LILA RAJIVA: The Mind-Body Politic
Individuals Not Ideologies
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Soros, Paulson etc. Under DOJ Probe For Destabilizing Euro
Yes, indeed. One for the good guys!
“The U.S. Justice Department has launched an investigation into whether heavyweight hedge funds including Soros Fund Management, SAC, Greenlight Capital and Paulson & Co. aggressively shorted the euro in recent weeks to destabilise it, the WSJ reported on Wednesday, citing people familiar with the matter.
According to the paper, the department has asked hedge funds to retain trading records and electronic communications relating to the EU currency which needless to say has come under strong selling pressure as a result of the Greek debt crisis. The euro has lost more than 10% since November. It currently trades at $1.3609….”
More at the Wall Street Journal.
I blogged a few days ago about David Einhorn’s holdings, noting his anti-Euro trade; I also noted that without the raids against Allied and Lehman and without his late-in-the day piling onto gold, Einhorn’s record really isn’t as impressive as all the hype about his abilities would lead you to believe.
Feds Uses Bribery, Class-Warfare To Catch Tax Cheats
From CNN, via Lew Rockwell, the latest Federal incentives for snitching and snooping on your fellow citizen:
“In 2006, the IRS really started cracking down on big time cheaters and introduced a new whistle-blower program, in which informants are paid a minimum of 15% and a maximum of 30% of the amount owed.
But there’s a catch: In order to collect a reward, the taxes, penalties and interest in dispute must add up to at least $2 million. And if the suspected tax evader is an individual, his or her annual gross income must exceed $200,000.
So far, the new incentives have been effective. The IRS has received tips from about 476 informants identifying 1,246 taxpayers in fiscal year 2008, the first full year the program was implemented………
Who snitches?: In this program, the most common informants tend to be dissatisfied middle-ranking employees in big companies, said Tim Gagnon, an academic specialist of accounting at Northeastern University……..
Stephen Whitlock, director of the IRS Whistleblower Office, said that informants have had some connection to the taxpayer but they are not always close acquaintances. They have typically been employees, investors or business associates.
He also said many claims are for substantially more than the $2 million threshold and involve businesses or very wealthy individuals.”
My Comment:
In other words, what you have is the IRS incentivizing class-warfare. By dangling a chunk of cash in front of their noses, the government encourages employees to act against their own economic interest on the basis of a non-existent public good.
Non-existent?
Well, yes. Since the government is using its tax revenues mostly to pay off its own friends, to fatten the banks and financiers, loot the tax-payer, murder foreign nationals, and generally mismanage the country, the public interest (in so far as we can ascertain one) may well be better served by not paying taxes.
Tax cheats, while clearly not heroes from a moral standpoint, are also not the villains they’re often made out to be.
The villains are those who constantly demand higher and higher taxes and destroy the productive capacity of this country in pursuit of hubristic and vain schemes that have done nothing but turned a nation built on free enterprise into one enslaved by political patronage…
Tax snitches, as I said, don’t even serve their own economic self-interest. Sure, they get their one-off reward for snitching. But they’ve effectively ended any chance of their being hired by anyone…unless they manage to evade detection.
Any taxes an employer pays to the government must inevitably be passed on to employees and customers. That’s as ineluctable an economic law as any.
Ergo, pay taxes and the Feds get the money….don’t pay and the economy, the customer, or employees eventually get it.
An employee who plumps for snitching is obviously not only treacherous and disloyal as a human being, he’s also an economic fat-head.
Ron Paul On Fed Coverup Of Watergate, Saddam Funding
Statement of Congressman Ron Paul
United States House of Representatives
Statement for the Record
February 25, 2010Madame Speaker, I would like to enter into the record the following letter from Professor Robert D. Auerbach, a professor at the LBJ School of Public Affairs at the University of Texas. This letter provides additional information regarding remarks I made at yesterday’s Financial Services Committee Humphrey-Hawkins hearing, remarks which Federal Reserve Chairman Bernanke categorized as “bizarre.”
