Category: Corruption

OOPS!!!

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The FBI had to rush and arrest Khalifah al-Akili after he sent out an email to his friends and the Guardian newspaper that he was being targeted for entrapment by them:

The arrest of a Pittsburgh man described as a Taliban sympathiser has sparked allegations that the FBI deployed a notorious confidential informant used in previous controversial stings on suspected Muslim radicals.

Khalifah al-Akili, 34, was arrested in a police raid on his home on March 15. He was later charged with illegally possessing a gun after having previous felony convictions for drug dealing. However, at his court appearance an FBI agent testified that al-Akili had made radical Islamic statements and that police had uncovered unspecified jihadist literature at his home.

But, in a strange twist, al-Akili’s arrest came just days after he had sent out an email to friends and local Muslim civil rights groups complaining that he believed he was the target of an FBI “entrapment” sting. That refers to a controversial FBI tactic of using confidential informants – who often have criminal records or are paid large sums of money – to facilitate “fake” terrorist plots for suspects to invent or carry out.

In the email – which was also sent to the Guardian before al-Akili was arrested – he detailed meeting two men he believed were FBI informants because of the way they talked about radical Islam and appeared to want to get him to make jihadist statements. According to his account, one of them, who called himself Saeed Torres, asked him to buy a gun. Al-Aikili said he refused. The other, who was called Mohammed, offered to help him go to Pakistan for possible Islamic radical training. Al-Akili also refused.

It looks like the FBI was was trying to manufacture some more terrorists, and when this guy started realized that some weird sh%$ was going down, and emailed the press, they busted him.

Let’s be clear, he is being charged with breaking the law. It is allied alleged that as a felon, he did break the law when he fired a friend’s rifle at the range 2 years ago, but he’s being held without bail because prosecutors are alleging that he is a terrorist.

This isn’t making us any safer, and I cannot imagine how this can do anything but feed distrust of law enforcement among among American Muslims.

Rupert Needs to Be Banned from Broadcast Ownership Right Now

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The latest news is that News Corp paid hackers to help people steal the broadcasts of its primary competitor:

Part of Rupert Murdoch’s News Corporation empire employed computer hacking to undermine the business of its chief TV rival in Britain, according to evidence due to be broadcast by BBC1’s Panorama programme on Monday .

The allegations stem from apparently incriminating emails the programme-makers have obtained, and on-screen descriptions for the first time from two of the people said to be involved, a German hacker and the operator of a pirate website secretly controlled by a Murdoch company.

The witnesses allege a software company NDS, owned by News Corp, cracked the smart card codes of rival company ONdigital. ONdigital, owned by the ITV companies Granada and Carlton, eventually went under amid a welter of counterfeiting by pirates, leaving the immensely lucrative pay-TV field clear for Sky.

The allegations, if proved, cast further doubt on whether News Corp meets the “fit and proper” test required to run a broadcaster in Britain. It emerged earlier this month that broadcasting regulator Ofcom has set up a unit called Project Apple to establish whether BSkyB, 39.1% owned by News Corp, meets the test.

No, News Corp is not “fit and proper” to broadcast in the UK.

I Can Haz Prosecushions?

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We now have a smoking gun in the matter of MF Global, an email detailing how John Corzine ordered customer funds transferred to JP Morgan Chase, and the fact that JP Morgan asked for, and never got a statement that they weren’t customer funds:

Jon S. Corzine, MF Global Holding Ltd.’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.

Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

…………

arry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.

The money transferred came from a segregated customer account, according to congressional investigators. Segregated accounts can include customer money and excess company funds.

So Corzine ordered the illegal transfer of customer funds, and JP Morgan was worried about this that they demanded a letter saying that they were not doing this, but never followed up on their demand.

I think that the bigger story here is JP Morgan. We already knew that Corzine was hip deep in stealing customer funds, what we didn’t know that JP Morgan knew, but took the money anyway.

These folks need to be frog-marched out of their offices in handcuffs.

They need to be tried under RICO and if they go to jail it should not be a white-collar resort prison, they should go to a federal POUND ME IN THE ASS prison.

