Last week, I posted Andrew Ross Sorkin’s NYT video on “The Financial Crisis, Five Years Later,” with a single word editorial, all in caps: BULLSHIT.

The views espoused in this video were such unmitigated nonsense that I ended up changing my Sunday WaPo column in part to respond to that silliness: Lehman’s thud signaled an enduring trauma. It didn’t cause it.

I was factual, and did not refer to the Times or Sorkin by name. Others, were more direct, including this brutal evisceration by Ryan Chittum of the Columbia Journalism Review: Andrew Ross Sorkin, Wall St. concern troll.

Looking forward, I am working on something detailing the prosecutable crimes that both the Bush and Obama administrations chose to ignore. But a simple place to start is exec compensation and Sarbanes Oxeley.

Indeed, one Crisis myth that I am compelled to point out as nonsense was that the claim, by CEOs like Dick Fuld and his lawyers, as well as other execs, that they did not profit from any of this. That is simply a bald faced lie, and I have the quarterly public filings to prove it. In fact, I first detailed many of these 5 years ago.

In the Lehman column, I noted the Harvard study that “calculated that Fuld earned $522.7 million from 2000 to 2007. He garnered $461.2 million of that by selling 12.4 million shares of Lehman.“Given what we know about Repo 105 fraud,I have little doubt that Fuld and others committed multiple felonies under Sarbanes-Oxley Act of 2002 and should have been prosecuted.

Here is my short list of those who pocketed money that was likely based on false or misleading or even fraudulent accounting of quarterly earnings statements for the 2007-08 period:

Bears Sterns (BSC) former chairman Jimmy Cayne, rescued by a $29 billion Fed shotgun wedding to JPM, received $60 million when he was replaced.

American International Group (AIG) chief executive Martin Sullivan got a $14 million compensation package in 2007. Robert Willumstad was handed $7 million for his three months at the helm..

Morgan Stanley (MS) Chief Financial Officer Colin Kelleher got a $21 million paycheck in 2007, but in 2008 Morgan Stanley received expedited approval to become a banking holding company in 48 hours — record time. I would spend some time reviewing that if I were head of SEC enforcement.

Countrywide Financial’s (CFC founder & CEO Angelo Mozilo, cashed in $122 million in stock options in 2007; His total take is estimated at over $400 million dollars. The SEC charged (Civil, not Criminal) Mozilo with Insider Trading, and settled for $67.5 million.

Merrill Lynch (NYSE:MER) Stanley O’Neal steered Mother Merrill into financial collapse, was taken over by Bank of America. His exit package was $160 million.

Bank of America (NYSE:BAC) acquired both Merrill and Countrywide. Stupidity isn’t criminal, and for his genius in nearly destroying BofA,  CEO Kenneth Lewis brought home $25 million in 2007.

Fannie Mae (FNM) CEO Daniel Mudd received $11.6 million in 2007. His counterpart at Freddie Mac (FRE) Richard Syron, brought in $18 million. They certified their quarterlies under Sarbanes-Oxley just like other CEOs right up until the point they became insolvent and were nationalized by the Federal government.

Washington Mutual (WM) WaMu chief executive Kerry Killinger received $88 million in compensation between 2001 and 2007 — just before they collapsed in a heap of subprime and were sold by the FDIC to JPM.

To put all of this into broader context:

David DeBoskey, a San Diego State University professor, created an estimate pf the total compensation for just 4 firms that collapsed: Lehman Bros., American International Group, Fannie Mae and Freddie Mac. Professor DeBoskey calculated their top executives received total compensation in excess of $1.4 billion in salaries, bonuses and stock-related pay from 2003 to 2007.

I find it incredible, nearly impossible to believe, that the prior quarterly earnings filings met the legality of SarBox certifications.

That was the first place Justice should have begun their investigations for prosecutions.

Category: Bailouts, Corporate Management, Investing, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “The False Crisis Narrative Persists”

  1. rbdrach says:

    You have to be kind to ARS. Sucking up to CEOs is basically his job description. That is what he does. He is either going to put together an apologist re-writing of history or nothing at all. That his only move — parroting his top level sources, who are always happy to talk to him.

  2. Moss says:

    Sarbanes-Oxley is like any legislation. It only works if you’ve got a regulator and a cop enforcing it. It is the enforcement of the law that has not been undertaken. Gutting budgets, extensive lobbying, career revolving doors and subsequent conflicts of interest make it practically impossible.

  3. Herman Frank says:

    Sitting on their mountain of cash they can’t read your comments, too high up in the clouds! It’s only us “the 99% suckers”, who stand with our feet in the bog, who can read, weep, and tremble with rage.

    BEING ANGRY AT WHAT or WHOM? “Criminal syndicates and their bosses”? Or “A justice system that is bought, packaged and shelved”?

  4. theexpertisin says:

    Almost all citizens will never see these figures. Our society is too obsessed with entertainment distractions to give a crap about it.

    The Roman Empire, revisited.

  5. zell says:

    Go Barry! But the TBTF’s won the battle and therefore have been successful in writing history/ propaganda. Their leaders walked off with riches after devastating the economy. The gov’t was complicit and continues in that mode- Agencies exercising their prosecutorial discretion.
    All will be well as liquidity drowns the problems. Last week the Fed didn’t blink, it gulped as the national and international currency/ credit markets came back at him in a giant wave.

