and profited from the leverage bubble. It might be a little kind to Hank “Bazooka” Paulson, but I thought it was entertaining and offers some meaningful insight on the “big men in little coats” that were pulling the levers of the bailout frenzy in the fall of 2008. (Also gives you some sense of the horror and stress they must be facing now as the financial system rolls into the next phase of Lehman-like-triggers.)
Meanwhile as many cities have been arresting hundreds of Occupy protestors over the past few days, Rolling Stone’s Matt Taibbi brings our attention to one of many outrageous examples of inequality and unfairness in present thinking and policies: a single mother of two was sentenced to three years in jail for lying on a food stamp application. Apparently she did not disclose that she had previous drug convictions which, in some states makes a person ineligible for food. Here is Taibbi:
Anita McLemore…lied to feed her children, gave back every penny of her “fraud” when she got caught, and is now going to do three years in prison…
But you can be a serial fraud offender like Citigroup, which has repeatedly been dragged into court for the same offenses and has repeatedly ignored court injunctions to abstain from fraud, and this does not make you ineligible to receive $45 billion in bailouts and other forms of federal assistance.
This is the reason why all of these settlements allowing banks to walk away without “admissions of wrongdoing” are particularly insidious. A normal person, once he gets a felony conviction, immediately begins to lose his rights as a citizen.
But white-collar criminals of the type we’ve seen in recent years on Wall Street – both the individuals and the corporate “citizens” – do not suffer these ramifications. They commit crimes without real consequence, allowing them to retain access to the full smorgasbord of subsidies and financial welfare programs that, let’s face it, are the source of most of their profits.
Why, I wonder, does a bank that has committed fraud multiple times get to retain access to the Federal Reserve discount window? Why should Citigroup and Goldman Sachs get to keep their status as Primary Dealers of U.S. government debt? Are there not enough banks without extensive histories of fraud and malfeasance that can be awarded these de facto subsidies?