Abacus is a more complicated case. The more shocking one to me is why Dick Flud isn't in jail. His use of the Repo 105 to move assets off the books to make Lehman look less leveraged and in better condition is a clearer case of fraud. He essentially did the same thing that Enron did - and Sarbanes Oxley requires that CEO sign off on the truthfulness of financial statements. Here's a guy that seems to have deliberately misled in those financial statements, yet he walks free. To me, that case is a more clear case of how the SEC is a toothless agency.
Is it fraud though? Repo 105 (and 108) were perfectly legitimate financing transactions and their reporting adhered to the relevant accounting standards.
Yes they were done to lower the firm's reported leverage, but again this computation conformed to regulator standards.
So not so clear cut it's "fraud" as nothing was mis-reported.
Edit: incidently this is nothing like what Enron did, which was to move assets off balance sheet by moving them to SPVs and swapping the risk back (incidently also completely legal and fairly common in structured finance). These were simple repo transactions.
This is very similar to what Enron did, although the vehicle was different - they moved liabilities off the books to make themselves look less leveraged. Enron did this through shell companies owned by Fastow - Fuld/Lehman did this through abusing a standard rule and then getting E&Y to hold their nose and say that these transactions were not material and did not involve reporting the information to shareholders. To me, that's fraud.
I'm not alone in this analysis:
"The segment, which marks the first time Vakulas has been interviewed since filing his nine-volume, 2,200-page report two years ago, claims there is sufficient evidence to prosecute officials at Lehman. According to Vakulas, Lehman Brothers was intentionally misrepresenting their financial health."
The key question, to me, is whether they knowingly misrepresented the health of the company in reporting to shareholders. If it ever went to trial I think the answer would be "yes" - but of course we'll never know because no one in the US government wants to go after them.
At least the NY Attorney General went after E&Y and extracted a minor settlement (albeit one with no admission of wrongdoing):
When I was growing up, my father used to tell me "bankers cause wars; they are the biggest criminals in the history of mankind." The article, and my own personal experience, which I'd rather not divulge in public, illustrate this perfectly. I know all the managers knew about the scam; they perpetrated it; and yet, they walk free and flush with cash from such deals, while ordinary people lost their homes and jobs. The S.E.C. is in cahoots with them. Essentially, the managers and lawyers inside of the S.E.C. and the banks found a way to commit criminal acts without going to prison.
Goldman, the company, is not allowed to contribute to candidates. What OpenSecrets means when it says that is Goldman employees contributed. Which is unsurprising. Goldman has tens of thousands of well-payed employees in a heavily Democratic state. Who would they contribute to?
Why do we know where contributions come from? Why are they not anonymous? I think it'd be better if candidates had no idea where all that money came from.
The concept of a nation-state depends upon closed-source sovereignty. Anonymous money could be coming from anyone or any foreign nation-state, thus usurping and subverting the sovereignty nation state.
However, this is a problem that already exists because it is easy enough for a foreign entity to use a third party shell to do this (i.e. AIPAC).
What I mean is that it should be anonymous to the candidate. One way to accomplish that is to have all donations pass through a central fund that passes it on to the candidates. Some government organization could check whether the donation meets the rules and do something else with it when it doesn't.
That would make it an unaccountable black box, though. That would not be good in the interest of transparency. On the other hand, there are plenty of unaccountable black boxes already.
The candidate who would be most likely to make sure they keep their jobs and are not prosecuted for fraud.
>Goldman, the company, is not allowed to contribute to candidates. What OpenSecrets means when it says that is Goldman employees contributed.
This is a null distinction. "Goldman Sachs" is not a person, it is a brand name: words on a piece of paper or on the front of a building. Though I understand how this could be confusing as the law (once again, words on paper) says that articles of incorporation (words on paper) are literally people.
When someone says "Goldman" they are of course referring to the persons who work or invest together under the banner name "Goldman Sachs". Like when someone says "the US did x" they are of course referring to citizens, and not the flag.
Thanks for saying this. I really wish the media would stop talking about candidates receiving donations from companies, which, as you point out is not possible.
You could look at the Clinton speaking fees, and contributions to the Clinton foundation as buying access and favour from large companies. Also, corporations can contribute unlimited funds to a candidates SuperPac (which we swear doesn't coordinate directly with the campaign! Wink, wink!)
The Clintons made hundreds of millions off speaking fees and donations to their foundation, Presidential library, etc. We've perfected many avenues for graft here in the US.
"The United States Supreme Court held (5–4) that the First Amendment prohibited the government from restricting independent political expenditures by a nonprofit corporation. The principles articulated by the Supreme Court in the case have also been extended to for-profit corporations, labor unions and other associations. By allowing unlimited election spending by individuals and corporations, the decision has "re-shaped the political landscape" of the United States."
Citizens United did not affect the ban on corporations donating to candidates. Subsequent to Citizens United, the Supreme Court denied certiorari to Danielczick vs. U.S., which would have implicated that issue.
