Wednesday, January 23, 2013

PBS Frontline"The Untouchables": why weren't Wall Street moguls prosecuted for 2008?

On Tuesday, January 22, 2013, PBS Frontline presented an episode “The Untouchables”, written and directed by Martin Smith, exploring why no Wall Street executives (outside the Bernie Madoff world) were prosecuted for the financial practices that led to the Financial Crisis of 2008.
A link for the show (through WGBH) is here.

Much of the early part of the broadcast focuses on Countrywide and on the lending practices.  One manager tells of seeing a car with the placard reading “Fund It”.  That means, don’t worry about the creditworthiness of a home purchaser – don’t worry about income, jobs or credit history. Just process the loan.  We’ll dice it up, securirtize it.
The documentary also shows how the “due diligence underwriting” became a scam.

In fact, in my own “retirement”, I got some unsolicited phone calls around 2006 and 2007 to sell mortgages.  I didn’t bite.  It was too good to be true.  How could any of this continue working for long?  It was such an obvious Ponzi scheme.  Houses can’t go up forever. The tone of some of these approaches was rather offensive, as if I could prove that I could "provide for a family" by hucksterizing junk. 

Smith interviews Lanny Breuer, of the Department of Justice, who says that it is very difficult to take what seem like unethical lending practices and build them into a case that can prove a crime to a jury “beyond a reasonable doubt” necessary for a criminal conviction.
Smith also mentions a documentary film “Confidence Game”,by Nick Vernistky.  It isn’t on Netflix yet, and I couldn’t find it on Amazon.  The film apparently tracks the investigations done by private law firm Patterson Belknap.

Along the lines of moral behavior – are people who took out silly loans personally responsible for believing they could get something for nothing? – one could read Michelle Singletary “Are we ready to recognize economic reality?” in the Washington Post, p. A10, Wednesday January 23, 2013, here.  Online, the title is “Are we ready for change?”  The column was motivated by President Obama’s inaugural speech.  I certainly get her later points about low wage jobs and how the middle class (let alone the rich) lives off work done by the poor (or at least by policies that slight the needs of the poor).  But are we all ready for Mao’s solution of making everyone take his turn becoming a peasant?  The books by Barbara Ehrenreich ("Nickel and Dimed", where she "paid her dues" as a low-wage worker), come back to mind.  

Let's not forget the 1987 Brian de Palma film "The Untouchables".  Saw it in Dallas. 

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