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OpEdNews Op Eds    H1'ed 2/28/11

TheTen Reasons The Banksters Get Away With Fraud

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Message Danny Schechter

Personalizing bad guys makes for good TV without offering a real explanation.

When financial institutions and services became the dominant economic sector, they, effectively, took over the political system to fortify their power. It was a done incrementally, over years, with savvy, foresight and malice.

First, many of those who might later be charged with financial crimes and criminal fraud invested in lobbying and generous political donations to insure that tough regulations and enforcement were neutered before the housing bubble they promoted took off.

They did so in the aftermath of the jailing of hundreds of bankers after the S&L crisis, to guarantee that could never happen again when the next crisis hit.

In effect, their deregulation strategy also deliberately    "decriminalized" the environment to make sure that practices that led to high profits and low accountability would be permissible and permitted.

Presto: The once illegal soon became "legal."

The cops and watchdogs were taken off the beat. Anticipating and restraints, they engineered a low-risk crime scene in the way the Pentagon systematically prepares its battlefields. This permitted illicit practices, to be encouraged by CEOs in a variety of control frauds to keep profits up so that the executives could extract more revenue with obscene bonuses and compensation schemes.

Today's proposed Republican cutbacks for the funding of regulatory bodies aims to undercut recently passed financial reforms. Warns one Commissioner of the Commodity Futures Trading Commission, if the budget is slashed, "there would essentially be no cop on the beat...we could once again risk another calamitous disintegration." He added, according to a New York Times report, "the process will mean nothing, squat, diddley " if we get cut we're going to be in a world of hurt." The GOP knows exactly what the intended consequences of its plans are.

Second , the industry invented, advertised and rationalized exotic financial instruments as forward looking "innovation" and "modernization" to disguise their intent while enhancing their field or maneuver. This was part of creating a shadow banking system operating below the radar of effective monitoring and regulation. There was no focus on controlling the out of control power of the leverage-hungry gamblers at unregulated hedge funds.

Third , the industry promulgated economic theories and ideologies that won the backing of the economics profession which largely did not see the crisis coming, making those who favored a crackdown on fraud appear unfashionable and out of date. As economist James Galbraith testified to Congress:

""The study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft-pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the dot.com bubble. They continue to do so now."

Foxes guarding the chicken coop

Fourth , prominent members of the financial services industry were appointed to top positions in the government agencies that should have cracked down on financial crime, but instead looked the other way. The foxes were indeed guarding the chicken coop guiding institutions that tolerated, if not enabled, an environment of criminality.

Alan Greenspan and Ben Bernanke were repeatedly warned by underlings at the Federal Reserve Bank about pervasive predatory practices in the mortgage and Subprime markets and they chose to do nothing. Now Greenspan acknowledges pervasive fraud but decries the lack of enforcement while Bernanke wants to run a Consumer Protection Agency after ignoring consumer complaints for years. Even as the FBI denounced "an epidemic of mortgage fraud" in 2004, their white-collar crime units were downsized.

Fifth, the media was complicit, seduced, bought off and compromised. As the housing bubble mushroomed in the very period that the media was forced to downsize, dodgy lenders and credit card companies pumped billions into advertising in radio, television and the internet almost insuring that there would no undue media investigations Financial journalists increasingly embedded themselves in the culture and narrative of Wall Street by hyping stocks and CEOs\

The "guests" routinely chosen by media outlets to explain the crisis were often part of it, charges Jim Hightower, "Many of the "experts' whom I read or see on TV seem clueless, full of hot air. Many of their predictions turn out wrong even when they seem so self-assured and well-informed in making them."

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News Dissector Danny Schechter is blogger in chief at Mediachannel.Org He is the author of PLUNDER: Investigating Our Economic Calamity (Cosimo Books) available at Amazon.com. See Newsdisssector.org/store.htm.
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