Banksters Pretend that Prosecuting Wall Street Crime Will Blow Up the Economy

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Wall Street Criminals Threaten that Economy Will Blow Up If They’re Prosecuted

The Department of Justice is “considering” initiating criminal charges against 2 banks.

In response, the normal cast of characters is saying – as they have for years – that prosecuting banks will cause a meltdown of the economy.

The U.S. attorney for the Southern District of New York recently mocked the silly claims of gloom and doom:

Companies, especially financial institutions, will do almost anything to avoid a tough enforcement action and therefore have a natural and powerful incentive to make prosecutors believe that death or dire consequences await,” he said. “I have heard assertions made with great force and passion that if we take any criminal action, the skies will darken; the oceans will rise; nuclear winter will be upon us; and the world as we know it will end.”

As we’ve repeatedly noted, this is wholly untrue.

Indeed, prosecuting the individual Wall Street executives who knowingly committed criminal fraud won’t harm the economy.  After all, the main driver of economic growth is a strong rule of law. And numerous Nobel prize winning economists have said that prosecuting Wall Street white collar is necessary for a prosperous economy.

Proof that prosecuting criminal fraud doesn’t hurt the economy  comes from Iceland:

[The U.S. and Europe have thwarted white collar fraud investigations … let alone prosecutions.] On the other hand, Iceland has prosecuted the fraudster bank heads (and here and here) and their former prime minister, and their economy is recovering nicely … because trust is being restored in the financial system.

In response to the sky-is-falling spouting banking apologists, professor of law and economics – and chief S&L prosecutor – William Black  explains:

First, no banker is “too big to jail.” They are easily replaceable and removing a fraudulent bank CEO from power is the single most productive act that regulators and prosecutors can accomplish. [The Department of Justice’s chief of criminal prosecutions] Breuer and Attorney General Eric Holder were involved in a con when they claimed that their failure to prosecute the senior bank officers leading the frauds was in any way related to “too big to fail.” Hilariously, they even applied the “rationale” for non-prosecution to former bank officers – as if a bank would fail “because” its former officers were prosecuted. It is a testament to the weakness of the reportage that this claim was not treated with ridicule.

Second, valid fraud prosecutions do not “cause” a business to fail. The fraud causes them to fail. They should fail when their “profits” arise from fraud. In particular, they should fail in the case of accounting control fraud because their “profits” are the fictional product of accounting fraud. The markets and the economy are greatly improved when fraudulent enterprises are destroyed.

***

Third, very little is actually “destroyed,” when we place a fraudulent bank in receivership, fire the crooked CEO, and sell the bank to an acquirer of integrity and competence. The new bank will, net, be greatly improved because it has been freed from control by the fraudulent leadership that was “looting” the bank (George Akerlof and Paul Romer, 1993, “Looting: The Economic Underworld of Bankruptcy for Profit”).

Fourth, there is rarely a need to prosecute a bank. In virtually every case in which the bank’s frauds cause serious harm senior officers of the bank will have led the fraud and profited from it. Everyone in law enforcement realizes that any effective deterrence will come from prosecuting those officers and not only removing their fraud proceeds but also imposing fines that will leave the officers bankrupt.

Fifth, the bank’s controlling officers are in an immense conflict of interest when their frauds are detected. They control the bank and its resources. Their first priority is to prevent their own prosecution. Their second priority is to prevent any substantial “claw back” of their compensation. Their third and fourth priorities are to do the same for less senior officers. This isn’t altruism (though it certainly has an aspect of class-based affinity). Fraudulent CEOs realize that it is risky to allow the prosecutors to gain any leverage over more junior officers who may “flip” and testify against the CEO. The fraudulent officers controlling the bank, therefore, will gladly trade seemingly huge fines in exchange for obtaining their top four priorities.

[Finally, the government’s policy of not prosecuting Wall Street criminals] produces what Akerlof and Romer warned was the “sure thing” of CEO “looting” through accounting control fraud plus the assurance that the CEO will not be prosecuted, forced to surrender his fraud proceeds, or forced to pay fines that bankrupt him.Unsurprisingly, the result has been unprecedented accounting control fraud by elite banksters.

