Enforcers Investigate Financial Services Industries While Government Bails Them Out

Daniel Young — Fri, 26 Sep 2008 03:39:53 +0000

FBI on the case

One could argue that the current scrutiny of the global finance systems by regulators and enforcers is too little too late but I’m in the better late than never camp.

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

I reckon it’s only a matter of time until these authorities expose an Enron style pandemic of lies, inflated expectations, fictitious profits, non-disclosure, shady accounting processes and fraud across the industry.

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.

Just Another 24 Hours » Fraud

Enforcers Investigate Financial Services Industries While Government Bails Them Out