These SEC Insider Emails Reveal Why No Bankers Have Gone To Jail

Tyler Durden's picture

Back In April 2010, the world was stunned when in what would be the first major case dealing with the fallout from the endemic fraud prevalent during the last housing and credit bubble, the SEC charged Goldman Sachs and Paulson with securities fraud over the infamous Abacus CDO, which was subsequently featured in Michael Lewis' Big Short book and movie. There was also hope that for the first time, bankers - ostensibly from the company that does "God's work" - would go to prison. None of that happened, and instead just a few months later Goldman walked away with a $550 million slap on the wrist, while a young Goldman banker, French citizen Fabrice Tourre, who was in his late 20's when Goldman was quietly colluding with Paulson to package a "time bomb" CDO it knew would explode in just a few months, was the only Goldman banker prosecuted. In 2013, Fabrice Tourre, a low-ranking trader,  was found liable for violating securities laws and ordered to pay more than $850,000. He also avoided prison time and is now a Ph.D. candidate at the University of Chicago.

He was the only banker who was named in the entire Abacus fraud, something which we laughed at long and hard in 2010 because according to the SEC, this meant the 20-year old was the mastermind behind all of Goldman wrongdoing; nobody else at the firm was aware of what had been going on.

But what was most appalling and what made it clear that the SEC is a captured organization, was not only that no other banker at Goldman was named, but that absolutely everyone avoided prison time setting a disastrous precedent which demonstrated that when it comes to criminal liability, Wall Street will henceforth have a permanent get out of jail free card.

Earlier today, ProPublica's Jesse Eisinger published a story that looks at the evolution of the SEC's collapse, and how from a regulatory agency meant to defend investors, it instead mutated into a captured, crony, revolving door (whose employees all too frequently end up working for the same companies they should be prosecuting) farce, whose only purpose is to protect criminal bankers from prison while handing out paltry fines which ultimately are paid by the company's shareholders while management walks away free.

Eisinger tells the story of one SEC lawyer, perhaps the last SEC lawyer with a conscience, James Kidney, who joined the agency in 1986. "He was thirty-nine at the time, having first worked a stint as a journalist. The “steam was elevated” at the agency when he started there, he said. Young lawyers were expected to go after the big names, and they did: the junk-bond king Michael Milken, the insider trader Ivan Boesky, the investment banker Martin A. Siegel."

As a trial lawyer, Kidney’s job was to develop a compelling narrative that could be presented to a jury of laymen unfamiliar with the intricacies of finance. “Jim was a great attorney. A lawyer’s lawyer. Sound legal mind, excellent writer, and a true trial lawyer,” said Terence Healy, the vice-chair of securities enforcement practice at Hughes Hubbard and a former colleague of Kidney’s at the SEC. But Kidney also exasperated some staffers who thought he wasn’t detail-oriented and didn’t grasp nuances.

More importantly, Kidney provided Eisinger "with a cache of internal documents and emails about the Abacus investigation" which demonstrate conclusively just how "captured" the securities regulator truly is. 

Kidney was assigned to take SEC's investigation against Goldman (and Paulson) and bring the case to trial. But, as Eisinger writes, "tight away, something seemed amiss. He thought that the staff had assembled enough evidence to support charging individuals. At the very least, he felt, the agency should continue to investigate more senior executives at Goldman and John Paulson & Co., the hedge fund run by John Paulson that made about a billion dollars from the Abacus deal. In his view, the SEC staff was more worried about the effect the case would have on Wall Street executives, a fear that deepened when he read an email from Reid Muoio, the head of the SEC’s team looking into complex mortgage securities."

This is where the email trail proving the SEC should be immediately disbanded and its tasks handed off to an impartial, third-party, ideally private agency, begins: 

Muoio, who had worked at the agency for years, told colleagues that he had seen the “devasting [sic] impact our little ol’ civil actions reap on real people more often than I care to remember. It is the least favorite part of the job. Most of our civil defendants are good people who have done one bad thing.”

In this case, Muoio is referring to career criminals who have violated securities laws on countless ocasions, but for whatever reason, he believes that bringing justice to these "real people" is the "least favorite part of the job." Incidentally bringing justice to criminals is the only part of his job, but he believes they deserve a chance because they have "done one bad thing."

This attitude agitated Kidney, and he felt that it held his agency back from pursuing the people who made the decisions that led to the financial collapse.