I thank Congressman Ron Paul for bringing to the public’s attention the Federal Reserve coverup of the source of the Watergate burglars’ source of funding and the defective audit by the Federal Reserve of the bank that transferred $5.5 billion from the U.S. government to Saddam Hussein in the 1980s. Congressman Paul directed these comments to Federal Reserve Chairman Ben Bernanke at the House Financial Services Hearing February 24, 2010. I question Chairman Bernanke’s dismissive response.
BERNANKE: “Well, Congressman, these specific allegations you’ve made I think are absolutely bizarre, and I have absolutely no knowledge of anything remotely like what you just described.”
The evidence Congressman Ron Paul mentioned is well documented in my recent book, Deception and Abuse at the Fed (University of Texas Press: 2008). The head of the Federal Reserve bureaucracy should become familiar with its dismal practices.
First, consider the Fed’s coverup of the source of the $6300 in hundred dollar bills found on the Watergate burglars when they were arrested at approximately 2:30 A.M. on June 17, 1972 after they had broken into the Watergate offices of the Democratic Party. Five days after the break-in, June 22, 1972, at a board of directors’ meeting of officials at the Philadelphia Fed Bank, it was recorded in the minutes [shown on page 23 of my book] that false or misleading information had been provided to a reporter from the Washington Post about the $6,300. Bob Woodward told me he thought he was the Washington Post reporter who had made the phone inquiry. The reporter “had called to verify a rumor that these bills were stolen from this Bank” according to the Philadelphia Fed minutes. The Philadelphia Fed Bank had informed the Board on June 20 that the notes were “shipped from the Reserve Bank to Girard Trust Company in Philadelphia on April 3, 1972.” The Washington Post was incorrectly informed of “thefts but told they involved old bills that were ready for destruction.”
The Federal Reserve under the chairmanship of Author Burns not only kept the Fed from getting entangled in the Watergate coverup, which the Fed’s actions had assisted, it allowed false statements about bills the Fed knew were issued by the Philadelphia Fed Bank to stand uncorrected. Blocking information from the Senate and House Banking Committees [letters shown in my book, Chapter 2] and issuing false information during a perilous government crisis imposed huge costs on the public that had insufficient information to hold the Fed officials accountable for what they had withheld from the Congress. Had the deception been discovered the Fed chairmen following Burns may have been forced to rapidly implement some real transparency to restore the Fed’s credibility. That would have reduced or eliminated many of the lies, deceptions, and corrupt practices that are described in my book.
The second subject brought up by Congressman Ron Paul is the exposure of faulty examinations of the Federal Reserve of a foreign bank in Atlanta, Georgia through which $5.5 billion was sent to Saddam Hussein that a Federal Judge found to be part of United States active support for Iraq in the 1980s.
On November 9, 1993, several federal marshals brought a prisoner, Christopher Drogoul, into my office at the Rayburn House Office Building of the U.S. House of Representatives. The marshals removed the manacles. Drogoul took off his jump suit and changed into a shirt, tie, and business suit. He immediately looked like the manager of the Atlanta agency with domestic headquarters in New York City of Banca Nazionale. Drogoul had come to testify about a “scheme prosecutors said he masterminded that funneled $5.5 billion in loans to Iraq’s Hussein through BNL’s Atlanta operation. Some of the loans allegedly were used to build up Iraq’s military and nuclear arsenals in the years preceding the first Gulf War.”[1]Drogoul’s “‘off book’ BNL-Atlanta funding to Iraq began in 1986 as financing for products under Department of Agriculture programs.”[2] The loans allegedly had been authorized by the U.S. Department of Agriculture. Since Drogoul told the committee he was merely a tool in an ambitious scheme by the United States, Italy, Britain and Germany to secretly arm Iraq in their 1980-88 war, the testimony was politically contentious and unproven. He was sentenced in November 1993 to 37 months in prison and he had already served 20 months awaiting his sentencing hearing.
U.S. District Judge Ernest Tidwell found that the United States had actively supported Iraq in the 1980s by providing it with government-guaranteed loans even though it wasn’t creditworthy. The judge said such policies “clearly facilitated criminal conduct.”[3]
Gonzalez was drawn to Drogoul’s answer about the Fed examiner who had visited his Atlanta operation. Gonzalez said that:
“At the November 9, 1993 Banking Committee hearing I asked Christopher Drogoul, the convicted official of the Banca Nazionale Del Lavoro agency branch in Atlanta, Georgia, how the Federal Reserve Bank examiners could miss billions of dollars of illegal loans, most of which ended up in the hands of Hussein.
