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Why Has Nobody Gone To Jail For The Financial Crisis? Judge Rakoff Says: "Blame The Government"

Tyler Durden's picture


By US District Judge Jed S. Rakoff (pdf)

Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?

Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans  leading lives of quiet desperation: without jobs, without resources, without hope. Who was to blame? Was it simply a result of negligence, of the kind of inordinate risk-taking commonly called a “bubble,” of an imprudent but innocent failure to maintain adequate reserves for a rainy day? Or was it the result, at least in part, of fraudulent practices, of dubious mortgages portrayed as sound risks and packaged into ever-more-esoteric financial instruments, the fundamental weaknesses of which were intentionally obscured?

If it was the former – if the recession was due, at worst, to a lack of caution – then the criminal law has no role to play in the aftermath. For, in all but a few  circumstances (not here relevant), the fierce and fiery weapon called criminal prosecution is directed at intentional misconduct, and nothing less. If the Great Recession was in no part the handiwork of intentionally fraudulent practices by high-level executives, then to prosecute such executives criminally would be “scapegoating” of the most shallow and despicable kind.

But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years. Indeed, it would stand in striking contrast to the increased success that federal prosecutors have had over the past 50 years or so in bringing to justice even the highest level figures who orchestrated mammoth frauds. Thus, in the 1970's, in the aftermath of the “junk bond” bubble that, in many ways, was a precursor of the more recent bubble in mortgage-backed securities, the progenitors of the fraud were all successfully prosecuted, right up to Michael Milken. Again, in the 1980's, the so-called savings-and-loan crisis, which again had some eerie parallels to more recent events, resulted in the successful criminal prosecution of more than 800 individuals, right up to Charles Keating. And, again, the widespread accounting frauds of the 1990's, most vividly represented by Enron and WorldCom, led directly to the successful prosecution of such previously respected C.E.O.’s as Jeffrey Skilling and Bernie Ebbers.

In striking contrast with these past prosecutions, not a single high level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears very likely that none will be. It may not be too soon, therefore, to ask why.

One possibility, already mentioned, is that no fraud was committed. This possibility should not be discounted. Every case is different, and I, for one, have no opinion as to whether criminal fraud was committed in any given instance.

But the stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word “fraud” no fewer than 157 times in describing what led to the crisis, concluding that there was a “systemic breakdown,” not just in accountability, but also in ethical behavior. As the Commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising 20-fold between 1998 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker, was publicly warning of the “pervasive problem” of mortgage fraud, driven by the voracious demand for mortgagebacked securities. Similar warnings, many from within the financial community, were disregarded, not because they were viewed as inaccurate, but because, as one high level banker put it, “A decision was made that ‘We’re going to have to hold our nose and start buying the product if we want to stay in business.’”

Without multiplying examples, the point is that, in the aftermath of the financial crisis, the prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud. In a nutshell, the fraud, they argued, was a simple one. Subprime mortgages, i.e., mortgages of dubious creditworthiness, increasingly provided the sole collateral for highly-leveraged securities that were marketed as triple-A, i.e., of very low risk. How could this transformation of a sow’s ear into a silk purse be accomplished unless someone dissembled along the way?

While officials of the Department of Justice have been more circumspect in describing the roots of the financial crisis than have the various commissions of inquiry and  other government agencies, I have seen nothing to indicate their disagreement with the widespread conclusion that fraud at every level permeated the bubble in mortgage-backed securities. Rather, their position has been to excuse their failure to prosecute high level individuals for fraud in connection with the financial crisis on one or more of three grounds:

First, they have argued that proving fraudulent intent on the part of the high level management of the banks and companies involved has proved difficult. It is undoubtedly true that the ranks of top management were several levels removed from those who were putting together the collateralized debt obligations and other securities offerings that were based on dubious mortgages; and the people generating the mortgages themselves were often at other companies and thus even further removed. And I want to stress again that I have no opinion as to whether any given top executive had knowledge of the dubious nature of the underlying mortgages, let alone fraudulent intent. But what I do find surprising is that the Department of Justice should view the proving of intent as so difficult in this context. Who, for example, were generating the so-called “suspicious activity” reports of mortgage fraud that, as mentioned, increased so hugely in the years leading up to the crisis? Why, the banks themselves. A top level banker, one might argue, confronted with increasing evidence from his own and other banks that mortgage fraud was increasing, might have inquired as to why his bank’s mortgage-based securities continued to receive triple-A ratings? And if, despite these and other reports of suspicious activity, the executive failed to make such inquiries, might it be because he did not want to know what such inquiries would reveal?

This, of course, is what is known in the law as “willful blindness” or “conscious disregard.” It is a well-established basis on which federal prosecutors have asked juries to infer intent, in cases involving complexities, such as accounting treatments, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it. As that Court stated most recently in Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011), “The doctrine of willful blindness is well established in criminal law. Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances.” Thus, the Department’s claim that proving intent in the financial crisis context is particularly difficult may strike some as doubtful.

Second, and even weaker, the Department of Justice has sometimes argued that, because the institutions to whom mortgage-backed securities were sold were themselves sophisticated investors, it might be difficult to prove reliance. Thus, in defending the failure to prosecute high level executives for frauds arising from the sale of mortgage-backed securities, the then head of the Department of Justice’s Criminal Division, told PBS that “in a criminal case ... I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides. And so even though one side may have said something was dark blue when really we can say it was sky blue, the other side of the transaction, the other sophisticated party, wasn’t relying at all on the description of the color.”

Actually, given the fact that these securities were bought and sold at lightning speed, it is by no means obvious that even a sophisticated counterparty would have detected the problems with the arcane, convoluted mortgage-backed derivatives they were being asked to purchase. But there is a more fundamental problem with the above-quoted statement from the former head of the Criminal Division, which is that it totally misstates the law. In actuality, in a criminal fraud case the Government is never required to prove reliance, ever. The reason, of course, is that would give a crooked seller a license to lie whenever he was dealing with a sophisticated counterparty. The law, however, says that society is harmed when a seller purposely lies about a material fact, even if the immediate purchaser does not rely on that particular fact, because such misrepresentations create problems for the market as a whole. And surely there never was a situation in which the sale of dubious mortgage-backed securities created more of a huge problem for the marketplace, and society as a whole, than in the recent financial crisis.

The third reason the Department has sometimes given for not bringing these prosecutions is that to do so would itself harm the economy. Thus, Attorney General Holder himself told Congress that “it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute - if we do bring a criminal charge - it will have a negative impact on the national economy, perhaps even the world economy.” To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse -- sometimes labeled the “too big to jail” excuse – is disturbing, frankly, in what it says about the Department’s apparent disregard for equality under the law.

In fairness, however, Mr. Holder was referring to the prosecution of financial institutions, rather than their C.E.O.’s. But if we are talking about prosecuting individuals, the excuse becomes entirely irrelevant; for no one that I know of has ever contended that a big financial institution would collapse if one or more of its high level executives were prosecuted, as opposed to the institution itself.

Without multiplying examples further, my point is that the Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent, but rather has offered one or another excuse for not criminally prosecuting them – excuses that, on inspection, appear unconvincing. So, you might ask, what’s really going on here? I don’t claim to have any inside information about the real reasons why no such prosecutions have been brought, but I take the liberty of offering some speculations, for your consideration or amusement as the case may be.

At the outset, however, let me say that I totally discount the argument sometimes made that no such prosecutions have been brought because the top prosecutors were often people who previously represented the financial institutions in question and/or were people who expected to be representing such institutions in the future: the so-called “revolving door.” In my experience, every federal prosecutor, at every level, is seeking to make a name for him-or-herself, and the best way to do that is by prosecuting some high level person. While companies that are indicted almost always settle, individual defendants whose careers are at stake will often go to trial. And if the Government wins such a trial, as it usually does, the prosecutor’s reputation is made. My point is that whatever small influence the “revolving door” may have in discouraging certain white-collar prosecutions is more than offset, at least in the case of prosecuting high-level individuals, by the career-making benefits such prosecutions confer on the successful prosecutor.

So, one asks again, why haven’t we seen such prosecutions growing out of the financial crisis? I offer, by way of speculation, three influences that I think, along with others, have had the effect of limiting such prosecutions.

First, the prosecutors had other priorities. Some of these were completely understandable. For example, prior to 2001, the FBI had more than 1,000 agents assigned to investigating financial frauds, but after 9/11 many of these agents were shifted to anti-terrorism work. Who can argue with that? Eventually, it is true, new agents were hired for some of the vacated spots in fraud detection; but this is not a form of detection easily learned and recent budget limitations have only exacerbated the problem.

Of course, the FBI is not the primary investigator of fraud in the sale of mortgage-backed securities; that responsibility lies mostly with the S.E.C. But at the very time the financial crisis was breaking, the S.E.C. was trying to deflect criticism from its failure to detect the Madoff fraud, and this led it to concentrate on other Ponzi-like schemes, which for awhile were, along with accounting frauds, its chief focus. More recently, the S.E.C. has been hard hit by budget limitations, and this has not only made it more difficult to assign the kind of manpower the kinds of frauds we are talking about require, but also has led S.E.C. enforcement to focus on the smaller, easily resolved cases that will beef up their statistics when they go to Congress begging for money.

As for the Department of Justice proper, a decision was made around 2009 to spread the investigation of these financial fraud cases among numerous U.S. Attorney’s Offices, many of which had little or no prior experience in investigating and prosecuting sophisticated financial frauds. At the same time, the U.S. Attorney’s Office with the greatest expertise in these kinds of cases, the Southern District of New York, was just embarking on its prosecution of insider trading cases arising from the Rajaratnam tapes, which soon proved a gold mine of good cases that absorbed a huge amount of the attention of the securities fraud unit of that office. While I want to stress again that I have no inside information, as a former chief of that unit I would venture to guess that the cases involving the financial crisis were parceled out to Assistants who also had insider trading cases. Which do you think an Assistant would devote most of her attention to: an insider trading case that was already nearly ready to go to indictment and that might lead to a high-visibility trial, or a financial crisis case that was just getting started, would take years to complete, and had no guarantee of even leading to an indictment? Of course, she would put her energy into the insider trading case, and if she was lucky, it would go to trial, she would win, and she would then take a job with a large law firm. And in the process, the financial fraud case would get lost in the shuffle.

Alternative priorities, in short, is, I submit, one of the reasons the financial fraud cases were not brought, especially cases against high level individuals that would take many years, many investigators, and a great deal of expertise to investigate. But a second, and less salutary, reason for not bringing such cases is the Government’s own involvement in the underlying circumstances that led to the financial crisis.