To be sure, Kidney has criticized the SEC publicly in the past, and the agency’s handling of the Abacus case has been previously described, most thoroughly in a piece by Susan Beck, in The American Lawyer, but the documents provided by Kidney offer new details about how the SEC handled its case against Goldman. As ProPublica writes, the SEC declined to comment on the emails or the Abacus investigation, citing its policies not to comment on individual probes. In a recent interview with me, Muoio stood by the agency’s investigation and its case. "Results matter. It was a clear win against a company and culpable individual. We put it to a jury and won," he said.

Kidney, for his part, came to believe that the big banks had “captured” his agency — that is, that the SEC, which is charged with keeping financial institutions in line, "had become overly cautious to the point of cowardice." He is right.

ProPublica writes that soon after he joined the case, Kidney believed that the evidence the SEC staff had assembled justified charges against more people and he argued for, at the very least, an investigation of higher-level executives.

The SEC team had not interviewed Tourre’s direct superior, Jonathan Egol. Nor had they questioned top bankers in Goldman’s mortgage businesses or any of the bank’s senior executives. Even more surprising to Kidney, the agency had not taken testimony from John Paulson, the key figure at his eponymous hedge fund. It seemed to Kidney, as he reviewed the case materials, that the agency had spent more time and effort investigating much smaller insider-trading cases. Just two weeks after he joined the case, on August 14th, Kidney urged the team to broaden its investigation and issue key participants in the Abacus deal what are known as Wells notices — official notification that the SEC is considering charges.

Specifically, Kidney - just like us 6 years ago - could not understand why SEC staffers were reluctant to investigate Tourre’s bosses at Goldman or anyone at Paulson. Charging only Goldman, he said, would send exactly the wrong message to Wall Street. "This appears to be an unbelievable fraud," he wrote to his boss, Luis Mejia. “I don’t think we should bring it without naming all those we believe to be liable.

His boss, and virtually everyone else at the SEC, disagreed. This is what happened next:

Kidney’s view of the case put him at odds with Muoio, who was widely respected at the agency for his analytical abilities. Kidney said that he was aghast when, in an email sent a month later congratulating his team on their work investigating Tourre, Muoio described potential targets of SEC charges as “good people who had done one bad thing,’’ and he did little to hide his irritation.


I am in full agreement that when we sue it can be devastating, and that we have sued little guys way too often on flimsy charges or when they have been punished enough,’’ he wrote back. “But I’m not at all convinced that Tourre alone is sufficient here.”


Kidney later explained to Muoio that he was pushing for a more assertive approach because he believed that the SEC had grown too passive in its oversight of Wall Street. “The damage to the reputation of the [SEC] in the last few years and the decline of the institution are very troubling to me,” he wrote.


Kidney and Muoio battled for months. Kidney felt that the agency was overly dependent on the kind of direct evidence it had against Tourre. Part of the problem was that high-level Goldman executives had been savvier in how they communicated: when topics broached sensitive territory in emails, they would often write “LDL” — let’s discuss live.

Not only was SEC employee Reid Muoio against persectuing bankers, he was actively working against the case.


Kidney pressed the team to take what he thought were obvious investigative steps. He had been told by a staff attorney in the group that Muoio had vetoed the idea of calling Paulson to testify, and the agency hadn’t subpoenaed Paulson’s emails initially, relying mainly on the voluntary disclosure of documents. “We didn’t get subpoena power until late in the investigation,” a staff attorney acknowledged to Kidney in an email sent late in August of 2009.

As the year ended, Muoio remained opposed to bringing charges against anyone but Tourre. In a December 30th email, sent to the entire group investigating the deal, Muoio offered an explanation for what had happened during the bubble years: “Now that we are gearing up to bring a handful of cases in this area, I suggest that we keep in mind that the vast majority of the losses suffered had nothing to do with fraud and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time.”

And that right there is the smoking gun strawman: ignore the "one off" crime because most of the fraud took place because someone was really just too stupid to know otherwise. Even if that someone worked for the firm which prides itself on having a more strict acceptance ratio than Harvard, and where figuring out how to outsmart everyone else on Wall Street, not to mention Congress and Main Street, is a key ingredient of successfully advancing to partner level.

