Scapegoats and the Gold Man

“The business of America is business” is probably one of the few memorable quotes from President Calvin Coolidge, but clearly, this is a nation where so many define themselves by their work. Unlike Europeans, who are legally mandated to take 5 week vacations every year (try doing business in Europe in August), one in four working Americans don’t even have paid vacations, and over half of those that do seldom take all the days to which they are entitled. Among the most demanding vocations is finance, which rolls every second of every year, and has made the United States, with its powerful work ethic, the most important monetary center on earth. We do indeed seem to put our corporate business structures at the top of the American value priority list, trumping just about everything else by miles… even ethnics and common sense.

Blame for the global meltdown has been laid clearly on the doorstep of the financial community that encouraged and provided the underlying fuel to enable massive borrowings in both the public and private sector, using that America ingenuity to create wealth-building (later destroying) financial instruments that allowed bundles of debt to be repackaged and traded like commodities… constantly opening the flow for new debt to replace the bundles that were sold. Hardworking, thinking American in the financial community applying their vacationless efforts continue to create even more such tradable instruments.

And while the work of our nation’s major financial institutions is one of our country’s most necessary engines for economic growth, it sometimes puzzles me how we seem to be giving that sector much more of a blank check – without corresponding “checks” and balances – that accorded to any other segment of the American economy. Thirty trillion dollars or more in economic damage to the world’s financial health and not one single Wall Street maven at one of the big investment houses has been convicted of a single crime. Where the government has acted, it has tended to focus on individual scapegoats – who clearly cannot act in such mega-institutions without the approval and knowledge of management – as opposed to assessing true responsibility to those who approved, encouraged and enabled the less-than-ethical practices that lite rally caused the meltdown.

The best case in point is the Securities and Exchange Commission’s litigation against one individual in the vast bureaucracy of Goldman Sachs: “Hundreds of employees worked closely in teams, devising mortgage-based securities — billions of dollars’ worth — that were examined by lawyers, approved by management, then sold to investors like hedge funds, commercial banks and insurance companies… At one trading desk sat Fabrice Tourre [pictured above], a midlevel 28-year-old Frenchman who was little known not just outside Goldman but even inside the firm. That changed three years later, in 2010, when he achieved the dubious distinction of becoming the only individual at Goldman and across Wall Street sued by the Securities and Exchange Commission for helping to sell a mortgage-securities investment, in one of the hundreds of mortgage deals created during the bubble years.” New York Times, May 31^st. And note that this is a civil action, hardly the hard-nosed criminal prosecution that might be necessary to send the right signal to the Street.

The government, frankly, is embarrassed at the almost complete lack of prosecution, criminally or civilly, against the obvious wrongdoings at the mega-financial institutions – most certainly not just at Goldman, a company that has been vilified more than most, both because of the level of post-bailout profitability and its seeming inability to master public relations. “While Goldman paid $550 million last year to settle accusations that it had misled investors who bought the Abacus mortgage security, no other individuals at the bank have been named. Now, however, as criticism has grown about the lack of cases brought by regulators, the scope of the inquiries appears to be widening. The United States attorney general, Eric H. Holder Jr., has said publicly that his lawyers were reviewing possible charges against other Goldman officials in the wake of a Senate investigation that produced reams of documents detailing other questionable decisions that were made in the firm’s mortgage unit.” NY Times.

Of course, as time passes, the statutes of limitation – which set strict time limits (normally seven years in criminal actions) for prosecution – will exonerate more financial miscreants. If we want to avoid repeating the mistakes of the past, not only do we need regulations to defeat the most obviously destructive financial practices, but we also need to prosecute the decision-makers, the implementers, condoners as well as the enterprises themselves to send a truly clearly message that such behavior is simply intolerable. Apparently, Wall Street has very much been able to contain any attempt to generate justice from its past moral, ethical and legal lapses. What’s worse, Americans really don’t seem to care anymore and are electing politicians who very openly support letting such institutions to continue such abhorrent past practices unchecked.

I’m Peter Dekom, and at some point, unless we hold those responsible for massive social and economic damage accountable, we are going to see a repeat performance.