On the one hand, the government, writ large, had a hand in creating the conditions that encouraged the approval of dubious mortgages. It was the government, in the form of Congress, that repealed Glass-Steagall, thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading. It was the government, in the form of both the executive and the legislature, that encouraged deregulation, thus weakening the power and oversight not only of the S.E.C. but also of such diverse banking overseers as the O.T.S. and the O.C.C. It was the government, in the form of the Fed, that kept interest rates low in part to encourage mortgages. It was the government, in the form of the executive, that strongly encouraged banks to make loans to low-income persons who might have previously been regarded as too risky to warrant a mortgage. It was the government, in the form of the government-sponsored entities known as Fannie Mae and Freddie Mac, that helped create the for-a-time insatiable market for mortgage-backed securities. And it was the government, pretty much across the board, that acquiesced in the ever greater tendency not to require meaningful documentation as a condition of obtaining a mortgage, often preempting in this regard state regulations designed to assure greater mortgage quality and a borrower’s ability to repay.

The result of all this was the mortgages that later became known as “liars’ loans.” They were increasingly risky; but what did the banks care, since they were making their money from the securitizations; and what did the government care, since they were helping to boom the economy and helping voters to realize their dream of owning a home.

Moreover, the government was also deeply enmeshed in the aftermath of the financial crisis. It was the government that proposed the shotgun marriages of Bank of America with Merrill Lynch, of J.P. Morgan with Bear Stearns, etc. If, in the process, mistakes were made and liabilities not disclosed, was it not partly the government’s fault?

Please do not misunderstand me. I am not alleging that the Government knowingly participated in any of the fraudulent practices alleged by the Financial Inquiry Crisis Commission and others. But what I am suggesting is that the Government was deeply involved, from beginning to end, in helping create the conditions that could lead to such fraud, and that this would give a prudent prosecutor pause in deciding whether to indict a C.E.O. who might, with some justice, claim that he was only doing what he fairly believed the Government wanted him to do.

The final factor I would mention is both the most subtle and the most systemic of the three, and arguably the most important, and it is the shift that has occurred over the past 30 years or more from focusing on prosecuting high-level individuals to focusing on prosecuting companies and other institutions. It is true that prosecutors have brought criminal charges against companies for well over a hundred years, but, until relatively recently, such prosecutions were the exception, and prosecutions of companies without simultaneous prosecutions of their managerial agents were even rarer. The reasons were obvious. Companies do not commit crimes; only their agents do. And while a company might get the benefit of some such crimes, prosecuting the company would inevitably punish, directly or indirectly, the many employees and shareholders who were totally innocent. Moreover, under the law of most U.S. jurisdictions, a company cannot be criminally liable unless at least one managerial agent has committed the crime in question; so why not prosecute the agent who actually committed the crime?

In recent decades, however, prosecutors have been increasingly attracted to prosecuting companies, often even without indicting a single individual. This shift has often been rationalized as part of an attempt to transform “corporate cultures,” so as to prevent future such crimes; and, as a result, it has taken the form of “deferred prosecution agreements” or even “non-prosecution agreements,” in which the company, under threat of criminal prosecution, agrees to take various prophylactic measures to prevent future wrongdoing. But in practice, I suggest, it has led to some lax and dubious behavior on the part of prosecutors, with deleterious results.

If you are a prosecutor attempting to discover the individuals responsible for an apparent financial fraud, you go about your business in much the same way you go after mobsters or drug kingpins: you start at the bottom and, over many months or years, slowly work your way up. Specifically, you start by “flipping” some lower level participant in the fraud whom you can show was directly responsible for making one or more false material misrepresentations but who is willing to cooperate in order to reduce his sentence, and – aided by the substantial prison penalties now available in white collar cases – you go up the ladder. For a detailed example of how this works, I recommend Kurt Eichenwald’s well-known book The Informant, which describes how FBI agents, over a period of three years, uncovered the huge price-fixing conspiracy involving high-level executives at Archer Daniels, all of whom were successfully prosecuted.

But if your priority is prosecuting the company, a different scenario takes place. Early in the investigation, you invite in counsel to the company and explain to him or her why you suspect fraud. He or she responds by assuring you that the company wants to cooperate and do the right thing, and to that end the company has hired a former Assistant U.S. Attorney, now a partner at a respected law firm, to do an internal investigation. The company’s counsel asks you to defer your investigation until the company’s own internal investigation is completed, on the condition that the company will share its results with you. In order to save time and resources, you agree. Six months later the company’s counsel returns, with a detailed report showing that mistakes were made but that the company is now intent on correcting them. You and the company then agree that the company will enter into a deferred prosecution agreement that couples some immediate fines with the imposition of expensive but internal prophylactic measures. For all practical purposes the case is now over. You are happy because you believe that you have helped prevent future crimes; the company is happy because it has avoided a devastating indictment; and perhaps the happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched.

I suggest that this is not the best way to proceed. Although it is supposedly justified in terms of preventing future crimes, I suggest that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing. Just going after the company is also both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility.

These criticisms take on special relevance, however, in the instance of investigations growing out of the financial crisis, because, as noted, the Department of Justice’s position, until at least very, very recently, is that going after the suspect institutions poses too great a risk to the nation’s economic recovery. So you don’t go after the companies, at least not criminally, because they are too big to jail; and you don’t go after the individuals, because that would involve the kind of years-long investigations that you no longer have the experience or the resources to pursue.

In conclusion, I want to stress again that I have no idea whether the financial crisis that is still causing so many of us so much pain and despondency was the product, in whole or in part, of fraudulent misconduct. But if it was -- as various governmental authorities have asserted it was –- then, the failure of the government to bring to justice those responsible for such colossal fraud bespeaks weaknesses in our prosecutorial system that need to be addressed.


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Tue, 11/12/2013 - 22:32 | 4148490 DoChenRollingBearing
DoChenRollingBearing's picture

"It's Queen Elizabeth's (II) fault."

-- Lyndon LaRouche

Tue, 11/12/2013 - 23:08 | 4148574 VD
VD's picture

As per above, Eric Holder should be jailed. This nation has been reduced to a farce and miscarriage of justice all around for top 1% and then some; captured SEC will never prosecute beyond token minor bs: they all need to to jailed. that's what's called taking an oath -- no one is honoring shit.

Tue, 11/12/2013 - 23:32 | 4148667 aint no fortuna...
aint no fortunate son's picture

It would have been nice if Judge Rakoff had written this piece two or three years ago, BEFORE the statutes of limitations were expiring. As to Holder, he's a disgrace, beyond the pale.

Tue, 11/12/2013 - 23:43 | 4148705 Diogenes
Diogenes's picture

When you see statements like this from important public officials it is proof positive that the fix was in. Now it is ok to talk about it because it is too late to do anything. Expect to see more statements like this from other sellouts I mean big shots.

Wed, 11/13/2013 - 00:28 | 4148815 NoDebt
NoDebt's picture

Just the 3 step process for crisis management in action here:

1.  Deny there is a problem.

2,  OK, there's a problem but there's nothing that can be done about it.

3.  OK, OK, there's something we could have done about it, but it's too late now.

We have arrived at Stage 3, as Dogonese points out.  Thank God it's over.  Now we can go about our normal lives.  Nothing to see here.  It's all over.  Move along.

Wed, 11/13/2013 - 04:28 | 4149070 Al Gorerhythm
Al Gorerhythm's picture

This ass wipe has never uttered an oath or heard of The Constitution, right?

Money clause..... Trampled

Second Ammendment.... Being trampled,

Free Speach clause........ Trampled

Presumption of Innocence.... Trampled

Right of Asembly....... Trampled.

Right to an Attorney........ Trampled.

Freedom from Taxation on one's labour....... Trampled

Property rights with no taxation........ Trampled.

The right to persue happiness through honest endeavour (like a lemonade stand) ..... Trampled.

Freedom of travel..... Trampled.

etc, etc, ad nauseum  ......  Trampled

And this cunt is a judge of the Supreme Court. May you wither in pain and die, you miserable motherfucker.

Wed, 11/13/2013 - 07:39 | 4149198 GetZeeGold
GetZeeGold's picture



For the life of me I cannot believe we'd ever die for these sins


We were merely freshmen

Wed, 11/13/2013 - 10:15 | 4149570 Muddy1
Tue, 11/12/2013 - 23:47 | 4148719 Nothing To See Here
Nothing To See Here's picture

It would have been nicer if this judge, as most people here, would know that "deregulation" has nothing to do with the subprime crisis. The deregulation script is the government's game, as it implies that MOAR regulation would have saved us from the financial collapse in 2008.

Glass-Steagall was the only piece of law which was repealed in the runup to the crisis, while regulation of the financial markets as a whole was expanding at an alarming rate. And the repeal of Glass-Steagall had nothing to do with what happened. Glass-Steagall dated back to 1933 and it applied to deposit institutions. Bear Stearns, Merrill Lynch, Lehman, AIG, Fannie, Freddie, etc. were not deposit institutions and thus were NOT regulated by GS before it was repealed.

Tue, 11/12/2013 - 23:56 | 4148740 stormsailor
stormsailor's picture

no statute of limitations on fraud

Wed, 11/13/2013 - 01:45 | 4148930 mc225
mc225's picture


some people act as though glass-steagall were a panacea.

in truth, competing currencies with no regulation would be better than a federal reserve, regulated. for who regulates the regulators?

we need unregulation... people free to float any currency they want; people free to exchange in any currency they can imagine.


Wed, 11/13/2013 - 03:37 | 4149055 TheLoveArtist
TheLoveArtist's picture

Why was Rubin so eager to repeal it then, he had a very long tenure with Goldmans Sachs.  While I don't blame the Jews for everything they have had quite a few dirty hands in the pie.  Reminds me of a quote by one of Europe's greatest statesmen, FREDERICK THE GREAT OF PRUSSIA wrote in his Testament politique that: We have too many Jews in the towns. As soon as you get away from the frontier, the Jews become a disadvantage, they form cliques, they deal in contraband and get up to all manner of rascally tricks which are detrimental to Christian burghers and merchants. I have never persecuted anyone from this or any other sect; I think, however, it would be prudent to pay attention, so that their numbers do not increase..... Here are some CITY JEWS, Blankfein of Goldman Sachs, Paulson former treasury sec and former head of Goldman Sachs in charge of ONE TRILLION dollar TARP handout to Wallstreet JEWS, Rubin former sec or treasury who pushed repeal of Glass-Steagall act, tax cheat Geithner, Summers, Junk Bond LBO specialist Michael Milken, Yellen, Greenspan, Bernake, Stepen Cohen of SAC, just to scratch the surface of the CLAN of Thieves.

Wed, 11/13/2013 - 05:19 | 4149115 assistedliving
assistedliving's picture

Hank Paulson is a Christian Scientist if i'm not mistaken. 

truth is every LIAR NINA NO DOC ALT A, sub prime, junk bond, S&P, Moody's, Fitch,GMAC, GE etc. etc. shit, ud hv to indict Half of USSofA(R).  when the boat leaks, even women and children drown

Tue, 11/12/2013 - 23:23 | 4148633 sgorem
sgorem's picture

fuck the blame! where's THE fucking JUSTICE.....and the Executioner!.....sooner, rather than later, there will be blood in the streets, and hunger is the key.  When .gov controls the toggle switch for your electric, your gas, your food, your heat, your money, your internet, your cell service, your job, your Ebt card, the highways, the bandwith, the radio, tv, and has the DHS and local and state police armed to the teeth with the latest/greatest military armaments, it ain't gonna end well for the common sheeple.