Kidney pressed on and pushed the agency to bring charges against Egol, Tourre’s superior at Goldman, arguing that the SEC should at least interview him. According to Kidney, Muoio once again hindered the investigation and dismissed the idea, saying that the agency knew what Egol would say. “That’s a cardinal sin in an investigation,’’ Kidney said that he told Muoio. “You can’t assume what somebody will say.”

Kidney also wanted to go after those who made the most money on the Abacus fraud: John Paulson and more importantly, the person who invented the trade that made John Paulson a billion dollars, Paolo Pellegrini.  In late October of 2009, Kidney circulated a long memo arguing that the SEC should consider charging Paulson & Co., John Paulson himself, and Paolo Pellegrini, who was the hedge fund executive who worked on the Abacus deal.

“Each of them knowingly participated, as did Goldman and Tourre, in a scheme to sell a product which, in blunt but accurate terms, was designed to fail,” Kidney’s memo said. “In other words, the current pre-discovery evidence suggests they should be sued for securities fraud because they are liable for securities fraud.”

Once again, Muoio intervened:

Some of Kidney’s colleagues initially supported his idea to pursue scheme liability, but Muoio seemed to think that doing so would hurt the agency’s solid but narrower case against Goldman. “I continue to have serious reservations about charging Paulson on our facts,’’ Muoio wrote. “And I worry that doing so could severely undermine and delay our solid case against Goldman.”  He was, of course, referring to the "case" in which not a single Goldman banker would be charged criminally, and only a 20 year old trader would see a civil lawsuit filed against him. Muoio’s viewpoint, again, prevailed.

* * *

Muoio, defended himself to ProPublica, and in an interview with Eisinger dismissed Kidney’s complaints. “I cannot imagine any basis for claiming ‘regulatory capture,’ given that I have never worked in industry or finance and given the cases I have made, including very significant cases against banks, auditing firms, companies and senior executives," he said.

Well, the basis is the glowing trail of evidence that Muoio, and the SEC, are clearly corrupt, and only a society that is too stupid, or too captured itself, is unwilling to accept it.

Kidney, clearly the only lawyer at the SEC with any integrity did not give up:

Even after he lost the debate over scheme liability, Kidney continued to argue for charging Jonathan Egol with securities-law violations. One staffer wrote that the SEC had testimony, but little documentary evidence, proving that Egol had reviewed the Abacus documents. “The law surely imposes liability on others besides the literal scrivenor [sic], or we are in big trouble,” Kidney shot back in an email. “Why are we working so hard to defend a guy who is now a managing director at Goldman so we can limit the case to the French guy in London?”


“I am sure you are not suggesting we charge Egol because of his position within the company,” Muoio replied. “Nationality is also clearly irrelevant and I hope that’s the last we hear from you on that subject. Tourre admits he was principally responsible for the problematic disclosures.”


Members of the SEC staff finally interviewed Egol in January. Muoio would later tell the SEC inspector general: “We didn’t lay a glove on him.” But Kidney felt differently. As he saw it, Egol had acknowledged reviewing all the documents that the SEC had deemed misleading.

And then, a miracle happened: someone at the SEC actually did their job and on January 29, 2010, after months of investigation and debate, the SEC provided a Wells notice to Jonathan Egol. 

Once again, enter banker defendant #1, SEC employee Reid Muoio:

In March, Muoio wrote an email arguing against charging Egol, saying that, among other reaons, he “will strike most jurors as nice, likable, down-to-earth family man.” 

And then another familiar name emerged:

On the afternoon of March 22nd, the team gathered in the office of Robert Khuzami, the SEC’s director of enforcement, for a meeting. Kidney, Lorin Reisner, and one other lawyer present were in favor of suing Egol; Muoio remained implacably against, as did others. Most of the lower-level staffers stayed quiet.

Ah yes, our good old friend, Robert Khuzami, star of such posts as SEC Whistleblower Blows the Whistle on Revolving Door Fraud (Khuzami: You're Outed), Circle Jerk 101: The SEC's Robert Khuzami Oversaw Deutsche Bank's CDO, Has Recused Himself Of DB-Related Matters, the same Khuzami who was General Counsel of one of the the most criminal banks in the world, Deutsche Bank, during the time when Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out,
and of course the same Robert Khuzami Who Stands To Lose Up To $250,000 If He Pursues Action Against Deutsche Bank.

