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If We Don't Punish Past Financial Crimes, Future Ones Are Inevitable

by David Callahan

Did you hear that one of the biggest banks in America just agreed to one of the biggest penalties ever for committing one of the biggest financial frauds in U.S. history? It happened just the other day and, no, chances are you didn't hear because the story was buried in the business section.

The bank is Bank of America. The penalty is $6.3 billion. And the crime is that BofA knowingly sold loads of bum mortgage securities to Freddie Mac and Fannie Mae -- securities packed with subprime mortgages taken out by lenders that couldn't really afford the loans and that later lost value when the housing market imploded. Bank of America and its former CEO, Kenneth Lewis, also settled a suit with New York State that it misled its shareholders when it acquired Merrill Lynch n 2008, leaving out the inconvenient truth that Merrill was saddled with huge liabilities.

These are brazen crimes. Remember, securities law is relatively simple when it comes to defining fraud: If I'm selling you stock shares or a bond, I need to tell you the truth about the underlying value of that offering. If I tell an investor that my company has a thousand clients, and that's why he should give me cash for an equity stake, but I know full well that my company only has a hundred clients, I have just committed a federal offense that can result in prison time. Likewise, if I have a bundle of mortgages that I know include a bunch of really shaky loans -- where due diligence was never done, and poor credit prospects were given loans -- than I have an obligation to tell you that, so my bundle can be priced fairly. I need to say: hey, these loans are really a mixed bag. If I don't say that, and I know the truth to be otherwise, I can be sent to prison. And for good reason: I've just cheated you out of a bunch of money. I've sold you something for top dollar that should have been heavily discounted, or not sold at all, based on information that I withheld from you.

Clear enough?

Okay, so now consider how Bank of America (and, even more so, its affiliated entity Countrywide) handled themselves in the housing boom. They made loans to nearly anyone with pulse during the go-go years, due diligence be damned, and passed that junk along to buyers of mortgage-backed securities. Executives knew that these securities were filled with dubious loans, but they withheld that information in peddling this stuff to investors. And it's not like the evidence of this deception is incredibly arcane and hard to fathom: In many cases, smoking guns have been found: like clear-cut emails of bank and mortgage people on the front lines of lending raising red flags about the quality of underwriting, warning the execs upstairs that bad loans were being made. And investigators and plaintiff lawyers have taken depositions revealing what executives at places like BofA knew and when they knew it.



Sunday's Doonesbury- This Is MyFacts!

Toon: Fun with Corporate Conscience Clauses


The excuse for killing Trayvon Martin has become the standard of democracy

Ana Marie Cox

The Florida House recently passed legislation that would seal the records of anyone who successfully sustains a stand-your-ground defense after a shooting. The proposal would allow a gun-wielding vigilante to escape not just any and all legal complications but also awkward interactions with curious neighbors. So Floridians think a stand-your-ground shooting might be something one would want to hide. Which might finally answer the question: does Florida have any shame?

Some of the state legislators were at least aware of the attention stand-your-ground laws have drawn. As Democratic Rep. Mia Jones explained to her colleagues: "The world is looking at Florida and … we don't look good right now." This is not, perhaps, a persuasive argument in a state that leads the nation in both incidents of human cannibalism and "zombie foreclosures". The so-called “warning-shot” bill passed 93-24.

Shamelessness aside, the renewed passion of Florida politicians for the expansion and protection of this type of loophole – the very kind that let George Zimmerman run free, even if he got off on self-defense – at least raises a different question: Why are those local legislatures passing such embarrassing laws in the first place?

As the nation's statehouses have splintered off from the on-year electorate, states such as Florida (really, especially Florida) serve up the best examples for how our "laboratories of democracy" have become playgrounds for mad scientists – particularly, the right-wing American Legislative Exchange Council. Almost all of Florida's legislative antics (including some off-the-clock holiday jaunts) can be connected to ALEC. ALEC designs the legislation, compliant legislators cut-and-paste it into law – literally, in the instance of Florida Rep. Rachel Burgin, who forgot to remove ALEC's mission statement from the text of an anti-tax bill she submitted in 2012.



Sandusky's wife goes on offensive against accusers

POSTED: Saturday, March 29, 2014, 11:44 AM
STATE COLLEGE, Pa. (AP) - It was long after former Penn State assistant football coach Jerry Sandusky had been arrested, tried and convicted of sexually abusing 10 boys before his wife said she realized just how much trouble he was in.

In an interview this week at her home in State College, Dottie Sandusky said she still had hope even after his 45-count guilty verdict. But when the judge handed down a 30- to 60-year prison term, she said she fully comprehended his predicament.

"I think it was at the sentencing," she said during a 90-minute interview at her dining room table. "I mean, I really and truly believe, I believe in, when you tell the truth and who you are, that things work out."

"I trust my husband," she said. "That's what the world is about today. People don't trust anybody. And all these young kids, all they think about is sex."


Chemistry Professor Accidentally Taught The Wrong Course For Months

A chemistry professor at Houston-area Lonestar College allegedly taught students the wrong material for the majority of a semester, according to a local news station's investigative report.

Lonestar student Lauren Firmin told KHOU that she enrolled in and believed she was taking an "Intro to Chemistry" course in Fall 2013. However, the self-identified straight-A student realized something was wrong when she failed every test in the class, she said.

