Like most guys, I like to keep score.
It’s not just sports.
I like to keep a tally on Wall Street winners and losers.
Who’s getting the big payday? Who’s getting the shaft? Which greedy bums are going to jail because of their role in bringing about the worst financial meltdown in a generation?
Every financial crisis has its villains.
The Depression had electricity and railroad magnate Samuel Insull, who partly inspired the movie “Citizen Kane.”
The savings and loan crisis of the 1980s had banker Charles Keating.
The implosion of the junk bond market fell like a ton of bricks on insider trader Ivan Boesky and its mastermind Michael Milken.
The spectacular collapse of energy giant Enron Corp.'s sacrificed the late Kenneth Lay on the altar of justice.
Every crisis needs a pound of flesh. Eighteen months in, no real captain of industry has been forced to walk the plank.
Most Infamous Don’t Fit the Mold
We’ve had likes of Ponzi schemer Bernie Madoff. That hardly counts. If Bernie hadn’t turned himself in because he was so beset with personal guilt, he could have ripped his clients for billions more. The feds never would have been the wiser.
There’s also recently captured financial fugitive Robert Allen Stanford. Like Madoff, he’s simply another Armani con man.
Although their cases are high profile, neither can be directly linked to the causes of the crisis. They’re merely poster boys for an era of lax enforcement, weak regulations and an unbending faith in the power of the free markets.
What about guys like former Countrywide chief exec Angelo Mozilo or Lehman Brothers’ Dick Fuld?
Under Mozilo, Countrywide became the nation’s largest subprime lender. Mozilo is being sued by the Securities and Exchange Commission for “deliberately misleading investors” about the risks posed by Countrywide’s lending practices. But Mozilo is facing a money judgment only, not a firing squad.
Fuld was the financial industry’s modern-day equivalent of Rome’s Nero. He fiddled while his company and investors’ fortunes burned to the ground. Everyone knows that Fuld cooked the books at Lehmans. Instead of walking the Green Mile, Dick was given a fat paycheck. He was last seen strolling the greens at Pebble Beach.
For an outsider looking in, it’s hard to fathom why guys like Vikram Pandit, CEO of Citigroup, are still walking around free, let alone with a job. He and his company have fleeced the taxpayers out of $45 billion, and he still has his lair in the Hamptons.
Let’s not forget the fortunate felons at AIG. They got $180 billion from the taxpayers. They still are handing out bonuses with impunity.
Pinning Blame Is a Slippery Game
Currently, the FBI has 600 large-scale corporate fraud investigations under way. At least forty involve sub-prime players, the first domino that triggered the global financial meltdown.
The acquittal today of two former Bear Stearns hedge-fund managers in a subprime mortgage fraud case tried in a Brooklyn federal cour,t doesn’t bode well for the government.
The government’s case against Ralph Cioffi and Matthew Tannin was largely based on incriminating email communications. Prosecutors unsuccessfully argued that these electronic missives conclusively showed that Cioffi and Tannin knew that the two hedge-funds they ran were bloated with worthless paper that the pair actively concealed from the investors.
After a month-long trial, the jury needed just nine hours of deliberation to return a not-guilty verdict.
Recently, after months of investigation, the FBI arrested Raj Rajaratnam, the founder of Galleon, a major hedge-fund player known for its investments in technology stocks. The charges against Rajaratnam, who headed up a $3 billion fund include insider trading. The case against Rajaratnam is founded on wiretaps and several witnesses who already have pleaded guilty to a variety of federal crimes.
But as far as criminals go, Rajaratnam is about as electrifying as a flasher at a gentleman’s club. He looks as dangerous as your tubby Uncle Fred in a Santa suit.
The real problem with finding and prosecuting the culprits is that nobody is really sure who to blame.
We could blame Alan Greenspan because he was the voice and brains behind the free market frenzy. But poor old Alan has already fallen on his sword.
Former Texas senator Phil Gramm could be clapped in irons. He was the guy who carried the legislation that eliminated the firewall between commercial and investment banks when the Depression-era Glass-Steagall Act was overturned.
Lots of folks would like to see former President Clinton take the perp-walk. He signed the legislation that trashed the Glass-Steagall prohibitions.
If we’re going to send Bill Clinton to the grey-bar hotel, George W. Bush ought to be his cellmate. “W” presided over the era of lax regulation where corporations were trusted to police themselves. His regulatory appointees never saw a law they wanted to enforce.
While we’re at it, maybe we ought to execute a citizen’s arrest warrant against investors gullible enough to think they could get something for nothing or the borrowers who were misled into believing they actually could afford the home they were buying.
Looking back, plenty of players can shoulder the blame, but there is no one to truly hang in effigy.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