The Banksters Acts Exceed My Cynicism

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When a mortgage firm sues their servicer because for being too cooperative with the people that they cheated:

Just when you think you’ve seen it all in mortgage-backed securities litigation, along comes the likes of Sand Canyon to prove you wrong.

The onetime California mortgage lender, which stopped originating loans in late 2007 and sold its servicing business to American Home Mortgage Servicing in 2008, has filed a complaint in New York State Supreme Court in Manhattan that accuses American Home of making it too easy for MBS trustees and insurers to get hold of underlying loan files. In essence, Sand Canyon’s lawyers at Cahill Gordon & Reindel are arguing that the servicer should be helping it thwart claims that it breached representations and warranties about the mortgages it sold to MBS issuers, not smoothing the way for put-back demands.
Sand Canyon’s 26-page complaint, filed last month, asserts that American Home pledged to act as an ally when it bought the servicing business in 2008. “Sand Canyon bargained for and obtained (American Home’s) cooperation in connection with Sand Canyon’s defense,” the complaint said. Under their agreement, according to the complaint, American Home was supposed to “refrain from disclosing confidential loan information to third parties except as required by law.”
Most pooling and servicing agreements permitted MBS trustees and insurers to see underlying loan files only during regular business hours and at the servicer’s offices, according to the Sand Canyon complaint. But American Home, the suit alleged, has provided electronic records in response to demands from trustees and insurers.

Until we start putting these f%$#s in prison, and we seize every penny that they have through RICO and asset forfeiture, they aren’t going to stop.

We need to put some of them in jail for the rest of their lives, and when they die, we need to take their fillings.

I Unreservedly Support This Union

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It looks like the slaves student athletes are looking to unionize again:

With college basketball’s March Madness approaching, commentators will soon regale us with tales of underdogs, upsets and last second heroics. But few will mention the moment, 17 years ago, when a group of players planned to stop the games.

Rigo Núñez, a reserve on the 1995 University of Massachusetts basketball team, says more than 20 players from several teams attempted to organize an action to halt March Madness. The plan was that the players would show up on the court, in full uniform, and refuse to play ball. The goal, says Núñez, was to “paralyze the whole NCAA.” William Friday, who co-chaired the Knight Commission on College Athletics at the time, recalled to the Atlantic the time he was warned about a planned March Madness strike.

Those plans fell apart. Friday says the plan he was warned about centered on a certain team, and that team lost prior to reaching the Final Four. Núñez says the culprit was fear of retaliation. “The fear of being blackballed overcame the ‘rah rah’ emotion … No one went on to actually pull the trigger.”

But in the 17 years since that strike plan fizzled, there’s been little change in the conditions that fueled players’ unrest. And, with the backing of a major union, there are still players organizing to do something about it.

It’s about time.

At the top tier schools, in the big money sports, the fiction of student athletes is a disservice to the athletes, and the schools as institutes of higher learning.

Payback is Sometimes a Bastard Too

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There was a sex scandal in Minnesota, where the leader of the state Senate (a Republican, hoocoodanode) was found to have slept with an aide.

The aide was fired, and the (married) Senate Leader resigned.

The twist was that the leader who  resigned was one Amy Koch.  It was a woman.

In any case, the staffer who was fired has now filed suit, and he is threatening to out other state lawmakers who are f%$#ing around:

The saga continues over former Minnesota Senate Majority Leader Amy Koch’s (R) “inappropriate relationship” with a subordinate staffer. Michael Brodkorb, who served as Koch’s executive assistant and communications director, claims that he was fired after the relationship was discovered because of his gender. He also says he has proof that other female staffers who had relationships with legislators were allowed to keep their jobs.

Brodkorb is now preparing to sue the Minnesota Senate, alleging wrongful termination and discrimination. Documents outlining the basis of the case confirm the relationship between Brodkorb and Koch. Rumors swirled in December that Koch’s “inappropriate relationship” was with him, but it wasn’t confirmed at the time. It continues:

“Brodkorb has evidence that similarly situated female legislative employees, from both political parties, were not terminated from their employment positions despite intimate relationships with male legislators. It is clear that Mr. Brodkorb was terminated based on his gender. He intends to depose all of the female legislative staff employees who participated in intimate relationships, as well as the legislators who were party to those intimate relationships, in support of his claims of gender discrimination.”

