In light of JP Morgan’s $2 Billion blunder this is a very crucial question we all should be asking ourselves. If a bank can’t even manage its own finances, what makes you think they can manage your finances?
This isn’t the Wild West. This is an institution that takes customer deposits that are explicitly insured by U.S. taxpayers and is suppose to operate conservatively lest it suffers a major “blow up.” Continue reading
According to 24/7 Wall St.’s research, Goldman Sachs has made it onto its 10 Most Hated companies list.
I am not surprised. The greed of GS executives has become legendary and their actions severely damaged investors and the U.S. economy. Exposure started in 2010 when the company was sued for fraud and settled for $550 million – a small percentage of annual profits. Fraud accusations against GS actually accelerated after the settlement and fines became a cost of doing business. GS is facing a number of suits for toxic mortgages it sold to individual and institutional investors.
Being on a Most Hated list must rankle GS executives, but they have made hundreds of millions of dollars in compensation and they know Americans have short memories. Eventually this will be old news and it will be business as usual.
What is truly amazing is that GS defrauded investors and caused major damage to the U.S. economy and not one company executive went to jail. Why not? These executives have purchased Get Out of Jail Free cards from politicians who care more about re-election than protecting Americans from greedy executives.
This cycle will repeat itself over and over again until the executives who made the decisions to rip-off the public begin joining Bernie Madoff in jail.
There is no question Occupy Wall Street has gotten a lot of publicity – most of it bad.
One of its goals is to increase the awareness of the American public about the greed and corruption that permeates Wall Street. It has not accomplished this goal. Its message has been obscured by tents-in-the-park.
Unfortunately, it does not stand for a clear-cut cause that people can rally around. Its message is rapidly becoming old news – even if it has a float in the Rose Parade.
If Occupiers are fed up with Wall Street they should have shined their spotlight on company executives who made millions when they decided to rip-off the American public. They should use public data to publish a Top Ten List. The spotlight should focus on the executives’ decisions, compensation, and the damage they did to their own clients and the American public.
Occupiers should also shine their spotlight on the politicians who pass regulations that protect these executives from prosecution for their crimes. Wall Street executives can commit crimes and their companies pay fines without admitting any guilt.
According to the SEC it does not have the legal resources to prosecute the executives of large companies. Its solution is to levy fines that become a cost of doing business for the executives’ companies. Consequently, there is no downside for corrupt executives.
Occupiers should be focused on making executives and politicians accountable for decisions that damage the American public. This is a cause worth fighting for.
Wall Street greed and corruption will not go away until the incentives to cheat investors have to be removed and executives who commit criminal acts are sent to jail.
I have been blogging for months about the SEC’s practice of letting Wall Street companies pay fines for committing fraudulent acts.
Finally, Jed Rakoff, a U.S. District Court judge rejected a $285 million settlement between Citigroup and the SEC. Citigroup was accused of mortgage fraud – in this case, a $1 billion CDO that cost investors $700 million.
The SEC claims it does not have the staff or resources to prove Citigroup committed fraud in a prolonged court battle because Citigroup has deep pockets and a lot of attorneys.
I have two problems with this position. Apparently big Wall Street companies can commit fraud and get away with it because they employ a lot of high powered attorneys. Second, companies don’t commit fraud, the executives who run the companies commit fraud.
These executives make millions from fraudulent acts and IF they are caught their companies pay fines to regulatory agencies that do not want to take them on in lengthy court battles.
What a crock. The SEC claims a company committed fraud, but does not prove its claim. The company pays a fine, that is small percentage of its profits, without admitting it did anything wrong – after all investors only lost 70% of their money in a short time period. I guess the SEC protects investors from bad guys if they have limited resources to pay attorneys.
Something stinks here. When something smells this bad I believe politicians are involved. Dig a little deeper and I bet the SEC’s position is a result of pressure that is exerted by politicians to protect the executives who run Wall Street companies. These companies bought protection by spending more than $300 million per year on lobbyists.