Mr. Drogoul stated:
“The task of the Fed [bank examiner] was simply to confirm that the State of Georgia audit revealed no major problems. And thus, their audit of BNL usually consisted of a one or two-day review of the state of Georgia’s preliminary results, followed by a cup of espresso in the manager’s office.”
Gonzalez was appalled at the of lack of effective examination of a little storefront bank and also appalled by the gifts exchanged by officers of the New York Federal Reserve and the regulated banks in New York City where the main U.S. office of BNL was located. A description of what followed is in my book.
The Fed voted in 1995 to destroy the source transcripts of its policy making committee that had been sent to National Archives and Records Administration. Chairman Alan Greenspan had the committee vote on this destruction, telling the members: “I am not going to record these votes because we do not have to. There is no legal requirement.” (p. 104 in my book.) Greenspan thus removed any fingerprints on this act of record destruction. Donald Kohn, who is now Vice Chairman of the Board of Governors at the Federal Reserve, answered some questions I had sent to Chairman Greenspan about this destruction. Kohn replied in a letter on November 1, 2001 to me at the University of Texas that they had destroyed the source records for 1994, 1995 and 1996, they did not believe it to be illegal and there was no plan to end this practice. That is one reason why the Federal Reserve audit supported by Congressman Ron Paul is needed. The Fed must stop destroying its records.
[1] Marcy Gordon, “Banker Imprisoned in BNL Case Tells Story to House Committee,” The Associated Press, November 9, 1993.
[2] U.S. Newswire: “Former Executive of Atlanta Agency of Italian-Owned Bank Pleads Guilty to Conspiracy”, from U.S. Department of Justice, Public Affairs, June 2, 1992.
[3] Peter Mantius, “Drogoul given 37 months Judge in BNL case also blasts actions of U.S. prosecutors,” The Atlanta Journal and Constitution, December 10, 1993, Section A, p. 12.
Robert Auerbach is Professor of Public Affairs at the Lyndon Baines Johnson School of Public Affairs, The University of Texas at Austin. He was an economist with the House of Representatives Financial Services Committee during the tenure of four Federal Reserve Chairmen: Arthur Burns, William Miller, Paul Volcker, and Alan Greenspan. Auerbach also served as an economist in the U.S. Treasury’s Office of Domestic Monetary Affairs during the first year of the Ronald Reagan administration and as a financial economist with the U.S. Federal Reserve System. Auerbach has been a professor of economics at the American University in Washington, D.C. (1976-83), and a professor of economics and finance at the University of California-Riverside (1983-93). He has written numerous articles, and two textbooks in banking and financial markets. He received two Masters degrees in economics, one from the University of Chicago and one from Roosevelt University, where he studied under Abba Lerner, and a Ph.D. in economics from the University of Chicago, where he studied under Milton Friedman.
Soros: Gold In Bubble; But Keep Stimulus Going…..
Always nice to see people talk out of both sides of their mouth.
Here is currency speculator George Soros (ex of legendary hedge-fund Quantum) at the World Economic Forum at Davos:
“When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.”
So far so good. Mis-price money (cheap interest rates) and people don’t want to keep their savings in it. They want it in something that isn’t subject to mis-pricing (so they hope) - hence gold.
But then Soros shows how disingenuous he’s being by adding this:
“I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.”
That is, he’s suggesting running more deficits and keeping the money spigot going, just the thing that’s caused the gold price to rise.
So how do we understand this?
Gold is due for a technical correction, but it’s also probably responding to deflation in the general economy. It’s not going down that fast, because a lot of people are also buying it speculatively.
That’s the tug of war.
Meanwhile, who know what Soros’ holdings are and who knows what his motivations are in making such contradictory statements.
But anyone who takes these sorts of pronouncements as any kind of lead for their own investments/speculations, should be prepared to part fairly soon from their money.
