Applying “Broken Windows” Theory to Wall Street

by lizard

Obama’s quick, decisive use of his Executive Authority to provide a short-term, partial fix for millions of people who don’t have legal status to be here will undoubtedly improve the lives of those who have been living in fear. The president promised to act, and he delivered. I’m sure some Democrats are hoping Republicans go berserker with impeachment fever. That will certainly help Tester raise fear-cash for senatorial candidates in 2016.

There also seems to be more movement with prisoners held, some without charge, at GITMO. A Saudi prisoner was just released back to Saudi Arabia. Is Obama trying to make good on one of his first presidential promises? Is this a part of crafting his legacy?

A significant part of Obama’s legacy will be his unwavering fealty to Wall Street. The latest betrayal by the Obama administration has Senator Warren saying Enough is Enough:

Sen. Elizabeth Warren is not pleased that President Obama, once again, has called on a longtime Wall Street insider—especially one who has played a prominent role in controversial corporate “inversion” deals that allow U.S. companies to shed their nationality in the wake mergers—to take a powerful post at the Treasury Department.

Warren’s ire was raised by Obama’s nomination last week of Antonio Weiss, head of global investment banking for the financial giant Lazard, to become Under Secretary for Domestic Finance in his adminstration and the senator from Massachusetts said almost immediately that she would oppose the nomination. On Wednesday night, however, Warren made her disappointment—and not a little outrage—known in a piece published on the Huffington Post, saying that though she’s tried to “give deference” to the president over his choices for the economic team this latest choice goes too far. “Enough is enough,” she wrote.

Obama may be fixing the immigration status of millions living here illegally, lifting the cloud of fear hanging over their heads, but the people he picks to oversee economic policy ensures that the opportunities people who immigrate are seeking will remain unreachable for too many.

This is the result of failing to effectively punish the criminal behavior of top executives; this is the result of the Obama regime’s policy of too big to jail.

Regulators still need to appear to be doing their job, though, so there are low hanging fruit being picked off here and there. Alexis Goldstein, a former Wall Street cog turned activist, has a fascinating new post asking this question: Why Is a Wall Street Regulator Embracing “Broken Windows” Theory?

4&20 regulars are probably familiar with Broken Windows Theory as it relates to policing because I’ve put out posts like this one and this one.

As it applies to regulating the financial sector, Broken Windows keeps regulators busy with petty stuff while the real sharks and wolves continue their gluttonous predation. From the link:

If you look at the Securities and Exchange Commission’s (SEC) list of recent enforcement actions, it reads like a laundry list of small-time offenders. From penny stock promoters, to “pump and dump” schemers, to an unregistered broker in Tampa, everyone seems to be targeted by the SEC. Everyone, that is, except executives.

That’s because, under the leadership of Mary Jo White, the SEC has adopted a controversial enforcement strategy known as “broken windows.” The theory argues that if one broken window goes unrepaired, soon all windows will be broken, because letting petty crimes go unpunished will evidence that the community doesn’t care about disorder. But the strategy — traditionally employed in the policing of street crime — has shown itself over the years to be incredibly controversial.

White took over the SEC in April 2013, entering the agency at a time when many had lost confidence in their capacity and will to pursue financial crisis-era violations. In fact, given her background as a prosecutor, many held out hope that White’s tenure would usher in a new era where the agency would be tough-on-crime, with the incoming Chair promising Senators a “bold and unrelenting” focus on enforcement, should she be confirmed.

In the intervening time, White appears to have fulfilled her “bold and unrelenting” promise in a peculiar way: instead of prosecuting widespread, systemic frauds at the nation’s largest financial institutions, the SEC has instead embraced a persistent focus on low-level offenders. Given how harshly the SEC has been criticized for their failure to hold elites accountable, why would the agency use a failed and racially coded approach to securities law enforcement?

Good question, Alexis. As Obama begins crafting his legacy in earnest, will the economic tune remain the same?

  1. Laws, wether it be our current Emperor or SEC regulators, are for the little people.

  2. steve kelly

    “Contrary to accepted premise – that radical dissent demonstrates a personality disorder – the opposite could be true: in the face of severe injustice a refusal to dissent is the sign of a character flaw or moral failure.” – Paul Street

      • steve kelly

        Washington Post is your source? That’s your story and you’re sticking to it?

        My understanding of oil markets: Oil (bitumen in this case) is a global commodity, dictated more or less by global supply and demand, priced accordingly, and distributed wherever demand may be supplied profitably. Agreed?

        So, what difference does it make where processed bitumen is sold?

        The primary complaint is directed at “externalized” cumulative environmental destruction/pollution associated with extracting, transporting, processing, and ultimately burning the final product. These are real costs not calculated or assigned to most extractive activities — wrongly in my opinion. Costs exceed net public benefits in this case.

        Did I lose you somewhere? I tried to be succinct.

        • Just once you guys should try some intellectual honesty stating exactly what’s wrong with a source rather than lazily casting a broad net.

          That said after reading the WP piece you’d come to realize that the Texas refineries will reduce the “cumulative” effects by processing piped crude rather than accepting imports from afar.

          • Just once, Swede, I wish you would show some intellectual honesty and stop imagining that your authoritative sources trump all others. That’s the biggest problem with you after confirmation bias, that you don’t trust your own intellect and instead parrot others, especially biased right wing sources, to an embarrassing degree.

            • Just the oner day you said the Bakken would run out of oil because of something John H. said.

              What a joke, John doesn’t know anything about Bakken oil. Harold Ham, whom I quoted made the Bakken. And now your precious govt. have revised their numbers up to his because of the continuing volume increases combined with advancing tech.

              You’re a retired bean counter who consumes literary garbage on a constant basis. You have no opinions which can’t be overridden by industry analysts, leaders, or owners.

              What was that saying? “Garbage in garbage out”.

            • John was a little more nuanced, as he’s been through a boom or two. He said the money was being made above ground. The decline on those wells is steep, so that they have to continue drilling at a feverish pace to maintain production. Production costs are very high. ConocoPhillips indeed did opt not to pipeline there due to grim prospects. It is not that the production and drilling will not continue, but rather only that it is not a panacea.

              I know a little bit about the business, having been in it since 1974. I am no expert, but did not rely solely on John’s viewpoint. I’ve seen those T-shirts that say “Lord grant us another boom. We promise not to screw it up.”

              I am, like just about everyone you torment with your shallow links and parroted garbage, just someone who thinks, reads, reflects. You on the other had are basically illiterate. This comes through in your inability to read through a post before “commenting” – supplying visual links, as you did here. You are not well read, have no depth, rely on experts who you do not have the depth to question, and never, for even a second, self reflect. You’re an ass.

          • steve kelly

            Never said anything was wrong with your source.

            I must assume that Texas refineries will process any crude that will make them profit. The article did say imports from Mexico and Venezuela were down, but did not say whether or not that was a temporary or permanent condition. I might add that the distance from Canada’s Tar Sands to the Gulf Coast is “afar” too.

            You may be right about piped crude reducing cumulative effects, however slightly, however insignificantly, when considering the process as a whole. The pipe, giving credit to it’s potential environmental benefits, still does nothing to offset or reverse the overwhelmingly negative net public benefit. I will spare you an analogy.

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