Nearly 80 years ago, on Capitol Hill, Ferdinand Pecora forced J. P. Morgan Jr. and other “banksters” to reveal the corruption that had fueled the Great Depression—bringing shame on the financial industry and resulting in new laws to curb abuses. Today, with Republicans having threatened to block reform and Goldman Sachs fighting fraud charges, the author looks back at the Pecora Commission hearings, which riveted America, and asks why there is no comparable investigation now.
J.P. Morgan Jr. was terrified. He was the most famous and arguably the most powerful banker in the United States, and also among the most secretive. But in May 1933, in the aftermath of the greatest financial crisis in the history of the United States, he was being called to testify before the Senate Committee on Banking and Currency to explain how the catastrophe had occurred. Morgan dreaded the prospect, in part because it was a painful reminder of his famous father’s unhappy experience testifying before the 1912 Pujo Committee, which had investigated the “money trust” (and was partly responsible for the creation of the Federal Reserve Board). The elder Morgan, mercilessly interrogated, had died shortly after the hearings. Many of his associates, not least his son, had blamed his death on his public humiliation.
Now it was the younger Morgan’s turn. Known to friends and associates as Jack, he was 65 years old and semi-retired. He feared that he might not be able to answer the committee’s questions, and he was even more afraid that he might lose his temper. His partners rehearsed Jack Morgan for days, peppering him with hostile and insulting questions. In the meantime, the Morgan bank’s powerful lawyer, John W. Davis, tried to keep the committee at bay. A onetime Democratic presidential nominee, Davis had helped pass a New York law barring any investigation of private bankers, and he argued in court that the Morgan bank was therefore entitled to privacy. But the U.S. Senate passed a resolution requiring the bank to open its books. The bank reluctantly complied and agreed to let Morgan testify.
He was to be questioned by Ferdinand Pecora, a former prosecutor who was now the special counsel to the committee. Pecora was known to be tough and unrelenting, and the prospect of his cross-examination attracted enormous publicity…
I wrote extensively in 2009 as to How Wall Street Bought Washington. Well, it would appear that the purchase and sales agreement between these two entities remains in place.
A recent press release highlights developments on Senator Chris Dodd’s proposed Financial Regulatory Reform along with a recent assessment by Washington insider and Illinois Senator Richard Durbin.
DEMOCRATIC FINANCIAL REFORM BILL EXITED SENATE BANKING COMMITTEE WITHOUT RESTORING KEY INVESTOR LEGAL RIGHT TO HOLD KNOWING AIDERS AND ABETTORS OF FRAUD ACCOUNTABLE
Senator Durbin Says: “Frankly, the banks own Congress,” as Investigation of Lehman Brothers Found Its’ Accountants and Lawyers Helped “Cook the Books”
March 24, 2010: The Senate Banking Committee financial reform bill was voted out of committee on Monday afternoon. On the previous Friday Senator Jeff Merkley (D-OR) offered an amendment to include the restoration of the legal rights of investors to hold accountable those who knowingly aid and abet fraud, a critical component of financial reform. The first draft of Senator Dodd’s bill, which was on the Committee Web site for months, contained this provision.
Chairman Dodd apparently dropped that important investor protection measure in a failed attempt to gain Republican and Wall Street support and the Democratic bill exited his Committee without it. As a result, Senator Merkley’s amendment was never even considered. Therefore as it now stands the legislation heading to the floor of the Senate does not restore the lost right of investors to hold knowing aiders and abettors accountable to the investors they help rob.
As Senator Dick Durbin (D-IL) said (prior to Chairman Dodd’s mark-up): “Hard to believe in a time when we are facing a banking crisis, that many of the banks created, that the banks are still the most powerful lobby on Capitol Hill. They frankly own the place.“ Senator Durbin said this in a radio interview on Monday, March 15 (WJJG-AM: “Mornings with Ray Hanania,” a big Chicago area political call in show).
