Crack Down on Capital Pirates
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Joe Conason
For many years, Robert Morgenthau has warned America that the nexus of capitalism and criminality poses a serious threat to our prosperity, security and growth. Now in the wake of the collapse of Bear Stearns, which pushed global markets still closer to the brink, perhaps the nation will listen to the Manhattan district attorney, whose scrutinizing gaze is fixed on targets well beyond New York.
As a legendary prosecutor of international financial crime, Mr. Morgenthau has long kept a watchful eye on the buccaneering crew at Bear, the firm that now symbolizes the worst in amoral capital. Its executives were notorious for testing the limits of the law, by sheltering shady stock promoters and bucket-shop brokerages and by swelling the assets of its hedge funds with dubious mortgage-backed assets.
When a pair of Bear hedge funds based in the Cayman Islands fell last summer, after their subprime mortgage investments went sour, Mr. Morgenthau sounded an early alarm. He urged the federal government to remember the fall of Long-Term Capital Management, the huge Cayman-based hedge fund whose implosion 10 years ago came close to sinking several major U.S. banks. The inevitable multibillion-dollar federal bailout prevented or postponed financial disaster—but we were not ready then to absorb the real meaning of that costly experience. That lesson, as Mr. Morgenthau explains, was simple: “Markets, like the hedge-fund market, that are unsupervised and conduct business in secret, in tax havens, will eventually cause serious problems.” He has always possessed a talent for understatement.
Ironically, Bear Stearns executives shunned any participation in the rescue of Long-Term Capital in 1998—and indeed mocked the government intervention that they now covet. Like so many corporate leaders who proclaim strict adherence to free-market principles and standards, the Bear gang doesn’t stand up too well under close examination. When those Cayman-based funds nose-dived last year—wonderfully named the “High Grade Structured Credit Strategies Fund” and the “High Grade Structured Master Credit Strategies Enhanced Leverage Fund”—Bear’s clients lost billions.
Of course Bear’s poor performance didn’t dissuade James Cayne, its recently departed boss, from the gross display of buying himself a $28 million home, weeks before his corrupted firm finally tanked. There he sits in diminished splendor, while lawyers and economists bargain with the Treasury Department over the price of his company’s distressed shares.
If we must preserve Bear and its profligate executives to protect ourselves, we should make comparable efforts to save the homeowners, cities and states that stand to lose so much in this deluge of stinking paper. There is no moral excuse to subsidize the losses of the super-rich while leaving everyone else to the mercies of the market. What’s good for the country-club Republicans is good for the working-family Democrats, too.
But as Mr. Morgenthau insists, we cannot sustain an economy of universal bailouts. A son of F.D.R.’s treasury secretary, he understands how the New Deal saved democratic capitalism from mindless greed 75 years ago, and he knows that the undoing of those reforms over the past 25 years has led to our present troubles. More and more of our capital, including public pension funds, has moved into offshore havens where banking and corporate secrecy laws allow hedge-fund operators to avoid regulation and taxes. This escape from transparency will continue as long as it is permitted by law and rewarded by the tax code.
All that will soon have to end, or we will find ourselves again at the edge of disaster.
Obviously we should hope that the Treasury Department and the Federal Reserve find a way through this crisis without severe damage to the U.S. and world economy. The question is whether we will make the necessary changes to our political economy—including a renewed regulatory regime and a new New Deal for the American people—without suffering hard times such as we have not seen for decades.
As we mark the end of a long era of conservative excess, we could do much worse than heed Mr. Morgenthau’s advice. In the name of free markets, we had made ourselves and our economy vulnerable to the worst impulses of a greedy, remorseless few. He saw that on the horizon and tried to tell us. Perhaps now we will listen.
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i agree with you on virtually no issue. I don't think we should bail out speculators. They and union leaders make their choices as to where they want to invest the members money. If they make bad choices, it is up to the membership to sue them; the prosecutors to prosecute if the leaders have violated laws.
I think it is stupid for anyone to try to buy a home with zero down and take out an ARM mortgage. If one can not put together even 5% down, how can he/she even maintain the property?
Karl, that is not what was being pointed out in the article. What the article said is that we need to stop bailing out rich ba$$tards because they are rich. The reason they are rich is because they made shady business decisions that should be illegal. I agree with that. If the "no money down" loans were never dreamed up, we would not be in this financial mess. However, someone saw a way to make money on it, had the rules on it relaxed (while chanting the republican mantra "Regulation Bad, Deregulation Good", and there you have it. A spectacular meltdown of the Capitalist way. I don't care what anyone says, but Greed is never good.
