Juggling Dynamite

Punk Economics – Lessons from the Banking Crisis. Here is a direct video link.

“Guarding against the unthinkable is more necessary than ever in a world home to over $700 trillion in derivatives (including $75 trillion housed at a single institution, Deutsche Bank) and tens of trillions of dollars of debt weighing down sovereign and central bank balance sheets. The unthinkable only has to happen one time to destroy us. It almost destroyed us six years ago. And while the surface of things is telling us that the bull market is intact and another crisis is not imminent, the architecture of the global economy and financial markets remains far more leveraged than before the financial crisis and therefore highly fragile.” —Credit Strategist, author, Michael E. Lewitt, March 2014

They have known about all of these outrageous, flagrant, abusive practices since at least 2009, but it took public anger prompted by Lewis’s “Flash Boys” to finally prod some action from prosecutors. See: NY AG eyes exchanges in High Frequency probe.

We should recall that it took 4 more years of heinous acts and anarchy by investment bankers after the crash of ’29 before policy makers and prosecutors finally took serious action to clean up the snake pit. First the Pecora Commission had to bring the abuses out in a public hearing. Maybe Lewis is a modern day Pecora?

“The New York Attorney General’s office is seeking information from exchanges and alternative trading platforms about their relationships with high frequency trading firms, as part of its probe into allegedly unfair trading practices on Wall Street, according to sources familiar with the situation.

Attorney General Eric Schneiderman’s office is expected to send subpoenas within days to exchanges, one of the sources said on Thursday. The subpoenas will likely focus on how high frequency traders may receive information before other market participants.

Another source said major banks that operate dark pools, or platforms where trades take place out of sight of the rest of the market, have been sent letters asking for information.

The sources spoke this week on condition of anonymity because they were not authorized to discuss the matter publicly.

The major U.S. exchange operators include IntercontinentalExchange Group (ICE.N), Nasdaq OMX Group Inc (NDAQ.O) and BATS Global Markets.”

In his 1939 memoir “Wall Street under oath” Ferdinand Pecora wrote:

“Bitterly hostile was Wall Street to the enactment of the regulatory legislation…had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the banker’s stoutest allies.”

And they still are…so far at least…It is way past time to start calling thieves, thieves and cheats, cheats. Tolerance is killing free markets and hopes for a brighter future.

Reports that Credit Suisse (CS) and BNP Paribas (BNPQY) may be hit with criminal charges stunned Wall Street Wednesday as it potentially marks a dramatic shift in how Federal prosecutors look at the financial services industry.

Since the 2008 crisis and up to and including JPMorgan’s (JPM) settlement for enabling Bernie Madoff earlier this year, U.S. regulators have typically sought to settle cases of alleged misdeeds rather than pursue criminal charges. Typically, the big banks pay a fine without having to admit to any wrongdoing and no senior executives have suffered anything more than, perhaps, deferred bonuses.

In his latest book, The Divide, Matt Taibbi set out to examine why Wall Street has been largely immune from prosecution since the 2008 crisis; that’s in contrast to the S&L crisis of the 1980s — when over 800 bankers went to jail — and the accounting scandals of the early 2000s, when high profile CEOs like Enron’s Jeffrey Skilling, WorldCom’s Bernie Ebbers, Tyco’s Dennis Kozlowski and Adelphia’s John Rigas went to jail for various crimes. Here is a direct video link.

See also: Everything is going wrong on Wall Street for a good summary of the latest criminal antics of the ‘cut a cheque and get away with everything’ banksters.