Update: FBI raids the banksters of Wall Street

Posted by AzBlueMeanie:

Handcuffs_man_140 Chris Hayes hosted the Rachel Maddow Show last night and discussed the FBI raids on the banksters of Wall Street on Monday. Monday, Nov. 22nd – Rachel Maddow show:

[T]oday‘s FBI actions provide a good occasion to marvel at just how little there has been in the way of criminal law enforcement in the wake of the largest financial crisis in 80 years.

$1 trillion of wealth vanished, leaving an economy hammered hard by the worst recession years, working people bearing the brunt, record bonus and profits on Wall Street. And there‘s a ton of anecdotal evidence from lawsuit depositions to interviews I‘ve conducted for a book I‘m writing that much of what created the crisis was systemic deception and institutional corruption.

Yet, aside from Bernie Madoff, who had seen hardly a perp walk or a conviction. So what gives? Part of the problem is that actually bringing cases, financial fraud cases, is very difficult. In 2009, the federal government tried but failed to convict two Bear Stearns hedge fund managers for security fraud.

Convincing 12 jurors beyond a reasonable of ill-intent while guiding them through a dizzying array of complicated numbers is an exceedingly tall order. But part of it has to do with the mindset with which the governing and financial classes have come to view the crisis.

In the mind of those who run Wall Street in Washington, the entire financial meltdown was a kind of collective error in judgment. Nothing untoward about it. No bad faith, just fundamentally good faith mistake that a whole bunch of very wealthy and powerful firms and economists and politicians made.

We thought the housing bubble would last forever. We thought people would pay back the loans. We thought these financial instruments were distributing and reducing risk, not exacerbating and multiplying it. It turns out, we were wrong. Mistakes happen. Let‘s move on.

There‘s another way of interpreting what happened, which is to view the entire chain of housing bubble, mortgage securitization as a giant Ponzi scheme, fundamentally predatory in nature and predicated on deception.

In other words, you have to use the F-word – fraud. Now, these two ways of thinking about what happened aren‘t mutually exclusive. In fact, it is probably some combination of both.

But I was struck when I read Michael Lewis‘ masterful account of the crisis, “The Big Short,” by a quote from one of the book‘s protagonists about exactly this good faith and bad faith distinction, “There were more morons than crooks,” short seller Vincent Daniel told Lewis, “but the crooks were higher up.”

The crooks were higher up. Goes a long way towards explaining why we haven‘t seen more prosecution of the crooks. If we want to avoid another crisis, that‘s going to have to change.

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