Posts filed under “Crony Capitalists”
Yesterday, we looked at why bankers weren’t busted for crimes committed during the financial crisis. Political corruption, prosecutorial malfeasance, rewritten legislation and cowardice on the part of government officials were among the many reasons.
But I saved the biggest reason so many financial felons escaped justice for today: They dumped the cost of their criminal activities on you, the shareholder (never mind the taxpayer).
Corporate executives theoretically work for the owners of the company, namely, the shareholders. But there is an agency problem in that owners can’t closely manage and object to the actions of these executives. Collective owners, such as mutual funds, seem to have no interest in doing so. What we end up with is a management class that works for itself instead of on behalf of the owners of the publicly traded banks. Many of these executives committed crimes; got big bonuses for doing so; and paid huge fines using shareholder assets (i.e., company cash), helping them avoid prosecution.
As for claims, like those of white-collar crime defense attorney Mark F. Pomerantz, that “the executives running companies like Bank of America, Citigroup and JP Morgan were not committing criminal acts,” they simply implausible if not laughable. Consider a brief survey of some of the more egregious acts of wrongdoing:
click for larger version Source: BV, FT This morning we discussed the danger that arises from merely fining banks instead of prosecuting them for violating laws. Since the news cycle is focusing on the potential multibillion-dollar fines for BNP Paribas SA and Bank of America Corp., let’s have a look at the amount of…Read More
Every day brings multiple new scandals. At least they used to be scandals. Now they’re simply news items strained of ethical content by business journalists who see no evil, hear no evil, and speak not about evil. The Wall Street Journal, our principal U.S. financial journal ran two such stories today. The first story deals…Read More
Dysfunction Is Limiting U.S. Position Abroad, Observers Say; ‘Sadness From Our Trading Partners’ click for ginormous graphic Source: WSJ Here is the problem with using the debt ceiling as a negotiating tactic: It does permanent, long lasting damage to the reputation of the US, and hastens the day when the US Dollar is…Read More