"New Deal saved democratic capitalism from mindless greed 75 years ago,"
Really Joe? Let's see, the depression continued 8 years after fdr got into office. We didn't pull out until we entered WW2. Joe is an idiot.
Here, here. People still think that FDR got us out of the Depression??!!!
When the Japanese attacked, our economy was still a wreck.
Die already Morgenthau.
Dear Steve --
May you rot in jail with the rest of them when the revolution comes. I'll come visit just to watch your misery.
See ya in stir, sucker,
Kornhole Killer
Kornhole and Idiot well illustrate the pure naked selfishness of freepers. Mixed economy, commonwealth, society, are beyond their comprehension. Power over other people -- POOP -- is what they worship. The tyranny of unfettered unregulated "capitalism" is unseen by them. 80 - 15 - 4 - 1. Eighty out of one hundred Americans are loosers, fifteen tread water, so four can do very well and one can rule. Three eyes. In America most wealth is Inherited, acquired Illegally and accrued Immorally.
Adam Smith envisioned "liberal economics", not unrestrained predatory economics. No way did he mean to craft a world where, by design, 80% would have to loose. They can no longer blame competing ideologies like defunct communism and socialism. Like it or not, the failings of so-called capitalism can no longer be whitewashed, apart from the intellectually bankrupt who have not the courage to challenge their own discredited beliefs.
Ironically, if you really want to see contempt for society and your fellow man your best bet is to observe the contemporary American Christian Capitalist Crackpot. To see how utterly stupid they are one need only acknowledge the re-election of George W. Bush.
But don't listen to me because I'm really an idiot who has no clue what makes a country great. I wish the Soviet Union were still around.
I include myself in that 80 percent that are losers. But I enjoy all the toys the productive people create. Like this computer I'm writing on (not mine, internet cafe,) my iPod, (cuz I'm an iSheep,) my playstation at my parent's house, my used Corolla.
I is a hypocrite!!
Vote GOP!
Bear Stearns engaged in imprudent financial practices and self destructed. Its employees and stockholders have been convicted in the marketplace and given capital punishment. Individuals who profited from specific crimes are subject to the criminal justice system. The NYS criminal justice system is an inadequate vehicle for pursuit of what are generlly complex frauds and federal crimes.
Like most leftists, Joe rewrites history. FDR flayed about with spastic programs to fight the Great Depression for many years. While Herbert Hoover was in office when things collapsed, his management of the Depression was at least as good as FDRs. Hoover is castigated for doing nothing, so he did not care about the people, it follows. FDR tried everything and failed so he is credited with caring about the people!
President Bush assumed office at a time that the economy had slowed considerably. The 9/11 attack took a trillion dollars out of our economy. President Bush took specific actions including two major tax cuts. The economy roared back and we had the longest period in history of job growth and economic growth which now has slowed. President Bush immediately sought and obtained a stimulus package from congress. yet president Bush is reviled by the left when his actions actually - unlike FDRs - have worked. yesteday the labor Department reported that incomes actaully increased in January and unemployment claims dropped. But Joe, true to his leftist bones, will decry capitalism and any Republican president and repeat the lie about FDR.
Seductive salesmen persuaded people that there was no downside to buying things they were unable to afford. This is not anything new in the annals of humanity. Those who knew fraud was being perpetrated need to be sought out and punished so severly as to preclude this happening again. I do not imply a fine and short prison sentence but rather total impoverishment of the salesmen and their families for several decades. The punishment should be so onerous as to gib=ve the larcenous souls great pause. The punisment can't be just fit to the thief. The proceeds and outcome of the theft affects the victims' families so let the punishment do the same for the thief's family.
I realize this sounds drastic but the cyclic nature of this sort of fiscal larceny indicates that it may be worth the risk for some people. Let the punishment be shared by the families involved. Let them all suffer. The thief's spouse children and parents must all suffer not just shame and temporary discomfort but truly grinding poverty.
Moron-ey.
Yep. Name fits.
re: Mike Moroney
Bear Stearns engaged in fraud. I see where James Cayne just cashed in for $61 mil and Bear Stearns is being "bought out by JPMorgan Chase in a government-led bailout". It's not clear to me why the marketplace should convict good-faith employees and shareholders. When government bails out Wall Street and big business, it's just partnering, or creating job incentives or stimulating the economy. But when government helps working class citizens, well that's SOCIALISM!!!
Like most republicants, Moroney makes stuff up. FDR was the most successful president of the twentieth century. He put the country back to work. He restored dignity to working men and women and inspired hope for a better future in an entire nation. For decades and spanning generations his image appeared in homes all across America. Unlike the Stalin-esque winger campaigns to shotgun Reagan's image to the commons, a grateful nation voluntarily placed FDR's picture prominently in it's homes out of reverence.