In the matter of SEC litigation against DB, Khuzami had no choice but to recuse himself. Against Goldman, however, he made it clear whose interests he protects:

The following day, Khuzami emailed the group with his decision: “I am a no on Egol. An extremely difficult call,” he wrote. “The lack of consensus among our group is itself, for me, confirmation of this conclusion.” Khuzami did not respond to a request for comment for this article.

Kidney had lost. "He was offered the job of handling the expert witnesses for the trial but knew what that meant — that he was getting demoted. He declined."

And just like that, the only person who actually fought to put criminal bankers behind bars was kicked out of the SEC. He retired in 2014 after becaming disillusioned. Upon retiring, in 2014, he gave an impassioned going-away speech, in which he called the SEC “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors.”

* * *

As for Goldman, on July 15, 2010, the SEC settled with Goldman for $550 million. Goldman Sachs did not admit any wrongdoing. The SEC wrung an apology out of the bank, which the agency perceived as scoring a victory that critics called inadequate.

It would be the only SEC action brought against the bank for its actions in this corner of the mortgage securities markets just before the meltdown, although a Senate investigation uncovered questionable behavior related to other Goldman mortgage securities. The Justice Department recently settled a case with Goldman that charged that the bank had misrepresented mortgage-backed securities. The bank had to pay on the order of $5 billion. The Justice Department did not charge any individuals.

To this day, not a single banker has gone to prison for crimes during the last credit bubble.

* * *

In the conclusion to the Propublica piece, Kidney reflected on why the SEC has so miserably failed in its mission.

The oft-cited explanations — campaign contributions and the allure of private-sector jobs to low-paid government lawyers — have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants inside working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions.

And why is that? The answer, of course, came from the very top. In this case Eric Holder who admitted on the record that banks are simply "Too Big To Prosecute"

GRASSLEY: On the issue of bank prosecution, I'm concerned that we have a mentality of too-big-to-jail in the financial sector of spreading from fraud cases to terrorist financing and money laundering cases -- and I cite HSBC. So I think we're on a slippery slope.


HOLDER: The concern that you have raised is one that I, frankly, share. And I'm not talking about HSBC now. That (inaudible) be appropriate. But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.

This is better known as the "send one banker to jail, and the financial system crashes" defense.

Sadly, since nothing will change and the system is broken beyond repair and more corrupt with every day, it is an excuse that will be used extensively following the next, and far greater, financial crash.

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Fester's picture

Time for some more banksters to die.  


Jump mofo's

gladius17's picture
gladius17 (not verified) Fester Apr 21, 2016 7:14 PM

"the vast majority of the losses suffered had nothing to do with fraud and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time.”"

Ah, the tried and true "incompetence" theory. They didn't mean to be evil--it was an accident. They didn't intentionally bring the entire world under their thumb; it's a sheer coincidence that they own and control everything.  Almost makes you feel sorry for them, doesn't it, since they are being blamed for all this stuff that isn't actually their fault, just bad luck?

knukles's picture

The smartest guys in the room are stoooopid?
Not fraud?
I call Bullshit.   They knew exactly what they were doing.

Cognitive Dissonance's picture

It's not illegal if you don't get pay a't prosecuted.

Ivanka2032's picture

It's not illegal if the judge is a member of your tribe



CheapBastard's picture

"Most transparent SEC ever!"

Twee Surgeon's picture

A quick search for who is pro publica and I got me some George Soros and the usual suspects, scroll down to funding,

I have not read much of the article but have developed a habit of taking nothing at face value, Soros Fingerprints just for starters. It's for the public you know.......

old naughty's picture

Big Short II cometh,

"The un-be-lie-able pent-house".

TeamDepends's picture

Greed + Arrogance + Stupidity = Fraud

pakled's picture

It depends on what level you are examining. At one level there were plenty of yahoos who fall into the greed/stupid etc. category. Plenty. But at a higher level the concentrated string pullers are more aware of the ramifications of their actions.


The email to me indicates that investigators weren't shaking the higher branches of the tree.

Crash Overide's picture

Reading this article just pisses me off.

Lone_Star's picture

Me too.

Muoio's face, and words, makes me want to punch him.

TeraByte's picture

That´s why we need Dr Guillotine. Only people make these accidents to happen and them by doing it deliberately for their own gain. Allah All Mercifull does not give them absolution from their doings. Christians and similarly insane try to grant them immunity against from premeditated crimes.

Blythes Master's picture

"Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions."

Because of regulatory capture.