Separately, also on March 15, in a Senate speech, Senator Ted Kaufman (D-Del) said: “Lehman Brothers was cooking the books. Fraud and potential criminal conduct were at the heart of the financial crisis.”
Senator Kaufman was referring to the 2,200 page report issued last week on the investigation into Lehman Brother’s spectacular failure. It documents in-detail how Lehman’s banking counterparties, lawyers and accountants knowingly structured faux
Nomi Prins is a former investment banker turned journalist. She worked at Goldman Sachs and Bear Stearns. She is the author of several books; her latest, just out, is called It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street. She spoke on the themes of the book at the Strand Bookstore in New York on September 29th.
If you or anyone you know still believes the government (or the media) tell us only the truth, please pass them this direct admission that lying is a primary strategic device for so-called “authority figures”:
Translation: when our elected representatives and their appointed officials believe we need to be manipulated, they rationalize their lies based on whether they think we need them at the time.
I am not naive. I firmly believe we have a problem with ignorance and sheeple in our country. However, the only way to fix the problem is to distribute more accurate information — not the opposite. Further, for those of us who work hard to stay educated, we expect to be treated like adults!
In this specific case, the Treasury Department’s lies (via Hank Paulson) encouraged people to hold their investments. Therefore, if you listened to Paulson et al, you literally lost your hard earned money and life savings. Last time I checked, citizens should not expect to get fiscally hosed by their Treasury Secretary.
To be fair, this is not only a Wall Street and Washington problem. Seemingly, most public discourse these days centers around complete lies, myths, and other rhetorical strategies aiming to put insular interests ahead of what’s best for the nation. It’s time to demand at least our public stewards accurately explain the true state of affairs so we can make informed decisions.
Lawmakers possess many perks. However, legal insider trading may be the biggest fringe benefit of all.
A study* released by Professor Alan Ziobrowski at Georgia State University concluded legislators in Congress make “significant abnormal returns.” Moreover, active traders outperform corporate executives. “We have every reason to believe they are trading on information that the rest of us don’t have,” reports Ziobrowski.
How the hell is this bullshit going on? Craig Holman at consumer watchdog organization Public Citizen notes, “The Securities and Exchange Act does not apply to members of Congress, congressional staff, or even lobbyists.” Outraged?
If you are a voting citizen, your public representatives can legally trade investment vehicles based on information received at work. And much information is gleaned long before trickling down to the good ‘ole People. Thus, as you already deduced, a major conflict of interest exists when your political representative must choose between your needs and those of his/her portfolio.
This is another example of the cosmic irony in which Wall Street is overseen by Washington yet no one is overseeing DC. During my interview with Congressman Alan Grayson he explained the importance of auditing the Federal Reserve. While we’re making a list and checking it twice, let’s get lawmaker insider trading into the “Must Do Now” column.
* The study used hundreds of personal financial disclosures and more than 6000 stock transactions by members of Congress going back up to 15 years.
Insider trading is illegal, but the definition of insider trading is not inclusive enough. Government employees, buying and selling on non-public information, clearly violates the spirit of insider trading laws, but till now has been overlooked.
With the federal government increasingly involved in the financial affairs of private companies, a pair of lawmakers has proposed prohibiting members of Congress and other federal employees from trading stocks
According to the experts, things are looking up. Central bankers have expressed "growing confidence…that the worst of the financial crisis [is] over and that a global economic recovery [is] beginning to take shape." A well known strategist asserts that the "recession is ending ‘right now.’" President Obama has said "the economy is ‘pointed in the right direction.’"
Small-business owners aren’t convinced the recession is ending and their outlooks darkened in July, according to a monthly survey conducted by the National Federation of Independent Business.
NFIB’s index of small-business indicators fell 1.3 points last month to 86.5, the second consecutive monthly decline. The biggest reason was a drop in the number of small-business owners who expect the economy to improve in the next six months.