***

None of this explains why they don’t prosecute bankers (much less ex bankers)

Indeed, the whole if-you-prosecute-the-economy-dies scam is like the 2008 bailouts. As we wrote at the time:

Congressmen Brad Sherman and Paul Kanjorski and Senator James Inhofe all say that the government warned of martial law if Tarp wasn’t passed.

***

As Karl Denninger wrote yesterday:

[S]ounds like “Bail me out or I will crash everything.”

Isn’t that analagous to walking into a bank, opening one’s coat to reveal an explosives-laced belt, and saying “gimme all the money or everyone dies!”

I noted in November:

In the 1974 comedy Blazing Saddles, Cleavon Little plays the new sheriff in an old Western town. The sheriff is African-American, and when he rides into town for the first time, the [racist] townspeople pull out their guns and are about to shoot him.

But he quickly puts a gun to his own head, pretends he’s scared of his own gun, and says “BACK OFF OR THE AFRICAN-AMERICAN GUY GETS IT!!!” The townspeople are dumb and fall for it, suddenly terrified that he’ll kill himself. Here’s the scene.

That’s what Wall Street is doing with the bailout.

The fat cats on Wall Street are saying “give us a lot of money, and buy all of our bad debt for a lot more than its worth, or Wall Street will get it and we’ll go into a depression!”

Are Americans stupid enough to fall for it?

In a recent interview, William K. Black uses the exact same Blazing Saddles sheriff-bank analogy.

***

Any way you look at it, the too big to fails are not needed and they are dragging our economy into a black hole. Like the sheriff in Blazing Saddles … they are playing us for fools.

[Yves Smith] shared another analogy with me: a man with 15lbs. of Semtex strapped to his waist. She says “any surprise people in the vicinity are very attentive to his desires?”

Indeed, it’s the old protection racket.

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  • Name

    Prophesying economic disaster if banksters don’t get their way is the third oldest profession.

  • drew

    Either way we’re screwed so let’s get this party started.

  • mitchie124

    Save the world. Imprison a Rothschild.

  • Rich

    they didn’t pay all that money to the campaign coffers of Barack and Joe “The Senator from MNBA” Biden for nothing.

  • failedevolution

    How to transform an independent country into a banksters colony

    http://failedevolution.blogspot.gr/2014/04/how-to-transform-independent-country.html

  • 3xaparent

    Suicide Bankster? If American’s were actual patriots and loved their country, they’d take the banksters out of their homes and march them to the gallows. If you love your country, protect it from all enemies….foreign or domestic.

    • 3xaparent

      And by that I mean I’d love to see the CEO’s of the big banks murdered in the streets as a warning to other con artists that “We The People” won’t stand for it any longer.

  • goingnowherefast

    Iceland puts the lie to the banksters’ claim. Criminal behavior is always bad for the noncriminals. How hard is that to comprehend?

  • Jay Black

    Iceland did it and they’re economy has improved since. The rats who didn’t leave Reykjavik quickly enough are now in jail. The globalist banksters are using fear to keep the American people from pressuring their elected representatives to prosecute. But it won’t be enough to simply prosecute them. The Federal Reserve fractional banking system must be dismantled and abolished.

    Let the investment bankers do their business apart from the commercial banking sector. Re-enacting the original Glass-Steagall act would separate the two and wipe all of the accumulated trillions in bailout debt off the books in one fell swoop. You want to see a bankster sweat? Push hard as hell for Glass-Steagall re-enactment. The US Constitution permits the establishment of a credit issuing national bank for large and medium scale infrastructure, science or other economic driver projects, leaving personal and business loans, mortgages, car loans, chequing, savings and credit card accounts, etc., to serve customers as they had without interference from Wall Street.

  • olde reb

    I believe the scenario of great economic chaos in the United States, and the world, may be correct. The analysis to discredit such a conclusion misses the crucial point.

    It is not an individual banker, or an individual bank, that would be the object of a criminal prosecution for fraud. It is entire Federal Reserve system and the unknown owners of the Board of Governors that have committed fraud for over 50 years.