Tue, 11/12/2013 - 23:38 | 4148688 zanez
zanez's picture

No statute of limitations on rope and lamp posts.

Wed, 11/13/2013 - 09:15 | 4149333 Againstthelie
Againstthelie's picture

Libertarians must be glad about it, because it's a result of an extremely weak state owned by the Plutocrats. In fact it's not even a state, it's only a BUSINESS.

Wed, 11/13/2013 - 12:33 | 4150171 PT
PT's picture

+1 to you Againstthelie.

But I see you went straight over the heads of four (so far).  You tried to tell 'em, but they still don't get it. 

Tue, 11/12/2013 - 22:33 | 4148494 jet813
jet813's picture

No it's King Georges fault - damn that stamp tax

Wed, 11/13/2013 - 07:29 | 4149186 nmewn
nmewn's picture


Pass a law forcing mortgages to be made on some past pretense, to people who cannot pay and then expect to control/regulate the ethics of your actions (the crafting the law) with your technocrats who are just as stupid as the lawmakers themselves.

Expecting greed or self interest to go away (from the lawmaker to the CEO to the one getting the loan) is like expecting the sun to never rise.

Tue, 11/12/2013 - 22:34 | 4148498 Joebloinvestor
Joebloinvestor's picture

The government didn't waste a whole lot of time going after the savings and loan criminals.

Tue, 11/12/2013 - 22:47 | 4148524 Cognitive Dissonance
Cognitive Dissonance's picture

The S&L's were not too big to fail. Ultimately they were too little to (successfully) fraud.....and get away with it.

Tue, 11/12/2013 - 23:01 | 4148561 Cdad
Cdad's picture

...and I do believe we are quickly getting to the point........where the fraud in the big banks can no longer be swept under the rug, too.  No, I'm not saying that Eric Placeholder is getting ready to act.  I'm talking about the market itself.  Don't know if any of you have noticed...but the only cash that seems to be going into the market anymore is Bernanke's funny money.

As such...that moment when it is all too apparent that there is nothing but fraud going on...that is the moment that Jamie Dimon, Loyd Blankfien, etc...just let it all go...and sell.

These last couple weeks on the market...absolutely abysmal liquidity.  

Tue, 11/12/2013 - 23:21 | 4148628 TheRideNeverEnds
TheRideNeverEnds's picture

that is the moment that Jamie Dimon, Loyd Blankfien, etc...just let it all go...and sell.


That is exactly WHY they wont be prosecuted.   Since they ARE the market, backed by the FED backed by tax dollars its zero risk to them and we shall continue up untill they say otherwise, if Obama and co. cross them they will crash the market and you better believe they have made that clear to him in their many many publicized private meetings at the white house.


I believe they are in the process of transferring the risk to the bagholders (retail customers) currently, hence the light volumes.  There are not enough public buyers for them to all out sell and they know it, easy does it till they can unwind positions and position on the short side then woosh, they pull the rug out.     

Wed, 11/13/2013 - 08:30 | 4149258 Bangin7GramRocks
Bangin7GramRocks's picture

Why would they ever "pull the rug out"? Only if they were facing actual prosecution for the crimes that they committed against the world. They make more money by keeping the ponzi going. The threat that they could and would drive the world economy into a vicious depression is what has kept them out of jail. It's called leverage. Not sissy financial leverage, but real leverage!

Tue, 11/12/2013 - 23:39 | 4148685 The Old Man
The Old Man's picture



Item # 10 under "Decline of S & L's" (circa 1986-1995)

A virtual end of inflation in the American economy, together with overbuilding in multifamily, condominium type residences and in commercial real estate in many cities. In addition, real estate values collapsed in the energy states — Texas, Louisiana, Oklahoma particularly due to falling oil prices — and weakness occurred in the mining and agricultural sectors of the economy.

So the problem existed beforehand with S & L's and the TBTF banks gradually took up the slack after Glass Steagall was nullified.

Somebody had to take it up.

But .gov didn't think ahead to what they created. And they damn well know it's their fault.

Tue, 11/12/2013 - 22:39 | 4148509 Everybodys All ...
Everybodys All American's picture

I don't think jail is the right place for these people either. I'm thinking to let God sort it out would be a better solution.

Tue, 11/12/2013 - 23:51 | 4148733 Flakmeister
Flakmeister's picture

Don't you know, jail is only for little people....

That and for Blacks dumb enough to get caught with a dime bag.....

American justice for wealthy is simply to fine the bastards 5-10% of whatever they grifted after giving them a 20% tax cut...

Tue, 11/12/2013 - 22:41 | 4148513 A Lunatic
A Lunatic's picture

The whole damnable system is a fraud from the highest levels down to the people of Wall-Mart who gleefully trample and kill each other every fucking Black Friday........

Tue, 11/12/2013 - 22:54 | 4148547 Cognitive Dissonance
Cognitive Dissonance's picture

This time it's really different.

<Wall-Mart will open Thanksgiving afternoon, thus no Black Friday. Problem solved.>

Tue, 11/12/2013 - 23:30 | 4148662 A Lunatic
A Lunatic's picture

Black Friday is no longer politically correct anyhow, so why not throw Thanksgiving to the corporate wolves. It would be nice if they could also be open all day Christmas as well so people don't have to wait until the day after to take back all of their gifts.....

Tue, 11/12/2013 - 23:59 | 4148745 Thin_Ice
Thin_Ice's picture

Geesh, don't give 'em that idea. They may just do it.

I think the way Black Friday has morphed into Black Thanksgiving is a sign of what our society has become. Drunk on consumption and the pursuit of the "deal", ignoring what we have and being thankful for it and instead focusing on more, more, MOAR! Sometimes I hate consumerism.

But the retailers will be pushing hard this year due to deflated margins and a shorter shopping season. Nevermind I started to seeing X-Mas themed commercials the day before Halloween.


Let the mayhem ensue.

Wed, 11/13/2013 - 07:40 | 4149201 StychoKiller
StychoKiller's picture

How many cheap waffle irons and Spiderman towels do the Ignorati need?

Wed, 11/13/2013 - 11:09 | 4149782 Vendetta
Vendetta's picture

I heard the waffle irons are $1.87 this year instead of the $2 last year.   People will be wild about it and start hitting each other over the head with them because there will only be 2,000 waffle irons allowed for each store.

Tue, 11/12/2013 - 23:32 | 4148661 udaman
udaman's picture

Why would anyone down vote that comment?

Tue, 11/12/2013 - 22:43 | 4148517 GumbyMe
GumbyMe's picture

I guess in the end, it's "We the people", the "owners" of our government, who caused all of this, therefore we can only blame ourselves.

Tue, 11/12/2013 - 23:23 | 4148636 CH1
CH1's picture

"We the people", the "owners" of our government

That hasn't been true for a LONG time, my friend.

Tue, 11/12/2013 - 22:45 | 4148521 Alcoholic Nativ...
Alcoholic Native American's picture

Good question

Tue, 11/12/2013 - 22:48 | 4148530 The Old Man
The Old Man's picture

No, it's the rating agencies faults. If they would have bothered to attempt "Due Dilligence", like all the rest of us "HAVE" to, then maybe the bundled POS MBS's  would have not been such a F******  "TULIP" trade in the first place.  And DOJ apparently takes it in the ass just like us. It'll be a miracle if this judge EVER get's nominated to the SCOTUS. He just signed his resignation and is retiring, I'll bet. Law? What Law?

Tue, 11/12/2013 - 22:52 | 4148539 Orly
Orly's picture

Alas, poor Rakoff. I knew him well, Horatio...

The cracks are beginning to resonate on a global scale.

A public figure stating for the record what ZeroHedge has alleged all these years.

And just WWNTD?

"In 1935 at his annual birthday party/press meeting a 79 year old Tesla related a story where he claimed a version of his mechanical oscillator caused extreme vibrations in structures and even an earthquake in downtown New York City."'s_oscillator

A simple device.  How quaint, even... Keep sounding off.  Keep telling everyone who is willing to listen.

The gateway to the fourth turning has arrived, ladies and gentlmen.


Tue, 11/12/2013 - 22:57 | 4148554 DoChenRollingBearing
DoChenRollingBearing's picture

Good seeing you around, Orly!

Tue, 11/12/2013 - 22:59 | 4148556 fonzannoon
fonzannoon's picture

I never thought I'd see the sentence "the gateway to the fourth turning has arrived" followed by a smiley face.

Tue, 11/12/2013 - 23:01 | 4148560 Colonel Klink
Colonel Klink's picture

Judge Rakoff should be careful when flying, hot tubbing, or driving his car.

Tue, 11/12/2013 - 23:07 | 4148576 Clowns on Acid
Clowns on Acid's picture

Exactly Orly - Where was the Hon Judge Rakoff after QE1 ? QE2 ? in fact QE?. Only now do we see after the Lame Stream media pefformances of Weill, Rubin, Hank Paulsen, Greenspan, and Hazaur (see ZH) ... we now get a Judge angrily arguing that perhaps the banks were at fault ... but it was the Clinton (Weill / Rubin) triumpherate that repealed Glass Steagal, put the CRA Act on 'roids under a Bwarney "He made me bite the pillow" Frank and Chris "the human brown bag" Dodd controlled Congress.  This got the resecuritization of the securitizations going full bore.

Hey when Franklin Raines collected $40MM for his time at Fannie... where was the Hon. Judge Rakoff then ?

The rats are painting themselves as cats these days at a mile a minute.

Tue, 11/12/2013 - 23:18 | 4148616 TheFreeLance
TheFreeLance's picture

Yes. One more time -- finance did not break in 2008, the rule of law did.

The legal cartel looked around, blinked, and collectively said, "Well, if THOSE guys have to lose THEIR phony money, what about OUR phony money?"

There was zero interest in prosecuting serial fraud if the prosecution only took money from the banksters without enriching a member of the legal cartel -- worse, routine investigation EXPOSED many members of said cartel to financial and prosecutorial risk as co-conspirators in the fraud.

Any honest US Atty in America could've RICO'd Countrywide and Golden West, popped the bubble, blown up HELOCs, put a few dozen banksters and govt officials in jail and cauterized the wound. It would have been painful, horrible, and completely unprecedented. But it would have been done. Over.

Unlike QE Forever.

Tue, 11/12/2013 - 23:34 | 4148675 sgorem
sgorem's picture

+1000 for the Clowns, bravo.