Policing Wall Street…
From Black Star News:
“In the 1980s there was one great stock fraud, which captured the imagination of the American public. That stock fraud involved a chain of electronics stores, which went by the name of “Crazy Eddie.” These stores were founded by Eddie Antar (“Crazy Eddie”) of Brooklyn. “Crazy Eddie” used radio advertising to hype his stores. In the end the retail chain of “Crazy Eddie” went bankrupt; a $300 million fraud.
At the center of this fraud was Sam E. Antar, a cousin of “Crazy Eddie” Antar and the Chief Financial Officer of the “Crazy Eddie” retail chain. Currently Sam E. Antar has publicly stated that he has reformed and is now lecturing, without charge, on the “dangers” of crime. It is strange that Sam E. can afford this largesse because he filed for bankruptcy several years ago. He claims to be supported by the real estate interests of his wife’s family.
Recently he was the focus of an article, “Crazy like a fox,” by Aaron Elstein, which appeared in the October 4, 2009 issue of Crain’s New York Business. Once a felon, always a felon. Yet Elstein referred to Sam Antar as “a former felon.” That alone shows his bias and makes the reader believe that rather than an article the piece is meant to rehabilitate Antar. A felon is someone convicted of a felony. There is no such thing as a former felon.
Elstein also reported: “Mr. Antar admits working for a short-seller before. He did research for Barry Minkow, an investor who served prison time in the 1990s for running a fraudulent carpet cleaning service.” This is like saying “The titanic ran into an ice cube.” There are several understatements in the “article.”
Sam Antar not only worked for Barry Minkow but contributed $250,000 to Minkow’s Fraud Discovery Unit, which supposedly ferrets out false information in filings by publicly listed companies. Antar claims that this $250,000 was his wife’s money. Antar’s wife must be the most generous woman in the world- doling out $250,000 as a gift to her husband’s friend.
Here’s what happened: Minkow finds false information in SEC filings. Minkow then sells the stock short, in hopes that the stock price declines. Minkow then releases his findings. Minkow then buys back the stock after the price has declined. By that very fact alone, Minkow is not an “investor.” Minkow is a short seller.
As the reader can readily determine someone is making money from this arrangement. What’s not stated in the article is that Minkow did not just run “a fraudulent carpet cleaning service.” Minkow’s carpet cleaning business was called ZZZZ Best, a stock fraud that defrauded the American public of hundreds of millions of dollars. Minkow served seven years in federal prison for fraud among other charges.
The article is a “white wash,” a “fix.” Minkow owes the government approximately $16 million and his salary is garnished to pay the amount owed. That is why the payment could not be made out personally to Minkow but to the Fraud Discovery Unit- the money would have been seized.
During his incarceration Minkow converted to Christianity and studied for a Divinity Degree. Currently Minkow is a pastor of a Church. I find it rather amusing when convicted felons turn to God. It has been my experience that once a stock fraud artist- always a stock fraud artist. The money is too good and too easy. That is why the members of Aish Kodesh in Long Island participated in the stock frauds of Maier Lehmann.
Sam E. Antar is a fraudster; as is Barry Minkow.
Both have now found God. Perhaps they have monetarized God.”Manfredonia, a trader and whistleblower on Wall Street in the 1980s, is now on a campaign to expose corruption on the Street. Please e-mail him tips to Edward@blackstarnews.com
Ron Paul: No Military Occupation Of Haiti
Statement of Congressman Ron Paul, United States House of Representatives Statement in Opposition to H Res 1021, Condolences to Haiti, January 21, 2010
I rise in reluctant opposition to this resolution. Certainly I am moved by the horrific destruction in Haiti and would without hesitation express condolences to those who have suffered and continue to suffer. As a medical doctor, I have through my career worked to alleviate the pain and suffering of others. Unfortunately, however, this resolution does not simply express our condolences, but rather it commits the US government “to begin the reconstruction of Haiti” and affirms that “the recovery and long-term needs of Haiti will require a sustained commitment by the United States….”