Contributions to candidates implicates very different concerns. The biggest difference, in my opinion, is that in Citizens United the law targets people who are not running for office. The ban on corporate contributions to candidates can be seen as a regulation on the candidate who may be required to bear such additional regulation as part of running for office.[1]
[1] That is not the orthodox explanation for the distinction. The orthodox explanation invokes Buckley v. Valeo's balancing test, and notes that the free speech concerns are less in the case of direct campaign contributions and the corruption risk is greater. I don't like balancing tests so I don't find that persuasive.
Citizens United was not about, and did not change, the restriction on "candidates receiving donations from companies", which is what OP was discussing.
Considering the maximum campaign contribution is $2,700 per candidate, I think it's safe to say they plan on influencing the election without relying on directly funding candidates. That does not mean that the candidates aren't responsive to these alternative funding streams.
Another example of how this money corrupts the position of politicians can be seen in the Clinton Foundation.
"Giustra is a Canadian mining magnate who became a large donor for the Clinton Foundation 11 years ago, going on to set up the ‘Great White North’ chapter of the foundation. He currently sits on the board.
The billionaire later became an example of the foundation’s murky ties between donors and apparent political favors, due to the 2005 dinner with Giustra, Bill Clinton, and Kazakhstan president Nursultan Nazarbayev – and the deal that “stunned the mining industry, turning an unknown shell company into one of the world’s largest uranium producers in a transaction ultimately worth tens of millions of dollars to Mr Giustra,” wrote the New York Times, quoting analysts."
> You have to look more broadly than just direct contributions to candidates
No. Citizens United only covered direct contributions to candidates, and while it is correct that you should look more widely to ascertain the overall workings of the American electoral system, the second you do so you are no longer evaluating the impacts of Citizens United.
> Consider the Koch brothers [...] Giustra is a Canadian mining magnate who became a large donor for the Clinton Foundation
You are now talking about independent expenditures by individuals, which ALSO was not impacted by Citizens United. Neither example you give is something which was illegal prior to Citizens United, but legal afterwards. (And in fact, one of the examples took place before Citizens United, so um...)
As a result, your post just underscores how unimportant (and overhyped) Citizens United was, once you "look more broadly than just direct contributions to candidates".
It's pretty simple: the Treasury head and many others in regulators are ex-Goldman. The word is subversion. The biggest violators have people embedded into the regulators to make sure they're not a problem.
The majority of that list fits my pattern with two claimed to be public service. Lew was COO for one of the guilty parties as the stuff happens. Geithner came in after the bailouts started. Paulson is the main guilty party there. Lew and Geithner, whatever their beliefs, haven't tried to make a prosecution happen or significantly countered the funding. The crooks are doing A OK with some of their gains paid back in fines. Cost of doing business.
List isn't looking good. That's without considering Kissinger or RAND connections. No speculation needed with results like this. ;)
I agree with you and find it aggravating as I see it in politics all the time. Otherwise smart, effective people stay all over peripheral instead of core issues.
An example is recent election. People are citing what each candidate says or promises despite admiting the whole game is to lie for votes then do what they're paid to do by their contributors. So, you look at voting history and prior business activity to determine both likely action and character. Got Hillary and Trump filtered out almost instantaneiusly for me whereas they rise to the top for the masses. "But he/she said..." (Sighs)
For those of you who haven't spent the past 10 years of your lives following this and want a quick TL/RD, the below link has a good recap of what Abacus is.
I am not an American and I wonder why the most likely presidential candidate is the one taking somewhat opaque "speaker's fees" from an organisation that a lot of Americans realise operates in ways akin to a mafia. From the outside it like turkeys voting for Xmas.
I boil this down to a few categories of people in positions of government. There is a certain word, don't say it too loud or they might run or grab pitchforks, but the word is... cough... accountability.
Looks around carefully. I spent some time contracting in DC, and the conclusion I came to is that there are three main types of people around the government and financial centers of power.
1) Those who are aware of the coming shitstorm and the complete corruption and subversion, and are just trying to "get theirs". This usually ends up in a "I got mine, fuck you" attitude. They don't push back because they know they would get punished for it, so they instead use their knowledge to further their career at the expense of their duty, and principles. They know, but don't care (enough to risk anything) about the status quo.
2) Those who know about the situation, and agree with it. These are usually indoctrinated extremists on either side of the spectrum, neocon, ultra-lib, the kind of people who now think capatalism in it's current form is the best gift from god and they speak of peace while selling massive amounts of weapons to dictators they setup all around the world. They know, and they care (for the wrong things), and actually perpetrate many of the abuses of the system.
3) Those who are too ignorant or stupid to know, or the slightly modified, those who have an idea about how bad it is but would rather stick their head in the sand and pretend reality doesn't exist. They don't know and don't care.
Don't tell me where all the true patriots went. I have told my friends, that "I know not one brave soul, not one." (keep in mind I'm not talking about media figures, like Snowden, Manning, Drake, Binney, Tice, Edmonds, all of whom I do consider brave souls) To me, that is the real problem I faced when I had my Descartes reset, in that I started to realize that while I still believe in the power of an oath, and the duties that come with them, the majority of the people around me and in positions of real power pay tons of lip service to principles, but never actually do them. Personally, I think this is causing a kind of mass cognitive dissonance and compartmentalization that we have yet to realize the full impact of.