“The recession is wearing Main Street folks down,” says Bill Dunkelberg, NFIB chief economist. “And unfortunately, lawmakers in Washington are doing more to scare small-business owners than to reassure them of an economic recovery.”
Small-business owners are worried about higher taxes and proposed mandates to provide health insurance, Dunkelberg says. Taxes were cited as the No. 1 business problem by 22 percent of the small-business owners surveyed.
A bigger problem, cited by 32 percent, was poor sales.
Hmmm, I wonder which group -- those who are supposedly in the know or those who are struggling to get by -- is living in the economic no-spin zone?
Quote: "Power alters the basic neurological processes in the brain and inhibits those parts of the brain that would allow a person to show restraint. It allows them to systematically ignore the consequences of their actions." Adam Galinsky, Kellogg School of Management.
It is too bad Eliot could not have exercised better judgement, knowing that he would be targeted by the powers on Wall Street and Washington when he took them on. See the quote at the top of this blog for the most likely reason.
That he was exposed in his scandal by an intense Federal investigation speaks to the depth of the corruption of Washington under Bush, and even now, by the financial powers.
He is right of course, and everything that the Obama Administration is doing on the economic front is a sham.
There is a ‘new regulatory spirit’ and the Democrats under the skillful hand of Larry Summers and Barney Frank seek to channel it into irrelevancy.
July 14 (Bloomberg) — Eliot Spitzer, the former New York governor and attorney general, said U.S. banks made a “bloody fortune” while receiving taxpayer money without a proven benefit to the wider economy.
Politicians understand the “populist rage” with excesses in the financial industry and in this case the “public is right,” said Spitzer in a Bloomberg Television interview today. “We have saved financial services, we have not created a single job. We are still bleeding jobs.”
As New York attorney general, Spitzer was known as “the sheriff of Wall Street.” He changed business practices and collected billions of dollars in settlements from financial corporations such as Merrill Lynch & Co., American International Group Inc. and Marsh & McLennan Cos. He later became governor, resigning in March 2008 after he was identified as a client of the Emperors Club VIP, a high-priced prostitution ring.
Spitzer said new rules proposed by President Barack Obama’s administration are irrelevant because regulators failed to enforce existing regulations.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
“You don’t need new regs to do it, you just need the will to do
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
The latest Headline PCE price index year-over-year (YoY) rate of 1.43%, virtually unchanged from the previous month's 1.45%. The Core PCE index of 1.48% is likewise virtually unchanged from the previous month's 1.46% YoY.
As I've routinely observed, the general disinflationary trend in core PCE (the blue line in the charts below) must be perplexing to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. Since April of last year Core PCE had hovered in a narrow YoY range of 1.23% to 1.35%. The five most recent months have lifted the range slightly to 1.44% to 1.6...
Yesterday's record-breaking surge in the Ruble appears, as we warned, to have been front-running today's rate-hike announcement... and despite its surprise size, it is disappointing the market. The 5%-plus swing higher in the Ruble yesterday has been notably retraced as the Russian currency plunges (biggest drop in almost 6 years) after the central bank hiked rates 150bps (expectations were broadly of a 50bps hike) but it appears the 'whisper' number was a 200bps hike and a shift in FX policy to more active intervention. The inituial rip rally instantl...
Bulls showed renewed backbone last week and drew a line in the sand for the bears, buying with gusto into weakness as I suggested they would. After all, this was the buying opportunity they had been waiting for. As if on cue, the start of the World Series launched the rapid market reversal and recovery. However, there is little chance that the rally will go straight up. Volatility is back, and I would look for prices to consolidate at this level before making an attempt to go higher. I still question whether the S&P 500 will ultimately achieve a new high before year end.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then o...
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If you're following Valeant's proposed takeover (or merger) of Allergan and the lawsuit by Allergan against Valeant and notorious hedge fund manager William Ackman, for insider trading this is a must-read article.
Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Linette goes through the con...
There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...
Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?
With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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