The Good, the Bad and the Greedy - Wall Street Criminals on notice
Looks like the financial crisis is taking the much anticipated criminal turn with the FBI starting to seriously probe allegations of fraud by a number of Wall Street firms whose recent collapses sent markets into turmoil. The ones that received the most media coverage - Lehman Brothers, mortgage giants Fannie Mae and Freddie Mac and insurer AIG - are big targets in the FBI's wide-reaching inquiry. This news comes on the heels of the $US700 billion government bailout of the troubled financial sector.
The FBI probe aims to determine whether company executives had any responsibility for the institutions' financial woes through misinformation or material misinformation. FBI Director Robert Mueller said last week that the bureau was probing 24 to 26 financial institutions, but gave no details other than to describe them as "large corporations" that may face allegations of misstated assets. ABC News said the probe was "multifaceted and the net is much deeper than the major firms officials confirmed today," adding that the probe had expanded from 14 major firms to 26 in less than a year.
Critics have complained that AIG and several other collapsed companies hid the extent of their deepening financial problems from regulators and investors by understating excessive debt and risky investments. The Washington post reports that the wide-ranging financial probes are operating at different stages of development and no charges are imminent, according to sources.
Have your say: Do you think the FBI will lay criminal charges against any senior company executives, and which companies are most at risk for criminal behavior? Comment here
I'll start the ball rolling by saying that AIG is the company most at risk simply because of their size and lax regulation, but I do feel the probes should also extend to people and companies that purposely pushed bad news (on CNBC especially) about firms they had short sold, so that when the company stock fell they profited handsomely. Also, due to the complex nature of the investigations and the number of people involved it will be very hard to make serious allegations stick to specific individuals. Jail time also seems unlikely for a number of already fired CEO's and more likely the penalties will be financial in nature since "everybody was doing it" [poor financial risk management]. Don't look for any types of charges to be announced anytime soon though if current proceedings (e.g. investigations into mortgage giant Countrywide) are any guide. It could be years before investigations are concluded and until then we will just have to wait and see what happens as this drama unfolds. Should spawn a whole series of books/movies on this topic which could make interesting reading/viewing.
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September 25, 2008 2:04 PM
They are all a bunch of crooks that are getting on welfare courtesy of us who pay taxes. It is a damn shame, shame, shame! Vote Obama!
September 25, 2008 2:52 PM
Now that we are full-fledged socialists, I say it is time to start regulating executive compensation. We all know how much this country –and the world – hates George W. Bush, but it is amazing that he is fighting the regulation of executive compensation as part of the bailout. Does he enjoy being made fun of? I guess he believes there is such a thing as “half-pregnant”. Need I remind him that “the horse has left the barn” – we are already deep into socialist activities already; taking an additional element (regulating market driven compensation) and including it in the bailout package is a no brainier.
I lean toward the libertarian side of things and realize that government intervention is rarely the most productive way to solve problems, but come on!….”In for a penny, in for a pound”, as they say. I see the moral hazard in all this less with the government taking over companies (a la Chavez or Russia), and more with sending a message to executives that they are so much smarter and valuable then the rest of us, that even when they fail, they must be paid.
If it were up to me, I would cap the salaries at $500,000 for any executive that takes the government’s money. If you don’t like the deal, then refuse the “gift” from the government and watch your company go bankrupt. If we learned any lesson in this mess, it was the fact that finance executives are only smart when the market goes in the preferred direction, up.
September 25, 2008 2:55 PM
In 2007, the total compensation of chief executives in large American corporations was 275 times that of the salary of the average worker, the Economic Policy Institute, a liberal research organization, estimates. In the late 1970s, chief executive pay was 35 times that of the average American worker! In 2010 it will be.......
September 30, 2008 3:36 PM
I think the current regime is inept in doing anything for the good of the country!!! What good has Bush done for the US? He's ruined our international relations and worse...he's largely responsible for potentially ruining our economy!! Will McCain do much better? I don't think so. He's just as old school as Bush!! Time for a change!! Let's get someone in that has fresh ideas that will improve our foreign relations, economy, and the overall well-being for each and every American (and legal aliens).
October 2, 2008 6:55 AM
This is a tough one.
If we regulate compensation too much we might reduce the incentives to attract the best people for the job. That said it is obvious that the current system of linking executive renumeration to share price is simply not working.
October 4, 2008 9:49 PM
Thanks for all the comments. It will be interesting to see how the wall street execs come out of the current mess. Thanks to Debt Kid for also publishing this post inf the Carnvial of Personal Finance
October 12, 2008 6:52 AM
Looks like the financial crisis is taking the much anticipated criminal turn with the FBI starting to seriously probe allegations of fraud by a number of Wall Street firms whose recent collapses sent markets into turmoil. The ones that received the most media coverage, Yeah!!! send those greed bastards to us and we'll exploit them! http://www.greedypeople.com
February 21, 2009 6:24 PM
The fat needs to be cut in Washington, such little thing as having a different pen every time Obbama signs his mark on s paper and all teh over nothing that he signs.
August 25, 2009 11:43 PM
The chance of these Wall street Criminals getting a judicial flogging is as likely as finding palm trees at the North Pole.
As long as these commercial and investment banks are allowed access to low interest, unlimited funds from Feddie (a.k.a. the Bankers Private Bank) to use for gambling in the markets there will be no change.
I think we may need to return banks to their original purpose which is to accept deposits and make loans.