When I think about the leadership traits I learned in the Corps, and how little of them I see in our leaders, I fear for the future of my country.
(in case anyone is wondering, they are: Justice, Judgement, Dependability, Initiative, Decisiveness, Tact, Integrity, Enthusiasm, Bearing, Unselfishness, Courage, Knowledge, Loyalty, and Endurance.)
I've seen a steady erosion of ethics in all professions.
I don't know what's causing it. Actually, I have a few hypothesis, but I'll get hammered for even mentioning them.
I used to look at people's actions in society, with the expectation that the average guy would be one of the 65% who delivered the legal 450v sting in the Milgram experiment. That left 35% who would do The Right Thing.
As, I've aged, I see a number much greater than >65%. I'm seeing way too many people doing immoral legal acts. Acts that are highly immoral, but legal.
I used to just take ethics for granted.
I am now Shocked when I run across a person with ethics.
I've gotten so jaded when someone is being honest/genuinely helpful--I look for the catch I missed. So, basically I look at most people, especially the financially successfully with extreme caution.
In Ireland, I was told they look at successful people differently than we so I the United States. They look at that person, and wonder, "Who did they screw over, or step on in order to get there." I overheard this. It might be wrong. I haven't got there, but it's getting close.
I'm not even talking about blatant criminals. I'm talking about the guys in ties. The guys with licenses. The guys with power. The guys who bend the rules in order to get ahead. The guys who exploit poor and uninformed just because they are easy marks.
The Polish philosopher Leszek Kolakowski once said "Original sin remains a profound and insightful view of the human condition".
He didn't last long at Berkeley, as it happens.
That comment on original sin is misguided at best. Original sin sets up guilt before any wrongdoing, it's a means of control, there's nothing insightful about it.
Why can't people excel and be experts while being a regulator? That's like saying police have to be criminals before they can be police or they won't be experts.
If the financial industry is doing things so complicated that they cannot be policed, then they should be made to define their actions so that they CAN be policed, or their actions should be illegal.
It's not that you cannot play for Blackhawks for a few seasons, and then sign up with Rangers. As the revolving door metaphor suggests, the movement is both more frequent and continuous. Glenn Greenwald goes even further in With Liberty and Justice For Some, suggesting the government and the industry have in practice become two departments of the same organization, with employees being reassigned, but never actually leaving:
"People like [the Democratic appointees] Rubin, Summers, Patterson, and Gensler shuffle back and forth between the public and private sectors, taking turns as needed with their GOP counterparts. When in government, they ensure that laws and regulations are written to redound directly to the benefit of a handful of Wall Street firms, abolishing most regulatory safeguards that keep those behemoths in check. When the electoral tide turns against them, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented (or failed to implement) when they were in charge. Then, when their party returns to power, back they go into government, where they use their influence to ensure that the cycle keeps on going."
And if you don't care for a 9–5 back at your old bank, or your party holds the presidency for too long and you're kinda strapped for dineros, you just ask for a reassignment with a short period of unemployment. During the sabbatical, you visit your Wall Street office for a few hours, collect a "speaking fee"[1], and take a holiday. When you come back, infused with vitamin D and liquidity, your lesser-minded colleagues may think you never left or (gosh!) took a bribe.
I do know former coders managing government tech policy now. Don't assume they all lack technical knowledge. That's increasingly not the case from my experience.
I'm making an analogy to tech policy. Of course we had people with coding experience managing tech policy. Similarly, we want people with banking experience managing banking policy.
The question that the revolving door complaint raises is whether these people can competently perform in these regulatory positions without bias.
The solution isn't picking different people, it's transparency and enforcing the checks and balances. Articles like this are important, because the SEC is notoriously bad at being transparent (getting a D- on FOIA) and it exists as an independent agency in the executive branch.
I dig your solution as well as some kind of limitations on "crossing the aisle" once you've gone over. Like former regulators have to have n years out of the job before being legally allowed to work for financial institutions or other ways to add distance and disincentive lenient regulation.
I have issues with employment restrictions, more on the public to private transition. A public sector job in almost any fashion is not going to pay as much as a private sector finance job. n years is overly punitive for someone who is likely not paid very well to begin with. Let's say you reduce it down to jobs only above a certain level. You will absolutely see a shift in how people pursue promotions and probably introduce a disincentive to even enter the field at a senior level.
Program/code the regulations into the financial systems instead of relying on the thumbs up from an easily corruptible human being.
Edit: immediately after posting this it occurred to me how terrible if not impossible this would be with the spaghetti code that is the tax and compliance legal code. So that would ideally have to be reformed, or rewritten and consolidated which is quite a big proposition
Mainstream Banks laundered close to 400 billions in drug money and got slapped with fines in 10 mil. range. Everyone is up in arms about GS.
GS counterparties are supposed to be sophisticated Fund managers they are payed millions in fees for managing money. It's their job to do due diligence on the deals they do with GS or otherwise.
"In our conversations, Kidney reflected on why that might be. The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role. But to Kidney, the driving force was something subtler. Over the course of three decades, the concept of the government as an active player had been tarnished in the minds of the public and the civil servants working inside the agency. In his view, regulatory capture is a psychological process in which officials become increasingly gun shy in the face of criticism from their bosses, Congress, and the industry the agency is supposed to oversee. Leads aren’t pursued. Cases are never opened. Wall Street executives are not forced to explain their actions."