Bill Anderson On The New KKK: Kleptocrats, Kartels, and Kon Men
“As I see it, the bankers are not clueless at all. They understand the game, they understand that the government is going to clean up the mess that they and their friends in Congress and the Bush and Obama administrations have created, and they understand that their antics are going to give them what they always have wanted: a nice, cozy, financial cartel which will provide sweet political contributions for the political classes, bonuses and high pay for themselves, and very little for everyone else.
Former Spy Bosses, Goldman Exec Behind Full-Body Scanner
I blogged earlier about the full-body scanner.
It turns out that one of the scanner’s strongest advocate, Michael Chertoff, former Homeland Security Czar, stands to gain by the sale of the scanner, via his security consulting outfit, Chertoff Group.
Its 8 members include 3 former senior executives from Homeland Security, 2 from the CIA, 3 from the NSA, 1 from FEMA, and 1 from Goldman Sachs. (more…)
Goldman Charity Prompted By PR Concerns
RaceTotheBottom, a law blog on corporate regulatory issues, has this on the latest PR move by Goldman Sachs, one we noted in our previous blog post on Haiti. which mentioned the donations made by the big banks.
“The latest effort by Goldman to ameliorate the criticism is apparently to require top officers and managers to donate a certain percentage of their compensation to charity. As the NYT noted:
* While the details of the latest charity initiative are still under discussion, the firm’s executives have been looking at expanding their current charitable requirements for months and trying to understand whether such gestures would damp public anger over pay, according to a person familiar with the matter who did not want to be identified because of the delicacy of the pay issue.
Apparently Bear Stearns had done something similar in the past, requiring the top 1000 employees to contribute 4% of their compensation to charity.
The specifics have apparently not yet been determined. Nonetheless, unlike the stock bonuses, the approach effectively reduces the amount of compensation paid to each employee.
Goldman could have considered reducing the amounts paid in compensation and contributed the saved amounts directly to charity. The financial institution in fact added an additional $200 million to its charitable foundation. But making direct contributions would have potentially violated state law.
Corporations are obligated to profit maximize. Some portion of the company’s profits can be donated to charity. Companies may do so, however, only if there is a business benefit. See RMBCA § 3.02(15)(permitting “donations, or do any other act, not inconsistent with law, that furthers the business and affairs of the corporation.”). For modest amounts of contributions, the business benefit can be vague, with enhanced reputation in the community enough of a justification.
For more significant amounts, however, there must be a sufficient nexus to the business of the company. Had Goldman chosen to donate 5% of the amount left aside for compensation, an amount that would probably exceed $1 billion, it would have needed to show some type of meaningful connection to its business. Any failure to do so would likely generate lawsuits from shareholders alleging that the board had failed to engage in the required profit maximization.”
My Comment:
Isn’t this exactly why the more laws you have on the books, the more complicated your problems get?
Think about it. Goldman can’t make direct charitable contributions, because companies are obligated to maximize profits. Why are they obligated to maximize profits?
Because that’s what shareholders are due, per company law.
You might ask whether maximizing profits is always in a company’s best interests, versus building long term value or market share or any number of other things that stake-holders in the company might value more than high returns, but those things don’t count, because that’s how a law works - like a blunt instrument.
And then when managers focus on these short-term horizons and start doing legal (or illegal) tricks to show quick gains on their books, then we need another set of laws to curb them, with incentives running in the opposite direction….
The end result is a muddle of misplaced directives and restrictions that distort the market.
And people criticize the free market!Sith-Lord Sweep: AG’s Pending Indictments Cover Major Hedgies, Journalists, and Regulators
Corporate finance generalist, investment banker and expert in derivatives, Austin Burrell, sums up last week’s announcement by Attorney-General Eric Holder that there are 5000 pending indictments [sic] arising out of the investigation of fraud in the capital markets:
[Note: the DOJ is involved in some 5000 odd cases of fraud related to the financial industry… (more…)
Open Letter To The Secretary-General Of UN
Wednesday, December 9th 2009, 2:07 AM ESTCo2sceptic (Site Admin)Dear Secretary-General,
Climate change science is in a period of ‘negative discovery’ - the more we learn about this exceptionally complex and rapidly evolving field the more we realize how little we know. Truly, the science is NOT settled.
