My Idea of Man of the Year, 2011.

I know a guy who is a big fan of synchronicity, the simultaneous convergence of related events. There’s more than a little “tin-foil hat” to him, which is a way of saying I don’t agree that a streetlight flickering out as you drive by is a sure sign of approaching Armageddon. But … there is synchronicity/convergence I can believe it, and there has been some very intriguing, interrelated stuff going down in the past few days.

The key event centers around my idea of a modern hero, Federal Judge Jed Rakoff. Rakoff has been assigned the (latest) SEC case against CitiGroup for what by all appearances, smells, waddles and quacks is gross fraud, this time in (one of) their flagrant gaming schemes during the sub-prime crisis. In a nutshell, Rakoff has had enough of of the business-as-usual legal conclusion wherein plaintiffs the size of Citigroup “neither admit nor deny” the charges for which they are paying what to laymen seem like a gargantuan fines … $285 million in this case. Noting that $285 million is “pocket change” to something like Citigroup, (which no doubt calculates possible SEC fines into every large “play”), Rakoff is requiring the case to go to open court, so that both the public at large and potential civil litigants can understand what in the hell actually happened, and …. possibly … prevent it from happening again.

Like most of Wall Street, CitiGroup is a “recidivist” in these kinds of cases. You may remember Goldman Sachs paying out $550 million in a similar “neither admit nor deny” settlement.

Said the Judge yesterday, “In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth.”

Without question, the good judge and the entire surrounding federal court apparatus will be under intense behind-the-scenes pressure to move off this position and accept the standard “neither admit nor deny” scenario. For its part the SEC explains that, according to its rules, it has no other choice but to accept these muzzled settlements … but that it again is appealing to … Congress … to change its charter and allow it to respond more aggressively, and require more transparency.

Well, you can imagine who will be ramming a pipe wrench into the gearwork of that plea. To a certain faction of Congress Citigroup counts as a “job creator” and legislation that requires transparency from them, and leaves them far more vulnerable to civil suits, amounts to “class warfare”.

Here’s a collection of New York Times stories on Judge Rakoff.

Now, the synchronicity parts to this story for me include the following:

The Times story on the tax avoidance strategies of the Estee Lauder estate. In it we see — again — how thanks to heavily lobbied tax “advantages” the super-wealthy access loopholes of no value to other citizens … who don’t happen to have their hands on $100 million or more. The story lays out the blizzard of trusts, off-shore tax havens, based-in-Bermuda investment offices, etc. all designed to avoid transparency. The Lauder family’s rationale? Avoiding payment of tens of millions of dollars in taxes and driving their effective tax rate down to far less than, well, Warren Buffett’s secretary.

A la Judge Rakoff, dragging this kind of thing out into the light of day embarrasses both the Lauder estate and the IRS into applying some kind of corrective justice, and … adds fuel both to the essence of the OccupyWallStreet movement and the growing awareness among the middle-class of the flagrant redistribution of wealth (“class warfare”!) lobbied into the US tax system.

Next, there is the looming departure of Barney Frank, and the glee he took in Monday’s press conference laying into the forces — read “job creator” protecting Republicans and Blue Dog Democrats — working overtime to suck effective oversight and … transparency, out of the Dodd-Frank financial reform act. The fact that anyone, even someone with a national radio show, can plausibly argue that Barney Frank was the key to the meltdown of Wall Street’s sub-prime casino says a lot about how little transparency has been allowed to bleed out of the disaster, largely because of astonishing amounts of money from giant banks and hedge funds, etc.. into Congressional PACs.

Franks says that considering the full-obstruction mode of Congressional Republicans he’ll be better able to make changes outside of actual government. Which is another reason why Jed Rakoff is a hero.

Congress as it is, (and as it will remain, thanks to partisan gerrymandering), is incapable of offering anything remotely resembling a full explanation of any disaster to the public, much less one involving the source of their “mother’s milk” … corporate contributions.

Far better is a high-profile public trial, rich in discovery and cross-examination, with a high likelihood of additional, accelerated, aggressive civil suits to follow. Hell, spread it around and start a half-dozen of these things simultaneously, just to see how well Wall Street attorneys can coordinate their strategies for opacity.

So Judge Rakoff, here’s to you. Right now, you’re the man. But if I were you I’d be getting my big boy pants on, because forces mostly unseen by the public will be coming after you.

Oh, and this just in … from reporter David Phelps in this morning’s Star Tribune; “Minneapolis investment adviser Feltl & