SEC Trial Lawyer Displays Flash of Honesty Amidst Obama Administration Lies

by lizard

Wall Street has corrupted its regulators and when Obama says he’s going to do something about it, he’s lying. This isn’t news, but it is an important reality to revisit periodically.

James Kidney, a retiring SEC trial lawyer, decided to clearly state what many already know: the SEC is a “Bankster turnpike“. From Bloomberg:

The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, according to a copy of his remarks obtained by Bloomberg News. “On the rare occasions when enforcement does go to the penthouse, good manners are paramount. Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening.”

Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.”

In reporting on this moment of honesty from a SEC insider, Eric Zeusse’s piece at Counterpunch reminds us of Obama’s empty rhetoric:

Kidney’s speech said that his superiors did not “believe in afflicting the comfortable and powerful.”

Referring to the agency’s public-relations tactic of defending its prosecution-record by use of what he considered to be misleading statistics, Kidney said, “It’s a cancer” at the SEC.

Two recent studies have provided additional depth to Kidney’s assertions, by showing that Obama and his Administration had lied when they promised to prosecute Wall Street executives who had cheated outside investors, and deceived homebuyers, when creating and selling mortgage-backed securities for sale to investors throughout the world.

President Obama personally led in this lying.

On May 20, 2009, at the signing into law of both the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act, Obama said: “This bill nearly doubles the FBI’s mortgage and financial fraud program, allowing it to better target fraud in hard-hit areas. That’s why it provides the resources necessary for other law enforcement and federal agencies, from the Department of Justice to the SEC to the Secret Service, to pursue these criminals, bring them to justice, and protect hardworking Americans affected most by these crimes. It’s also why it expands DOJ’s authority to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes — institutions where more than half of all subprime mortgages came from as recently as four years ago.”

Then, in the President’s 24 January 2012 State of the Union Address, he said: “Tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. (Applause.) This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans. Now, a return to the American values of fair play and shared responsibility will help protect our people and our economy.”

However, two years later, the Inspector General of the U.S. Department of Justice issued on 13 March 2014 its “Audit of the Department of Justice’s Efforts to Address Mortgage Fraud,” and reported that Obama’s promises to prosecute turned out to be just a lie. DOJ didn’t even try; and they lied even about their efforts. The IG found: “DOJ did not uniformly ensure that mortgage fraud was prioritized at a level commensurate with its public statements. For example, the Federal Bureau of Investigation (FBI) Criminal Investigative Division ranked mortgage fraud as the lowest criminal threat in its lowest crime category. Additionally, we found mortgage fraud to be a low priority, or not [even] listed as a priority, for the FBI Field Offices we visited.” Not just that, but, “Many Assistant United States Attorneys (AUSA) informed us about underreporting and misclassification of mortgage fraud cases.” This was important because, “Capturing such information would allow DOJ to … better evaluate its performance in targeting high-profile offenders.”

Recently High Frequency Trading (HFT) has gotten some media scrutiny. There was another opportunity to scrutinize HFT after the Flash Crash on May 6th, 2010, but the obvious corruption of regulators ensures there are no serious threats to raking in the cash, no matter how risky strategies like HFT continue to be.

So the New York Times will write nice articles describing why interest in a tax has been “revived”, but I suspect the reason this sensible populist tax is getting some pre-midterm election attention is so candidates can stump on it then do not a goddamn thing about it in office. From the NYT:

It’s not every day that you find a fan club for new taxes, especially among economists and legal experts.

But a burst of outrage in recent days generated by Michael Lewis’s new book about the adverse consequences of high-frequency trading on Wall Street has revived support in some quarters for a tax on financial transactions, with backers arguing that a tiny surcharge on trades would have many benefits.

“It kills three birds with one stone,” said Lynn A. Stout, a professor at Cornell Law School, who has long followed issues of corporate governance and securities regulation. “From a public policy perspective, it’s a no-brainer.”

Not only would the tax reduce risk and volatility in the market, Professor Stout said, but it would also raise much-needed revenue for public coffers while making it modestly more expensive to engage in a practice that brings little overall economic benefit.

Sounds great, doesn’t it. But who believes there’s a real chance that common sense can translate to political policy, especially when that policy is specifically designed to take one of the money-making toys from the dangerous brats on Wall Street?

Instead, we need to remember that the current administration consistently lies about what it intends to do for political gain, and by remembering those lies maybe we can avoid falling for future lies from presumptive candidates, like Hillary Clinton, who will continue to wield the wealth of the .01% to protect their ill-gotten gains from the pitchforks.




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