Therefore, there is no sound reason to impose expensive and restrictive public policy decisions on the peoples of the Earth without first providing convincing evidence that human activities are causing dangerous climate change beyond that resulting from natural causes. Before any precipitate action is taken, we must have solid observational data demonstrating that recent changes in climate differ substantially from changes observed in the past and are well in excess of normal variations caused by solar cycles, ocean currents, changes in the Earth’s orbital parameters and other natural phenomena.
We the undersigned, being qualified in climate-related scientific disciplines, challenge the UNFCCC and supporters of the United Nations Climate Change Conference to produce convincing OBSERVATIONAL EVIDENCE for their claims of dangerous human-caused global warming and other changes in climate. Projections of possible future scenarios from unproven computer models of climate are not acceptable substitutes for real world data obtained through unbiased and rigorous scientific investigation.
Specifically, we challenge supporters of the hypothesis of dangerous human-caused climate change to demonstrate that:Variations in global climate in the last hundred years are significantly outside the natural range experienced in previous centuries;
Humanity’s emissions of carbon dioxide and other ‘greenhouse gases’ (GHG) are having a dangerous impact on global climate;
Computer-based models can meaningfully replicate the impact of all of the natural factors that may significantly influence climate…”
For the rest of the post and the complete list of signatories, see Climate realists.
Hedge-Fund Pays Naked Shorting Critic Byrne $5 Million
Copper River Partners (formerly Rocker Partners), the short-selling hedge-fund of David Rocker and Marc Cohodes, and associated entities have settled a case brought against them in 2005 by Patrick Byrne, CEO of embattled internet retailer Overstock, according to The Register.
Note: The suit doesn´t charge naked shorting, but defamation and illegal collusion with research analysts.
Copper River worked with a research firm, Gradient Analytics, that employed well-known financial journalist Herb Greenberg, one of the central figures in the story of the “capture” (corruption) of Wall Street journalists by speculators. Hedge funds stand accused of engaging in illegal collusion with journalists to drive down stock-prices of companies.
Last year, Gradient settled for a figure between $1.5-$2 million and issued an apology. Now comes this further vindication.
Despite the relatively trivial amount won in the Rocker case, $5 million, it´s noteworthy that the settlement does all the things victory in an actual court trial does, without the risk of losing on a technicality.
It also underscores something I´ve been suggesting for a while.
That public interest blogging and journalism alone isn´t enough.
It´s necessary to actually sue or inflict damage of some kind to score victories in these things.
Unfortunately, that´s usually not worth doing for people who aren´t wealthy. Vicariously, however, we “little people” can at least relish the spectacle of the behemoths of finance getting it in the rump.
And this case could prove to be a model for similar lawsuits by other embattled companies.
Still to come is Overstock´s suit against 12 prime broker-dealers (including Goldman Sachs), which will go to trial in late 2010. The suit charges an illegal stock market manipulation scheme.
Also in the works, the SEC, which dropped its investigation of Gradient in 2007, has now turned its sights on Byrne. Given Byrne´s charge of regulatory and media capture, there are some who see this as retaliatory.
What A Billionaire Can Buy
For those who think that nationalism is the threat, rather than transnationalism, consider this:
“Bill Gates, America’s richest man with a net worth of $50 billion, has a personal balance sheet larger than the gross domestic product (GDP) of 140 countries, including Costa Rica, El Salvador, Bolivia and Uruguay. The Microsoft ( MSFT - news - people ) visionary’s nest egg is just short of the GDP of Tanzania and Burma.”
More here at Forbes.
Sandinista General: Kleptocrats ‘R Us - So What?
“Ortega defends the Sandinista Front’s rise to economic power, which started during the 1980s and has accelerated in recent years. Since President Daniel Ortega returned to power, opponents have criticized him and his party for essentially privatizing Venezuelan aid, which last year totaled $457 million, according to the Central Bank.
The Sandinista government has created a series of privately managed companies under the auspicious of the Venezuela-bankrolled Bolivarian Alliance for the Americas (ALBA). Those companies, which represent more than $530 million in energy contracts, tourism holdings, and cattle farms, are linked to the presidential couple and managed by the family and Sandinista party treasurer, Francisco López…….
