Wall Street's Scams, Lies and Frauds

By Danny Schechter, AlterNet. Posted May 26, 2009.

So many of us know in detail about all the false warnings and exaggerated claims that were used to justify the war in Iraq.

By now, six years later, and after many books, reports, news stories and films (hopefully including my two books and film, Weapons of Mass Deception), we see the pattern of lies and deception. We realize what a fraud was committed against the American people and what its consequences have been for the people of this country, Iraq and Afghanistan.

For many of the righteous among us who thunder against these lies, there seems to be a lack of curiosity about the costly frauds that flushed our economy down the toilet. Here too, there is a tendency to focus blame on politrick(ian)s, and not look at the larger fraud behind the fraud, in part, because most economists and media outlets minimize its role.

First, it's clear that, like on the war, government officials did mislead us, from original deregulators in the Carter-Reagan years to the financial "modernizers of the Clinton-Bush 2 era with their refusal to accept responsibility for the consequences of their free-market fantasies, the gutting of rules and regulations and embrace of a phony 'ownership society.' "

It is also now easy to blame the now self-admitted "naivete" of Fedhead Alan Greenspan or the continued arrogance and bluster of Democrat-turned-Republican Texas Sen. Phil Gramm, who killed the Glass-Steagall Act and called fighters against predatory lenders "terrorists."

It is equally easy to scorn those who claim that our government is a "tyranny" and call Obama a flaming socialist.

Flash back with me now to March 2007, just a few months before the markets melted down. Slate reported then on testimony by the two top economy watchers in America. They insisted that problems that were unleashed like a tsunami had been "contained."

"Testifying on March 28, Ben Bernanke said, 'At this juncture … the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.' The same day, Treasury Secretary Henry Paulson told the House of Representatives that 'from the standpoint of the overall economy, my bottom line is we're watching it closely but it appears to be contained.' "

In May, Bernanke returned to the containment theme, saying, "we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system." A few weeks later, he reiterated that "the troubles in the subprime sector seem unlikely to seriously spill over to the broader economy or the financial system."

On July 26, Paulson told Bloomberg, "I don't think it [the subprime mess] poses any threat to the overall economy." In China a week later, he revised and extended his remarks: "I also said I thought in an economy as diverse and healthy as this that losses may occur in a number of institutions, but that overall this is contained, and we have a healthy economy."

Duh? Wrong, wrong, wrong.

But, before you dismiss these two geniuses as dunderheads, let’s consider what they knew or should have known. Or perhaps, like their counterparts in the Pentagon, they were blinded by their own assumptions and false "intelligence."

As people with a strong memories of our volatile history of financial crises, they know it’s not the just the government that should be indicted -- it’s the irrational system it upholds.

At that time, and for years leading up to the popping of an artificially created bubble, there was a white-collar crime wave under way with large-scale corporate fraud that was duly reported and duly ignored.

In 2004, the FBI first reported publicly on an "epidemic" of mortgage fraud that had been going on for years, charging 80 percent of the losses were the result of deceptive practices by lenders backed by our biggest financial institutions.

Criminologist William K. Black, a former bank regulator and expert on crimes committed by the men at the top -- so-called control frauds referencing the practices of CEOS in control at big corporations -- studied these reports, pointing out that by 2008 there were only 62,000 "criminal referrals" in this industry with only agencies reporting crimes "mandated" by law to do so.

See more stories tagged with: economy, obama, wall street, financial crisis

Danny Schechter writes the News Dissector blog for Media Channel. His latest book is Plunder: Investigating Our Economic Calamity (Cosimo Books).

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