    The Fed uses the FRBNY to embezzle $4 billion daily by their exclusive handling of records of disbursements of money from auctions of Treasury securities. Ref. http://www.scribd.com/doc/101937790/Federal-Reserve-Heist. Profit of the Fed legallly belongs to the government.
    Those accounts have never been audited or reported to Congress. Ref. http://www.scribd.com/doc/99860711/rip-off-by-the-fed-5-rtf .

    The owners of the BOG are the same Wall Street financiers that have imposed financial chaos using debt in Europe and in the third world using the IMF and WB. Ref. http://www.scribd.com/doc/115919607/FUNDING-THE-NEW-WORLD-ORDER
    They also handle the $17 trillion debt of the United States through the Primary Dealers. Internal memos have identified collection of the U.S. debt is the “end goal.”

    Only two possible scenarios appear viable:

    1. The status quo continues. The Wall Street financiers are able to collect on the U.S. national debt in the same manner as debts of Greece, Cyprus, Haiti, etc., are being collected by troika, ECB, IMF, WB, etc. Austerity and martial law will be imposed on the U.S. Confiscation of assets of citizens, including but not limited to banking accounts, pensions, savings, CD’s, life insurance, stocks, etc., seizing of assets under a pretext of IRS or SS obligations for make-believe debts, the selling of national assets to financiers at fire-sale prices, arbitrary seizures and control of real estate under pretended offenses, will be standard practice.

    2. The National Debt is evidenced as an act of fraud and theft by an audit of the Treasury security auction accounts maintained by the FRBNY. The implied contract with the owners of the BOG—based upon paying a debt that can never be culminated—is declared null and void from its inception as are all fraudulent contracts. The extension of legal tender status to debts of the (unknown) owners of the FRBOG is therefore nullified and the debts of the Fed belong only to the perpetrators of the fraud. (those green things in your billfold are Federal Reserve Notes with legal tender status). Only Congress can do this.

    Either scenario will cause great economic readjustment.

    • Mary Brown

      Is a market correction and disruption at the bottom of a continuing depression going to matter to the average person? Not really, very few have much in a 401k and they will recover eventually. What it will hurt is the super wealthy who are living on fake money generated in a computer. Backed by nothing but your faith that it is worth $1 in goods or services.

      We need a new national currency backed by a basket of commodities. Gold, silver, iron, copper, other metals, grains, oil, coal could all be part of it. Those assets in storage on a 1:1 basis would back the new currency issue.

  • JailBanksters

    It has turned Wall St into a Circus, where nobody believes anything that comes out of there.
    The end result is the same, lost all credibility. The only difference is, they may never ever get any credibility back again, because there is no end in sight. The problem is infinite just like the corruption and the money supply. Rather than kill the beast, they would rather pretend all these wounds are nothing, there just a scratch.

    • Mary Brown

      Wall Street Money = Massive Debt pure and simple, it is all fake gains caused by the Fed Reserves QEinfity pumping in ever more devalued dollars.

      Want to invest in something sound? Gold and silver. In 1963 a silver quarter would buy a gallon of gas, that same silver quarter(worth $3.49 as of today) will still buy a gallon of gas today. And that is with the precious metals markets price manipulation artificially holding down the true market value of gold and silver.

  • Arizona

    TWENTY YEARS AGO,the flowering plants were everywhere,AND THE HONEY BEES RULED THE ROOST,last year “I SAW THREE HONEYBEES”,and so far this year,I’ve only seen ONE,we noticed the DEER are sick,the ELK are sick and the wild animals of the forest are way to SKINNY,the animals are starving,MONSANTO IS DESTROYING THE animals of america, by killing all the BEES,THERE IS NO LONGER ENOUGH FOOD,the plants are dieing and the berries and plums the animals once ate ARE GONE,your worring about your money? I GOT NEWS FOR YOU “PLANET EARTH IS DIEING ” and it can be layed at the feet of monsanto and the US GOVERNMENT,RIGHT NOW,its almost to late to save the planet,…WHERE YOU GOING TO SPEND ALL THAT MONEY ON A DEAD PLANET?????

  • Mary Brown

    Every bank that commits fraud should have 10 times the profit they made taken in fines. Would put an end to the crime and cheating when it drives a few of them bankrupt.

    And what part of the economy will it hurt? The middle class is already hurting, the only ones profiting are the wealthy and who gives a crap if they lose money.