Our PECORA MOMENT Has Finally Arrived With Goldman Sachs

[Segami]

by Simon Johnson

We have waited long and patiently for our Ferdinand Pecora moment – a modern equivalent of the episode when a tough prosecutor from New York seized the imagination of the country in the early 1930s and, over a series of congressional hearings: laid bare the wrong-doings of Wall Street in simple and vivid terms that everyone could understand, and created the groundswell of public support necessary for comprehensive reregulation. On Friday, that moment finally arrived.


There is fraud at the heart of Wall Street, according to the Securities and Exchange Commission. Pecora took on National City Bank and J.P. Morgan (the younger); these were the supposedly untouchable titans of their day. The SEC is taking on Goldman Sachs; no firm is more powerful.


Pecora exposed the ways in which leading banks mistreated their customers – typically, retail investors. The SEC alleges, with credible detail, that Goldman essentially set up some trusting clients and deliberately misled them – to the tune of effectively transferring $1 billion from them to a particular unscrupulous investor.


Pecora had the drama of the congressional hearing room and used his skills as an interrogator to batter the bastions of Wall Street, day-after-day, with gruesome and convincing detail. We don’t know where and when, but the SEC action points in one direction only: Lloyd Blankfein (CEO of Goldman) in the witness box, while John Paulson (unindicted co-conspirator) waits in the on-deck circle.


Either Blankfein knew what was going on – and is therefore liable before the law – or he was clueless and therefore incompetent. Either way, the much vaunted risk management and control systems of Goldman, i.e., what is supposed to prevent this kind of thing from happening, are exposed to be what we have long here claimed: bunk (as I argued with Gerry Corrigan, former head of the NY Fed and long-time Goldman executive, before the Senate Banking Committee when we both testified on the Volcker Rules in February).


“Too big and complex to manage” is actually the best defense for Goldman’s executives and they should offer to break up the firm into smaller and more transparent pieces as a way to settle the firm’s liability with the SEC. The current management of Goldman – along with the team that ran the firm under Hank Paulson – have destroyed the value of an illustrious franchise. Goldman used to stand for something that customers felt they could trust; now it is just a sophisticated way of ripping them off.


Excerpts from Sen. Ted Kaufman's devastating speech in the Senate:

<http://baselinescenario.com/2010/03/15/senator-kaufman-fraud-still-at-the-heart-of-wall-street/>



- “ fraud and potential criminal conduct were at the heart of the financial crisis ”



- “ This is not about retribution. This is about addressing the continuum of behavior that took place – some of it fraudulent and illegal – and in the process addressing what Wall Street and the legal and regulatory system underlying its behavior have become.”



- “ When crimes happened in the past (as in the case of Enron, when aided and abetted by, among others, Merrill Lynch, and not prevented by the supposed gatekeepers at Arthur Andersen), there were criminal convictions.”



- “ If we uncover bad behavior that was nonetheless lawful, or that we cannot prove to be unlawful (as may be exemplified by the recent reports of actions by Goldman Sachs with respect to the debt of Greece), then we should review our legal rules in the US and perhaps change them so that certain misleading behavior cannot go unpunished again.”



- “ Following these transactions, Goldman Sachs and other investment banks underwrote billions of Euros in bonds for Greece. The questions being raised include whether some of these bond offering documents disclosed the true nature of these swaps to investors, and, if not, whether the failure to do so was material.”


“These bonds were issued under Greek law, and there is nothing necessarily illegal about not disclosing this information to bond investors in Europe. At least some of these bonds, however, were likely sold to American investors, so they may therefore still be subject to applicable U.S. securities law. While “qualified institutional buyers” (QIBs) in the U.S. are able to purchase bonds (like the ones issued by Greece) and other securities not registered with the SEC under Securities Act of 1933, the sale of these bonds would still be governed by other requirements of U.S. law. Specifically, they presumably would be subject to the prohibition against the sale of securities to U.S. investors while deliberately withholding material adverse information.”


more


<http://baselinescenario.com/2010/04/17/pecora-moment/>

[Lena inRI]

1. Ahhh. . .yes. . .and our Pecoras should be. . .

. . .both Andrew Cuomo and Anthony Weiner, good New York "interrogators" again like Ferdinando Pecora who was a Sicilian immigrant New York attorney when he prosecuted the big crooks causing the 1930's Depression.