Heh.

Please, call his bluff. I want him to spill the beans.

What is the Last Place You Would Expect to Hear Someone Calling for an Indictment of Jon Corzine?

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Well, you know, the OP/ED page of the New York Times is close to the top of that list, but Joe Nocera just called for prosecutions in the MF Global matter:

It’s sure starting to look as if Jon Corzine is going to get away with it.

By now, it has been well established that Corzine’s former firm, MF Global, committed the sin of sins for a broker-dealer. In late October, during the final, desperate days before it entered bankruptcy proceedings, its executives took money from segregated customer accounts — money that belonged not to MF Global but to the farmers and commodities traders that were its clients — and used it to prop up its rapidly collapsing business. Nor was this petty cash: of the $6.9 billion in customer assets that MF Global held, a stunning $1.6 billion is missing. There is virtually no chance that the full amount will ever be recovered.

Let’s not mince words here. These executives committed a crime. Virtually every knowing violation of the Commodities Exchange Act is a crime, but taking money from segregated customer accounts is at the top of the list. And for good reason. Customer money is supposed to be sacrosanct. If a broker-dealer goes bankrupt, the segregated accounts are supposed to remain safe, a little like the way bank deposits remain protected if a bank goes under. Indeed, customers need to be able to trust the fact that their money is segregated and protected at all times. Otherwise, the markets can’t function.

Yet, a few weeks ago, Azam Ahmed and Ben Protess, who have done a remarkable job covering the MF Global bankruptcy for The Times, wrote an article suggesting that prosecutors were having trouble putting together a criminal case against anyone at MF Global. So far, wrote Ahmed and Protess, they’d been “unable to find a smoking gun.” In fact, they continued, “a number of federal prosecutors have expressed doubts” that MF Global “intentionally misused customer money.” Apparently, the current theory is that it was all just a big accident, the chaos of those final days causing the firm’s executives to tap into customer funds without realizing it.

Excuse me while I roll my eyes. Of course there isn’t a smoking gun. As a general rule, financial professionals tend not to write e-mails that say, “Hey, we’re desperate. Let’s break into the customer accounts!” And, of course, they are always going to say it was unintentional. They are saying it already, starting with Corzine, who told Congress last year that “there was no intention to violate segregation rules.”

He’s right.

He’s also right that the failure to prosecute is an assault on the idea of the rule of law.

It’s not a particularly surprising conclusion to draw, but the fact that it’s appearing in the New York times is a big deal.

It Aint Just Mortgages that the Banksters are F%$#ing UP

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Once again, the banks sold bad paper, in this case, credit card debts that they knew were not accurate and, and once again, Matt Taibbi has a distills the essence of the matter:

In a story that should be getting lots of attention, American Banker has released an excellent and disturbing exposé of J.P. Morgan Chase’s credit card services division, relying on multiple current and former Chase employees. One of them, Linda Almonte, is a whistleblower whom I’ve known since last September; I’m working on a recount of her story for my next book.

………

The Cliff’s Notes version of the story goes something like this: Late in 2009, Chase’s credit card services division sold a parcel of nearly $200 million worth of credit card judgments to a debt collector at a discount. This common practice in the credit-card industry is a little like a bookie selling the outstanding debts of his delinquent gamblers to a leg-breaker for 25 cents on the dollar. If the leg-breaker gets half the delinquents to pay, the deal works out for both sides — the bookie gets 25 percent of money he wasn’t going to collect, and the leg-breaker makes a 100 percent profit.

Only they did not do even the barest due diligence:

Linda [Almonte] subsequently found an enormous range of errors. Some judgments, she told me, were not judgments at all. In some cases, she said, Chase actually owed the customer money.

