Palin’s Email Hacker Faces Jail Time While Wall Street’s Billion Dollar Fraudsters Retire In Style

Our long time VIP Members will know that in a previous life, I spent ten years working as a stockbroker on Wall Street and can’t help but keep track on what’s going on there…

You may recall that it was the collapse of a Wall Street firm called Lehman Brothers that started the ball rolling on the biggest financial crisis the world has seen since the great depression.

After her testimony on the bankruptcy, Rep. Anna G. Eshoo (D-Palo Alto) released a statement saying:

“The Examiner’s report laid bare how the collapse of Lehman Brothers resulted from risky, deceptive practices which exemplify the worst excesses of Wall Street and the root causes of the financial crisis that led us into the deepest recession since the Great Depression. These practices may not be illegal, but they are criminal. The report underscores the fundamental need in our nation for common-sense financial reform to bring transparency to the market place, as well as protection of investors and taxpayers.

“More than 40 municipalities, including San Mateo County in my Congressional District, had invested over a billion dollars in the purportedly stable and safe financial products of Lehman Brothers. When Lehman collapsed, all of these taxpayer funds were lost. The affects of this loss are still being felt today-teachers are being laid off, schools are not being built or renovated, roads are not being improved, and transportation plans are being scrapped.

William K. Black, Associate Professor of Economics and Law, University of Missouri — Kansas City made a statement before the Committee on Financial Services United States House of Representatives regarding “Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner.”

William K. Black stated that: “Lehman’s failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001, and that is with their subprime and liars’ loan operations.”

“Lehman was the leading purveyor of liars’ loans in the world. For most of this decade, studies of liars’ loans show incidence of fraud of 90%. Lehmans sold this to the world, with reps and warranties that there were no such frauds. If you want to know why we have a global crisis, in large part it is before you. But it hasn’t been discussed today, amazingly.”

Among the 27 page prepared statement, it’s interesting and very disturbing to see the following statements:

“First, Lehman’s nominal corporate governance structure was a sham. Lehman was deliberately out of control with regard to “risk” in its dominant operation — making “liar’s loans.” Lehman did not “manage” the risk of making liar’s loans. It engaged in massive, fraudulent transactions that were “sure things””

“Lehman’s principal source of (fictional) income and real losses was making (and selling) what the trade accurately called “liar’s loans” through its subsidiary, Aurora.”

“There is no way to “manage” the “risk” of making massive amounts of liar’s loans. Lehman was the world leader in making liar’s loans. As the name makes clear, Lehman’s top managers knew that their principal source of income was making fraudulent loans. It was necessary, therefore, that Lehman not document that its liar’s loans were frequently fraudulent. Lehman, instead, classified its massively fraudulent liar’s loans as “prime” loans.”

“… Lehman personnel that pointed out the fraudulent liar’s loans were attacked, even fired, by Lehman’s management. Honest managers, of course, would be delighted if employees identified frauds.”

“Making liar’s loans is not risky — it is suicidal. That is why every significant lender specializing in liar’s loans failed. The pervasive fraud cannot be admitted — for Lehman’s entire business model was premised on massive sales of liar’s loans to others. If Lehman admitted that its liar’s loans were often fraudulent it could not sell them — cutting off one of its largest sources of income.”

“Criminologists refer to entities that spread fraud epidemics as “vectors” (continuing the public health metaphor, the anopheles mosquito is a “vector” that spreads malaria and can create epidemics). Lehman was one of the largest vectors that spread the fraud epidemic.”

“It is critical to understand that making liar’s loans required multiple frauds by multiple parties. Because liar’s loans create an intensely criminogenic environment, they produce fraud epidemics.”

So how many of the Lehman employees who were “engaged in massive, fraudulent transactions” have gone to prison so far?

Not one!

It’s hard to believe that Dick Fuld, the Gorilla of Wall Street and the former chairman and chief executive of the US bank Lehman Brothers, which collapsed in 2008 with more than $600 billion of debt, insisted that the firm had been “risk averse” and failed only because of the “terrible timing” of some of its investment decisions.

“The veteran chief executive, who had previously blamed the government for failing to rescue Lehman, told the House financial services committee: “I’m very much aware that one day we had a firm, the next day we did not. A lot of people got hurt, and I have to live with that.”

And he will “live with that” in style, because since 2000, Richard Fuld received $484 million in salary, bonuses and stock options. Although he has suffered a little because “…given the collapse of Lehman Brothers and its now worthless stock, his actual holdings were closer to $350 million.”

Although I agree with Larry McDonald, a former Lehman vice-president who says: “I think this is gross negligence of the highest order and I want to see people behind bars…” the prevailing legal wisdom is that the “I knew nothing about it” defence might just work – even for the man in the corner office during the most notorious Wall Street banking collapse since the Great Depression.” .

Meanwhile we read that David Kernell, the young man who hacked Sarah Palin’s email account “faces up to 50 years in prison if found guilty of four charges.”

Now there’s justice for you…

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Written by Scott Oliver, author of 1. Costa Rica Real Estate Scams & How To Avoid Them, 2. How To Buy Costa Rica Real Estate Without Losing Your Camisa, 3. Costa Rica’s Guide To Making Money Offshore and the Director/Producer of the Costa Rica Living & Retirement – Secrets To Happiness DVDs.

Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.