Crash and burn already.

junction's picture

For how New York’s justice system operates, at the SEC and elsewhere, look at the case of Kalief Browder.  The New York media totally ignored the story until a freelancer published a story on Browder in the New Yorker, breaking the New York press’ code of omerta.  Degenerate Bronx DA Richard Johnson (in office 27 years) made no apology for what happened and the judge who repeatedly postponed a criminal trial on the charges against Browder, Darcel Clark, left the bench to run for Bronx DA when Johnson suddenly decided not to run again for DA.  Instead, he replaced Clark as judge on the state Supreme Court, filling her vacancy.  The witness against Browder had long vanished but DA Johnson kept quiet about that as Judge Clark gave Johnson’s ADAs most of the 30 postponements in this case.

A Bronx man who spent three years as a teen in Rikers Island enduring beatings by guards and inmates and long stints in solitary confinement without ever being convicted has committed suicide.

Kalief Browder, 22, used an air-conditioning cord to hang himself Saturday at his family’s Bronx home, according to the New Yorker magazine.

“Ma, I can’t take it anymore,” Browder told his mother the night before he took his life.

Browder became a cause célèbre, garnering support from rapper Jay Z and talk-show host Rosie O’Donnell, after his torturous stint at Rikers was exposed. His case prompted Mayor de Blasio to reform the scandal-plague city jail to stop solitary confinement for 16- and 17-year-old inmates.

“This case is bigger than Michael Brown,” Browder’s lawyer, Paul Prestia, told the New Yorker, referring to the unarmed black Missouri teen whose shooting death by a white cop in August 2014 sparked national protests.

Kalief Browder committed suicide in his family's Bronx apartment after he spent three years as a teen in Rikers Island enduring guard beatings and solitary confinement without ever being convicted. Browder hung himself with a cord.

“When you go over the three years that he spent (in jail) and all the horrific details he endured, it’s unbelievable that this could happen to a teen-ager in New York City,” Prestia said. “He didn’t get tortured in some prison camp in another country. It was right here!”

In May 2010, cops arrested Browder on Arthur Ave. in the Bronx after a teen accused him of robbing him of his backpack.

His family was unable to raise his $3,000 bail, so Browder remained locked up in Rikers awaiting trial.

nmewn's picture

Too true, such is the state of "law" in this nation. A starving man steals a loaf of bread and is deprived of his liberty. The former CEO of Goldman can steal millions and become a senator & a governor.

Its gotten to the point we are breaking "the law" if you don't buy health insurance or wear a seat belt? 

Its gotten so completely immoral & corrupt the head of the DoJ himself can conspire to smuggle guns across international borders knowing full well they will be used to commit murder (because that was a feature, not a bug of the smuggling operation) and still look people straight in the eye and say they have no right of self defense?


They are dead to me.

Implied Violins's picture

Unfortunately we are dead to them, and they are trying to make that a reality. We need to show some signs of life soon to reverse this trend, and quite soon...

RopeADope's picture

"Now that we are gearing up to bring a handful of cases in this area, I suggest that we keep in mind that the vast majority of the deaths suffered had nothing to do with murder and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time."

Shadow1275's picture

That's right just like how murder is caused by the mild desire to kill somebody and rape is caused by the lesser desire to steal someone else's body.


So by that logic does that mean that I won't go to court if I murder you Mr. SEC man of the people?

Kefeer's picture

Shocking I say - sarc.

max2205's picture

The depth of corruption is historic 

G-R-U-N-T's picture

Who would buy and sell government debt, if not the big banks, that's their leverage over Washington! Washington serves the banks while the people are thrown under the bus paying for the to big to fail-O-rama. However, there will come a time when government's worldwide won't be able to sell their debt, no buyers, then the end comes.

scatterbrains's picture

This cock sucker needs to be a face card in the deck of cards of banksters to be strung up by their necks

pndr4495's picture

Clinton - Rubin - Greenspan - Summers - Levitt - These are the men who sowed the seeds of the 2008 debacle & they will NEVER be held accountable. It is laughable to me that Levitt gets so much air time on Bloomberg. I'd like to see if he knows how to hold a simple tool like a flathead shovel, and to see if he is willing to use it to perform his own work. The same goes for the rest of the Commodity Futures Modernization Act 0f 2000 proponents, as well as the legislators who thought it was a great idea to repeal Glass-Steagall. These people purposely forgot that there is a MORAL STANDARD to which to adhere when one is serving as a public trustee.