When she brought these concerns to her superiors, what do you think their response was? They told her and others to shut up and just sell the stuff anyway. Her boss, Jason Lazinbat, allegedly told her “she had better go along with the plan to sell the misrepresented asset.”
Think of the consequences of this: because Chase was so anxious to make money off this debt sale, countless credit card borrowers would now have collection agents chasing them for money they did not owe. The debt-buyer, too, was victimized by being sold accounts it could not collect on. It is almost impossible to estimate how many man-hours of pointless court proceedings would be lost because of this decision.

You know, this sounds familiar. Just like the foreclosure fraud.

In fact, it sounds like a pattern, a, “pattern of racketeering,” as in RICO, and the burden of proof in RICO, particularly for asset forfeiture, is not that high.

How about it, Barack?

It’s something that you can do in your 2nd term, and you don’t need Congressional approval to do this.

Full Disclosure, I Served in the UMass SGA Senate With Him

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They are finally getting around to sentencing Tony Rudy, one of the final defendants in the Abramoff matter, 6 years after he pled guilty.

The weird thing is that the prosecution and defense have agreed to have the agreed upon facts sealed for national security reasons:

Nearly six years after he pleaded guilty in the Jack Abramoff scandal, a former aide to House Majority Leader Tom DeLay will likely be sentenced in the near future. But because of a joint motion granted by the federal judge hearing the case against Tony Rudy, the public wouldn’t see the filing listing agreed upon facts in the case.

The reason? National security.

The feds and Rudy’s defense team wrote that the disclosure of “sensitive information related to national security matters” likely “would compromise and negatively impact ongoing intelligence efforts.” They said the sensitive information had “no relationship to the Department of Justice’s investigation of Jack Abramoff or related persons.”

The folks at TPM got a comment from Abramoff about this, and he was pretty stunned by this.

My guess is that he probably did some work for a Persian Gulf monarchy, and the State Department wants it buried, but we’re likely to find out through a leak in the next few months.

Rats Leaving the Sinking Vampire Squid

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So, Greg Smith, who ran equity derivatives business in Europe, the Middle East and Africa for Goldman Sachs, has resigned today.

Normally, this would not be particularly newsworthy, except for the fact that he published his separation letter on the OP/ED page of the New York Times:

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

Truth be told, I’m not impressed.

This guy as been a Vampire Squidling for over a decade, so I see this as kind of self serving.

If he were claiming law breaking, it would mean something, but he is mostly complaining how the brokers trash talk:

You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

He’s not claiming any law breaking (Yeah, right), just that there is a insane macho culture at Goldman that sees the clients more as marks than as partners in success.

How the f%$# can you work at a f%$#ing brokerage for ten f%$#ing years, and not f%$#ing realize that it’s a f%$#ing testosterone f%$#ing hormone filled f%$#ing cesspool after being there two f%$#ing weeks hours.

Seriously, just f%$#!

Whoever wrote, “Why I am leaving the Empire, by Darth Vader,” got the crux of the matter.

I will issue a correction if this guy does something like working for a regulator, but my guess is that this is all about providing himself plausible deniability, or possibly pimping a book, or maybe he’s hanging out his own shingle.

Here’s a thousand years on what I’m seeing:

Why I am leaving the Empire, by Darth Vader


H/t FT/Alphavill for the Pic

[update]Matt Taibbi thinks that this guy is for real, so if you want want an opposing opinion, and I think that it is well argued, go read.

Cue Inspector Renault

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I’m shocked, shocked to find that gambling is going on here!

I am shocked, shocked I tell you, that we are now seeing reports that senior managers actively directed their subordinates to robosign and falsify records:

Employees at major banks who churned out fraudulent foreclosure documents, forged signatures, made up fake job titles and falsely notarized paperwork often did so at the behest of their superiors, according to a federal investigation released Tuesday.

It’s well documented that the nation’s biggest banks routinely “robo-signed” legal papers to keep up with the wave of foreclosures brought on by the housing bust. But the new report from the inspector general of the Department of Housing and Urban Development reveals that those shoddy practices often came at the direction of managers at the banks, and that employees in some cases were judged by how fast they could get new foreclosure filings out the door.

