- Danny Schechter is a media activist, critic, independent
filmmaker, and TV producer as well as an author of 10 books and lecturer
on media issues. Some call him "The News Dissector," and that's
the name of his popular blog on media issues. He's also the co-founder
of Media Channel.org that covers the "political, cultural and social
impacts of the media," and provides information unavailable in the
- Schechter's books include The More You Watch The Less
You Know, Plunder: Investigating Our Economic Calamity and the Subprime
Scandal, and his newest and subject of this review, The Crime of Our Time:
Was the Economic Collapse "Indeed, Criminal?"
- As a form of economic terrorism, indeed so says Schechter
and many others. Ellen Brown, author of Web of Debt, writes: Schechter
"establishes the crime's elements, identifies the players, and exposes
the weapons that have turned free markets into vehicles for mass manipulation
- More still, according to former high-level government
and Wall Street insider Catherine Austin Fitts in describing a "financial
coup d'etat" that includes inflating multiple market bubbles, pump
and dump schemes, naked short selling, precious metals price suppression,
and active market intervention by Washington and the Fed that lets powerful
insiders game the system, commit massive fraud, and be able to transfer
trillions of public wealth to themselves, then get open-ended bailouts
when the inevitable crisis surfaces.
- In his last book, Plunder, Schechter deconstructed one
element of the economy's financialization - the outlandish amounts subprime
lending, instrumental in inflating the housing bubble and the economic
crisis that followed.
- The Crime of Our Time is his latest attempt to explain
"the financial collapse as a crime story (and) the high status white-collar
crooks" who wreak havoc on "the lives of hundreds of millions
worldwide." He quotes from author and labor activist Jonathan Tasini
in his new book, The Audacity of Greed, saying:
- "Over the past quarter century, we have lived through
the greatest looting of wealth in human history." While an elite few
profited hugely, "the vast majority of citizens have lived through
a period of falling wages, disappearing pensions, and dwindling bank accounts,
all of which led to the personal debt crisis that lies at the root of the
current financial meltdown."
- The fallout cost millions of Americans their jobs, homes,
savings, and futures, the result of a Washington - Wall Street criminal
cabal and their scandalous conspiracy against the US public. In the Crime
of Our Time, Schechter, once again, does a superb job explaining it astutely,
thoroughly, and clearly.
- Introduction - Our Time and Financial Crime
- (1) In Wall Street We Trust
- Once again, the major media betrayed the public by cheerleading
the inflating market bubbles, ignoring the cause and Wall Street/Washington's
role, then downplaying the severity of the crisis that has a long way to
run. Instead their reasoning goes: "we are all to blame, guilty of
greed, over-spending and under-saving," so "when everyone's at
fault, no one can be held responsible."
- Yet capitalism's internal contradictions make it crisis-prone,
unstable, ungovernable, and self-destructive because of its repeated cycles
of booms creating bubbles, creating busts, then depressions, and inevitably
decay and demise.
- Initially, The New Times deflected attention by focusing
on human errors like "wild derivatives, sky-high leverage, (and) a
subprime surge," but avoided the core issue of white collar crime
and Washington's complicity in it. When it was too late to matter, columnists
like Bob Herbert wrote about financial "malefactors" who walk
away "with a suspended sentence, and can't wait to get back to their
nefarious activities." Where were they when it mattered most?
- Still today, the corporate media ignores the crime scene,
instead calling criminal bankers "egotistical jerk(s) as trapped as
anyone" in their own mess, as much victims as their prey.
- (2) Former Bank Regulator William Black Speaks Out
- Economics Professor William Black is a former senior
bank regulator and Savings and Loan prosecutor. In April 2009 interviews
in Barrons and with Bill Moyers on public television, he referred to "failed
bankers (advising) failed regulators on how to deal with failed assets"
they all conspired to create, proliferate, and use to defraud unwary buyers.
