STOCK MARKET WATCH -- Tuesday, 17 April 2012

[Demeter]

12. Precious Metals Déjà Vu For Morgan Stanley?

http://etfdailynews.com/2012/04/10/precious-metals-deja-vu-for-morgan-stanley/

In the middle of 2007, Morgan Stanley paid out $4.4 million to settle a class-action lawsuit initiated against it by its own clients. Why were Morgan Stanley’s clients suing it? They alleged that Morgan Stanley took money from them for buying precious metals on their behalf, took money from them for “storage” of these precious metals accounts, but only pretended to purchase the bullion. Morgan Stanley (reading from the standard Wall Street script) denied the allegations, but settled the case “to avoid the cost and distraction of continued litigation.” Before moving on to Morgan’s Stanley’s latest exploits in the precious metals market, this deserves a few comments.

First of all, if Morgan Stanley did only pretend to purchase bullion on behalf of its clients, while charging them for the “bullion” and storage fees on that imaginary bullion, we have a word for such actions: fraud. So if Morgan Stanley was guilty of swindling its own clients in this manner then why wasn’t it required to acknowledge its guilt? The answer is simple. Morgan Stanley is based in The Land of Fraud (aka the United States of America). In The Land of Fraud swindling people (whether total strangers or long-term clients) is a way of life – just ask a former Goldman Sachs employee. Thus the Wall Street banksters can commit fraud without ever having to admit fraud. Indeed, Bloomberg explicitly confirmed that the SEC’s commit-but-never-admit policy has been standard practice for more than four decades, with such settlements then rubber-stamped by the U.S. judiciary. Bloomberg noted this institutionalized corruption when it criticized a (lone) U.S. judge who has had the temerity to challenge the commit-but-never-admit doctrine:

…As part of the agreement, New York-based Citigroup neither admitted nor denied the allegations, a clause which has been standard in such settlements for at least four decades.

But it gets better for the Wall Street fraud factories. Not only can they commit acts of fraud with impunity while never having to admit to them, but the “fine” they receive after being caught in the act is rarely more than 10% of their proceeds of crime – and often much, much less. A classic example was the travesty of American Justice when Wachovia Bank was caught laundering nearly $400 billion dollars of drug cartel profits. It paid less than $200 million in fines and penalties. This was less than 2% of the bank’s 2009 profits, and less than 0.05% of the drug-money it laundered. Given the colossal size of the crime, given the hundreds (if not thousands) of people who would have been murdered to produce those profits, given the tens of thousands (if not hundreds of thousands) of people who would have become addicted to the drugs which produced those profits; one would have thought that Wachovia would have faced the maximum possible wrath of the law. After all, this crime occurred in the country which has foisted its hypocritical “War on Drugs” upon the world. Yet what we saw (and what we always see in The Land of Fraud) was something far less than “a slap on the wrist.”...The implication here is clear with a commit-but-never-admit doctrine which goes back at least 40 years: in the United States the word “fraud” is considered redundant. The presumption of the so-called regulators can only be that all of Wall Street’s transactions are fraudulent, and thus classifying any individual Wall Street business deal as a “fraudulent transaction” would be like referring to “wet water” or “cold ice”.

This is confirmed by the quantum of fines for this litany of fraud, which is never called fraud. We have another term for when someone is forced to surrender a tiny portion of their profits from a transaction to an “associate”: a commission. These farcical legal proceedings are nothing for the Wall Street banksters but a (minor) cost of doing business. In other words, it is yet another absurd fraud to refer to the pennies levied against Wall Street as “fines”. A fine (by definition) penalizes someone for doing something wrong. Obviously if you “fine” someone only 1% or 2% of their ill-gotten gains you are not penalizing them at all – you are encouraging them to rape-and-pillage as a way of life....