“I believe the reports we just released will leave the reader asking one question: How could so many people have participated in this misconduct?” David Montoya, HUD inspector general, said in a statement. “The answer: simple greed.”

HUD investigators launched their inquiries soon after news of the banks’ practices caused a national uproar in late 2010, and government officials used their findings as they negotiated a recent landmark $25 billion settlement with the banks.

HUD reviewed foreclosure practices at all five banks involved in the recent settlement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. They issued subpoenas, pored over personnel files, conducted interviews with scores of employees and examined the quality control measures — or lack thereof — at the banks’ mortgage servicing units.

Repeatedly, according to the report, investigators were hampered by poor record-keeping at the banks, sluggish responses to requests for documents and an unwillingness to make employees available for interviews or to allow them to answer detailed questions at the virtual foreclosure factories where they worked.

Nevertheless, investigators pieced together a picture of a deeply flawed system riddled with errors, where employees often had little or no training, where managers encouraged wrongdoing and where haste trumped all else.

You know, maybe the banks had poor record-keeping, and responded sluggishly to requests for documents because, you know, they knew that they were aggressively breaking the law.

Stop the looting, and start prosecuting!

Quote of the Day

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I’ll say what Joe didn’t: The prosecutors need to cut a deal with one of the small fish in order to catch a big (or bigger) fish. Perhaps with MFG’s Treasurer or Comptroller. If it were me, I’d let the Defense bar know that we have 3 potential immunity deals that go to the first takers (with several hi profile exceptions).

This is just like prosecuting drug dealers — you pick up the dime bag seller, roll them to the mid-level guy, repeat. Keep doing that until you reach as close to the top as you can get.

Works for pot, crack, robo-signing, and segregated account theft . . .

—Barry Ritholtz on how to prosecute MF Global executives for stealing customer funds

The Hair of Doom is Arrested

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The Hair of Doom!

Specifically, Rupert Murdoch protege Rebekah Brooks, along with her husband and other Murdoch Staffers:

Rebekah Brooks, the former chief executive of News International, the British newspaper division of Rupert Murdoch’s media empire, was arrested early Tuesday on suspicion of obstruction of justice, according to a person with knowledge of the arrest. Her husband, Charlie, a friend of Prime Minister David Cameron from their days at Eton three decades ago, was also arrested, the person said.

The police said in a statement that six people in and outside of London had been arrested on Tuesday as part of Operation Weeting, the criminal investigation into phone hacking and other illegal activities at The News of the World and other newspapers. None have yet been formally charged with crimes; in the British system, charges can be filed months after an arrest, and sometimes not at all.

Following standard procedure, the police statement did not identify those arrested. But a person with knowledge of the arrests said that besides Ms. Brooks and her husband, they included Mark Hanna, the head of security for News International.

The police statement said the six had been arrested between 5 a.m. and 7 a.m. and were being interrogated at different police stations on suspicion of “conspiracy to pervert the course of justice,” the British equivalent of obstruction of justice. This could relate to activities like destroying e-mails, computers and other evidence, people with knowledge of the investigation said.

Two former editorial staff members at News International said they had heard from inside the company that the questioning was related to e-mails that were deleted before the police widened their phone hacking investigation last year.

It’s never the crime, it’s the cover-up.

Not Enough Bullets…

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And Louis Freeh is at again, trying to make sure that the money stolen by the banks from MF Global customers stays stolen.

In this case, he is attempting to pay hush money large bonuses to MF global executives:

Three top executives at MF Global Holdings Ltd kept on since the commodities firm’s collapse could receive performance-based bonuses under a retention plan being prepared by a court-appointed trustee, people close to the trustee said.

Trustee Louis Freeh plans to ask a bankruptcy judge to approve the employment agreements, said these people, who spoke on condition of anonymity because the plan is still being crafted.

The plan will include bonus payouts for Chief Operating Officer Bradley Abelow, General Counsel Laurie Ferber and Chief Financial Officer Henri Steenkamp if they meet certain targets.

The formation of a plan does not necessarily mean bonuses will ultimately be paid or that the executives will earn as much total compensation as they have in the past.