He explained that many failed banks were deliberately brought down, and:
- "The way that you do it is to make really bad loans,
because they pay better. Then you grow extremely rapidly, in other words,
you're a Ponzi-like scheme. And the third thing you do is" leverage
up. It's hugely profitable and "inevitable that there's going to be
a disaster down the road."
- Black explained it in his book, The Best Way To Rob A
Bank Is To Own One, especially in a lax regulatory environment under the
privately owned Federal Reserve and powerful financial giants that run
the government, not the other way around. They write the laws, make the
rules, install their people in top Washington posts, and get open-ended
bailouts and absolution when their scam implodes.
- In the 1930s, the Pecora Commission's Chief Counsel Ferdinand
Pecora noted how "Legal chicanery and pitch darkness were the banker's
stoutest allies." So weren't complicit government officials as well
as media commentators turning a blind eye to their crimes.
- (3) The Crime Wave Is Still With Us
- In an environment of lax regulation, a Wall Street owned
and operated Fed, the Treasury as their private piggy bank, a bipartisan
criminal culture in Washington, and corporate lobbyists taking full advantage
to get the best democracy their money can buy, it's little wonder that
the same dirty game persists because who cares enough to stop it.
- At the same time, millions of jobs are being lost. Home
foreclosures are at record highs. Next year's 2010 mortgage resets will
unleash a greater number, and ahead is the full impact of nationwide commercial
real estate defaults plus any number of new unpleasant surprises.
- Even so, little relief is in sight for beleaguered households
or for 48 of the 50 states under water from their budget crises. But according
to Fed Chairman Ben Bernanke, "the recession is very likely over at
this point (even though) it's still going to feel like a weak economy for
- (4) "The Biggest Crime In The World"
- That's what former Wall Street banker Nomi Prins told
Schechter when he interviewed her last December. "You're talking double-digit
trillions of dollars - minimum - already in the beginning of 2009, and
we are nowhere near done with finding out how much loss there really is."
- One estimate was $197.4 trillion, including "monies
lost, value depreciated, and money spent to try to stabilize the system....and
that (figure) may be low," yet it's incomprehensible. And getting
to the bottom of it through a modern-day Pecora Commission may duplicate
the 9/11 whitewash. According to economist Dean Baker:
- "Instead of striving to uncover the truth, (an investigation)
may seek to conceal it" and tell banksters they're free to steal again.
- (5) Insiders Wanted
- According to Schechter: "We need investigations
by insiders who know where the bodies are buried, and in many cases, not
yet" interred. We need more State Attorneys like Eliot Spitzer and
enough honest politicians to embrace them. We need proof of who's on the
take followed by "a jailout, not (another) bailout. We need to remember
Balzac's insight (that) 'Behind every great fortune lies a great crime,'
" in a culture where the only one is getting caught.
- The Madoff Moment
- In business since 1960, Bernard L. Madoff Investment
Securities LLC provided executions for broker-dealers, banks, and financial
institutions, and was one of the world's largest hedge fund managers, handling
billions of dollars for a select clientele that included banks, insurance
companies, other hedge funds, universities, charities, and numerous prominent
- Madoff served as vice-chairman of the NASD, was a member
of its board of governors, and chairman of its New York region. He also
chaired the Nasdaq's board of governors, served on its executive committee,
and was chairman of its trading committee.
- In addition, he was chief of the Securities Industry
Association's trading committee in the 1990s and earlier this decade in
the same capacity when he represented brokerage firms in discussions with
regulators about new stock market trading rules. He was highly respected
and a pillar among his peers until the scam he created imploded.
- On December 11, 2008, he was revealed as a world class
swindler when federal agents arrested him for running a giant Ponzi scheme.
According to the FBI's Theodore Cacioppi:
- Madoff "deceived investors by operating a securities
business in which he traded and lost investor money, and then paid certain
investors purported returns on investment with the principal received from
other, different investors, which resulted in losses of billions of dollars."