Tue, 11/12/2013 - 23:49 | 4148726 Diogenes
Diogenes's picture

Anything made of metal will vibrate at a certain frequency. The larger the object the lower the frequency. If you can set up a vibration of the right frequency the object will fatigue and be destroyed.

Wed, 11/13/2013 - 01:17 | 4148888 Orly
Orly's picture

Not exactly the theory.

All things resonate in and of themselves, simply because the parts that create the whole are not really "there" but move in and out of their true selves.  It's a quantum thing...

What Nikola Tesla demonstrated was that almost anything in the Unviverse can be used as a medium of frequency, such that the vibration may live inside of the medium and, without altering the medium itself, can compound its own strength by the power of "resonance," independent of the medium it exists in,  Bamboo will do, if you don't mind, though it is conceded that metals work exceptionally well.

The point being the resonant voice can grow louder and louder, stronger and more forceful independent of the will of the medium to stop the vibration.  In fact, there reaches a point of critical resonance, when even the efforts of the medium to try to stop it add to the compounding power.  Hence the earthquake in Bedford-Stuy...

We are at the critical juncture when all of our tiny voices, our "conspiracy theorist" voices, have resonated to the point where the medium will try to crush us,  Unfortunately for them, as they add their voices of denial, the resonant frequency only gets more powerful.

I believe it was William Shakespeare (or some fraud writing under that pseudonym...) who pointed out the absolute liar by saying, "I believe thou dost protest too much."

Listen for more blatant, loud and obvious protests coming from our eloquent leaders, while the more and more common man looks up from his grinding wheel and asks the age-old question: "what the fuck, yo?"


Wed, 11/13/2013 - 01:44 | 4148927 Flakmeister
Flakmeister's picture

Good grief, please take your pseudo-science bullshit elsewhere...

To describe the propagation of sound in a solid object does not require Quantum Mechanics....

Google "normal mode" and get back to us...

And quit smearing the good name of Tesla with your drivel...

Wed, 11/13/2013 - 02:05 | 4148965 Orly
Orly's picture

Ah, Flak...

Still a jerk, I see.  Quantum mechanics and "solid objects" in the same sentence?  Really?  Bing the words "mechanical resonance" and get back to your AlGore altar before you freeze to death in your anthropogenic global warming world, willya?

Tell us what else you don't understand about the way the real world works, please.  I'm dying to hear.  Solar cycle much?  Prolly not...

It was in that same apartment building that Tesla tried his new Crooke's tube- only in Tesla style at a megavolt of electricity- to reproduce Roentgen's experiment using this new "X" ray by exposing himself before a glass photographic plate.

After an hour, Nikky said, when the inside of his head got warm, did he think he had exposed it enough.  Sure enough, when the plate was processed, there was an image of the inside of his calvarium.  Needless to say, the rest of his days were spent in diminshing returns, increasing paranoia and delusion.

Do you have a C/T scanner in your mommy's basement, Flak?  Jus' curious...

Wed, 11/13/2013 - 02:24 | 4148992 Flakmeister
Flakmeister's picture

You are a babbling fool....

Do you think they call it "Solid State Physics" for shits and giggles?

Hows that Electric Universe thingie tie in with recent CMB data from the Planck experiment? Or did I confuse you with another a whackadoo?

BTW, she has been dead for 8 years... 

Wed, 11/13/2013 - 10:56 | 4149722 Seize Mars
Seize Mars's picture

It's good to vent, and the internet is I think a healthy way to do this. But at some point the sarcasm and other negative crap starts to feed on itself.
Try to accept people without too much judgement-if people see things a certain way, or have certain beliefs or opinions, just try to respect them.
It starts to build on itself also. Try it, you might start to feel better about yourself.

Wed, 11/13/2013 - 11:37 | 4149916 Almost Solvent
Almost Solvent's picture

Can't we all just get along?

Wed, 11/13/2013 - 12:36 | 4149921 Flakmeister
Flakmeister's picture

One of the reasons this country is so fucked up is that bullshit is not called out...

Orly is entitled to her opinions, she is not entitled to her own facts or science... Very simple...

And she had better be able to defend those opinions she chooses to make public if she is questioned on them...

It is called accountability and it has been sorely lacking for a long time in this country...

Unless you think that what we really need are personalized echo chambers where everyone can hold hands and sing Kumbaya...

Tue, 11/12/2013 - 22:53 | 4148540 buzzsaw99
buzzsaw99's picture

company is happy because it has avoided a devastating indictment...

a devastating indictment??






oh noes! not a devastating indictment! NOT THAT! ANYTHING BUT THAT!

Tue, 11/12/2013 - 23:14 | 4148601 suteibu
suteibu's picture

And those fines, just the cost of doing business in our "new" economy.

Tue, 11/12/2013 - 22:54 | 4148546 jim249
jim249's picture

A long read, but well worth it.

Tue, 11/12/2013 - 22:59 | 4148558 oddjob
oddjob's picture

It was apologist drivel.

Tue, 11/12/2013 - 23:31 | 4148663 Bazza McKenzie
Bazza McKenzie's picture

On the contrary, it was an insightful comment by someone who is a judge, not a blogger, and thus forced to be careful with his words.  Despite the need for such care, he has skewered the federal prosecuting agencies for their failure to prosecute bankers, and has shown why under the law that is precisely what they should have done rather than these fake slaps on the wrist penalties for companies.

Tue, 11/12/2013 - 23:35 | 4148678 Renfield
Renfield's picture

Heh - I should have waited another few minutes before my comment. You said it quicker & briefer.

Wed, 11/13/2013 - 00:12 | 4148772 oddjob
oddjob's picture

Color me a bit skeptical, but opinions from a judge nominated by Bill Clinton won't favour the greater good.

Wed, 11/13/2013 - 00:20 | 4148801 Flakmeister
Flakmeister's picture

Come clean, you don't really think much of judges no matter who appointed them?

Care to share who is your fav on the SCOTUS? And why?

Tue, 11/12/2013 - 23:40 | 4148673 Renfield
Renfield's picture

I agree, Jim249. As a layperson, I appreciate this detailed look into the way the legal establishment might be thinking about this issue, and his honesty in describing its failings and limitations.

I agreed with his suggestion that corporate liability (not in so many words) currently goes too far to protect guilty executives, who hide behind it and escape with NO punishment of any kind even when they are found out. I appreciated that he was not afraid to finger the government as culpable without going too far in speculating about their intentions or venting outrage.

I also liked the way he dealt with the usual MSM excuses - Too Big To Jail, and "nobody did anything illegal" when the blogosphere is alight with evidence of fraud and perjury - with a sort of dry understatement: "To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse -- sometimes labeled the “too big to jail” excuse – is disturbing, frankly, in what it says about the Department’s apparent disregard for equality under the law". (his emphasis)

I thought this article was informative and timely. I have to admit if he'd started acting like a hothead, all outrage - "WHY ISN'T ANYONE IN JAIL WHEN IT'S SO OBVIOUS" - I'd have trusted his thinking less.

He's a judge, so I thought his sober, arm's length approach to this very volatile subject was appropriate to his role.

Wed, 11/13/2013 - 10:23 | 4149535 OneTinSoldier66
OneTinSoldier66's picture

"“too big to jail” excuse – is disturbing"


Calling TBTF/TBTJ that's been going for five years now, "disturbing", is weak in my eyes. Really weak.


Hmmmm. Does this guy get his paycheck from Government?



Repudiate odius debt? No, I just find it "disturbing".


Tue, 11/12/2013 - 23:26 | 4148553 Mercury
Mercury's picture

It was the government, in the form of both the executive and the legislature, that encouraged deregulation, thus weakening the power and oversight not only of the S.E.C. but also of such diverse banking overseers as the O.T.S. and the O.C.C. It was the government, in the form of the Fed, that kept interest rates low in part to encourage mortgages. It was the government, in the form of the executive, that strongly encouraged banks to make loans to low-income persons who might have previously been regarded as too risky to warrant a mortgage. It was the government, in the form of the government-sponsored entities known as Fannie Mae and Freddie Mac, that helped create the for-a-time insatiable market for mortgage-backed securities. And it was the government, pretty much across the board, that acquiesced in the ever greater tendency not to require meaningful documentation as a condition of obtaining a mortgage, often preempting in this regard state regulations designed to assure greater mortgage quality and a borrower’s ability to repay.

 Oh please with the pompus bullshit Rakoff, this is your government managing markets and trying to engineer's only gotten worse since.


Yes, how about those hundreds of acts, regulations, laws, supervisory authorities and threats that constituted government coercion to force banks and lending institutions to extend mortgages to (pick your euphemism) traditionally underserved demographics?

Here is a sampling of "unregulated" mortgage market regulations in force at the time FROM 1989 AND 1990 ALONE:

The HUD Reform Act of 1989, The Homebuyers and Renters Relief Act of 1989, The Housing Opportunity Zones Act of 1990, The Department of Housing and Urban Development Accountability Act of 1989, The Community Housing Investment Partnership Act, The Recycling of Existing Assets for Cost-Effective Housing Act of 1989, The Low-Income Housing Credit Act of 1989, The Low Income Housing Preservation Act of 1989, The Housing Affordability Act, Homeownership and Opportunity for People Everywhere Act of 1990, Fair Lending Enforcement Act of 1990, The Housing and Community Development Act of 1989, The Housing and Community Development Act of 1990, The Community Housing Investment Partnership Act, The Homeownership Assistance Act of 1989, The Home Mortgage Overcharge Prevention Act of 1989, he Neighborhood Mortgage Lenders Accountability Act, he First-Time Homebuyers Assistance Act of 1989, The Homeownership Through Sweat Equity Act of 1989 and The Fair Lending Oversight and Enforcement Act of 1989.

Have you died boredom yet?...because there's a lot more and we haven't even got to Fannie, Freddie or the Community Reinvestment Act yet.

Pop quiz: Did the above cause risk to be more or less accurately priced within the mortgage issuance and securitization process during the period of time under consideration?

Blame the government indeed.


Tue, 11/12/2013 - 23:27 | 4148648 Bazza McKenzie
Bazza McKenzie's picture

Suggest you actually read his article, since he covered the government's own involvement.  Which does not alter the massive fraud conducted on the watch of bankster CEOs who were culpable for that fraud and should have been prosecuted for it, except Obama wanted to keep them as contributors.

Wed, 11/13/2013 - 00:24 | 4148664 Mercury
Mercury's picture

Bad incentives beget bad actors and bad outcomes.

If Uncle Sam had stuck to his knitting this wouldn't have happened.

Wed, 11/13/2013 - 00:31 | 4148822 RaceToTheBottom
RaceToTheBottom's picture

Hmmm, didn't this mess span multiple presidents?  Or is that inconvenient?