Still, it has garnered attention from at least one key politician. Sen. Chuck Grassley, the highest-ranking Republican on the Senate Judiciary Committee, said in a statement it was “hard to believe that Mr. Freeh would consider bonuses to these select few while customers and investors are still trying to recoup their losses.”

Because, of course the people who stole the money in the first place.

Seriously, the casual corruption of Loius Freeh and His Evil Minions™, which are in tern a reflection of the endemic levels of corruption of our financial system, just boggle the mind.

It’s got me agreeing with a Republican Congressman, Timothy Johnson, wants blood:

I would wager the combined assets of these executives, along with those of Mr. Jon Corzine, would go a long way towards paying back their customers. That’s what would happen in the world I grew up in.

And on the other end, where we have another trustee allegedly trying to recover money for account holders, we have the other end of the bankster protection racket:

MF Global Inc.’s trustee asked futures customers to release claims on the defunct brokerage in return for money they are owed, demanding an “unwarranted” transfer of legal rights, a group of customers said.

The customers, including William Fleckenstein, Thomas Wacker and Summit Trust Co., said in a court filing yesterday that they were notifying the judge supervising the firm’s liquidation of their “concern” in case he wasn’t aware that trustee James Giddens had mailed his demands to some customers along with his determination of their claims. One of Giddens’s demands may require customers to release claims made in class- action lawsuits, they said.

“It may be interpreted to release claims being asserted in the numerous class action lawsuits filed by aggrieved customers,” the customers said in the filing. “It could also potentially be asserted as a bar to recovery by some or all of the defendants joined in these lawsuits, including claims in the suits against parties alleged to be responsible for the misappropriation of customer funds.”

I’m not sure which is worse, the level of corruption, or the brazenness with which they operate.

H/t Atrios.

Iceland Does it Right

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Not only are they prosecuting their banksters, they have put a former PM in the dock:

The trial of former Icelandic Prime Minister Geir Haarde, on charges of negligence over the 2008 financial crisis, has begun in Reykjavik.

Mr Haarde is thought to be the first world leader to face criminal charges over the crisis.

He rejects the charges as “political persecution” and has said he will be vindicated during the trial.

The country’s three main banks collapsed during economic turmoil and the failure of Icesave hit thousands.

With a population less than that of Baltimore City, Iceland seems to have cornered the market on both balls and common sense where the financial meltdown is involved than the other 6.8 billion of us.

Go figure.

Broken Window Theory of Financial Crimes

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Bill Black has a very interesting look at the “Broken Window” theory of law enforcement and how, and whether, it might be applied to financial wrongdoing.

For those of who are unfamiliar with the “Broken Window” theory of law enforcement:

James Q. Wilson was a political scientist who often studied the government response to blue collar crime. The public knows him best for his theory called “broken windows.” The metaphor was what happens to a vacant building when broken windows are not promptly repaired. Soon, most of the windows in the abandoned building are broken. The criminals feel little compunction against petty destruction because the building’s owners evince no concern for the integrity of their building. Wilson took social norms, community, and ethics seriously. He argued that as community broke down fewer honest citizens were active in monitoring and policing behavior. The breakdown in community was criminogenic – it led to widespread serious blue collar crime. He urged us to take even minor blue collar crimes and breaches of civility seriously and to demand that they be contained through social pressure and policing.

Wilson got a lot of credit for cleaning up New York City, where crime levels did drop, but they did elsewhere, so perhaps the theory is a bit overrated.

And it should be noted that Mr. Wilson specifically excluded white collar crimes.

I think that the operative word here is “white”.

As in pigmentation, and Wilson found “white crime” just fine:

In a book entitled, Thinking About Crime, Wilson argued that criminology should focus overwhelmingly on low-status blue collar criminals.

This book [does not deal] with “white collar crimes”…. Partly this reflects the limits of my own knowledge, but it also reflects my conviction, which I believe is the conviction of most citizens, that predatory street crime is a far more serious matter than consumer fraud [or] antitrust violations … because predatory crime … makes difficult or impossible maintenance of meaningful human communities (1975: xx).

