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A Sad Tale of Wall Street’s Orphans

Posted by Larry Doyle on December 1, 2011 7:56 PM |

A lead editorial the other day in the Wall Street Journal highlighted:

“Federal Judge Jed Rakoff’s rejection Monday of a $285 million settlement between Citigroup and the Securities and Exchange Commission is playing in some circles as a great populist victory against Wall Street. But it looks to us more like a rebuke of the cozy relationship between regulators and the regulated that too often leaves justice as an orphan.

Justice as an orphan sounds eerily similar to the fact that “success has many fathers, but failure is an orphan.”

Is there any greater failing in our nation than a lack of justice? I think not. 

I am heartened by the fact that the WSJ acknowledges the cozy relationship between regulators and the regulated, defined here at Sense on Cents as the Wall Street-Washington incest. Perhaps we should not be surprised that the offspring of incestuous relationships would be relegated to an orphanage.

While I am happy that the WSJ acknowledges the “cozy incest,” I am left to wonder where is the WSJ and why doesn’t this once proud business journal dig deeper and highlight the identities of the orphans where the justice was left looking for a home?

Shame on the WSJ for not being more explicit and exposing the names of our lonely and lost orphans seeking real justice.

While many regular readers are very familiar with the identities of many orphans which have found a home at Sense on Cents, for newer readers I am compelled to highlight a list of “orphans” I laid out the other day in my commentary, Judge Rakoff: “Truth Is Confined to Secretive, Fearful Whispers”:

1. What was the real nature of the relationship between Bernie Madoff and the regulators at FINRA, especially Mary Schapiro?


2. What are the details of the liquidation of ~$650 million auction-rate securities from FINRA’s internal investment portfolio in 2007? Did FINRA front run the ARS market in the process? Did it benefit from having access to inside information not shared with investors?

3. What is the real truth to the payment of funds to FINRA’s member firms during the merger of the regulatory arm of the NYSE and the NASD to form FINRA? Did FINRA intentionally misrepresent the facts both verbally and in the written proxy used for this merger?

4. What really happened inside Bernie Madoff’s operation? Why haven’t we seen meaningful results or heard more from Madoff’s CFO Frank DiPascali who pled guilty a long time ago? Why? Where’s the truth here?

5. What was the real nature of the relationship between Allen Stanford and the Department of Justice? Was Stanford running a Ponzi scheme simultaneously while operating a front for the DOJ to infiltrate the drug trade in central and South America? We have heard little about Mr. Stanford for a long time.

6. Why haven’t we ever seen any developments on what appeared to be a clear cut case of insider trading by former Goldman Sachs honcho and then chair of the New York Fed Stephen Friedman? Recall that Friedman purchased a not insignificant block of Goldman stock during the period when the Wall Street firm was receiving a large amount of bailout funds. Friedman was pushed out of his position at the NY Fed as a result, but what about truth and justice here?

7. Will we learn the whole truth as to what transpired at MF Global and the role that Jon Corzine played during those fateful days when the firm was going down?

8. Will we learn the truth as to what really happened in the fraudulent robo-signing practices within the mortgage operations of our large money center banks?

9. Will we ever learn the truth as to insider trading allegations within the credit derivatives market leading up to and throughout our market meltdown of 2008?

10. Will we ever learn the truth as to the nature of political payoffs, –er, I mean, political contributions — from those within our financial services industry to their incestuous partners in Washington?

11. Why is it that a documentary on the $330 BILLION ARS (auction-rate securities) crisis HAS NEVER BEEN aired in our nation? Will we ever learn the truth on that front? When might those investors, still stuck with tens of billions of dollars worth of frozen ARS, ever get the return of their funds from these supposed cash surrogate investments?

As I review that list of ‘orphans,’ I am not hard pressed to think that the relationships between those in Washington and their partners on Wall Street were exceptionally cozy.

Where is the Wall Street Journal to call for greater transparency on each and every one of these orphans so justice in America can regain its rightful position in the land of the free and the home of the brave?

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.


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