Wall Street firms that are allegedly too big to fail are, in the eyes of Federal regulators, reportedly too big to punish. Despite having been accused by the government of cheating and misleading clients while ripping off the investments of tens of thousands of consumers, some of the nation’s largest financial firms have received, sometimes repeatedly, special exemptions from the Securities and Exchange Commission (SEC) that have saved them from regulatory penalties that would have decimated their fraudulent mutual fund businesses.
The SEC was well-aware of Bernie Madoff’s ponzi fraud scheme, but did absolutely nothing to stop or prevent it. More than a dozen firms have been let off the hook by the SEC since January 2007, including Bank of America, Citigroup and American International Group (AIG).
Goldman Sachs, the world’s largest financial firm, has been in the middle of and responsible for many of the fraudulent bubbles that have caused the world’s economy to crash — more than once. Despite defrauding the world’s populations out of trillions of dollars, not one person has been held accountable, which is hardly surprising when you consider the fact that President Obama’s economic team is padded with Wall Street insiders, most of which have ties to Goldman Sachs. Rampant financial fraud in Credit Default Swaps (CDS) and Derivatives — which are also being concocted for use around carbon trading schemes in part of the proposed Cap and Trade legislation — helped cause the global meltdown.
In lieu of regulations and accountability for their fraudulent actions, SEC rules allow corporate lawbreakers to apply for Section 9(c) waivers that effectively shutter the violators operations from one of the SEC’s harshest penalties. Consequently, regulators never rejected one single application for any of those firms. Some of the firms were punished by other means, but were spared from any type of severe penalties or accountability. According to McClatchy News, the last time the SEC’s staff turned down a waiver was 1978.
SEC’s Long Period of Stagnant Enforcement
The SEC has had a long period of stagnant enforcement despite the massive securities frauds of the past decade. The Government Accountability Office reported (PDF) that SEC enforcement workers have felt overwhelmed by their caseloads and undermined by SEC leaders that have been hesitant to dole out heavy punishment.
Companies typically fill out waivers when they are caught violating federal law. A McClatchy News review of recent waiver applications found that the SEC granted exemptions to the same firms more than once — once after a firm committed the same violation of law and also for a company that misled the SEC in its application. The SEC also accepted a Wall Street firms argument that they were too big and too complex to be subject to a law written almost 70 years ago.
In March, E-Trade applied for a Section 9 waiver when they were caught using tactics that denied the customer the best price. SEC calculations estimated that E-Trade had cost its customer $28.3 million. E-Trade didn’t admit guilt, but settled the case in the U.S. District Court in New York, agreeing to pay $34 million in penalties.
Without the waiver, which the SEC granted, E-Trade said its in-house mutual fund operation could have been decimated, potentially causing customers ‘severe and irreparable hardships,’ also saying it needed exemption from punishment that could increase the costs to people who owned them. More than 1,500 employees could be affected.
SEC’s Problematic Record of Enforcement
Instead of punishing E-Trade and getting the money back from the many customers that were defrauded, the SEC granted the waiver. Two weeks after the waiver was approved, E-Trade closed the mutual funds in question, harming the customers E-Trade told the SEC it was trying to help. Despite harming all those customers, the E-Trade waiver could allow the company to restart its mutual funds.
‘Permanent’ SEC enforcement parlance has sometimes proven to be temporary. Citigroup settled a case after the SEC accused it of manipulating stock market research in 2003. The settlement ‘permanently restrained and enjoined’ Citigroup from violating a specific section of federal securities law. Citigroup has been caught twice since then violating the same federal securities law. Again Citigroup filed its application for a waiver and again the SEC granted it.
Theoretically, securities law allows the SEC to garner heavier fines and heavier punishment from companies that violate previously ‘permanent’ injunctions, but the SEC has a problematic record of enforcement and keeping track of prior violations.
The SEC isn’t the only Federal agency with less than stellar oversight. The Environmental Protection Agency has had major aversions to enforcing laws pertaining to safe drinking water. Consequently, millions of Americans are drinking contaminated water. Since 2004, water provided to more than 49 million people has been found to contain illegal amounts of chemicals like arsenic or radioactive substances like uranium, as well as dangerous bacteria that is often found in sewage. It remains to be seen if newly announced enforcement procedures will work. These are only two examples of how politicized Federal agencies and faltering, fallacious oversight are affecting millions of Americans.
Congress Rated More Unethical than Car Salesmen
A recent gallup poll suggests that being a member of Congress rates as the least ethical and honest profession — Congress fared worse than car salesmen by 4 percent.
The U.S. Congress was bought and paid for by the financial industry years ago. H.R. 4173, the Wall Street Reform and Consumer Protection Act of 2009 passed in the House of Representatives, but not before House Republican leaders met with more than 100 lobbyists in an attempt to gut and nullify it. You can rest assured that the Senate will either bury it or make sure it doesn’t pass when they take it up next year. Since 2001, Federal lawmakers responsible for overseeing the U.S. economy have reportedly received more than $64.2 million from eight of the most troubled firms on Wall Street. More information on Wall Street’s ownership of Congress can be found from Open Secrets.
Congress stopped working for the people they allegedly serve long ago. An upcoming vote on Wall Street reform will be hindered by many in the House of Representatives, both Democrat and Republican, who plan to loosen restrictions on derivatives and reject tougher regulations. The problem with any type of reform being proposed by Congress is that most Congress persons haveВ been bought and paid for by a number ofВ large corporations from many differentВ industries.
The Government’s Framework for Impunity
Governmental corruption has become painfully evident since the attacks of 9/11. For years Americans have been fed the lie that Osama Bin Laden attacked the World Trade Centers when there is no evidence of that. For years the U.S. has illegally destroyed civil liberties and rights, while claiming to be chasing a man that died a few months after the attacks thatВ enabledВ the fraudulent war on terror. Instead of holding the war criminals accountable for their actions, the U.S. government continues the charade of fighting ‘extremists.’ Al Qaeda was created by the CIA and had nothing to do with the 9/11 attacks. Al Qaeda has everything to do with promoting the fraudulent, never-ending ‘War on Terror.’ When do we hold the true terrorist extremists — the U.S. Government — accountable for their crimes?
Even Obama’s appointed Pay Czar refuses to reign in extortionate salaries paid to the financial fraudsters responsible for ruining the global economy, proving yet again that the government doesn’t run the country. The financial industry does. What would happen if America followed in China’s footsteps and executed corruptВ officials?
That there is no accountability and little if any oversight in the Federal Government is hardly surprising. Since taking office, the Obama administration has done everything they could to hide the truth about Bush administration crimes and keep their crimes covered, in essence, trying to give themselves impunity from any of their questionable actions in the future. Much of the Obama administration is comprised of former Bush and Clinton administration members. Many in Congress who have enabled Bush administration crimes for the past decade are striving to make sure they themselves receive impunity for their criminal actions. Until there is accountability, there will be no reform and no justice. When does it end?