I am rather tolerant of some forms of civic corruption (if a good mayor can stay in office and govern effectively only by making a few deals with highway contractors and insurance agents, I do not get overly alarmed)…. (1975: xix).

Wilson won’t say it, and cannot now, because he’s dead, and may not admit it to himself, but he’s tolerant of white collar, because “Broken Window” enforcement should only be used when it involves cops harassing poor people and/or minorities.

That’s why Wilson created a “get out of jail free” for the crimes of the upper class.

I’m inclined to believe that small crimes beget bigger crimes, and that this problem is worse among the privileged than it is among the poor and minorities.

As Prof. Black illustrates in his article, when the little things are let slide, you end up with things like liars loans, and blacklists of honest home appraisers, with executives engaging in wholesale looting of their own firms.

H/t Yves Smith.

No One Owns Their House in the USA

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The fabrication of mortgage documents has gotten so bad that one of the most respected financial services consulting groups in the country, SolomonEdwardsGroup, has issued press releases explicitly offering falsified documents:

Reader Lisa N. pointed me to a troubling October 2010 press release by SolomonEdwardsGroup, a company that describes itself as a “national financial services consulting and staffing firm” about its remediation services for “significant loan documentation problems.” Alert readers will recognize that this is shortly after the robosiging scandal broke.

Here are the key parts of the press release:

SEG’s teams can also be rapidly deployed across the U.S., to help banks and servicers “scrub” files and determine which foreclosures may have been tainted by incorrect loan documentation and processing issues such as robo-signing….

For instance on a recent engagement, SEG quickly deployed a 25-person team to review a single-family loan portfolio containing 5,000 loans and within six weeks brought the portfolio into compliance with investor guidelines. During another recent engagement, SEG successfully completed the same type of project involving 20,000 single-family loans tainted by fraud allegations.

Needless to say, this sounds consistent to the charges we’ve heard from borrower attorneys and have even seen at trial: that of “tah dah” documents appearing suddenly in court that solved all the problems with the evidence presented. A not that unusual case occurred last week, in Kings County, New York, where in HSBC v. Sene, when the lawyers for the bank tried submitting two notes (borrower IOUs), the second attempting to remedy problems raised by the first one, each presented as the original. The judge not only ruled against the foreclosure but referred the case to the district attorney and the state attorney general.

…………

It was disconcerting to speak to someone who obviously thinks his firm is highly professional engaged in activities that include document fabrication, which is what creating allonges now amounts to. And the worst is I have no doubt SolomonEdwards is more careful than most firms in the industry. This confirms, as we have said repeatedly, that there was a massive failure in the industry to conform to the requirement of the legal agreements that it devised. And there is a very big business, now with a government seal of approval, in covering up that fact.

Seriously, over the past 20 years the banks have shredded the basic concepts of real estate law that took a thousand years to develop.

This law was created for one reason: to ensure that when someone bought the land, it could not be taken away by someone with a conflicting claim.

It’s all been destroyed.

Eric Holder Argues that Assassination is Legal

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Jeebus. It’s now OK to murder an American citizen because the President says so:

Attorney General Eric Holder on Monday explained why it’s legal to murder people — not to execute prisoners convicted of capital crimes, not to shoot someone in self-defense, not to fight on a battlefield in a war that is somehow legalized, but to target and kill an individual sitting on his sofa, with no charges, no arrest, no trial, no approval from a court, no approval from a legislature, no approval from we the people, and in fact no sharing of information with any institutions that are not the president.

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By “government” Holder means the president, whether President Obama or President Romney or President Santorum or any man or woman who later becomes president, and nobody else. That one person alone is to decide what is appropriate and lawful and feasible. If the Vice President thinks it is feasible to capture somene, too bad for him. He should have gotten a better job if he wanted to be a decider. If the Chief Justice of the Supreme Court thinks preaching against the United States is not a capital offense, tough tamales. He shouldn’t dress in his bathrobe if he wants to be taken seriously. If the United States Congress objects that the president’s “surgical strikes” tend to kill too many random men, women, and children, well they know what they can do: Run for president! If the United Nations special rapporteur on extrajudicial killings has objections, well — Isn’t that SPECIAL? And the American people? They can shut up or vote for a racist buffoon from the bad party.

