An Ongoing Quest For Answers -
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The Issue:
There are plenty of remedies that regulators and prosecutors could use to go after major Wall Street execs who committed very lucrative securities fraud in recent years. Why so little action?
Louise Harris • I was just talking to another securities lawyer about this on Friday. I think the answer to that question is to be found the aftermath of the blow-ups with Enron, Worldcom, HealthSouth, etc. They were complex cases which were extremely expensive and difficult to prosecute. What did the government get out of those prosecutions? What were the consequences of losing for prosecutors? Were the markets truly stronger as a result or did the fraudsters just move on to other "opportunities"? I think a thoughtful analysis of these events would be very illuminating. Any thoughts?
Brett Sherman • I agree completely... Corporate fraud by complexity is a big factor. However, this is a big problem since one could certainly argue that the failure of anything other than window-dressing prosecutions and other cosmetic fixes from the tech-wreck and early 2000s corporate scandals emboldened the kind of over the top fraud that led to the financial crisis. If this is true - and I believe it its - we are on a very slippery slope, don't you think?
Louise Harris • I think so but I get the feeling that there's an element that is willing to prop up the banks at any cost - even if that means turning a blind eye to fraud. You would know better than me having been "in the belly of the beast", but I get the feeling that if your average investor knew what went on at the banks there would be a real ugly crisis of investor confidence. I suppose the banks don't have to worry about that sort of exposure since they have institutional investors over a barrel...
Louise Harris • Agreed. The next question is, who can we look to who has the resources to cause reform. There are some truly great public servants at the local and federal level, but they face "heavy winds". I have high hopes for the trial lawyers - what do you think?
Laurence Gerowitz • A courageous and provocative discussion; aside from acknowledging the new calculus resulting from multiplying by at least negative two due to the PSLRA, by another minus five for Dura, Tellabs and the erosion of secondary liability, and the successful campaign by the right to demonize the plaintiffs bar . . . we must probably leap completely out of our professional box to a broader societal view. Our culture, at its lowest common denominator, has become one that asks not what is an appropriate behavior, but instead at what level does culpable behavior become risky, riskier and finally reckless. Decades of Charlie Sheen-style "winning" in the corporate arena have not only wet the slope, but washed it without trace into the sea.
Brett Sherman • The problem is easy to identify, but would require a social revolution on
par with the civil rights and anti-war movements of the 1960s. The US
Congress - has become a cancer. Both parties - but especially Republicans
focus on posturing for control and power instead of responsible
representative governance. I fear there is little hope - our generation
of Americans matured as we became the richest, most powerful country on
earth. Too many of us are needed to demand systemic change but too few of
us are willing to risk our own privileged place.
Brett Sherman • Oh, and one more thought- I am very disappointed in Obama. He is a
brilliant man. He understands that the top strata of our banking industry
is corrupt. He also understands that he is standing on the only platform in
that there is from which it is possible to focus the world's spotlight on
any issue under the sun. I guess I believed that he had the conviction and
the courage to try to create real change on Wall Street regardless of the
potential consequences for his own career. The President of the US has the
proverbial bully pulpit. Great leaders have guts to use it. We are in the
eye of the financial crisis - the storm is far from over.
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A reprinted Linked-In Discussion
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Jimmy Cayne told the FCIC that he takes full responsibility for the failure of BEar Stearns - funny how his idea of full responsibility is destroying the company, wiping out most shareholder value and pocketiing about 500 mill cash during the housing bubble,
Time for action!
Posted by: Ace Schwartz (not my real name) | 21 March 2011 at 03:25 PM
As a current senior Wall St trader, I will tell u that fraud by complexity as you call it is not policeable under the current system.
Posted by: Tony Battiglio | 21 March 2011 at 03:42 PM