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Taibbi: Wall Street Bribes, Bid-Rigging & Collusion

Posted by Larry Doyle on June 22, 2012 2:07 PM |

There are many markets on Wall Street with very serious ethical issues. From my perspective, no market over the last number of decades has been more ethically challenged than the world of municipal finance.

In the spirit of fairness, I would maintain once again that the overwhelming percentage of people on Wall Street in general and municipal finance specifically are very good, decent people. Regrettably, though, the premise of fair and ethical dealings within many markets and certainly municipal finance has gotten so blurred as to be unidentifiable.

In a MUST READ commentary that pulls back the cloak on the bribes, bid-rigging and collusion within the municipal finance markets, Rolling Stone’s Matt Taibbi provides a chilling look into this corner of Wall Street.

I will grant you that Taibbi can be melodramatic at times in his description of certain activities. That said, the  gross reality of the picture he paints of the organized, Mafia-esque type corruption truly smells. Take a whiff as Taibbi writes:

To grasp the full insanity of these revelations, one must step back and consider all this information together: the bribes, yes, but also the industrywide, anti-competitive bid-rigging scheme. It turns into a kind of unbroken Möbius strip of corruption – the banks pay middlemen to rig auctions, the middlemen bribe politicians to win business, then the politicians choose the middlemen to run the auctions, leading right back to the banks bribing the middlemen to rig the bids.

When we allow Wall Street to continually raid the public cookie jar, we’re not just enriching a bunch of petty executives (Wolmark’s income in 2008, two years after he was busted in the FBI raid, was $2,464,210.18) – we’re effectively creating an alternate government, one in which money lifted from the taxpayer’s pocket through mob-style schemes turns into a kind of permanent shadow tax, used to maintain the corruption and keep the thieves in place. And that cuts right to the heart of what this case is all about.

Wall Street is tired of making money by competing for business and weathering the vagaries of the market. What it wants instead is something more like the deal the government has – regularly collecting guaranteed taxes. What’s crazy is that in order to justify that dream of regular, monopolistic tribute, they’ve begun to see themselves as a type of shadow government, watching out for the rest of us. Amazingly enough, this even became a defense at trial.

The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartel­style scheming, are all legitimate market processes that lead to legitimate price discovery. In this lunatic worldview, the bid­rigging scheme was a system that created fair returns for everyone.

More than a little bit perverse. When people grow so accustomed to operating in a sty, before you know it the corrosive smell dissipates and the aroma of illicitly gained revenues, payoffs, and kickbacks becomes very sweet.

What is the name of this sweet, aromatic perfume?

Crony capitalism.

This heinous practice is played not only in the world of municipal finance but in the offices of many of our political heavyweights and their partners.

Who suffers from these rackets?

America as a whole.

Although some may think this corruption is merely business as usual, I believe there will come a day when the payback from the citizenry for these organized activities will be swift and severe. That day is approaching. With our nation moving ever closer to the fiscal cliff of no return, the public will turn its rage wherever appropriate. Where might that be?

Read Taibbi’s The Scam Wall Street Learned from the Mafia.

Thanks to the regular reader who brought this story to my attention.

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 so that investor confidence and investor protection can be achieved.


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