- He was tried in federal court on charges of criminal
securities fraud, convicted, and, on June 29, 2009, sentenced to 150 years
in prison, the maximum under the law. In fact, his real crime was getting
caught, and for ripping off the rich and famous, his own kind, who welcomed
the steady high returns until what seemed too good to be true turned out
to be a scam.
- Section 4 of the Securities Exchange Act of 1934 established
the SEC to prevent them. It's mandated to enforce the Securities Act of
1933, the Trust Indenture Act of 1939, the 1940 Investment Company Act
and Investment Advisers Act, Sarbanes-Oxley of 2002, and the Credit Rating
Agency Reform Act of 2006. Overall, it's responsible for enforcing federal
securities laws, the securities industry, the nation's stock and options
exchanges, and other electronic securities markets. It's charged with uncovering
wrongdoing, assuring investors aren't swindled, and keeping the nation's
financial markets free from fraud.
- For years, there were suspicions about Madoff because
no one understood how his strategy produced annual double-digit returns.
The SEC was alerted but didn't act. Derivatives expert Harry Markopolos
wrote a report for internal SEC use listing 29 Red Flags and accused Madoff
of running a giant Ponzi scheme, to no avail.
- Wall Street takes care of its own, and even internal
SEC documents suggest that the agency is notorious for being lax, preferring
wrist-slaps alone, and nearly always against lesser players, not prominent
ones like Madoff or major Wall Street banks and investment firms.
- As a result, the agency doesn't regulate. Investigations
aren't conducted or are whitewashed. Criminal fraud goes undetected or
is swept under the rug. Little is done to prevent it, and only rarely are
figures like Madoff caught. Wall Street's criminal culture is in safe hands
under its new head, Mary Schapiro, a consummate insider with close ties
to the Street's rich and powerful, which is why she was chosen in the first
- The White-Collar Prison Gang
- Even though felons like Enron's Jeffrey Skilling, Worldcom's
Bernie Ebbers, and Tyco's Dennis Kozlowski are in prison, corporate America's
criminal class is thriving, untouched, and mindful that very few of their
kind get caught.
- So far during the current economic crisis, not only are
most banksters unscathed, but they've been rewarded with trillions of taxpayer
dollars, interest-free Federal Reserve money, and an open-ended checkbook
for as much more as they want. Who said crime doesn't pay?
- The Crimes of Wall Street
- Schechter names many, including:
- -- "Fraud and control frauds;
- -- Insider trading;
- -- Theft and conspiracy;
- -- Misrepresentation;
- -- Ponzi schemes;
- -- False accounting;
- -- Embezzling;
- -- Diverting funds into obscenely high salaries and obscene
- -- Bilking investors, customers and homeowners;
- -- Conflicts of interest;
- -- Mesmerizing regulators;
- -- Manipulating markets;
- -- Tax frauds;
- -- Making loans and then arranging that they fail;
- -- Engineering phony financial products; (and)
- -- Misleading the public."
- Add to these:
- -- buying a controlling stake in Washington;
- -- assuring their own officials run the Treasury, Fed,
and all functions related to the economy and finance, including the regulatory
- -- writing laws and regulations that govern their industry
- In Washington, what Wall Street wants, it gets. As a
result, financial fraud and other scams are thriving. According to the
Treasury Department's Financial Crimes Enforcement Network, over 730,000
instances of suspected wrongdoing, or 13% more than in 2007, including
a 23% rise in mortgage fraud to almost 65,000
- By the numbers, they amount to:
- -- $994 billion in 2008 losses or a median loss of $175,000;
- -- financial institutions or government agencies accounting
for 27% of the total; and
- -- an estimated 17 - 30 months elapse before a typical
scheme is detected.
- Examples include "shady lending practices....deepening
debt, exploiting customers, overcharging borrowers with arbitrary late
fees, and imposing other hidden costs that bilk consumers."