Unlike the Hollywood hype of Italians as mobsters, some of the BEST lawyers have been and are ITALIAN-AMERICAN.

Go get 'em Mr. Cuomo. . .and your U.S.Congressional connection for another Pecora Committee is the Honorable "Antonio" Anthony Weiner. . .though he's Jewish he sure has the Italian drama in his interrogation delivery.

Hey. . .while you're at it, is your father available? Governor Mario Cuomo, who should have been one of our U.S. Presidents, could easily grill these current banksters/security fraudsters.

What a team you all would make. . .please let this be!









THE A TEAM !

:patriot: :applause: :patriot: :applause: :patriot:

[Segami]

5. It will take a leap of REAL Faith & integral substance for someone to come forward

and lay criminal charges against the family of master usurpers. I'm not holding my breath on this but one never truly knows whats lurking around the next crooked bend.

[rucky]

2. And ex-girlfriend of mine is on the GS legal team.

so I get some bonus schadenfreude when this goes down.

:thumbsup:

[Segami]

3. Don't be greedy. Keep us posted and spread a few morsels of the ' schadenfreude ' around to all! LOL

:toast:

[WillyT]

4. Big K & R !!! - More On Pecora Here:

<snip>

Originally a Progressive Republican, Ferdinand Pecora was appointed Chief Counsel to the U.S. Senate's Committee on Banking and Currency in the last months of the Herbert Hoover presidency by its outgoing Republican chairman, Peter Norbeck, and then continued under Democratic chairman Duncan Fletcher, following the 1932 election that swept Franklin D. Roosevelt into the U.S. presidency and gave the Democratic Party control of the Senate.

The Senate committee hearings that Pecora led probed the causes of the Wall Street Crash of 1929 that launched a major reform of the American financial system. Pecora, aided by John T. Flynn, an Irish-American journalist, and Max Lowenthal, a Jewish lawyer, personally undertook many of the interrogations during the hearings, including such high-profile Wall Street personalities as Richard Whitney, president of the New York Stock Exchange, George Whitney (a partner in J.P. Morgan & Co.) and investment bankers Thomas W. Lamont, Otto H. Kahn, Albert H. Wiggin of Chase National Bank, and Charles E. Mitchell of National City Bank (now Citibank). Because of Pecora's high-profile work, the hearings soon acquired the popular name the Pecora Commission, and Time magazine featured Pecora on the cover of its June 12, 1933 issue.



Pecora's investigation unearthed evidence of irregular practices in the financial markets that benefited the rich at the expense of ordinary investors, including exposure of Morgan’s “preferred list” by which the bank’s influential friends (including Calvin Coolidge, the former president, and Owen J. Roberts, a justice of Supreme Court of the United States) participated in stock offerings at steeply discounted rates. He also revealed that National City sold off bad loans to Latin American countries by packing them into securities and selling them to unsuspecting investors, that Wiggin had shorted Chase shares during the crash, profiting from falling prices, and that Mitchell and top officers at National City had helped themselves to $2.4 million in interest-free loans from the bank’s coffers.

Spurred by these revelations, the United States Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934. With the United States in the grips of the Great Depression, Pecora's investigations highlighted the contrast between the lives of millions of Americans in abject poverty and the high-rolling lives of such financiers as J.P. Morgan, Jr.; under Pecora's insistent questioning, Morgan and many of his partners admitted that they had paid no income tax in 1931 and 1932; they explained their failure to pay taxes by reference to their losses in the stock market's decline, but this explanation won them no sympathy.

After Pecora closed his investigations, on July 2, 1934, President Roosevelt appointed Ferdinand Pecora a Commissioner of the newly-formed U.S. Securities and Exchange Commission (SEC). In 1939 Pecora wrote a book about the Senate investigations titled Wall Street Under Oath: The Story of Our Modern Money Changers. On January 21, 1935, Pecora resigned from the SEC and became a judge of the New York State Supreme Court, a position he held until 1950, when he ran unsuccessfully against Vincent R. Impellitteri for Mayor of New York City. Returning to the practice of law, Pecora represented such major clients as Warner Bros. Pictures Distributing Corporation, et al. as respondents before the United States Supreme Court in the 1954 case, Theatre Enterprises v. Paramount, 346 U.S. 537.

Ferdinand Pecora died in 1971.

<snip>

Link: http://en.wikipedia.org/wiki/Ferdinand_Pecora

:patriot:

:kick: