Monday, 30 April 2012

To steal or not to steal. . .

Reading the business pages, an activity I enjoy when there are no slasher movies in my Netflix cue, I notice many stories about insider trading scandals and the judicial comeuppance of the perpetrators, either by regulatory agencies, criminal prosecutors or both. Here’s the latest list I can think of just in recent memory:

--the Raj Rajaratnam case involving his bloated hedge fund, a Goldman Sachs director who doubled as a McKinsey Associates bigwig, and a supporting cast of lesser scumbags;

--two cases reported in the Friday (4/27) NY Times from the U.K., one involving Lord Poobah X and a helpful co-conspirator from JP MorganChase, the other featuring David Einhorn, a regular presence on the finance pages for his great investing wisdom;

--a new Goldman-related case involving a medical devices company;

--the SAC Capital Advisers case from February, ongoing;

--and Congress’s own not-illegal insider trading activities, just prohibited a week ago.

For those not paying close attention, this might appear to signal Firm, Punitive Regulatory Action by the duly constituted agencies up to and including jail time. That actually happens on rare occasion, but more frequently the accused are allowed to pay a fine and fahgettaboutit, with their actions duly minimized by reporters in the Serious Newspapers who want access to them for their future stories. (Here’s the oily language used by the Times:
Mr Einhorn denied any wrongdoing, but decided to settle the case rather than fight it
—tut, tut, my dear, a minor bureaucratic inconvenience, nothing to see here, etc.)

While the accused in these cases are probably guilty as hell (especially those allowed to ‘admit no wrongdoing’), their shenanigans are really small beer compared to the wholesale looting that proceeds apace elsewhere with no resistance whatsoever. Now that’s a much more interesting list:

--the mortgage settlement announced at Obama’s State of the Union address in which turncoat Eric Schneiderman tossed in the towel along with his stained undies when he gave away the powerful weapons he wielded as Attorney General of New York State in exchange for a cameo TV shot and the goodwill of the Democratic Party apparatus;

--the massive, continuing judicial sedition performed by the mortgage industry through robosigning, fee-loading, illicit foreclosures, HAMP rip-offs, and a host of other unpunished crimes and misdemeanors leading lifelong real estate agents to counsel prospective buyers to stay far away from the housing market forever, lest their firstborns be snatched up by the banker pharaohs. (A key piece of reasoning in this drastic advice is that one can no longer be sure of title to one’s newly-purchased home--rather an important detail.)

--continued banker obfuscation about balance sheets, exemplified by the blatant lying performed at Lehman Brothers and for which no one has been accused, tried or punished. Since that notorious Repo 105 falsification was successfully done with impunity, there is no reason to believe anything that is being told to us (as in our pension funds, our state and city governments, etc.) by financial institutions re their products or their own balance sheets.

--the granddaddy of current financial scandals, the outright theft of customer money by MF Global Investments, led by a prominent Democratic moneybags and former New Jersey governor Jon Corzine. It’s truly remarkable how a billion dollars can disappear from an institution supposedly expert in managing money while to date no one (1) knows where it is nor how it got lost, (2) is being put in jail for taking it, nor (3) is particularly upset—except, of course, those whose pockets were suddenly emptied out.

Insider trading is inevitable in the upper reaches of finance and cannot really be stopped. Gross and obvious violations like those of Martha Stewart and the Raj guy can and should be pursued to keep the lid on things, but useful intelligence about how a business is doing is always going to circulate among those in the know, who will then use the knowledge to improve their stock portfolios.

But this policing, while necessary and healthy despite its inherent futility, should NOT be the priority activity of our prosecutors. There is huge, massive fraud and theft taking place on all sides with the connivance and protection of the federal government and its faux regulators. Courageous state and local prosecutors, if there be any of those left, should be setting their sights on that behavior, not routine insider trading, while there is still a smidgen of judicial independence remaining in the land.

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