FBI on the case
In an ideal world the punishment for our greedy financiers would be severe destitution and hardship but its not going to happen. These people are bound to remain wealthy and the industry as a whole has been provided a secuirty blanket as a result of the enormous financial bail outs by Governments and reserve banks around the world.
Someone needs to be held to account.
The FBI has launched more than 500 investigations into senior executives in the mortgage industry and is probing records relating to the failure of Lehman Brothers and AIG. This story is covered by The Indepdendent and MarketWatch, among others.
Brothers go their separate ways
Sadly, we’ll be adding LIES to the list of wrong-doings for the finance sector, which already includes greed and bad judgement.
But does this mean that the US Administration will effectively be bankrolling criminals if it is successful in rushing through the proposed US$700bn rescue package? Fannie Mae and Freddie Mac, the beneficiary of a multi-billion dollar Government buy-out, are both on the FBI’s watch list, along with 26 other companies. These investigations will take months and years while the rescue package could well be signed in this week.
The trouble is that Government and Finance are so intertwined and so inter-dependent that Government itself will have some difficult questions to answer if it holds the sector to account in a meaningful way.
This takes me back to an earlier post from January 2008, which included the following letter to the editor:
As a small investor, I’d like to wish all the Australian finance insiders – the fund managers, executives, merchant bankers and lawyers – a great year. Although I could never aspire to your earnings, it’s great that my investment funds let me assist your wealth by voting for ever rising executive pay and allowing more and more bonuses and payments to high-priced bankers and lawyers. That fact that you guys are all friends – and therefore know how to reward each other with my money – makes it even better.
I wouldnt say the US Govt is bankrolling criminals (by the way a fantastic jump to conclusion you have made – being investigated suddenly makes one a criminal).
I’d say they are trying to stop the world’s biggest economy from imploding. I agree its too little, but it may or may not be too late. It certainly has shown up a massive failure in regulation by the US who have allowed this situation to get to where it is now. How the hell does a multi billion dollar company like Lehman Brothers just become insolvent overnight and close its doors? Who signed the last audit report 2 months ago? Why arent they being held to account as well?
I’m waiting to see the detail of the rescue package. If the economy can keep on running by the US Govt effectively re-nationalising institutions like Fannie Mae and freddie mac, then the bailout will have been worth it. If they end up just giving loans to the companies, then that simply stinks. My dad owns a shop and is struggling with declining profits. Can I have a handout too?
Its interesting to see the US Govt picking and choosing who lives and who dies. eg Lehman Brothers was allowed to die whilst AIG was given a last minute lifeline. Its this aspect of what is happening right now that worries me. Some people have already been “held to account” – eg all those executives at Lehman now suddenly have no jobs, a cv that reads like a doggie bag, and all those shares and options in the company now worthless. I dont really have any sympathy for them by the way. But why should they be penalised whilst execs at Freddie Mac, AIG, etc get away with it. This is a dodgy solution to a dodgy problem.
I’d stay away from the stockmarket for a while. Cash is King.