Ortega said one can be a self-identified leftist and still be rich….”
More here at The Nica Times.
In other words Nicaragua’s dear “leaders” are in bed with every rich speculator/developer from abroad. And aid to the country is being siphoned off by them. Great news for the foreign speculators/flippers in the country, making their capital gains and throwing chump change to the kiddies to feed their conscience.
Bad news for ordinary folks who make their living working and producing for the predator class.
Ah, but the new rich are kind too. A few bones are being tossed to the underclasses to buy respectability. The usual formula of crony capitalism - predation + charity.
I steal whatever I can get away with. Then I go to mass and toss your dying children some old toys. I get to be richer than everyone…and better too. I cheat, lie, defraud, and stomp on a thousand faceless individuals to get what I have. Then I toss some tiny part back to some one else and absolve myself.
It’s the Jeffrey Levitt model of absolution. More than twenty years ago, Tony Korneiser wrote a piece in The Washington Post on the man who “stole Baltimore.”
Back then, Kornheiser presciently put his finger on the moral and social attitudes that would metastasize in twenty years to give us the bank that “stole America.”
“Today’s businessmen seem to have hung a sign that says: We Will Lie, Cheat and Steal Unless You Stop Us. They renounce their responsibility to behave ethically, and dare the government regulators to seal off the border.
The sin isn’t cheating, but getting caught. If Jeffrey hadn’t been caught, he and Karol might still be the toasts of Baltimore. They wouldn’t be seen as gluttons, but as eccentrics and damned entitled to be so.
A few years ago Jeffrey hired a public relations firm to retool his image. The trick, and Jeffrey understood it, was philanthropy. Rockefeller, Ford, du Pont, Morgan — they all gave some away. That’s how they bought respectability. Now their great-grandsons are running for president. Instead of being known as a slumlord, which he was before he got into banking, Jeffrey would be known as a philanthropist. Through Jeffrey’s and Karol’s good charitable deeds, the Levitt name would stand for kindness and compassion. What Jeffrey neglected to tell the public relations firm was that it wasn’t his own money he was giving away. “
To “slum-lord,” add con man, gangster, penny-stock pumper, bid-rigger, racketeer, briber, stock fraudster, blackmailer, thief, extortionist, pimp, charlatan - which is what the word financier really stands for today.
Kind of takes away the glamor…
Posterboyz of the Science-Industrial Complex: Vol. 1
The Daily Mail had this in June:
“A scientist who advises the Government on swine flu is a paid director of a drugs firm making hundreds of millions of pounds from the pandemic.
Professor Sir Roy Anderson sits on the Scientific Advisory Group for Emergencies (Sage), a 20-strong task force drawing up the action plan for the virus.
Yet he also holds a £116,000-a-year post on the board of GlaxoSmithKline, the company selling swine flu vaccines and anti-virals to the NHS.”
Note, 25% of that is in the form of shares, so he would directly benefit if the company’s stock were boosted by larger sales. But, apparently, he’s completely unrepentant about it.
There’s more:
During the 2001 foot and mouth outbreak, Sir Roy’s advice to Tony Blair led to the culling of more than 6million animals.
The previous year at Oxford University, Sir Roy was at the centre of controversy after claiming a female colleague had slept with her boss before getting a job. He was forced to apologize and pay compensation.
A university inquiry in the wake of the scandal found that he was in breach of rules by failing to disclose his business interests as director and shareholder of International Biomedical and Health Sciences Consortium - an Oxford-based biomedical consultancy, which had awarded grants to his research centre.
Sir Roy was forced to resign, although his career soon recovered. He moved to Imperial College within months, was made the Ministry of Defence’s chief scientist and, last year, took over as Rector of Imperial College, London where he earns up to £400,000 a year.
American Idolatry: White-Washing Hank Greenberg
In 2005, Fortune Magazine ran this piece by Devin Leonard. I just came across it in my mail, where it was lying forgotten at the bottom of the inbox.