SillySalesmanQuestion's picture

Lest we forget Bart Chilton and Gary Gensler...assholes.

herkomilchen's picture

Regulatory capture averting prosecution isn't the problem per se.  Anything that neutralizes government force distorting markets is good.

The problem is the hundreds of millions required to pay for the BS bureaucratic compliance overhead and lobbying of government commissar approvals required to form an investment bank legally allowed to compete with Goldman.  Not to mention supplying the millions in post-SEC-career salaries to capture the SEC officials.  Not to mention the insider club approvals required from legal monopolies like the Fed.

This aborts before birth any startups that would otherwise arise to eat the lunch of Goldman every time it attempted a less than wholesome practice.  That the law and SEC remain in full force to stamp these competitive entities out before they see the light of day is the actual crime.  Not that government agents are incompetent (redundancy) or self-interested (redundancy).

Joe_in_Indiana's picture

I believe Reid Muoio needs to be investigated and probably charged with malfeasance at the SEC.

Joe_in_Indiana's picture

Move up the foodchain from there.

o r c k's picture

When he found his car trunk full of gold bars nothing much mattered after that.

Mr. Bones's picture

It would be just super if he could explain, specifically, what it would take to have a prosecutable case. 

Also, as a sidebar, how much it would cost to buy him.  I'd like to see him blink and hear his denial.

Tom Green Swedish's picture

I am under the conviction the bankers were in all actually trying to prop up prices to stop the Chinese from getting their hands on our real estate.  I don't think they were wrong at all.  Made the Chinese go into their own market.  I see no wrongdoing here.


Also what is more valuable then USA companies? I see nothing wrong with a surging stock market.  


Now look where China is at.  I will enjoy watching China go down the tubes. 


Raise your hands if you are a gold collecting Russia / Chinese commie.

PoasterToaster's picture
PoasterToaster (not verified) Apr 21, 2016 8:32 PM

"That's not fraud.  THIS is fraud!"

Way to rationalize your scumbaggery, assholes.

williambanzai7's picture

Shut it down and turn off the lights on the way out. Let the states regulate the market.

Palladin's picture

This article implies that there was just one Abacus CDO.

There were many.

Some of the 20 or so are listed here, along with many others including the infamous Timberwolf CDO.

Take a look at every one of the Term Sheets or Offering Circulars. At the top of every one of them is this line: (Incorporated with limited liability in the Cayman Islands)

I mean WTF. Goldman can't incorporate them in Delaware, New York, or even Cleveland?? No they are all incorporated in the Cayman Islands for what purpose. Tax evasion, loose regulation and probably many other "advantages".

The MSM notion that they "were too complicated" is just bullshit. Take a look at the myriad of tables, endless listing of tranch after tranch. The legal staff that had to go over every line and entry had to be enormous. To say noting of the multitude of minions at Goldman that had to produce, print and distribute all the CDO's. Goldman, Merrill, Morgan Stanley, and all the other participants knew exactly what they were doing. When confronted with the losses, they called on their bought off politician and SEC stooges to sweep everything under the carpet.

And the fines were an ironic joke.

Think for a minute about the structure of any company, whether public or private. No company has any money. Any money that a company has is generated from selling a product or service and then paying expenses. If anything is left over then that money goes into the company treasury. It’s as simple as that.

Take for example the major Wall Street Banks, like J.P. Morgan, Citicorp or Bank of America etc. They were fined billions of dollars in the aftermath of the Financial Crisis in a settlement hammered out by the Justice Department and the SEC. Everybody cheered.

Somehow overlooked was the fact that the banks get all of their income, and profits from their depositors or customers. These were the very people that were harmed in the Financial Crisis and they were the ones that ended up paying for the fines, in the form of higher bank fees, less service, lower interest paid on savings. On a percentage basis, the banks overall profit level remained relatively constant. The money necessary to pay the fines levied had to come from somewhere.

And that somewhere was the banks customers.

But since none of the people were criminally charged so there is no reason not to continue breaking any and all rules or laws whenever it suits to benefit any company. The officers and directors know that their customers will be there to pick up the tab. If the fines are great enough, the government will bail out the banks if necessary with taxpayer money.

How do you spell fraud? Magnatar, that's how.

Here's an in depth discussion of how that all went down.

Lots of good information on the whole CDO scandal on ProPublica. Here's the search results for just Magnetar.