Basically, regulators don't have the balls to go after the big guys.
Sounds very similar to this story[0][1]. If i recall correctly: Ambitious NY Fed employee claims she was fired because she wouldn't soften language in a report; secretly records meetings that show extreme deference to banks. The This American Life version is really great.
But at the bottom of it, there was this thing that he [Eric Holder]
laid out called the "collateral consequences doctrine."
And what "collateral consequences" meant was that if
you’re a prosecutor and you’re targeting one of these big
corporate offenders and you’re worried that you may
affect innocent victims, that shareholders or innocent
executives may lose their jobs, you may consider other
alternatives, other remedies besides criminal
prosecutions—in other words, fines, nonprosecution
agreements, deferred prosecution agreements.
And again, at the time, it was a completely sensible
thing to lay out. Of course it makes sense to not always
destroy a company if you can avoid it. But what they’ve
done is they’ve conflated that sometimes-sensible policy
with a policy of not going after any individuals for any
crimes. And that’s just totally unacceptable.
"Of course it makes sense to not always destroy a company if you can avoid it." So that's the basic implied threat - destruction?
Nice. And this then becomes a brinksmanship game. The act of flauting the law is now coin of the realm.
Enron was taken down by ... the running dogs of CALPERS. "My fund can beat up your fund" so to speak. This is why we can't have affordable housing - the spall from Enron painted the whole state of Texas.
Shareholders don't deserve protection like that. I understand that giant corporations are not particularly run by shareholders, but if someone dumps their money into something and doesn't pay attention to it, it's fine to make them feel the consequences of not paying attention.
I'm confused by this. Shareholders are some of the primary victims being defrauded in these cases.
Enron's accounting gymnastics were precisely to defraud their shareholders. How is that negligence on the part of the shareholder? It's not - it's criminal on the part of the executives.
> Enron's accounting gymnastics were precisely to defraud their shareholders. How is that negligence on the part of the shareholder? It's not - it's criminal on the part of the executives.
Of course it is. Because in that case the perpetrators are the corporate officers and the victims are the shareholders. The shareholders were partially responsible for not choosing better officers, but for that they can only blame themselves.
But there are times when officers choose to harm third parties in furtherance of the interest of the shareholders. They do something illegal because it's profitable. And in that case losing their money is exactly what shareholders deserve for choosing officers with no scruples.
> It's not - it's criminal on the part of the executives.
So if this kind of behavior is prosecuted and severely punished (e.g. lifetime prison sentences) - shareholders would be less likely to be defrauded.
The protect-the-shareholders attitude is entirely oxymoronic here, since it just means that those exploiting the share-holders and the corporation know they are unlikely to face significant consequences and this encourages others to do likewise.
I didn't say it was negligence on the part of the shareholder. They are putting their money under the control of someone else, they should be thinking about risk when they do so. Is it so clear that a series of closer looks at Enron's books would have missed the fraud?
It's also the case that I was thinking more about the companies that are fined and keep operating with all the same officers in place than I was thinking about companies that implode. For example, shareholders of JP Morgan apparently aren't real sad with Jamie Dimon.
The reason why the government has to take action on this is because as a matter of policy, the government coerces people to invest in corporate America. If people were freer to not participate in the stock market casino, then there would be no need to regulate it.
Sounds a bit like a variety of legal realism, roughly the idea that the law is not what's formally written down, but the collection of practices that can be inferred from what people (judges, prosecutors, police, etc.) actually do. If Wall Street practices have become culturally normalized, especially among elites, then they simply get thought of as "legal", regardless of whether they follow the letter of the law, and it appears radical to argue that they should be prosecuted for doing things that are just normal practice and therefore presumptively legal. It looks to many people like you're trying to change the law in that case (the government intervening to overturn normal business practices) even if formally you're just enforcing the law as actually written. Many people in a position to initiate prosecutions shy away from that unless they have strong political backing (e.g. from a popular politician willing to make trust-busting or taking on Wall Street their signature issue).
Can I use that argument to get out of speeding tickets? It's culturally normalized to go 10-20kph over the limit, and people actually get pissed if you do the limit on the highway.
Where I live (Texas) the de facto norm really does appear to be that you're entitled to add 10 mph (~15 kph) to the posted speed limit, and that's roughly what the police enforce. People get really angry and start writing their politicians if police start frequently writing tickets for less than that, so they usually don't. Some police out in West Texas used to be notorious for setting up speed traps on the highways and enforcing the speed limit strictly (as a source of revenue), so the state legislature actually cracked down on them because people were so angry.
When you consider the real reason you are getting the ticket isn't that you were speeding, everyone else was as well, but that you are an easy money with an out of state plate or maybe the color of your skin wasn't appreciated by the officer. Now, real speeding tickets are given for people who are violating even the extended limits, but for the reality is that legal realism + over arching laws + selective enforcement means that the law actually is that being the wrong skin color or from the wrong location or displaying the wrong political bumper sticker is a ticketable offense as long as the officer doing so is being discrete enough.