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But you see, this is all OK, because Barack Obama is a good guy, so no countervailing government structures, or for that matter any public access to information needs to be allowed:

A consensus has emerged during the presidency of Barack Obama. His administration is increasingly regarded as the worst on issues related to freedom of information and transparency.

Today, Josh Gerstein of POLITICO has a story that gives voice to this emerging consensus, which more and more open government advocates hold despite the fact that the Obama Administration maintains it is committed to “openness.”

Gerstein’s story features a quote from a Washington-based lawyer “who’s been filing” Freedom of Information Act (FOIA) requests since 1978. The lawyer, Katherine Mayer, says, “Obama is the sixth administration that’s been in office since I’ve been doing Freedom of Information Act work. … It’s kind of shocking to me to say this, but of the six, this administration is the worst on FOIA issues. The worst. There’s just no question about it.”

Think about this for a second: This is all predicated on the idea that the Executive is a good guy who won’t abuse power, and so there is no need for checks and balances.

This is why I call Barack Obama the worst constitutional law professor ever.

What Is The Difference Between A Broker And A Psychopath?

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The answer appears to be, “psychopaths are much better for the rest of us“:

What makes individual stockbrokers blow billions in financial markets with criminal trading schemes? According to a new study conducted at a Swiss university, it may be because share traders behave more recklessly and are more manipulative than psychopaths.

Two weeks ago, yet another case of rogue trading shocked the financial world when UBS trader Kweku Adoboli was arrested for allegedly squandering some $2.3 billion with a risky and unauthorized investment scheme. The 31-year-old, who had been based in London for the Swiss bank, remains in jail. The bank’s chief executive Oswald Grübel, meanwhile, has resigned over the scandal — the third major embarrassment to rattle the institution in just a few years.

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According to a new study at the University of St. Gallen seen by SPIEGEL, one contributing factor may be that stockbrokers’ behavior is more reckless and manipulative than that of psychopaths. Researchers at the Swiss research university measured the readiness to cooperate and the egotism of 28 professional traders who took part in computer simulations and intelligence tests. The results, compared with the behavior of psychopaths, exceeded the expectations of the study’s co-authors, forensic expert Pascal Scherrer, and Thomas Noll, a lead administrator at the Pöschwies prison north of Zürich.

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“Naturally one can’t characterize the traders as deranged,” Noll told SPIEGEL. “But for example, they behaved more egotistically and were more willing to take risks than a group of psychopaths who took the same test.”

So, Dr. Noll, could you explain to me why we cannot, “characterize traders as deranged?”

It seems to me that if there is any lesson of the past few years, it is that traders are deranged.

HFT, SEC, EE-I-EE-I-O

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SEC Chairman Mary Schapiro is now saying that there may be some real problems with high frequency trading:

Chairman Mary Schapiro of the Securities and Exchange Commission (SEC) is worried about the rise of high-frequency trading, but two years after the agency flagged the phenomenon as a potential problem, she says regulators still don’t know enough to do much more about it.

High-frequency trading, which is practiced by hedge funds and other technologically turbocharged investors, involves the purchase and sale of large volumes of shares in tiny fractions of a second, often to exploit fleeting inconsistencies in the markets.

At a wide-ranging question-and-answer session with reporters Wednesday, Schapiro said that major regulators from various countries gathered in the fall to confidentially compare notes about high-frequency trading.

“And we all concluded that we have concerns but we don’t have enough data yet to really be able to justify significant additional steps at this point,” Schapiro said. “We need to have a much deeper understanding of the impact of high-frequency trading on our markets.”

This is why financial “innovations” should be treated the same way that the FDA treats drugs: You don’t get to use them until they are proven safe and effective.

But beyond this, it’s clear that HFT is a form of front-running, where computers see incoming orders, and get to the queue ahead of those orders in order to profit from the market move.

A financial transaction tax of 10 (I’d actually favor 50) basis points would solve this, and a lot of the other problems of our financial system.