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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.

 

  • Peter S.

    How is possible that Matt Taibbi has yet to be acknowledged with a Pulitzer?

    • Huckleberry

      “If voting changed anything they’d make it illegal.” — Emma Goldman

      The middle classes have for the past 400 years been the most revolutionary-minded members of society. Those parts of this society have been under pressure for 40 years. For most of that time, this pressure was concealed by debt. No more.

      They question is not what will happen when the people wake up, but toward which bogeyman their anger will be directed towards. Unfortunately for the 1%, the American people are weary from apparently pointless foreign conflicts.

      We have an entire generation coming of age that has seen that crime does, in fact, pay. The lyrics of gangster rap are nothing compared to the antics of the financiers who own our government.

      LD, you ought to feature Michael Burry’s recent remarks at UCLA’s 2012 commencement. I can only imagine what the graduates he addressed (and their parents) must have made of it. He told the truth, and it was not pretty.

  • Obsvr-1

    I am continually amazed how passive the American people are as these outrageous acts of corruption and crony-capitalism unfold. I would have thought by now we would have seen many more acts of violence towards the miscreants. The tea party did make headway into removing the entrenched incumbency before they were co-opted by the R’s. The Occupy Wallstreet movement was another attempt to organize a revolution, but it was co-opted by extreme liberal and incoherent blathering; if they could have just organized around a single theme of Crony- Capitalism, then the OWS movement would be alive and well with more mainstream Americans joining the effort.

    Why the affected farmers from the MF Global debacle has not catalyzed a “Tractor Drive” to Washington to demand justice is beyond me.

    The ability to organize a “Revolution for Change” has never been better with the tools of the Internet, however conversely it is the very existence of the Internet, all the distractions of media, entertainment, sports and the very act of just trying to make a living that erects barriers to a massive Revolutionary event.

    As these never ending stories of corruption, fraud, abuse, unethical and immoral activities flow, eventually the “straw that broke the camels back” will cause the $hit to hit the fan …

  • Bill

    This practice is emblematic of other areas, such as public sector unions putting their lackies in office, lobbyists buying pols–just like you write a check for an appliance (which is all many pols are, a tool)–to leach off the public fisc, and on and on and on. When I realized the scope and depth of the ARS scandal in 2008 it became apparent this country has turned into a kleptocracy. Lenin’s admonition has become true: democratic elections present the periodic opportunity for the masses to select those will oppress them.

  • JR

    Amen to Observer-1…the non-response by the many segments of the population affected by criminal activity means the pain threshold has not been reached.
    When will that happen? What will that look like?
    Hope I stil have some beer when that happy day arrives.

  • fred

    The Song Remains the Same

    The Libor Rate rigging scam sounds eerily similar to the muni scam highlighted in the Taibbi story. So far Barclays has been named but that is probably just the tip of the iceberg. According to ZH, US traders would express their wishes for where they wanted Libor pegged. The London office would then submit their interbank lending rate that was then used in the final LIBOR calc.

    Barclays settled for $450M, All the ARM’s were pegged to LIBOR. Basis points add up quickly, $450M sure sounds low!

    • fred

      LD,

      Where are the prosecutions?

      Why not RICO charges against the perps and the executives higher up in the food chain? There is some precendence of applying RICO outside organized crime.

      According to Wikipedia…

      Michael Milken was charged with 98 counts of racketeering and fraud (RICO) relating to insider trading. Milken was accused of utilizing a network of contacts to manipulate prices (SOUND FAMILIAR)of both stocks and bonds. Milken plead out to lesser charges to avoid spending the rest of his life in jail.

      There are are also international equivalents to RICO and most countries do cooperate with the US on RICO enforcement.

      RICO related charges are considered easy to prove because they focus on patterns of behavior rather than criminal acts.

      Forfeiture of gain, 20+ yrs in jail, treble damages. Why settle?

      Eliot “Ness” Spitzer, where are you when we need you?

  • LD

    Incest = Captured

    All the $$ spent on campaign contributions and lobbying is not charity. The payoff comes at times like these.

    • fred

      LD,

      So what you’re saying is, short term, the only hope for specific regulatory enforcement is a 60 Minute cover story?

      And longer term, any initiatives for campaign finance and lobbying reform are hopeless because of the identity equation: Incest = Captured?

      Let’s stop the incest!

      • LD

        Yep…






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