I drive 9mph over speed limit and I have not been ticketed a single time in 9 years I am driving. Cultural norm is that speeding 10mph is OK so police ignores some speeding in most locations.
Speeding often has surprisingly low fines. Get caught doing 115 in a 65 mph area in Florida. That's ~1,000$ for a first offence. Second time they revoke your license for a year and more than double the fine, next they revoke it for 10 years and charge you 5k.
My cousin when he was a teenager in Minnesota got a reckless/careless driving offense when he was speeding in his new Camero around the Mall going 80MPH. He lost his license for a year, had to pay a 2K fine, had to go to a defensive driving school course and then had some 50 hours of community service to do on top of it all. He's uncle has repeatedly said he would have been better off just getting a DUI. My uncle maintains the judge was the "hanging" judge type and my cousin's other two speeding tickets didn't help him much.
The funny thing is, he never got so much as a jay walking ticket after that, so the punishment definitely straightened him out.
Here in Ontario there are big signs on the highways that say if you're caught driving more than 50 kph (~30 mph) over the speed limit they take your license and your car (!) right there by the side of the road.
That's news to me! Admittedly, I haven't been on a highway in Ontario in ~2 years, but I definitely never saw signs like that then (of course, I definitely saw people exceeding the speed limit by 50kph on more than one occasion, and given how quickly my uncle made it to my grandparents' house in Ontario the last time he headed over from Montreal, I suspect he may have too ;).
- Canadian raised in the US, spent a fair amount of time in Canada
I've always wondered why production cars for road use can ever go over 100 mph. Put a governor at 65 mph and you never have to both enforcing speeding tickets again. I'm not advocating for this, but if it's so bad they will take away your ability to drive over it why not limit it mechanically?
Then in 10 years, someone, somewhere decides that 90 is acceptable on a specific road. Now all cars with limiters need to be modified. Want to be able to change it remotely? Now you add an attack vector. Throw in a GPS? Now you're asking for additional government monitoring that is mandatory and might be (will be) used for spying purposes.
You could design a GPS speed limiter that doesn't track location, TomTom's had an "overspeed" warning 10 years ago, it would go orange if you went over the speed limit and go red and make a bong noise if you went way over, My old boss used to drive fast so I saw that quite a lot (in the end I told him I wouldn't share a car with him if he didn't stick to the speed limit).
Nissan GT-R's have (at least in Japan, where it is as far as I know mandatory, not sure if they are removed in international sales) limiters that deactivate when they are on a white-listed race track.
You may actually need to go 100 MPH in traffic. Speed limits are 85 in places, and 15 over that may be required to maneuver.
Speed limits on interstate class roads seem pretty dangerous to me - you can watch people thinking "but I'll get a ticket" and backing off at bad times. Of course, I guess of there were no signs with numbers on them they'd drive 115 and kill themselves.
Speed limit on the highway by my house is 70. If you are doing less than 75 during rush hour you will be passed by a stream of cars. I've been overtaken while doing close to 90.
My own experience is that carse indicate something like 10% more speed than the real one. You can check that with a GPS, which gives very precise speed measurements. So maybe 9mph excesive speed will not trigger any radar.
Montana raised the speed limits from 75 to 80mph last summer. I've noticed an odd effect... the traffic is now predominantly moving between 75 to 80mph, not 75 to 85mph.
That would be an instance of fallacious reification[1]. Legal realism would say that the law is not enforced based on whether or not you obeyed the speed limit. The cop's whim, bias, and whatever organizational pressures bear down on them all contribute to your ticket. The statute itself is only a small part of the law.
I think I've even seen it in print (in some of those newspaper articles, like "Ask law enforcement questions"), but definitely from discussions with them, but Washington State Patrol's "stated" policy for speeding (at least on highways) is "Under 10 Over" and they won't target you.
Anybody who's been anywhere near the Seattle metro area knows what a bloodbath the speed traps are.
Targeted or not, they like to do insanely stupid things like park their cruisers on the shoulder of a bridge, inches from the lane of travel, lights off, at night, trying to "ambush" people.
The west side of the state is nothing compared to the east. The WSP on the east side of the cascades pull people over whenever they need some revenue, regardless of their speed. They are filthy thieves shaking down anybody that looks vulnerable. When I drive to Seattle, you can anticipate seeing the WSP approximately every 20 minutes the entire way across - until you hit the west side of the cascades, in which case you'll only see them occasionally up and down I-5. They are monsters and I'd be fine getting rid of them entirely. They are not making the roadways of Washington any safer and do not represent the values of the people of this state.
It's interesting you say that because I've had the exact opposite experiences.
I drive from Mercer Island to Spokane every weekend, and I commute from Puyallup to Mercer Island every day for work.
Going to work I'll see anywhere from two to five WSP, but usually traffic isn't moving fast enough for them to ticket. (Although, most mornings they have one or two people pulled over in the bend just in I-5, just a couple minutes north of the Tacoma Dome.)
Driving across the state I've only been pulled over once (near Ritzville). I won't say how fast I was going, but it was fast enough that right when I saw the headlights on her patrol car I immediately pulled over and waited for her to give me a ticket. (Which she did, and she knocked it down to something a bit more reasonable, money wise.)