By any objective standard, George W. Bush is the worst president in modern history and easily contends for the most failed of all time. Under Bush, a rising tide lifts all yachts. 8.5 million more uninsured, 5 million added to poverty, median income down, trade deficit doubled, dollar strength tanking, dependency on foreign oil up 8%, gas tripled, anemic job growth, national debt doubled, college tuition near double, personal saving rate in negative. Even Mort Zuckerman scoffs at the Bush stimulus. And ROW hates us, with even Britain approaching majority unfavorable.
But Moroney is a republicant. Can't tell the truth, can't obey the law, can't govern.
I must be the stupidest person online for posting some of the comments I post.
Please forgive me of my anusness.
You critics of FDR ever read a book called "Raw Deal"?.....Ever check out the amount of research that the author took the time and trouble to back up the facts with?
"Socialism"...what a great ONE word for a "sound bite soceity" to attach all of our petty hatreds on!!
I just drove across the entire United States of America on an Interstate Highway System...and didn't pay a single toll from one State to another...don't hear anybody bitchin' about that particular form of "socialism"! And wasn't it President Dwight D. Eisenhower (R) that really got that rolling?....A highway system that everybody rich or poor uses...Anybody want to depend on State highways for commerece or travel??
You idiot, Crider. What do you think your federal gas taxes pay for every time you fill up the tank??? That's how the interstates were paid for and maintained.
NOTHING is free. Let me repeat, NOTHING IS FREE, especially when it's given out by the government.
Somewhere, someone has a lighter paycheck so old people can get paid, illegals can get healthcare, schools can get fixed, potholes get filled, Pentagon gets a new bomber, Bear Stearns can get bailed out, etc, etc, ad nauseum, ad infinitum....
re: R. Crider
Exactly right. The republicant freepers, these followers of Ann Coulter, Ted Nugent, Weiner-Savage, Joe McCarthy, Rove and the like have contempt for America's legacy. When real conservatives like Kevin Phillips, Pete Peterson, William Buckley, Goldwater, the former McCain, even Nancy Reagan on stem cells; when rational conservatives push back the crackpots go hysterical.
Witness their feeble attempts to co-opt my moniker here. Note the utter lack of cleverness and originality coupled with their abject cowardice. Feeble indeed. And dishonest. What do you wanna bet the person or people doing it are Christian?
The G.I. Bill, rural electrification, interstate highways, national parks, social security, USPS, CAP etc. Of course, just name everything after Reagan and we'll see their staunch support.
"My illness helped me to see that what was missing in society is what was missing in me: a little heart, a lot of brotherhood. The '80s were about acquiring -- acquiring wealth, power, prestige. I know. I acquired more wealth, power, and prestige than most. But you can acquire all you want and still feel empty. What power wouldn't I trade for a little more time with my family? What price wouldn't I pay for an evening with friends? It took a deadly illness to put me eye to eye with that truth, but it is a truth that the country, caught up in its ruthless ambitions and moral decay, can learn on my dime. I don't know who will lead us through the '90s, but they must be made to speak to this spiritual vacuum at the heart of American society, this tumor of the soul."
Lee Atwater, February, 1991
http://www.huffingtonpost.com/kevin-phillips/the-destructive-rise-of-b_b...
Read 'em and weep boys. Witness the sobriety of a real died-in-the-wool grown-up fiscal conservative, if you can handle it.
"investors who state their belief that current U.S. inflation is really 6 to 9 percent a year, not the 2-4 percent the government alleges"
"If you measure the Dow in Swiss francs or euros, two strong currencies, it has already lost some forty percent of its 2000 value. Too many Americans live in a dream-world of economic misinformation."
Crime in this country is about to explode. It has been evident for some time, with the increase in gun violence as a good indicator. Talk about your volatile mix: a citizenry with decades of pent up needs and wage suppression, awash in guns, seeking redress from a unresponsive extra-legal (here, I am being very charitable) Bush/Cheney/Rove government that, astonishingly, enjoys the continued support of free-market studs (clowns) as represented here.
I don't think capitalism is working out so well, but what do I know. I mean, I never had the good sense to vote for Reagan, much less Bush. In fact, I have eight times cast votes against men named George Bush (ya gotta live in Texas to do that). By September 12, 2001, my greatest trepidation was not fear of terrorists, but rather how ham-fisted my government would respond.
On second thought, maybe my inductive/deductive reasoning isn't so bad?
Peace, out.
Hello Dano. Is there really and difference between the way the Communist Chinese and the neo-American capitalists conduct business? Both seem to have the objective of destroying the American Way of Life.