  6. MarkKlose says:

    It’s important to note that BAC paid 2/3 ($45 million) of Mozilo’s fine.

    http://www.reuters.com/article/2010/10/16/sec-mozilo-idUSN1521833920101016

  7. david_12321 says:

    I forget. What did poor old Martha do that she wore orange (in comparison to this lineup) and why was she prosecuted and these not? Things different in the old days?

    • Slash says:

      This. I thought at the time and still do that her prosecution was a reality show, to demonstrate that the good ol’ government is looking out for us and ensuring that our financial system runs with absolute integrity.

      I knew then that it was probably horseshit – not whatever crimes she committed, which I don’t doubt, but that the prosecution was highly selective, meant to set an example and take focus away from actually serious financial crimes.

      Of course, we know now how very selective it was. Disgusting. Appalling.

      The SEC has to be the most worthless government entity that exists today. And that’s really saying something.

  8. Petey Wheatstraw says:

    The Rule of Law has been abandoned. Either the American public does not contemplate that fact (and they are, apparently and happily, far too distracted to even pay attention), or they act purely on narrow and immediate self interest (the idea of there ever having been a Rule of Law that worked being jettisoned in favor of going along to get along. After all, what kind of dope pays attention to such “quaint” concepts?).

    At this point, they don’t even need no stinkin’ false narrative. The criminality has been blatant for quite some time.

  9. A says:

    Unfortunately this problem is becoming too universal in American business: senior executives bleeding their corporations, just like public unions bleeding their taxpayers.

    It seems the word ‘ethics’ has completely disappeared from the business dictionary.

  10. VennData says:

    Well, at least their compensation taxed at the low top rate that is needed for these brave job creators.

  11. rd says:

    In the Great Depression (an a number of the depressions before that) the Richard Fuld’s would have comout of the crisis bankrupt having to do what this guy is doing to make ends meet:

    http://www.bloomberg.com/news/2013-09-23/why-100-000-salary-may-yield-retirement-flipping-burgers.html

    Saving the system should never be focused on saving the people who broke the system. At the very least, they should have been investigated to evaluate if prosecutions were warranted. The massive failure occurred when Justice deliberately decided that they would not even investigate because it would be “destabilizing”. We will pay the price for that for decades.

  12. Livermore Shimervore says:

    When I heard Sorkin say “we have to accept that it may not have been illegal” the first thing that comes to mind is Jim Cramer’s EPIC meltdown “how can we have this level of ficition in financials after Sarbanes-Oxley???!!!!”.

    I think its safe to say that the minute you hear someone linked to Wall Street speaking over dramatic background music, it’s probably bullshit indeed.

  13. tryflyfishing says:

    When the President of the USA asks: if this is a banana republic? The cry from far far below should be: yes.

  14. 873450 says:

    Around 10/08, Hank Paulson’s accumulated wealth was estimated to be over $900 million.

    After Bear Stearns collapsed, his boss POTUS G. W. Bush was secretly recorded bluntly telling a room filled with extremely wealthy, extremely generous, extremely loyal, extremely nervous GOP political benefactors that, “Wall Street got drunk,” inventing crazy financial products and that his administration intended to do nothing about it because everyone knows inherently self preserving, self regulating Wall Street will sober itself up and stop destroying our banking system on its own without government interference. A few months later when Lehman dropped dead a panicked, bug-eyed Paulson kept repeating a different storyline involving the once-in-a-century storm nobody predicted or understood like some type of naturally occurring disaster was taking place. Last week, while hyping his movie starring himself as the world saving super hero, Paulson continued to reinforce the now well-established false narrative about a hundred-year hurricane.

    In today’s captured government ex-con and Wall Street hero Mike Milken would be a shoe-in to replace Ben Bernanke.

  15. [...] is not one to shy away from calling out Wall Street. As such, it’s not surprising that in a recent blog post, Ritholtz shared his short list of banking executives who pocketed money that was likely based on [...]

  16. Mattw says:

    OK, I agree the video was bullshit. However, I tend to think you are focusing on more of a minor issue. I wasn’t hung up on who made money off the financial crisis. Maybe their activity was criminal or was just short of criminal, and I don’t care. Because this is not a problem of a few individuals. The big picture is that this is a process problem involving the entire financial system. And this type of problem cannot be solved by throwing individuals into jail. It can only be solved by letting the system crash whenever it wants to crash.

    Andrew’s alarm at the end of the video is what worried me. Who is going to be there for the next big crash? I hope no one is going to be there, but obviously Andrew did not learn that lesson.

    • This is not a minor issue, and I obviously disagree with your wanton disregard for 300 years of legal jurisprudence. .

      Letting a few senior execs get away with breaking the law leads to wanton disregard of law in the future — which we have already seen occur. Pay a few fines, and its the cost of doing business.

      The rule of law is not merely some inconvenient social annoyance you brush off.

    • rd says:

      Unlike how the Supreme Court thinks the world works in Citzens United, it is actually people that make decisions, not corporations. If the people in charge of the corproations think they can do whatever appears expedient to them at the moment, disregarding fundamental property transfer laws, fraud statutes, forgery laws, etc., then there should be no expectation that we will be living in a civilized society in 50 years as the age of feudalism would be back. Each lord of the manor could set his own rules and he could just tell the ruling king to piss off.

      We spent a thousand years getting out of that morasse (Magna Carta was the first major rung in the ladder out of the pit). It would only take a handful of decades to get us back to it. Societies, like stock markets, collapse much faster than they rise.