This graphic spells out the Magnetar timeline.



GRDguy's picture

When are you going to take action?  Vote the incumbents OUT in the primaries.  Repeat.  I changed my party affiliation from Independent to Republican, because the majority of incumbents I can vote against are Republican.  Will change in the future as needed to continue voting out incumbents.  Yep, I'm just a raindrop falling in the desert.  But if enough Independents change to vote out incumbents, it'll be a flood.  In this flash flood video, consider the weather map voting districts and what happens next is the results of thousands, perhaps millions of raindrops.  It does happen pretty fast.  The deadwood represents the incumbents.

ersatz007's picture

Feudalism 2.0. Not much different than dukes, earls, Kings getting away with all sorts of crimes due to their station in life.

Radical Marijuana's picture

Yes, the banksters are the new royalty

Fraud Kings in entire Courts of FRAUD!

However, it is inconceivably worse now than during any previous times in human history. There is no doubt that "the system is broken beyond repair and more corrupt with every day" ... However, no previously existing human systems that backed up lies with violence were remotely close to being globalized systems of electronic money frauds, backed by the threat of force from atomic bombs.

"The system is broken beyond repair and more corrupt with every day" because the vicious spirals of political funding enforcing frauds are being driven at an exponential rate, while nobody else could compete with the people who get to make trillions upon trillions of units of the public "money" out of nothing, and then pay themselves billions upon billions of those units of the public "money" as bonuses.

The established systems operated primarily through the history of political funding, within which context nobody else that has to make "money" by selling goods or services can possibly compete with those whose "money" is more directly made out of nothing as debts.

I agree that banksters as the new royalty is Feudalism 2.0, or Neofeudalism. However, that is only a phase inside the overall tragic trajectory that "the system is broken beyond repair and more corrupt with every day" ... WHICH SYSTEM IS TRILLIONS OF TIMES MORE CRIMINALLY INSANE THAN ANYTHING MEDIEVAL EVER WAS!

ersatz007's picture

the level of obsfucation and distraction is also much higher than it ever was...allowing the 'royalty' to hide their actions like never before. 

Joebloinvestor's picture

After the S&L debacle, where bankers actually went to jail, things were put in place to assure NO BANKER WOULD GO TO JAIL AGAIN.

Pay fines, yes, go to jail, no.

runnymede's picture

2008 and it's aftermath removed any doubt that the bankers would be held accountable in any way by .gov

That's why this go-round is even worse.  Psychopaths now officially run every meaningful gov institution and know they are immune.  We have no rule of law,  therefore no meaningful country or civilization. A moment of silence for the passing of our country  ...........................

I'll believe it when I see it, when these folks swing.

SmittyinLA's picture

Jamie Gorelick recommended the current AG Loretta Lynch

jcdenton's picture

Well, I guess Muoio missed ..


That memo ..

To appear at the reading ..

of ..

the RIOT Act ..


So now we can with high confidence add Muoio to the list of defendents: (if not already there)

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Meanwhile, since we first began reporting on this crisis, the list of US criminals who have been scrambling to enrich themselves, throwing all caution and common sense to the winds, has expanded. Apparently, the spectacle of others engaged in a final self-enrichment free-for-all has been too much for some of these corrupt fools to bear.

Specifically, we are now formally authorised (in writing) to identify the following officials who are variously engaged ‘as we speak’ in terminal criminal financial operations contrary to the law and against the interests of the American peopleransacking the assets of the United States in a pig-trough free-for-all on a previously unknown scale.

James Wilkinson, Chief of Staff to Henry M. Paulson, US Treasury Secretary. On Thursday 24th August, Mr Wilkinson signed the necessary documents authorising, at long last, the transfer of the $4.5 trillion from the relevant US Treasury account with Goldman Sachs and Company, to the account of Ambassador Leo Wanta’s Virginia-based AmeriTrust Groupe, Inc. The funds were not paid over. He appears to have signed the documentation so that he personally cannot be accused of felonious conduct at the day of reckoning.

Henry M. Paulson, the US Treasury Secretary, himself. When and after he succeeded John Snow, it was believed that this reputedly honourable man had been appointed in part to hasten the conclusion of The Wanta Settlement, which triggers associated overdue ‘set-aside’ payments. It transpires, instead, that Mr Paulson may, whether through blackmail or for other reasons, have joined the ranks of the double-minded criminals – as he is alleged to have been seeking to obtain his own contract to run Medium Term Notes to Deutsche Bank using the US Treasury or its Federal Financing Bank (FFB), an institution with a separate legal entity based inside the Treasury itself.