"I was getting 40's on every test. I studied as hard as I could, did everything in my power to try," Firmin told KHOU.

According to Firmin, Lonestar chemistry teacher Thao Shirley Nguyen admitted to the entire class that she had accidentally been teaching a more advanced general chemistry curriculum. "In short, Firmin says Nguyen told the class that she had NOT been teaching them the introductory course in chemistry that they originally signed up for, but an advanced course in chemistry," KHOU reports.

Read more: http://www.businessinsider.com/chemistry-professor-accidentally-taught-wrong-course-2014-3

5.1 earthquake: Prototype early-warning system works again

By Rong-Gong Lin II
March 29, 2014, 12:02 p.m.
A prototype earthquake early-warning system worked again Friday night, giving seismologists in Pasadena about a four-second heads-up before shaking was felt from the magnitude 5.1 quake that struck near La Habra.

The system is being tested by a team of scientists on a U.S. Geological Survey project to create a statewide network.
USGS seismologist Lucy Jones has said the system works because while earthquakes travel at the speed of sound, sensors that initially detect the shaking near the epicenter of a quake can send a message faster -- at the speed of light -- to warn residents farther away that the quake is coming.

The system being tested by scientists at the USGS and Caltech previously gave officials at the Pasadena center about a two-second warning ahead of a magnitude 4.4 earthquake that struck near Westwood in March.

Once developed, the system could give downtown Los Angeles 40 to 50 seconds of warning that the “Big One” was headed from the San Andreas fault, giving time for elevators to stop at the next floor and open up, firefighters to open up garage doors, high-speed trains to slow down to avoid derailment and surgeons to take the scalpel out of a patient.


Vatican punishes Wisconsin priest for saying Mass with female priest

A 76-year-old Wisconsin priest and peace activist has been ordered by the Vatican to spend the rest of his life in prayer and penance for concelebrating the Catholic Mass with a female priest in 2011.

Father Jerry Zawada had been previously sanctioned by his religious order, the Franciscan Friars Assumption of the Blessed Virgin Mary Province in Franklin, for the November 2011 incident, pending Vatican review.

The Vatican order, issued by the Congregation for the Doctrine of the Faith this month, strips Zawada of his right to function publicly as a priest, and orders him to spend his life in prayer and penance at the order's friary in Burlington.

"I don't mind the prayer part," Zawada told the National Catholic Reporter this week. "But ... when they say that I need to be spending time in penance, well, I'm not going to do penance for my convictions and the convictions of so many others, too."

Read more from Journal Sentinel: http://www.jsonline.com/news/religion/vatican-punishes-wisconsin-priest-for-saying-mass-with-female-priest-b99235591z1-252965231.html

Detroit: bankrupt city readies for divisive $450m Red Wings arena

Billionaire Mike Illitch to build new hockey stadium
• Critics question use of $284.5m of public money

Police have started handing out parking tickets outside The Comet Bar, a cozy if incongruous spot smack in the middle of the blighted deadzone between downtown and midtown Detroit. Not so long ago it was hard enough to get the cops to come for a shooting, says the Comet’s pink-haired barmaid, who goes by the name of Nine.

The ticketing appears to be part of a drive to prepare the area for one of the biggest urban renewal projects Detroit has ever seen. And one that is dividing the community. Soon the contractors will move in to start work on a sports and entertainment district at the centre of which will be a $450m arena for the Detroit Red Wings ice hockey team – funded in large part by this bankrupt city.

The Comet faces an uncertain future, but for now it sits in an area mainly visited by locals and the occasional adventurous tourist taking “ruin porn” photos of Detroit’s burnt out buildings. From the back of the bar, across empty rubble strewn lots, you can see two abandoned tower blocks. On the top floor of one someone has graffitied “ZOMBIELAND” in giant black letters.

There are few people on the street – most appear homeless. The city recently pulled up the remaining benches in the area, in an attempt to discourage people from sleeping here. Now they sleep on the ground.



Save capitalism from the capitalists by taxing wealth

Rising levels of inequality need to be addressed on a global scale, writes Thomas Piketty

The distribution of income and wealth is one of the most controversial issues of the day. History tells us that there are powerful economic forces pushing in every direction – towards greater equality, and away from it. Which prevail will depend on the policies we choose.

America is a case in point. Here is a country that was conceived as the antithesis of the patrimonial societies of old Europe. Alexis de Tocqueville, the 19th century historian, saw America as the place where land was so plentiful that everyone could afford property and a democracy of equal citizens could flourish. Until the first world war, the concentration of wealth in the hands of the rich was far less extreme in the US than Europe. In the 20th century, however, the situation was reversed.

Between 1914 and 1945 European wealth inequalities were whipped out by war, inflation, nationalisation and taxation. After that, European countries set up institutions which – for all their faults – are structurally more egalitarian and inclusive than those of the US.

Ironically, many of these institutions drew inspiration from America. From the 1930s to the early 1980s, for example, Britain maintained a balanced distribution of income by hitting what were deemed to be indecently high incomes with very high tax rates. But confiscatory income tax was in fact an American invention – pioneered in the interwar years at a time when that country was determined to avoid the disfiguring inequalities of class-ridden Europe. The American experiment with high tax did not hurt growth, which was higher at the time than it has been since 1980s. It is an idea that deserves to be revived, especially in the country that first thought of it.



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