While London burns amid riots and looting, I thought I’d add this.
The analysis about banks looting is so pervasive and so undeniably correct that it’s almost official now: the latest global economic crisis has involved the biggest, most wholesale looting and unpunished fraud in financial history. This is not sloganeering: this is about the actual breakdown of the rule of law in the financial sphere.
There’s nothing particularly new here – as I said, it’s something that many many analysts have noticed. I am just putting up a marker on this blog here, for the record; something for me to link to on future occasions.
Just in case anyone is in any doubt, here’s some U.S.-based evidence and analysis, from respected voices:
For most citizens, one of the mysteries of life after the crisis is why such a massive act of looting has gone unpunished. There is undeniable evidence of institutionalized fraud.
The corruption and collapse of the rule of law, in the financial sphere, is basically irreparable.”
“Underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core.
The lack of prosecutions — the Justice Department has brought three cases against employees at large financial companies and none against executives at large banks — has left private litigants, mainly investors and consumers, standing more or less alone in trying to hold financial parties accountable.
“When federal authorities don’t fulfill their obligation to enforce the law, they essentially give an imprimatur to the financial entities to do whatever they want and disregard the law,” said Kathleen C. Engel, a professor at Suffolk University Law School in Boston.
An economic underground can come to life if firms have an incentive to go broke for profit at society’s expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations.
And I could have added a hundred more. As I said, nothing really new here.
But for anyone who missed it, or is in any doubt, this is what’s been going on. And the criminal financial enterprises banks are stronger than ever.