Now when I drive across the state I just throw my cruise control on at ~83 MPH (the extra three because it helps me get ahead of those cars whose speed "drifts" from 75-85 and back again, which is very annoying). Usually I'll drive past two or three officers who just sit there and watch me fly by at thirteen over.
IMHO the worst are the county sheriffs near the Chelan area. Those guys will ticket you for 51 in a 50.
I tend to agree. Granted, my first speeding ticket was coming back from the Gorge (rookie mistake, but at least I was not drunk and/or high!), but the cops are EVERYWHERE in the metro area. Last time I was there, I rented a car in downtown Seattle to go see the tulips, and saw 8 speedtraps, each with a cruiser clocking people with laser and multiple moto chase units, up and down I-5, in the 8 hours I had my rental car. I can go MONTHS in the SF Bay Area without seeing a single speed trap.
Eastern WA is just so much less populated.. maybe they stand out more, but they're not as common IMO. Granted, your speed will be higher when you DO get busted, and there are definite speed trap downs like Ritzville and Colfax, but I never found it to be anywhere near as bad as the metro areas.
And yeah, they can just fire all those assholes. They're absolutely terrible and do nothing to promote road safety -- it's the exact opposite.
Well, 520 used to not have any SPACE for cops. Occasionally they'd hide out at the little cutout for the bridge maintenance people. I'm not sure how this has changed, didn't they widen the bridge or something? Maybe there's more space for cops now.
In many jurisdictions there is a tacit understanding between police and residents that 9mph over the freeway speed limit will not get you pulled over, 10mph+ is fair game.
You probably couldn't use that in court to get out of a ticket, but as a matter of enforcement a massive amount of speeding is routinely tolerated.
Effectively that's how the law is enforced anyway. I've never seen someone pulled over for doing <= 10 over the limit on a highway. On large highways you can typically get away with going <= 15 mph over.
I've gotten a hefty ticket for 7mph over. This was on a rural road with wide shoulders and broad turns. The spot where I was busted is a really long straightaway with absolutely no driveways or other sources of entering/exiting traffic. The road would be perfectly safe if the limit were 65mph rather than 55mph.
You probably won't "see it" until it happens to you. Highway patrol is managed for revenue generation rather than public safety.
If you're ever going through Southern Utah, between Vegas and SLC, don't do it... my last ticket was for 6mph over. Pretty pricey, for what it was at that.
I totally get that piece, but I feel like in some ways it is meant as an attempt to deflect conversation away from what is stated to be a factor:
"The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role."
Emphasis on "have certainly played a role." The moment I hear that, I ask why the hell we aren't focusing the conversation there and keeping it there. Guarantee a lot of the "lack of balls" has to do with worrying about future security in the form of campaign contributions and private-sector jobs.
How about we solve for that problem first and see if they still lack balls when they are no longer worried about their financial future being directly tied to those they are supposed to police.
Who at SEC is elected? How does the prospect of going into a private sector job (usually at a law firm which makes money from banks getting in trouble), dissuade anyone from taking down a big Wall Street player?
Holding bankers accountable would not "hurt the industry." The health of the industry is driven by non-government market factors. Indeed, aggressive enforcement means more private sector job opportunities for regulators. SEC lawyers generally don't go to banks--they go into private practice law firms. Those firms make money when banks get in trouble. The recent financial collapse was actually good for financial litigation departments. Looking at it another way: the amount of demand in antitrust litigation is much lower these days than it was 30 years ago when the DOJ was much more aggressive about antitrust enforcement.
I just don't think the narrative about regulators going easy because they're hoping for a sweet gig at Goldman is consistent with what happens or even a theoretical analysis of peoples' incentives.
Ultimately, it's politics. Bill Clinton implemented massive deregulation in the financial industry. Regulation is seen as an illegitimate intrusion into the market's operation. So long as that is the case, regulators will avoid being aggressive for fear of provoking a political backlash.
>>We are talking about enforcement here. Putting bankers in jail instead of imposing a large fine on the corporation saves the banks money.
Maybe you live in a different reality, but in ours, the massive reputation hit the bank would suffer from having its employees go to jail would be tremendously more costly than meager fines that they can just shrug off.
Sure, but it's a zero sum game. The change in reputation of one bank won't affect the overall demand for banking services. From the point of view of the regulator trying to snag a private sector job, it doesn't matter. The same amount of banking business will continue to be done--if Bank A takes a hit Bank B will have more work and more jobs.
Consider that the OP is about Abacus, a financial product created by Goldman Sachs at the request of a speculator. If more exotic products like that are tainted by evidence of systemic corruption and the possibility of having to spend time in court, then customers may well choose to park their money in boring stock or bond index funds, which give the banks a much smaller cut. So it's not a zero sum game.
Federal agencies are ultimately responsible to Congress and the President. The recent (last 20 years) trend towards deregulation and lax enforcement (IMO) starts at the top but most visibly manifests in the actions or inaction of regulators like the SEC.
The effect of campaign contributions is unmeasurable at this writing. If we want to allow public service by government lawyers to be a farm system for big finance houses, then we can continue to underpay them.