- Most getting caught get off with mere wrist slaps or
occasional fines amounting to a tiny fraction of the crimes, so it pays
to keep committing them. According to Law Professor and corporate crime
specialist John Coffee:
- "Any criminal prosecution....must show either a
specific intent to defraud or, what federal law calls, willfulness which
means a real intent to deliberately defraud someone and engage in misconduct
that you realize was causing injury."
- So if fraud is committed with good intentions, criminal
prosecutions won't follow, only civil ones can to redeem losses, and during
the Bush administration, the Justice Department sought cash settlements
most often to keep plaintiffs out of court. And over 60% of the relatively
few tried and convicted served only about two years on average in country
club prisons, and over one-fourth of them were never incarcerated.
- It's why year after year, "The beat goes on (as)
new scandals seem to surface daily....(yet) no sooner does one scandal
erupt (when) another threatens to push it out of the public eye,"
or another unrelated issue is manufactured like the phony Swine Flu crisis
tries to sweep them under the rug altogether. Sadly, it works because the
public is none the wiser and never catches on to what investigative journalist
IF Stone once explained:
- "All governments are run by liars, and nothing they
say should be believed." Or he simply said: "All governments
lie," usually about the most important issues affecting everyone.
- The Criminal Mind
- The new Con Artist Hall of Infamy web site explains the
art of the con, has a con watch, and lists current inductees, including
many prominent past and more recent figures like Bernie Madoff, Jeff Skilling,
Bernie Ebbers, and Conrad Black. But for everyone exposed, dozens more
get away with cooking the books, manipulating markets, profiting from insider
deals, selling toxic junk to unwary investors, and pocketing multi-millions
as their legitimate right. Why not, when regulators and law enforcement
are complicit in letting them.
- They use "every angle to persuade people to believe"
that their integrity is impeccable, their financial skills unmatched, and
their strengths include:
- -- "power & influence" because of friends
in high places;
- -- "charisma" to attract broad appeal; and
- -- "strong cover" for being a respected financial
- They flourish best free from regulatory oversight during
periods of economic prosperity and bull markets, or at least the illusion
that these conditions exist. Former convicted felon Sam Antar explained:
- "White-collar criminals are economic predators.
We consider you, humanity, as a weakness to be exploited in the execution
of our crimes. In order to commit (them), we have to increase your comfort
level (by) build(ing) walls of false integrity around us....We have no
respect for the laws. We consider your codes of ethics, your laws, weaknesses
to be exploited in the execution of our crimes."
- "You can't be prosecuted for being stupid. So all
white-collar criminals always try to play stupid. They don't want to show
intent. It's easier to say that this was a result of a mistake or an error
of judgment, than to say that I intended to, to victimize or defraud somebody.
It's relatively easy (and) the criminal element today is figuring out a
way to exploit it" because of so much easy money around for the taking.
- The Crime at the Heart of the Crime
- Embracing fraud is simple when so many people in high
places commit it, get away with it, and the few caught keep most of their
gains and pay a small price for them. Further, "The line between legal
and illegal can be a thin one or no line at all. It can also be complicated,
even hard for government to investigate and prosecute."
- Also, no widely accepted definition of economic crime
exists because intent is so hard to prove, and in a lax regulatory environment
no incentive to either, especially since unelected officials come from
sectors they administer, then recycle themselves back to high-paying jobs.
- Who Should Be Prosecuted?
- Considering the extensive amount of fraud and harm caused,
tough RICO prosecutions should be used the same as against organized crime
that call for harsh sentencing penalties for the guilty.
- More than ever today, the problem is endemic, the way
William Black explains about the pressures on CEOs to keep up with their
peers and generate impressive profits even if getting them means cooking
the books and committing fraud.