Wed, 11/13/2013 - 02:07 | 4148913 Randoom Thought
Randoom Thought's picture

Sure, going back to the late 1800s with Lincoln conquering the union, then the creation of the US corporation, Woodrow Wilson and the creation of the Fed, Roosevelt confiscating gold, the War Powers Act ... LBJ's (apparently with a bunch of help) assassination of Kennedy, Nixon abandoning Bretton-Woods, Bush Senior trying to do an LBJ on Reagan (through the son of a business partner) ... and then miraculousely it all gets very well connected and all of the presidents don't even try to resist. It seems to have been decided that a global-communist system was to be created admininstered by globalist banker-technocrats. But to start, the US had to be destroyed and rebuilt in the new model.

The Bushes, Clinton and Obama are all globalist-communists and if one believes their press, psychopathic mass murderers as well ... Waco, Mena-Oklahoma City, 9/11, Mr. "I am good at killing people" ...

... or maybe they are simply demonically possessed and are not really responsible for their actions.


Wed, 11/13/2013 - 07:02 | 4149166 Mercury
Mercury's picture

Hmmm, didn't this mess span multiple presidents?  Or is that inconvenient?


Uncle Sam isn't a president.

Wed, 11/13/2013 - 07:18 | 4149174 overmedicatedun...
overmedicatedundersexed's picture

rak off, the law is never applied to TBTF. you wrote so many words and chased your tail. For a man in a position to have acted, you did not, your brothers in black robes did not, a special place in hell is reserved for the likes of you.

rak off, to those to whom much is given, much is expected. your hubris disgusts.

Wed, 11/13/2013 - 12:14 | 4150062 Son of Captain Nemo
Son of Captain Nemo's picture

To Randoom Thoughts and Mercury

Thanks for your post(s). 

I think the both of you got it "Right".

Tue, 11/12/2013 - 23:01 | 4148559 RafterManFMJ
RafterManFMJ's picture

"How can they send me huge campaign contributions if they are in jail? How can I go work for them after I leave Congress if they are in jail? Your question makes no sense to me." - Congressman Jones

Tue, 11/12/2013 - 23:07 | 4148577 Loophole
Loophole's picture

What institutions failed because of the repeal of Glass-Stegall?

Not a one.

Politicians decided that they could get votes by "helping" voters buy homes they couldn't afford. They created Fannie and Freddie to guarantee their loans. They had the Fed play ball by keeping interest rates down. They intimidated banks into making bad loans with the Community Investment Act and in other ways.

But economic reality eventually ruled as it always does and the system collapsed, taking much of the rest of the economy with it.

And none of the bailouts and Fed reaction to it has done anything but make things worse.

Wed, 11/13/2013 - 01:43 | 4148865 Randoom Thought
Randoom Thought's picture

As a result of Gramm-Leach-Bliley and the Commodity Futures Modernization Act of 2000, the institutions that failed are: The Free Market and the Rule of Law. These two pieces of legislation created the ability of banks to "legally" (they always did it) intertwine money creation with price manipulation and become TOO BIG TO FAIL.

IMO, until these systemic issues are corrected, nothing else of consequence can really be fixed and the free market and the rule of law will not be returned because people in power are convinced that it is better to accept (and privately benefit from ... apparently) ongoing bank created crime/fraud/theft/market manipulation than to put the welfare-warfare state at risk.

Obumbdumb points to the free market and the republic and say they failed. He suggests communism instead ... which is great for those in charge and sucks for everyone else. The free market and the republic did not fail on their own. They were undermined and subverted by the money creation powers.... which is exactly why those who framed the constitution gave that power only to Congress... and not privately owned banks.


Wed, 11/13/2013 - 12:56 | 4150310 PT
PT's picture

Re "Politicians decided that they could get votes by "helping" voters buy homes they couldn't afford." :

Who decided that that "help" should come in the form of unsustainable debt loads?  Who decided that "more debt" = "affordable"?

When they didn't like the laws, "they" got them changed.  You need to learn who "they" are. 

Tue, 11/12/2013 - 23:09 | 4148580 steelrules
steelrules's picture

Can't a federal judge press charges without the criminal Holder's ok?

Tue, 11/12/2013 - 23:09 | 4148585 suteibu
suteibu's picture

What a waste of time.  This guy sounds like a lawyer looking for a client, regardless of which side he is on.

Wed, 11/13/2013 - 01:46 | 4148928 Randoom Thought
Randoom Thought's picture

IMO ... just "rolling disclosure" at work. I think they believe that disclosure will eventually bring about conflict, which they seem to see as necessary for their transition.

Tue, 11/12/2013 - 23:11 | 4148588 max2205
max2205's picture






Tue, 11/12/2013 - 23:13 | 4148590 Dr. Engali
Dr. Engali's picture

Why has nobody gone to jail? I suggest you take a look at whose campaigns have been funded by the bankers and you'll have your answer.

Wed, 11/13/2013 - 00:23 | 4148806 Flakmeister
Flakmeister's picture

I guess then that BHO ain't a Marxist then...

A real Marxist would have had those fuckers up against the wall and shot...

Wed, 11/13/2013 - 01:51 | 4148935 Randoom Thought
Randoom Thought's picture

Lulz ... a real Marxist is a community activist who USES the people to put himself in power. Re-Read the Communist Manifesto. It is clear. But truly Barry is a faux-Marxist. He is bought and paid for ... and the consequences of his failure to obey are apparently severe.

Wed, 11/13/2013 - 02:26 | 4148996 Flakmeister
Flakmeister's picture


Wed, 11/13/2013 - 11:21 | 4149845 earnyermoney
earnyermoney's picture

He's a fascist.

Wed, 11/13/2013 - 12:09 | 4149927 Flakmeister
Flakmeister's picture

That is a very defensible statement....

Tue, 11/12/2013 - 23:13 | 4148592 Emergency Ward
Emergency Ward's picture

>> If Corzine is allowed to walk, it sends the message to not just the futures industry, but the entire US financial complex, “You can steal customer money from not just commodities accounts, but savings accounts, checking accounts, 401ks, and IRAs so long as you pay Obama 500k in bundled protection money, err, campaign contributions.”  And, while the current administration clearly doesn’t care about the integrity of markets, I do. <<

-- from a 2012 ZH article about JC.

Cling tightly and bitterly to your 401k and IRA.

Tue, 11/12/2013 - 23:11 | 4148593 q99x2
q99x2's picture

The Banks are the Government.

Tue, 11/12/2013 - 23:15 | 4148603 Cdad
Cdad's picture

Indeed...until such time as Average Joe is saying that very thing out loud...and he's all fraud.

Tue, 11/12/2013 - 23:15 | 4148604 Trampy
Trampy's picture

First, the prosecutors had other priorities. Some of these were completely understandable. For example, prior to 2001, the FBI had more than 1,000 agents assigned to investigating financial frauds, but after 9/11 many of these agents were shifted to anti-terrorism work. Who can argue with that?



Tue, 11/12/2013 - 23:22 | 4148624 booboo
booboo's picture

"First, the prosecutors had other priorities. Some of these were completely understandable. For example, prior to 2001, the FBI had more than 1,000 agents assigned to investigating financial frauds, but after 9/11 many of these agents were shifted to anti-terrorism work. Who can argue with that? Eventually, it is true, new agents were hired for some of the vacated spots in fraud detection; but this is not a form of detection easily learned and recent budget limitations have only exacerbated the problem."

Government grew by what percentage during this same time period? What budget cuts is the good judge refering to? and if so what does the sequester, ie holding the line today, have to do with the huge expansion of government from 2008 to 2012?

The judge argues for both sides here, he's a judge and is suppose govern the courtroom and preside over the case, there are no cases to preside over.

Herein lies the problem, the same monopoly that pays the prosecutors is the same monopoly that pays the judge and that is called a democracy, I want nothing to do with a democracy for this reason alone, I have others.

Wed, 11/13/2013 - 00:25 | 4148807 RaceToTheBottom
RaceToTheBottom's picture

"I want nothing to do with a democracy for this reason alone"

Has the democracy changed that much since the 80s?  They at least got over some of their corruption then.

Tue, 11/12/2013 - 23:21 | 4148625 Mr. Crisp
Mr. Crisp's picture

The sub-prime loan crisis/Great Recession was a result of Socialist Gov/Big Bankers in action. It was a preview of things to come.

Tue, 11/12/2013 - 23:21 | 4148627 Bunga Bunga
Bunga Bunga's picture

Get over it Americans, every nation gets the government it deserves. When you are asleep 24/7 you can't complain for getting robbed. You simply deserve it!

Tue, 11/12/2013 - 23:22 | 4148629 dark pools of soros
Tue, 11/12/2013 - 23:22 | 4148630 joego1
joego1's picture

It's nice to hear a judge step forward and speak the truth.

Tue, 11/12/2013 - 23:22 | 4148632 loveyajimbo
loveyajimbo's picture

Put this guy up against the corrupt dog-turd Holder... and the contrast speaks loudly to just what Obongo is all about.  You can do the same with any of his cabinet... including Hillaroid... against honest, intelligent people who love America... and were, therefire, not elgible to serve this cancerous maggot...

Tue, 11/12/2013 - 23:29 | 4148657 Seasmoke
Seasmoke's picture

The banks are the Government. The government was in on the fraud. And the Government is still foreclosing on Americans everyday.

Tue, 11/12/2013 - 23:53 | 4148737 Muppet
Muppet's picture

Gotta say that speech by Elizabeth Warren was excellent.  Best speech I've heard in years from a politician.   Can't believe she's a Democrat.  All I could think is that she could run for President on that speech as a great Republican.    Go ahead and down arrow me but I'm calling it right.   Her speech was excellent. 

Wed, 11/13/2013 - 00:18 | 4148797 RaceToTheBottom
RaceToTheBottom's picture

Maybe with the old republicans. 

New republicans hate her guts and tried everything to BOTH keep her from heading up the Consumer Finantial protection agency and her congress seat.

Wed, 11/13/2013 - 11:30 | 4149891 Vendetta
Vendetta's picture

Yep.  The Paul Craig Roberts type republicans support her, the new types then destroyed the CFP agency powers so it was a useless entity.  I didn't really see the demo party establishment supporting her all that much either.  Both parties are on the take, one way or another.

Wed, 11/13/2013 - 01:25 | 4148902 darteaus
darteaus's picture

Don't we have a President who also makes great speaches?

Wed, 11/13/2013 - 00:16 | 4148793 RaceToTheBottom
RaceToTheBottom's picture

I, for one, am very happy that no one was to blame for all this.  I kinda had a feeling that it was just one big misunderstanding.

Wed, 11/13/2013 - 11:32 | 4149899 Vendetta
Vendetta's picture


Wed, 11/13/2013 - 00:34 | 4148828 Quaderratic Probing
Quaderratic Probing's picture

No one will go to jail next time either...If you think they arn't planning the next robbery your dreaming

Wed, 11/13/2013 - 00:48 | 4148839 Radical Marijuana
Radical Marijuana's picture

These kinds of articles start by accepting that the currently established systems are not already overwhelming, legalized frauds ... then look a little bit at whether there were breaches of the traces of the legal limits that still exist ...

