Aug 09 2011

It’s semi-official: the banks have literally been looting

Posted by: Nick Shaxson in: Thoughts

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:

Salon / Yves Smith:

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.

James K. Galbraith:

The corruption and collapse of the rule of law, in the financial sphere, is basically irreparable.”

Matt Taibbi:

“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.

New York Times:

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.

Paul M. Romer / George A. Akerlof, 1994

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.

6 comments so far

randall bell 8th August, 2011 4.38 pm

Wow look, another writer spewing something sensationalist and attention grabbing to get coverage, be quoted by other bloggers, and make a name for themselves.

How many bloggers or journalists have you quoted that have said “well the Banks were in a hard position, they negotiated hard, they deserve the benefit of the doubt, etc etc”. None. Because if it bleeds it leads, and hence, let me help you with the next headline:


The more you repeat something, doesn’t make it real.

Nick Shaxson 8th August, 2011 8.34 am

Randall, one of the reasons I posted those links on the site was to point you towards the hard evidence – some people who have actually gone to the coal face and discovered what is actually going on. I suggest you go to them, and read what they have to say. And then come back and tell me if any of it – including the headline – is sensational. What we have been experiencing is fraud – by any definition of fraud.

Cos67 8th August, 2011 12.07 am

I’m glad to announce that Dylan Ratigan actually enunciated the word ‘offshore’ on American television.
I’m excited.

Nick Shaxson 8th August, 2011 9.21 am

I was actually on the dylan ratigan show myself, although he was sick himself on that particular day so i can’t necessarily claim any credit

[…] output produced) by top earners, it may lead to strong tax avoidance behaviour—assuming the opportunities for tax avoidance exist. Equally, high rates may lead top earners to adopt superior bargaining […]

[…] output produced) by top earners, it may lead to strongtax avoidance behaviour—assuming the opportunities for tax avoidance exist. Equally, high rates may lead top earners to adopt superior bargaining […]

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