- He presented this paradigm in a public lecture:
- -- "Corporate governance fails. Power is delegated
to CEOs and collaborating members of management;
- -- External controls fail through the manipulation of
outside auditors and accounting firms as happened in the Enron and WorldCom
- -- Rating agencies are co-opted and suborned through
conflicts of interest; (and)
- -- Regulation fails or is defanged with rules softened
or changed (through)
- (a) Deregulation
- (b) No regulation
- (c) Desupervision
- (d) Lobbying by Companies to undercut regulators which
is justified on ideological grounds as support for free markets (and)
- (e) Capture - What regulators there are (are) drawn from
the industry and share its outlook."
- The result has been the greatest ever transfer of wealth
from the many to an elite few that continues without missing a beat, and
why not. No one stops them. In fact, the current environment under Democrats
or Republicans lets them flourish.
- Whenever a systemic collapse occurs, old scams continue
and new ones emerge, always aimed at fleecing as much as possible from
- Investigating Financial Criminals
- Given the unprecedented amount of financial fraud, a
new independent Pecora Commission with teeth more than ever is needed
to root it out and hold the guilty accountable. But getting one is another
matter at a time Washington and Wall Street are co-conspirators with every
incentive to facilitate criminality and whitewash attempts to expose it.
- Nonetheless, economist Dean Baker lists questions needing
- -- asking financial executives under oath how they missed
the inflating housing bubble; and
- -- how they justify millions in compensation given the
crisis they were complicit in creating.
- However, getting straight answers will prove daunting
at best, and what government authority will demand them. Perhaps a "People's
Inquiry" can do better even with no teeth and no coverage by the dominant
- Progressive web sites and online radio and television
can feature the results and get them to growing audiences. Not millions
but enough to spread the word and hope others pass it on.
- If economic deterioration deepens over an extended period
with millions more out of jobs, homes, savings and hope, then a public
outcry for prosecutions might be unstoppable. Even then, it's a long shot
but something worth watching.
- Predatory Subprime Lending
- According to Schechter, "subcrime over the years
got millions of families into mortgages they couldn't afford, and that
the lenders knew they couldn't sustain." Low teaser rates and financial
institutions' collusion facilitated it to cash in on the enormous profits,
then hang fleeced homeowners out to dry by unaffordable mortgage resets
and eventual foreclosures.
- According to the Center for Public Integrity, the largest
Wall Street banks backed 25 of "the sleaziest subprime lenders,"
including CitiGroup, Wells Fargo, JP Morgan Chase, and Bank of America.
Combined, they originated $1 trillion in toxic mortgages from 2005 - 2007,
nearly three-fourths of the total.
- Even worse, warnings a decade ago went unheeded, and
former insider Catherine Austin Fitts saw an earlier scam unfolding, brought
it to the attention of her GHW Bush administration superiors, and was told
to shut up and mind her own business.
- The idea was to pump as much money into the housing market
to scam buyers with fraudulent mortgages designed to fail. It was predatory
lending across the board with corporate CEOs of the top Wall Street firms
involved. In 2004, the FBI first warned of a "fraud epidemic,"
then later launched "Operation Malicious Mortgage" that charged
over 400 defendants, convicted 173 of crimes, but only accounted for around
$1 billion in losses, a tiny fraction of the total fraud, none committed
by major players, and that's the problem.
- A Financial Crimes Enforcement Network (FinCEN) April
2008 study mortgage fraud study found that "the total for mortgage
fraud SARs (suspicious activity report) filed reached nearly 53,000, an
increase of 42 percent" over 2007. The February 2009 report is even
worse at over 62,000 SARs, and filings increased 44% from the previous
- Suspected crimes included:
- -- falsifying financial information, including fake accounting
entries, bogus trades to inflate profits or hide losses, and false transactions
to evade regulatory oversight;
- -- "self-dealing" through insider trading,
kickbacks, backdating executive stock options, misusing corporate property
for personal gain, and violating tax laws relating to "self-dealing"
that amounts to illegally taking advantage of insider positions; and