William K. Black is my favourite authority on those topics:

US collapse driven by 'fraud'; Geithner covering up bank insolvency

The great American fraud factory ...

During last 15 minutes of that half hour.

William K. Black pulls back the curtain

More from Black, the most qualified bank fraud expert I know of ...

Fraudulent Foreclosures

The DOJ's Pathetic Suit Against BofA Might Be the Most Pathetic in History

By William K. Black, August 8, 2013.

Black 9 11 Money, Motive, Technology, and Plausible Deniability

On that YouTube page, it links through to an abundance of other links, about the bigger picture, regarding how one can not fully understand that the financial crises commencing in 2008 were an INSIDE JOB, unless one puts that in the context that the events on 9/11/2001 were an INSIDE JOB. Also, as Brett Merkey stated: "One objective fact remains: the banks that were too big to fail then are much bigger now."

Indeed, check out what William K. Black has to say on those topics. He is one of the most experienced experts on control frauds, and has published lots of articles about the degree to which the biggest banks are now in the situation of triumphant runaway fraud, which system is practically guaranteed to encourage more control frauds in the future. There have NOT been any reforms that would make things possibly better. Rather, all of the actual "reforms" have, so far, been themselves fraudulent hypocrisies, since they have actually enabled more future frauds.

PEOPLE WHO HAVE THE POWER TO LEGALLY MAKE "MONEY" OUT OF NOTHING ARE NATURALLY GOING TO FIND EVERY POSSIBLE EXCUSE THAT THEY CAN TO DO MORE OF THAT. The whole systems is fundamentally based on legalized fraud, backed up by legalized force. There appears no limit to how much more insane that is going to become in the future.

As Max Keiser has repeatedly explained well, what the banksters learned from the Saving and Loans prosecutions, that William K. Black presided over, was how to gain more leverage over politicians, in order to change the laws so that they could get away with more frauds in the future. That was no accident. Furthermore, it is clear that "national security" concepts were always psychotic since 1947, and only got worse and worse, faster and faster since then, with big steps in that process being the successful assassination of President Kennedy, and the successful false flag attack on 9/11/2001. Therefore, it was perversely appropriate for the psychotic "national security" argument to be applied through the notion that the biggest corporations were too big to prosecute, and their main officers too big to jail. Indeed, from a practical point of view, those entities might have a sort of de facto sovereign immunity.

After all, how long would a politician or bureaucrat actually survive if they were effective at attacking the banksters, which are collectively a group of trillionaire mass murderers? Would not the biggest banks easily be able to pay for anyone who was a serious threat to them to be discredited or destroyed? Has not that happened to too many people, too many times to count?

Actually, we are deep into the paradox of enforcement, which is that nobody guards the guardian, and when the rule of law itself becomes the greatest form of organized crime, there is nothing outside of itself (other than maybe the longer term consequences of natural selection) which can correct that. The banksters are leading the way towards the paradox of final failure from too much success. Our entire civilization is headed towards decline and fall because the things that once made it strong have now become the things which are destroying it.

For a long time I have heard people warning about how we had only a limited amount of time to repair the system, before it became unfixable ... Well, I think that we have passed the event horizon into a social black hole. The triumph of financial fraud and deceitful use of force are going to automatically get worse, faster, and that will continue to drive it all mad, and towards its own eventual self-destruction.

I WISH that I could come to some other conclusion, or recommend something that we could do about that, however, I am no longer able to think of anything to suggest which I think has a hope in hell of preventing the decline and fall from playing itself through, in ways which are probably going to be trillions of times worse than anything that ever happened before in human history ...

Wed, 11/13/2013 - 11:42 | 4149929 Vendetta
Vendetta's picture

Yep.  Bill Black has been clear about it all for years and has all the credibility.  He belongs heading the the financial regulatory committee in Congress or Senate instead of associate professor of whatever he's teaching these days.  But he would probably meet with an 'accident' within a week if he had any true influence in politics and he probably knows it.   It is a sad picture, the state of this nation ... I know I for one .. among many ... have no faith nor trust in its govt ... they broke that ... not me.

Wed, 11/13/2013 - 00:47 | 4148843 piceridu
piceridu's picture

Kind of reminds me of the scene in V for Vendetta when Delia Surridge asks "Is it too late to apologize?" Well Judge, it's too late.

It seems to me that suddenly many of these captured entities are coming out and making apologies because they can feel some change, something is happening. I see it and hear it everyday where I never heard a peep before. More and more ordinary folk are waking up to the lies, corruption and theft of their labor.

These pompous assholes, judges, FED employees, and other government shills; cheerleaders for the status quo. They are living incredible lives on easy street with lifetime pensions and 5 star medical benefits; all because they kept their mouth's shut and did the bidding of their donors and handlers and got paid.

Well it's too late for you judge and the rest. I will not shed one tear or feel remorse when they get what's coming to them.


Wed, 11/13/2013 - 01:01 | 4148866 Bazza McKenzie
Bazza McKenzie's picture

Exactly what does Rakoff have to apologise for?  He's a judge, not a prosecutor.  He can only deal with cases brought into his court by prosecutors, and here, in careful legal terms, he is skewering the prosecutors (who are part of the administration) for failing to do their part in upholding the law.

If you had actually perused Rakoff's work as a judge, you would know he has been critical, in cases brought before him, of the prosecutors arranging light wrist slaps for fraud by large companies.  Here he points out that both legally and ethically they should have been prosecuting the senior execs of the banks involved in the frauds.

Wed, 11/13/2013 - 02:01 | 4148961 piceridu
piceridu's picture

So Judge Roberts has nothing to apologize for? He isn't captured along with the rest of the court? 

Wed, 11/13/2013 - 02:14 | 4148981 Radical Marijuana
Radical Marijuana's picture

And, as the Bank Guy from Brussels has commented several times before, what about the apparent facts that judges who actually enforce the law against the powerful tend to get assassinated?

Wed, 11/13/2013 - 03:43 | 4149057 Bazza McKenzie
Bazza McKenzie's picture

Roberts certainly has something to apologize for, specifically a ruling he made that essentially says the US government can use its taxing power to force Americans to do anything it wants, or to destroy them via taxation, thus nullifying most of the Constitution's restrictions on the government.

So Roberts certainly has something to apologize for.  But what has that to do with Rakoff?  piceridu didn't criticize any ruling by Rakoff, just apparently that Rakoff didn't unconstitutionally appoint himself as prosecutor as well as judge.

Wed, 11/13/2013 - 11:57 | 4149979 Vendetta
Vendetta's picture

It was obvious when GW was nominating guys like Roberts and Alito what they really were .. corporatists.  But many mistakenly thought whatever resistance and criticism people had of these nominations was for purely political reasons  ... now the nation is stuck with corporatists in the highest ranking court of the nation.  Of course, there are ways to remove them despite what many think (not killing mind you).... but with a political system so utterly corrupt it is unlikely anything good will come out of it.

Wed, 11/13/2013 - 01:12 | 4148884 Dre4dwolf
Dre4dwolf's picture

It's not like we aren't trying, there are plenty of lawsuites, its the judges fault, they keep letting money buy laws, if a fucking law is unconstitutional fucking smack it down.


Stupid laws should be made illegal.

Wed, 11/13/2013 - 01:28 | 4148904 Orly
Orly's picture

Are you aware that it is a crime to spit on the sidewalk in Louisiana?

Wed, 11/13/2013 - 02:21 | 4148987 Dre4dwolf
Dre4dwolf's picture

Shit really? when I took a trip to Louisianan 7 months ago I pissed in the harbor water, is that legal?

Wed, 11/13/2013 - 01:20 | 4148894 dunce
dunce's picture

All of this was pointed out years ago before the statute of limitations had timed out. There were many politicians that were involved in the fraud and not just legislatively. All the pertinent congressional committees received giant campaign funding for years from the financial institutions that profited from the scheme. Mostly it was sold as an effort to give mortgages to minorities and anyone that complained was a racist. Sound familiar??

Wed, 11/13/2013 - 02:37 | 4149001 Radical Marijuana
Radical Marijuana's picture

For sure, Dunce: "The pertinent congressional committees received giant campaign funding for years from the financial institutions that profited from the scheme." The heart of the matter has been the funding of the political processes. From a practical point of view, that is what makes fixing anything practically impossible at this time.

Here are some examples of how that corruption goes back to demonetizing silver in the early 1870s, in this little history, which I presume is correct, although I have never double checked the original sources myself:

1865: On April 14th, 41 days after his second inauguration, and just 5 days after General Lee surrendered to General Grant at Appomattox, President Lincoln is shot by John Wilkes Booth, at Ford's Theater. He would later die of his injuries. Subsequent allegations that international bankers were responsible for President Lincoln's assassination, would be made in the Canadian House of Commons, nearly 70 years later in 1934. The person who revealed this was a Canadian Attorney, Gerald G. McGeer. He had obtained evidence deleted from the public record provided to him by Secret Service Agents at the trial of John Wilkes Booth, after Booth's death. McGeer stated that it showed that John Wilkes Booth was a mercenary working for the international bankers. His speech would be reported in an article in the Vancouver Sun, dated, 2nd May 1934, which stated, "Abraham Lincoln, the murdered emancipator of the slaves, was assassinated through the machinations of a group representative of the International Bankers, who feared the United States President's National Credit ambitions. There was only one group in the world at that time who had any reason to desire the death of Lincoln. They were the men opposed to his national currency program and who had fought him throughout the whole Civil War on his policy of Greenback currency." Gerald G. McGeer also stated that Lincoln's assassination was not purely because the International Bankers wanted to re-establish a central bank in America, but also because they wanted to base America's currency on gold, which they of course controlled. They wanted to put America on a Gold Standard. This was in direct opposition to President Lincoln's policy of issuing Greenbacks, based solely on the good faith and credit of the United States. The Vancouver Sun article also quoted Gerald G. McGeer with the following statement, "They were the men interested in the establishment of the Gold Standard and the right of the bankers to manage the currency and credit of every nation in the world. With Lincoln out of the way they were able to proceed with that plan and did proceed with it in the United States. Within 8 years after Lincoln's assassination, silver was demonetized and the Gold Standard system set up in the United States."

1866: The European central bankers wanted the re-institution of a central bank under their control and an American currency backed by gold. They chose gold as gold has always been relatively scarce and therefore a lot easier to monopolize, than, for example, silver, which was plentiful in the United States, and had been found in huge quantities with the opening of the American West. So, on April 12th, Congress went back to work at the bidding of the European central bankers. It passed the, "Contraction Act," which authorised the Secretary of the Treasury to contract the money supply by retiring some of the Greenbacks in circulation. This money contraction and it's disastrous results is explained by Theodore R. Thoren and Richard F. Walker, in their book, "The Truth In Money Book," in which they state the following, "The hard times which occurred after the Civil War could have been avoided if the Greenback legislation had continued as President Lincoln had intended. Instead there were a series of money panics, what we call recessions, which put pressure on Congress to enact legislation to place the banking system under centralized control. Eventually the Federal Resrve Act was passed on December 23rd 1913."