The movie "The Big Short" has a brief scene with reference to this that you reminded me of and I highly recommend the movie. In the scene one of the main characters is discussing with his brother's ex who is an SEC regulator and she says something to the affect of "the regulators are a revolving door of industry insiders and you aren't going to get looked at when applying for the cushy bank job if you're known as the stickler regulator."
In Canada, there's a "saying" with the big Yelcos like BRM or Rogers: if they need a law passed, one of their VPs resigns and joins the CRCT (FCC equivalent). That'd explain how they pass laws like the one that mandated that competing DSL providers couldn't price services lower than Bell or offer uncapped data.
The same is said here but our current FCC chairman actually has some balls and was actively involved the past few years helping fight for net neutrality (though sadly at first being on the side of the ISPs)[0] which was kind of mind blowing.
This explanation is just an attempt at hiding the actual problem: the revolving door between the public and the private sector, specially in the banking industry. Of course you don't want to be the one sending Lloyd Blankfein to prison. No way you are going to get a lofty job at a bank after that.
This is the one case where regulators would have massive popular support, specially in an election year when two very popular candidates (well, three if you believe Hillary's latest statements) are calling for stronger measures against the people responsible for the "Great Recession".
Would it work if we made the revolving door less attractive?
For instance, could we pay the regulators enough for it to become attractive? Over time, maybe being a regulator will become the end goal of new grads.
Combining higher pay with putting various legal limitations on people who move between the two sides to combat the conflict of interest would certainly help.
Judges typically get paid less than many of the lawyers who argue in front of them, but there's still plenty of lawyers who want to take a paycut to be judges, and not much action in the other direction. Why? Because judges have really high status.
I was thinking that if the regulators are paid more, get a little more power (not sure if they already have enough power) and start to bust some bankers, get some publicity, then that might eventually lead to more status.
"Here are some possible theories of the financial-regulatory revolving door:
...
2. Regulators want to get higher-paying jobs at banks, so they try to be diligent, fair, competent and zealous, so that the banks are impressed by them and hire them.
3. Regulators want to get higher-paying jobs at banks, so they are hard on banks in ways that force the banks to hire lots of ex-regulators -- to understand complicated rules, say, or to work as monitors for regulatory settlements.
4. Regulators want to get higher-paying jobs at banks, so they are hard on banks in general, hoping that the banks will hire them to just shut them up."
Written by Matt Levine, who has 3x the experience working as Associate and Vice President at Goldman Sachs than he had working in the public sector.
I'm usually pretty skeptical, but reading an article on "how hard regulators are on banks" from someone who worked at Goldman Sachs in the 2007-2011 period, I had to chuckle.
Arnold Kling used to work for one of the housing agencies as an economist. He's on record repeatedly as saying that the Great Recession might as well have been the design goal of housing policy since George Romney.
Tss. After seeing how weakly regulators push exchanges like CME to prevent legitimate and proven spoofing, it's pretty clear that "backed up by their bosses" goes all the way up the chain.
Side comment: The GS head of technology recently left there to go to an at-best-mediocre options brokerage recently, which I recently left. Not gonna lie, that makes my suspicio-meter go off after seeing the shenanigans they did there.
Side note again: Another thing that pushes my supsicio-meter pretty far is seeing secret service, Harry Reid and a very well known name in HFT walk into an office and talk to each other for an hour.
I don't want to come to any direct conclusions, but "People are shitty" comes close.
Sounds more like the people at the top of the chain having different incentives and thus neutering the people further down who actually wanted to get their job done.
Or more to the point, if you are overseen by congress, which is in the pocket of these big banks, then regulatory action can be dangerous to your career.
"Get big government out of my business!"
"These regulations are killing my business!"
"People are going to go overseas and do the same thing!"
It's not just congressmen too. Even the public can be turned against the regulators with a steady drip of anti-regulation rhetoric from the newsmedia.
100% right. Before people start looking at those guys they should look at themselves. A lot of people in corporations do things they don't agree with or find ethically questionable but since the boss says so they will do it. "The fish stinks from the head". This is not isolated to government.
It's the same story everywhere. As long as there is hierarchy (which we do need in some form in most organizations) then there will be incentive for people to do things they personally disagree with due to the conflict of interest that arises.
It seems like one of the hardest problems to solve in our society because it seems to be so tied to our nature. I can recall doing things in grade school I knew was wrong but felt obligated to do because my peers and those I looked up to do too. While that isn't the same exact situation, the dynamics at play are the same. What can be done to combat this innate in-group/out-group behavior more effectively in our organizations and society?
Good or bad is not that clearly to distinguish. Going with the group is certainly the easiest path but on average it's probably also the right thing to do.
Or, alternatively, in this case there was no good case as some SEC lawyers suggested. It seems strange to me to suggest that assembling a security of mortgage bonds so that one party could short it while another could go long it is a crime. That is what Goldman is supposed to do !
There was no good case because, as the article explains in quite a lot of detail, the team was instructed not to interview anyone in any position of responsibility at Goldman/Paulson. It also explains, in quite a lot of detail again, how Goldman was not simply "assembling a security of mortgage bonds." There was quite likely intentional fraud involved.