You can trust Wall Street when executives start going to jail.
It is about time! A Forbes article recently reported the market share of major Wall Street firms for retail (individual investors) assets under management has fallen from 49.7% to 42.8%.
It appears investors are finally waking up to the fact that Wall Street firms put their needs for profits, rising share prices, and executive bonuses way ahead of investor needs to accumulate assets for retirement.
Since 2000 Wall Street firms have paid billions of dollars of fines for cheating investors. Based on their “unique” relationship (payola) with politicians they did not have to admit guilt when they paid the fines.
Consequently, no Wall Street executives went to jail. They are still running these firms and dreaming up their next financial bubble or scam.
Investors have moved their assets to smaller, more independent firms that do not have the massive conflicts of interest of the Wall Street firms.
Well done investors!
You can’t blame Wall Street for the low retirement savings rates of most Americans.
You can blame Wall Street for the bubbles, scams, and fraudulent activities that have reduced the value of the savings accounts of most Americans. Or, how about the pressure Wall Street analysts exert on American companies to earn more money. Thousands of companies have converted their defined benefit pension plans to 401k plans to transfer investment performance risk to their employees.
Now in a recent article, MSN’s Today Money reported 25% of Americans expect to work to age 80. And, 75% expect to work during their retirement years. These Americans are acknowledging it is more important to save a specific amount of money than it is to retire at a specific age. But, the consequences are horrific, especially if there are health problems.
The two primary ways to accumulate assets are savings and performance. Once you achieve a critical amount of assets, performance is more important than savings.
Where do you go to get performance? That’s right, Wall Street.
Wall Street’s robber barons are the executives who make millions ripping off Americans who have to defer retirements, take part time jobs, and reduce their standards of living.
Robber barons belong in jail. Politicians belong in adjacent cells. Then Americans can expect on ethical advice and services that help them accumulate more assets for retirement.
A recent UK study showed even bankers believe bankers are paid too much.
What is true in England should also be true in the U.S.
What blurs the facts in the U.S. is our definition of bankers. In the good old days, they provided traditional bank products: Savings, checking, loans, etc. Also, In the past, bankers were not well-known for their high pay. However, in more recent times, banks also own broker/dealers, Registered Investment Advisory firms, investment bankers, corporate finance operations, money managers, and mutual fund families.
This is the new world of banking. Banks want to derive as much revenue as they can from their customers. The bankers who make this happen are very highly compensated – in fact, you could say they are the new face of Wall Street greed and excess.
This is not going to change. Bankers are not going to volunteer to reduce their compensation. There is no regulatory authority that is going to force them to change their compensation practices. And, public outrage is short-term. As soon as the economy is producing jobs this outrage will go away. Bankers know this about consumers.
Maybe we should work in the new banking industry.
Can anyone solve this problem?
This is a great question that has no easy answer.
We know investors need the services that are provided by the financial services industry. We also know, compared to Wall Street, investors really are powerless. This does not bode well for meaningful change.
Wall Street executives are protected by influential politicians who pass regulations that protect the executives from prosecution when they defraud investors. Instead of jail time for executives, Wall Street companies are allowed to pay fines without admitting guilt.
Can investors stop these two corrupt entities from working together?
Investors are voters. They can get rid of the politicians that pass regulations that protect Wall Street executives. However, history says this is not likely to happen. Investors believe they are powerless so they accept the consequences of corrupt business practices with barely a peep.
A more practical solution is for investors to stop buying products from major Wall Street firms. They should begin using the services of small, independent Registered Investment Advisory firms that are required to put their financial interests first. These firms do a better job than their Wall Street counterparts for less money.
Investors may not be able to change Washington, but they can stop doing business with Wall Street Robber Barons that have long histories of cheating investors to maximize their own incomes.
If you won’t use the ballot box, then vote with your assets. Move them to investor friendly, independent firms.
This would be a worthy cause for Occupy Wall Street if they can get their act together.