So. There was at least one mainstream journalist hip to the revered boss of AIG. I take back my general denunciation of the media on this point. Apparently, what was missing was the larger picture…
Well, that’s what bloggers are for. We supply the big picture. We connect the dots…
Here’s a part of the piece:
“Not long after starting a prestigious new job as general counsel at American International Group, 48-year-old E. Michael Joye received an alarming piece of news. AIG, an employee confided, had for years been improperly booking premiums it received for workers’ compensation insurance. If true, it meant that the insurance company was cheating state governments out of tens of millions of dollars used to pay benefits to injured workers.
Joye, a former Navy lieutenant who had left a blue-chip law-firm partnership to join AIG, investigated the matter personally. He soon heard even more shocking news: that AIG chief Maurice R. “Hank” Greenberg knew about the practice–and had done nothing to stop it. Greenberg was one of the all-time great American CEOs. Could it really be true?…..
…According to Joye’s notes, one employee even described a meeting about the matter at which Greenberg had asked, “Are we legal?” When an employee responded, “If we were legal, we wouldn’t be in business,” Greenberg “began laughing, and that was the end of it.”
Nonetheless, Joye reported what he had learned in meetings with Greenberg and Thomas Tizzio, then AIG’s president. Then he wrote them a memo that couldn’t have been blunter. AIG’s behavior was “permeated with illegality,” he wrote; these “intentional violations” could produce criminal fraud and racketeering charges and “expose AIG to fines and penalties in the hundreds of millions of dollars,” as well as civil suits producing “astronomical damages awards.” AIG, Joye wrote, needed to end the illegal practices immediately, fire all those involved, report the violations, and make restitution.
After finishing the memo, Joye met with Tizzio. What was Greenberg going to do? Nothing, Tizzio told him, according to Joye’s later account. Greenberg had decided that correcting the problem would be too expensive. (Tizzio declined to comment.) Appalled at the news, Joye tendered his letter of resignation on the spot, packed up his office, and left the building. He had been at AIG for eight months……..
Hank Greenberg, however, did move quickly to deal with the thorny problem of a former general counsel who might publicly accuse him of condoning fraud. Two weeks after Joye quit, Greenberg sent a short note to Jules Kroll, founder of the well-known corporate-intelligence firm, forwarding background material about Joye. ……
Joye’s abrupt parting with AIG was not a case of skittishness brought about by the current spate of investigations into insurance industry accounting. No, Joye left AIG in January 1992, and for 13 years he remained silent about what he had discovered there. …….
But Joye never forgot his glimpse of the way AIG’s CEO did business. Even after retiring to his home near Princeton, N.J., he kept his AIG files. And so, this past spring, after New York attorney general Eliot Spitzer began an investigation into Greenberg’s long-buried secrets, Joye came forward to offer one of them up.”
My Comment
Notice how the universal (and well-merited) emphasis on the wrong-doing of Goldman Sachs, the company, or on AIG, the company, takes the focus off Greenberg. See, for example, this piece by Matt Taibbi, which does just that.
But worrying about AIG, or GS, as companies, at this point - while useful and necessary - is in some ways beside the point. The problem is not any company or organization itself but a network made up of people who use companies like GS or AIG or Citi. They’re the culprits of the financial crisis.
This network communicates outside the formal communication channels usual to business and government. You’re going to get relatively little looking for an email record or phone record — as a smoking gun. Or rather, even if you did find it, it would be secondary.
Take Blankfein’s presence (Lloyd Blankfein, CEO of Goldman Sachs) at the bail-out pow-wow hosted by Tim Geithner. Outing this gives you a tea-pot dome type scandal, but then what? The scandal can quickly be resolved by disposing of the offender. But that does next to nothing to disrupt the network. The rest of the insiders can always get another member to pick up the slack.
That means that in this game there are bag-holders... and there are players.
Vikram Pandit is, from that perspective, a bag-holder. Franklin Raines is a bag-holder. Bernie Madoff may have been turned into a bag-holder, but he was also a player.
And Hank Greenberg is a player, for sure.
Just my speculation, this Friday afternoon, as winter starts closing up shop in the Southern Cone. It was warm enough today to walk around without a coat. A couple of weeks more and spring will be here…
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