1872: Ernest Seyd is sent to America on a mission from the Rothschild owned Bank of England. He is given $100,000 which he is to use to bribe as many Congressmen as necessary, for the purposes of getting silver demonetized, as it had been found in huge quantities in the American West, which would eat into Rothschild's profits.

1873: Ernest Seyd obviously spent his money wisely, as Congress pass the, "Coinage Act," which results in the minting of silver dollars being abruptly stopped. Furthermore, Representative Samuel Hooper, who introduced the bill in the house, even admitted that Ernest Seyd had actually drafted the legislation.

1874: Ernest Seyd himself admitted who was behind the demonetizing of silver in America, when he makes the following statement, "I went to America in the winter of 1872 - 1873, authorized to secure, if I could, the passage of a bill demonetizing silver. It was in the interests of those I represented, the governors of the Bank Of England, to have it done. By 1873, gold coins were the only form of coin money."

1876: Due to the manipulation of the money supply in America, one third of the workforce is unemployed ...

Of course, the history of the creation of the Federal Reserve Board is better known now, beyond merely a very small circle of intellectuals, and reveals the same patterns. After that, and the income tax act to enforce it, America was on an automatic decline into debt slavery. From 1971 onwards, when the last bits of connection to gold were cut, the numbers for total debts were pretty well a perfectly exponential growth, and therefore, those numbers have become runaway debt insanity.

There are no mathematical ways to ever fix that debt insanity now, which is why one expects democidal martial to be the most probable future result, unless some other megadisasters from man-made or natural causes do not overwhelm things instead. The final result of runaway triumphant financial frauds is necessarily the eventual psychotic breakdown of those systems, unless something worse preempts that before it can happen ???

Wed, 11/13/2013 - 01:22 | 4148897 darteaus
darteaus's picture

Proving guilt is really quite simple:


  1. Are the top executives of the firm sophisticated investors? Yes.
  2. Did the top executives receive a bonus from the activities?  Yes.

Then, they must have known because their bonus depended on it.

Wed, 11/13/2013 - 12:05 | 4150019 Vendetta
Vendetta's picture

3.  Will they flee the country with their ill-gotten wealth if prosecutions started occuring in ernest?  Yes

Wed, 11/13/2013 - 02:32 | 4149002 Cheyenne
Cheyenne's picture

It's extremely difficult to reconcile this piece with the jurist who (1) excoriated the S.E.C. and BofA alike for the willful concealment of Merrill Lynch 2008 bonuses from BofA shareholders prior to their vote on the BAC-MER merger, (2) was so repulsed by the S.E.C.'s proposed settlement of a CDO fraud case against Citigroup that the parties joined hands in a mandamus action to the 2nd Circuit to order Rakoff to enter their complicit deal; Rakoff himself thus became a party to that appeal and was represented by pro bono counsel. (Oral argument was in 02/13; that decision's getting a little long in the tooth, no?)

This piece, in contrast to the above record, which is stellar, leaves me scratching my head.

First, Rakoff has no problem calling b.s. on the DOJ's global destabilization excuse heard, for example, in the HSBC money-laundering case, where the DOJ refused to prosecute even where the bank never contested criminality and indeed said the bad guys had all been fired. Rakoff correctly explains that the destabilization excuse cannot and does not apply to individual, i.e., human, criminals, no one of whom could ever pose the cited risk. (In the HSBC case, moreover, the individuals responsible were outside the bank; what's the excuse for not prosecuting them?)

But then Rakoff turns right around with the same broad brush he just picked apart and says, well, "the government"--as if such a thing were a single entity rather than a massive constellation of individual (and bad) actors--it's the government's fault for criminals doing this or that. Oh, really? It fascinates me to end that bankers enriched themselves beyond anyone's wildest dreams perpetrating criminal frauds--crimes which otherwise wouldn't have occurred because of this planetary blob called "government." Huh? The story in Logjammin' is better than this one, and it was ludicrous (according to Maude Lebowksi). I'm sorry, sports fans, but wide swaths of MBS don't get devalued to 8 or 10 cents on the dollar--90% down--unless there's fraud involved, I don't give a fuck what statutes or regs were in place. That's just not gonna work.

But my real problem is with this whopper: "In my experience, every federal prosecutor, at every level, is seeking to make a name for him-or-herself, and the best way to do that is by prosecuting some high level person."

That's insane. Holder has been in the DOJ for almost 5 years, Breuer was there about 4. By Rakoff's own math, they brought 0 prosecutions of high-ranking fin. execs. Under any interpretation of "seeking to make a name for oneself," the 0-prosecution track record fails. It's undisputed that it couldn't be worse.

More pointedly, EH and LB come from Covington & Burling, a firm that represents every major bailed out bank. In a few short days, I will release a video that explains exactly why the DOJ dropped its prosecution of the Goldman Timberwolf fraud case.

When the facts come to iight, they will annihilate any remaining shred of doubt that the DOJ acted in bad faith and on behalf of its Covington's client (and Congress's boss), Goldman Sachs.

Sorry, Judge, but you're way off the mark on this one.

Wed, 11/13/2013 - 02:57 | 4149030 123rainier
123rainier's picture

Martha Stewart served time....Mark Cuban will..don't know about all of you but Ifeel better.

Wed, 11/13/2013 - 03:22 | 4149047 JailBanksters
JailBanksters's picture

If they arrested every person that had a hand in the events leading up to 2008 then Washington and Wall St would be ghost town.

Wed, 11/13/2013 - 12:10 | 4150052 Vendetta
Vendetta's picture

IMO, they are ghost towns only zombies inhabit them and the sheriff left town long ago.

Wed, 11/13/2013 - 04:13 | 4149068 Seize Mars
Seize Mars's picture

Ok, Judge Rakoff.

Anytime you want to - anytime - you can haul the Asshole in chief into your court and find out what his real name is.

Anytime you want.

I'll hold my breath.

Oh, that's right, I forgot: a judge is nothing but a lawyer - a lying, bullshitting lawyer. And you are just as corrupt as the next one. Yeah, I almost forgot.

Thanks, Judge Rakoff!


Wed, 11/13/2013 - 04:42 | 4149089 yellowsub
yellowsub's picture

And fraud still continues till this day...

Wed, 11/13/2013 - 09:37 | 4149427 El Hosel
El Hosel's picture

The Fraud "Continues"?...  It has gone parabolic, its now everyday in your face Fraud. We know, that you know, that we a ripping you off, so what?

Wed, 11/13/2013 - 06:26 | 4149150 daemon
daemon's picture

" To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse -- sometimes labeled the “too big to jail” excuse – is disturbing, ... "

Whew ! ... I'm relieved, he seems to be disturbed.

I thought the entire Supreme Court belonged to Wall-street. Apparently, ... that's not the case for the chairs .

Wed, 11/13/2013 - 07:11 | 4149171 damicol
damicol's picture

You look at the top to the most despicable lying sociopathic turd on the planet today, one greasy  worm called obummer and then add the most flagrantly corrupt cock sucker  in holden, and  have a pathetic little weasel like carney  sucking on more cocks and assholes  and still making a pigs ear of it trying to spin thier crap and  work your way down.

This world is in dire need of some serious assassinations, and the fucking troiughing evil scum acros europe from the filthy commie barusto to the every corrupt  little ass wipes in every  euro country deserve the same fate.

In the end justice always wins, real justice, and it is called war


Wed, 11/13/2013 - 07:44 | 4149192 Dr. Bonzo
Dr. Bonzo's picture

I wouldn't normally waste my time on this... but... this entire article addresses nothing. Liars loans? WTF? The entire Western system of government does not hang in the balance because of "liars loans."

The principle problem that is still dragging on the economy, is the leverage that has been foisted on the system as a result of so-called complex financial instruments. This is the so-called "debt" we so loosely and randomly refer to. It goes beyond frivolous government spending, defense spending, and so forth... it was simply willed into existence by banks like GS and JPM--supposedly--as instruments to hedge risk. I add SUPPOSEDLY, becuase if you take a few minutes to read between the lines on the history of "how" these things came into existence, what you walk away with beyond the complex financial bullshit and double-speak is that they seem deliberately engineered to be too complicated to understand. To what end? To commit fraud I would contend.

How did these "innovations" come into existence? Apparently, in relation to JPM's risk exposure to the Exxon Valdez case back in the 90s, to help offset JPM's books in the event they were going to take a hit.

Let's pause there for a second. So... the entire universe of so-called complex financial instruments came into existence because someone at JPM had a brain fart... that their exposure could be written out of existence by inserting some mathematical formulas between their exposure to  Exxon's risk, and their books. In laymans terms... we have 3 shells... I place a ball under one, shuffle the shells around, and maybe with some sleight-of-hand, I reduce the chance of you finding the ball to 1-in-3. Anyone recall this principle charlatan trick?

This is a gross oversimplification of the process, but my implicit reading of the purpose of these instruments. Not only was JPM able to successfully write its exposure to a hit from any fallout from the Exxon case out of existence, they managed to transform a debt into an asset, and make a profit on it. And voila, the birth of Frankenstein. Something so fucking complicated, a gang of conmen could transform liabilities into assets and convince the entire world of suit-wearing bright people that these "innovations" were a godsend to finance. Indeed.

In less than 10-short years these fucking things went from less than 5 billion in contracts to well over 500 trillion. Think about that for a second. And THERE is the debt overhang we are talking about. I had a gut feeling these things were devised to be fraudulent by their very nature when some extremely bright people I know started making statements that after examining CDS contracts, they could not understand the contract. We're talking quants.

Complexity was engineered into the system, not to make the system more efficient, but to deliberately make it too hard to scrutinize. Too hard to scrutinize to what end? To. Commit. Fraud.

And THIS is the conversation that is not being had.

So herein lies the principle source of my rage. These are not a few bad apples. This is an entire system that is completely out-of-control, and that has not been made to account for its collosal fuck-up. Perhaps they thought they could get away with this and this was just an innocent little scam. No harm no foul. Unfortunately, the lives of billions hang in the balance, governments have offloaded these fucking toxic time bombs from banks balance sheets and outright bought them instead of declaring every single one of these goddamned things null and void. Remember that first TARP, that little 750 billion first bailout? Ever hear the story how they came up with 750 billion? 1 trillion sounded like too much. 750... sounded right. There's your fucking complex financial system for you in a nut shell. Complex financial system my fucking ass.

Pension funds, local banks, savings and loans, municipalities, cities, countries were sold on this crap in the name of hedging risk. And making a profit. All. One. gigantic. scam.

