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New Rules Won't Be Enough

By       Message Stephen Pizzo     Permalink
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A few weeks ago my illustrious Inside Job co-author, Mary Fricker, rang me up and proposed that we come out of retirement with a follow up to our New York Times best selling book on the S&L debacle, Inside Job. This time we'd explain exactly what went wrong that led to the current financial implosion. For a moment, but just a moment, I was tempted. After all, Mary is, without equivocation, the best investigative reporter I had the pleasure to work with. If anyone could get to the bottom of this mess it's Mary, I thought.

But then I thought again. When I look back 25-years to when Mary and Paul Muolo and I were picking through the smoking wreckage of America's once vibrant thrift industry, we found what?

  • Politicians in both parties on the take from the thrift industry
  • Thrift regulators who were either out to lunch or out-classed by the crooks -- or both.
  • Once legit thrift operators who decided it was more personally profitable to break the few rules -- that had survived deregulation -- than to follow them.
  • And hundreds of thrift "customers/borrowers" who had all the moral fibre of the off-spring of Bernie Madoff and Bonnie Parker.

Then, when I looked at today's Wall Street/Big Bank mess what did I see?

  • Politicians in both parties on the take from the financial services industry
  • Regulators who were either out to lunch or out-classed by the crooks,-- or both.
  • Once legit financiers who decided it was more personally profitable to either break existing rules or circumvent them than to follow them.
  • And a virtual financial service food chain of Wall Street and bankers who differed from Bernie Madoff only because they are not behind bars.

So, here's the deal. No exposes and no amount of new regulations are going to prevent the next financial crisis until we stop treating this for what it is: Mega-Kleptomania. It's embezzlement, strong-armed robbery, blackmail, forgeries, perjury, elder-abuse, shoplifting on a cosmic scale. It's a crime wave of proportions that would have bankrupted smaller nations long ago -- and has finally bankrupted ours.

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When our S&L book came out in 1989 we started it with a stanza from a Woody Guthrie song about bank robber, Pretty Boy Floyd:

Yes, as through this world I've wandered
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.
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We stopped there because, as bad as the S&L meltdown was, the next stanza did not apply:

And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home.

Alas, these outlaws have outdone Pretty Boy Floyd -- and then some -- as foreclosures abound.

No, I'm not wasting my time exposing in another book the already exposed. I see the problem and it's not technical, it's very, very human. I remember being on a TV talk show once on the book tour along with some guy representing the accounting industry. Now, if you don't recall, major accounting firms aided and abetted S&L crooks like Charles Keating -- et al, cook their books. Asked what I saw as the solution to the corruption of accounting firms I said, "send a few of them to jail and it'll stop tomorrow." The guy from the accounting industry literally started to get out of his chair as literally shouted, "NO!" (Hmmmm seems to be nerve there.)

So, to wind up, new regulations are fine, but these amoral sociopaths will absolutely and positively find ways to break them, circumvent them or simply ignore them. When they do -- and they will -- don't bail them, JAIL THEM. Simple as that.

After about a hundred of these smug pin-stripped little bastards are playing drop the soap in federal prison, you'll see a sudden new and refreshing appreciation for compliance with financial services regulations.

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I'd bet the farm on it.

 

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Stephen Pizzo has been published everywhere from The New York Times to Mother Jones magazine. His book, Inside Job: The Looting of America's Savings and Loans, was nominated for a (more...)
 

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