I read it differently. My take away was that the SEC didn't have the _evidence_ to go after anyone but Fabricci.
However, I really don't understand how Goldman would have profited from aiding Paulson & co. Goldman set up a security that let people bet for or against the housing market. It's similar to Vegas letting people bet on a sports match. Why would Vegas fix the game that other people were betting on? It's not like Goldman made more money because Abacus paid out to Paulson vs. the Germans.
> My take away was that the SEC didn't have the _evidence_ to go after anyone but Fabricci.
"Nor had they questioned top bankers in Goldman’s mortgage businesses or any of the bank’s senior executives. Even more surprising to Kidney, the agency had not taken testimony from John Paulson, the key figure at his eponymous hedge fund."
An investigator that doesn't ask questions will have a hard time finding evidence.
They get very large fees for "securitizing the deal", or being the ones who turns a bunch of loans into something that can be traded. In the case of very complicated deals, it can be several percent for a transaction that is low-risk for the bank since they've already identified both sides of the trade.
They don't have the upside. They already have the power to do almost anything to a bank. The top ranks of most big banks already spend most of their time worrying about the next inspection.
As far as regulators go, there is not much more fear and respect and obedience they can get.
So why make an example of anyone when day-to-day regulators are the big I ams
A sort of reverse Regulatory capture has been achieved. The regulators are calling the shots, but don't see the need to dig deeper.
The best analogy I can give is if Lord Ventinari from disc world were running 30's Chicago - Al Capone has been tamed, does not rock the boat and only kills his "own kind". Why should cleaning up the city and arresting Capone be a priority - he is under control.
I like discworld novels but I am not sure I want to live innsuchba compromised society
Matt Levine's theories nearly all suggest we should end the 'revolving door' because it leads to conflicts of interests - either by making regulation harsher or less harsh, rather than impartial.
If regulators really are harsh so banks hire them "to get them of their backs", presumably banks have an expectation that this works, causing in the long run, softer regulation.
The alternative theory that regulators are incentivised to be diligent and fair so banks will hire them on that basis is... not compatible with most people's understanding of the financial sector's culture.
Then you end up with career bureaucrats who have no idea what is going on regulating banks. Similar think led to crushing regulation in many areas of American life in the 1960's and 1970's. Deregulation of those industries led to innovations like UPS and FedEx that weren't legal before.
> Basically, regulators don't have the balls to go after the big guys.
Wouldn't you? The regulators receive direct or indirect instructions. They can see what happens when they choose not to listen. So why bother playing hero? Real life is not hollywood. You can always make the opposite argument no matter how flawed might be e.g. "hey! this guy is killing corporate America whilst the entire world is the midst of a crisis! It's crazy right?", you know how many bellow 50k/year households will buy that argument? It's crazy ;-)
This is a government policy, whether is good or bad depends on which side of the fence you stand. It's bad for the majority and for the rule of law, but who cares.
Panama papers is not a "leak" it was a hack by the NSA and only released a bunch of info on Panama based shell companies that are largely BRIC nations, none the US - and that it is a PSYOP to get a bit of anger against specifically others to protect US financial hegemony...
The only country to prosecute bankers/Wall Street - the PM resigned after he got caught doing the same thing.
It's revenge and a pre-emotive attack - but one that kind of lost control.
Watch the Panama papers doc to see how In The 2013 doc PBS' "the warning" the DOJ literally stonewalls against all questions regarding going after Wall Street.
The whole system is absolutely a corrupt greed ponzu scheme.
What happened those three vids, please, and give me your opinion.
Still, if Bernie did manage to get elected, that would be a clear message to the SEC that the public supports a more vigorous enforcement policy.
Even if all he does is make Hillary very nervous before losing the primary to her, I would hope that would still get the SEC's attention as well as hers.
We thought the same about Obama and then he turned 180 on us.
Bernie has a history favoring weapon makers from his own state as well as going after people using his logo, so we can be pretty sure that given the opportunity it will not all be as wonderful as he promises.
And who knows what they have collected about him in the meantime. There must have been a reason why Obama turned 180 so suddenly, as soon as he was in office.
The oft-cited explanations—campaign contributions and the allure of private-sector jobs to low-paid government lawyers—have certainly played a role. But to Kidney, the driving force was something subtler.
The only "subtler" thing is that corrupt actors of this sort need to manufacture vague and appealing alternatives to plain-old-corruption in order to look themselves in the mirror.
> Basically, regulators don't have the balls to go after the big guys.
The other component to this, is that regulatory compliance becomes a significant barrier to entry for new firms. Incumbents end up gaining even more organizational power as market power increases, and competition on price and service quality decreases.
Goldman Sachs has even mentioned this as an advantage on earnings calls. The regulatory burden on the financial industry is insurmountable for a new entrant.
What if it's simply bribes and he won't say it because they will eat him alive? "Tarnished concept of government blah blah" sounds great to those who love the concept while not exposing this guy to libel lawsuits from the people put by this concept into positions to take the bribes.
It's a political process in which officials are intimidated by their bosses from pursuing justice. Regulators don't have guns big enough for the big guys; they can't play the game of thrones.