We're being lead to believe this incredibly complexity is somehow an organic outgrowth of the "modern" computer-era financial system. In fact, it's one gigantic fucking fraud.

So, now to the esteemed judge Rakoff's mea culpa. I'm sorry... but beyond alllllll the rationalizations, all I am hearing is the new twist to the old... wir haben es nicht gewusst. The German cop out on the Holocaust. We didn't know.

Wir haben es nicht verstanded. We didn't understand.

And they still don't get it. That's my contention. And I'm sticking to it.

Wed, 11/13/2013 - 08:58 | 4149294 The Wedge
The Wedge's picture

"Complexity was engineered into the system, not to make the system more efficient, but to deliberately make it too hard to scrutinize. Too hard to scrutinize to what end? To. Commit. Fraud".


Very loud clapping!

My eyes begin to roll back and ancient languages that I don't even understand come out of my mouth when I here a floating head say the "great recession" was caused by bad loans or the mortgage industry. It certainly was a part of it but leaves much to be desired in the way of an explanation.

When the glass/stegal act was repealed as part of larger bill in 1999, the Government essentially said to Wall Street, do what you like, the tax payer will back you up. Wall Street had a closed highway system that had exits, multiple lanes, fast and slow. Then it's as if Congress just said go blaze your own path and many got filthy rich in the process. Whether anyone realized this or not is irrelevant. It probably would still be going on had the price of oil not shot up. But it wasn't just taking the fire wall down that paved the way for the mess the tax payer is in now, deregulation, irresponsible deregulation continues today. It would be one thing if you could point to someone in the SEC and say they were asleep at the wheel but it seems as though no one was even at the wheel. In this sense the Government is absolutely responsible for what transpired in 2008 just as much as the bull they let loose in the China Shop. And of course no one will tug too hard on this string, lest the whole thing unravel.

But the lynch pin is likely your above statement that it was made to be too complex. Designed to short circuit the system.

There will be hell to pay though, just not those responsible. No, it will be current and future generations that will pay dearly in many ways.

By the way what comes after a quadrillion? HA HA HA

Wed, 11/13/2013 - 09:32 | 4149403 El Hosel
El Hosel's picture

"Liars on loan", our "Elected" officials. The Machine owns the liars, puts them in place to protect the interests of the bigger liars inside the Machine. Makes the Mafia look like a teenage street gang.

There is no honor, your Honor.

Wed, 11/13/2013 - 10:43 | 4149668 OneTinSoldier66
OneTinSoldier66's picture

That was awesome Dr. Bonzo. Thank you!

Wed, 11/13/2013 - 11:02 | 4149755 earnyermoney
earnyermoney's picture

This site has been writing about the outright fraud for 5 long years. As for JPM, we all know Blythe Masters spawned the fraudulant instruments you mention. As for Judge Jackoff, he's part of the problem and needs to jump to his death.

Wed, 11/13/2013 - 08:06 | 4149230 Pumpkin
Pumpkin's picture

Our justice system has morphed into a two headed creature.  One head is the original judiciary and the courts, the other is the administrative courts, that look and act just like the original courts, but do not possess any judicial power.  The administrative courts will take the 'case' and fine someone $1 million for stealing $20 million.  Of course the theives pay income taxes on the $20 million and then a fine on top.  Both the administration and the theif are now happy.  The crime was successful, both parties made a lot of money, and the illusion of 'justice' surrounds the whole situation.  Who needs to go to jail?

Wed, 11/13/2013 - 08:21 | 4149242 RaceToTheBottom
RaceToTheBottom's picture

Everybody finds religion after they have got tired of committing their crimes....

They start thinking about their legacy, and possibly meeting their maker.

the list is really quite long if you play that out

Wed, 11/13/2013 - 09:19 | 4149347 robochess
robochess's picture

So obviously the obvious eludes US District Judge Jed S. Rakoff. I guess he believes it all depends on what you mean by the words: is, criminal, crime, fraud, legal, intent, deception, knowingly, etc., as someone already pointed out this is LAWYER SPEAK AT ITS BEST. IGNORE IT.


Here's a thought... and a good one: 

Vietnam Shows How To Clean Up The Banking System: Ex-Banker Faces Death Penalty For Fraud
Wed, 11/13/2013 - 09:29 | 4149388 ableman28
ableman28's picture

A simpler calculus is possible which arrives at the same explanation.

The member banks in the Federal Reserve and the membership of the Fed itself are operated at the top by people.  They know each other, socialize together, and essentially form a powerful,  priveliged elite within our society. They are counted on by the truly wealthy, the hereditary holders of the largest equity portions of major institutions to protect their assets.  These uber-wealthy, ones you rarely hear the names have enormous influence as well.

At the moment the Government is almost completely dependent on the central bank to buy massive amounts of new and roll over debt at extremely low rates.  If the Fed was not buying this debt true market rates would be much, much higher causing an near uncontrollable debt spiral.

Aggressive prosecution of senior banking officials would, in simplest terms, completely alienate the very group the Government needs help from now as well as the uber-wealthy behind them.

Sure, a few lower level people are going to get prosecuted and big headlines will accompany the fines that banks pay, nevermind they are tiny percentages of current operating income or the amount they made running the scams in the first place. Sacrificing a few lower level white collar workers or paying the occasional fine are just a cost of doing business.

Wed, 11/13/2013 - 09:43 | 4149449 overmedicatedun...
overmedicatedundersexed's picture

able so you think they are TBTF? no man is TBTF and these banks are run by people with names, they can be removed.

Wed, 11/13/2013 - 09:41 | 4149445 thruid
thruid's picture

Here, let me sum it up and save anyone the pain of reading this article.  The TBTF Banks OWN the government.  That explains the fraud, the lack of prosecution and the bailouts.  Instead of reading this cowardly pseudo tome check out what William Black or Simon Johnson have to say about what happened.  They are not so afraid of the Banks to HAVE an opinion.

Wed, 11/13/2013 - 18:54 | 4149485 withglee
withglee's picture

For example, prior to 2001, the FBI had more than 1,000 agents assigned to investigating financial frauds, but after 9/11 many of these agents were shifted to anti-terrorism work. Who can argue with that?

I can "argue with that"! Why did WTC7 fall down???!!!!

Todd Marshall
Plantersville, TX

Wed, 11/13/2013 - 10:12 | 4149551 withglee
withglee's picture

For all practical purposes the case is now over. You are happy because you believe that you have helped prevent future crimes; the company is happy because it has avoided a devastating indictment; and perhaps the happiest of all are the executives, or former executives, who actually committed the underlying misconduct, for they are left untouched.

If the internal investigation was of any use at all, it would reveal the executives who actually committed the underlying misconduct. So "why would they be left untouched"?

What he is really describing here is the new revenue source for the government. The government looks the other way while laws are obviously being broken and executives are profiting exorbitantly. Then it goes through one of these sham investigations, gets no one to admit guilt, but collects 10 cents on the dollar of the ill-gotten-gains. Bingo ... more money in the government coffers, stolen from the marketplace not as tax collections or inflation but as penalties (which are not distributed to those who were defrauded).

The government is the fraudster.

Wed, 11/13/2013 - 10:19 | 4149579 withglee
withglee's picture

If you are a prosecutor attempting to discover the individuals responsible for an apparent financial fraud, you go about your business in much the same way you go after mobsters or drug kingpins: you start at the bottom and, over many months or years, slowly work your way up.

In other words, if it gives the mobsters time to reorganize and dig in, it also gives the executives time to reorganize and dig in ... under the guise that you're building up a culture of snitches to fry the big guys. Who do you think you're kidding?

If I have a boss that I know is a crook, you have a much better chance of getting me to squeel on him if you have him in handcuffs than you do by leaving him alone for now and promising me protection.

Wed, 11/13/2013 - 10:23 | 4149592 andrewp111
andrewp111's picture

If a bankster kingpin, such as Jamie Dimon, has the power to bring down the world financial system on his own (he does), then it is not just the company that is too big to jail. The kingpins are as well.

And those kingpins can lavishly take care of Obama and his entire ruling party. So, what is not to like?

Wed, 11/13/2013 - 10:24 | 4149596 withglee
withglee's picture

"then, the failure of the government to bring to justice those responsible for such colossal fraud bespeaks weaknesses in our prosecutorial system that need to be addressed."

well duh!!!

Sat, 11/16/2013 - 08:16 | 4149682 RKDS
RKDS's picture

What a steaming pile:

"It was the government, in the form of Congress, that repealed Glass-Steagall, thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading. It was the government, in the form of both the executive and the legislature, that encouraged deregulation, thus weakening the power and oversight not only of the S.E.C. but also of such diverse banking overseers as the O.T.S. and the O.C.C."

It was also the government that passed Glass-Steagall and created those deregulated regulations in the first place.  But it's somehow all their fault that Wall Street lobbyists wrote laws to repeal and deregulate and installed purchased puppets to pass them.  More finger pointing from the freedom-from-responsibility crowd as usual.  Hey, you know what, I'm posting this from work, but it's not my fault, no sir, it's Microsoft's fault and the computer's fault and the ISP's fault and everybody's fault but mine!

Wed, 11/13/2013 - 11:04 | 4149764 LooseLee
LooseLee's picture

It doesn't matter now. They (those who committed fraud and were not brought to JUSTICE) will be some of the first 'trophy hangers' to be executed for their actions by the public when this thing finally blows....

Wed, 11/13/2013 - 12:10 | 4150050 Downtoolong
Downtoolong's picture

How convenient to excuse the banksters by steering the blame to government legislators and regulators, who can’t be sued, claimed against, jailed, or even fired for it in most cases. Besides, we all know the banksters write the legislation and regulations which govern them, so, it’s really moot to make a distinction between the banksters and government in the first place.

I call bullshit on this shameless dodge. It’s a soft way of saying it’s the peoples fault, not the handful of banksters who were behind the mess.

They did what they did and we all know why. No one was holding a gun to their head.

Wed, 11/13/2013 - 14:26 | 4150788 Blood Spattered...
Blood Spattered Banner's picture

Just a shameless attempt of CYA by a career bureaucrat.



Wed, 11/13/2013 - 14:48 | 4150918 Pizza man
Pizza man's picture

Useless and misleading article. The reason there have been no prosecutions of those responsible for the financial melt-down is because ALL ROADS LEAD BACK TO THE GOVERNMENT and mostly Democrats... who happen to hold power. From Carter's CRA to Clinton and Rubin killing Glass Steegal to enabling FNM and FRE to package and sell and finally to Wall Street. It ENDS with WQall Steet, but begins with government.


THAT is why we will NEVER see what Geo HW Bush and Lacy Hunt did in 1980.

Wed, 11/13/2013 - 15:08 | 4151014 Flakmeister
Flakmeister's picture

Your blinders are on....

Phil Gramm was a major player, after all he sponsered all the key legislation...

And did you forget about the S&L crisis?

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