Dr Ben Bernanke, Chairman of the Federal Reserve Board. In addition to what has previously been published about the Fed in this series, the CHIPS payment system is controlled by the Federal Reserve Bank of New York. If the New York Fed is choosing not to allow the ‘CHIP’ controlling Leo E. Wanta’s $4.5 trillion Settlement to be paid, Dr Bernanke is violating US Federal law and is not being prosecuted, contrary to the law. The Federal Reserve can continuously tap that “CHIP’ for the purpose of making money off-balance sheet. There is more than a suspicion that the Fed is illegally and fraudulently facilitating the illegal payment of criminal funds by this means and through associated transactions, in flagrant breach of the law and of the Full Faith and Credit of the United States – which is today, sad to say, null and void, as a consequence of these felonies.

Co-conspirators and accessories to the fact of this and multiple related ongoing fraudulent financial, tax-evading, money laundering transactions condoned by the ‘Justice’ Department and the Internal Revenue Service include:

George H. W. Bush Sr., former President of the United States, allegedly a.k.a. Georg H. Scherff, Jr., alleged head of Deutsche Verteidigungs Dienst, Dachau.

George W. Bush Jr., President of the United States.

Richard Cheney, Vice President of the United States. He is strongly rumoured to have been shorting the US dollar, betting against the US currency – which is both treason and a felony – using inside information

Donald Rumsfeld, US Secretary of Defense.

The Omega Group of ‘Neocons’ (Vice President Cheney, US Secretary of Defense Rumsfeld, and others).

Dr. Linton T. Wells II, Principal Deputy Assistant Secretary of Defense.

Unnamed officials at the US Department of Defense.

Maynard C. Anderson, former Assistant Under Secretary of Defense.

William B. Bader. PhD, Chairman of the Board, Eurasia Foundation, Georgia (former USSR), and former Associate Director, US Information Agency.

W. Neil Thompson and Mrs Janet Thot-Thompson, Multi-Sector Crisis Management Consortium (MSCNC), consisting of intelligence operatives.

John Negroponte, Director of National Intelligence.

General Michael Hayden, Director of Central Intelligence.

Starre Foundation, viz. Hank Greenberg and William B. Bader et al.

How much money is flowing from financial institutions in India, to the Bank of England, in the form of cash (US dollars), Medium-Term Notes and US Treasury instruments?

What are the amounts that are being credited for accounts of the following:


Former President William Jefferson Clinton

Senator Hillary Clinton


Special accounts for the US Republican Party

Special accounts for the US Democratic Party




As previously reported, the present and former holders of high office in the United States, with other American officials, are severally and collectively co-conspirators to criminal financial, money laundering and tax evasion operations, and are collectively accessories to the fact in respect of breaches inter alia of elements of some or all of the following US Statutes:

The Racketeer Influenced and Corrupt Organizations Act (RICO) enacted by Section 901(a) of the Organized Crime Control Act of 1970 [Chapter 96 of Title 18 United States Code].

The Currency and Foreign Transactions Reporting Act, a.k.a. The Bank Secrecy Act of 1970.

The Hobbs Act of 1946 [18 USC, Section 1951 including USC 371 (‘Conspiracy to commit offense or to defraud the United States’).

The Securities Exchange Act of 1934 implementing The Securities Act, 1933.

The Money Laundering Control Act of 1986.

The Organized Crime Control Act of 1970.

The Anti-Drug Abuse Act of 1988.

The Annunzio-Wylie Anti-Money laundering Act of 1992.

The US Money Laundering Suppression Act of 1994.

The Terrorism Prevention Act of 1996.

The Maloney Act of 1938, amending The Securities Act of 1933.


All of the parties concerned are also indictable under Section 35 of USC Title 18, ‘Crimes and Criminal Procedure’ (‘Imparting or conveying False Information’); under Title 18, Part 1, Chapter 1, Section 4, (‘Misprision of Felony’); under US Code Title 18, Part 1, ‘Crimes, General Provisions’, (‘Accessory after the Fact’), as explained in the Second Mid-August Status Report and posting; and also under HR 3723, The Economic Espionage Act of 1996

[end blockquote]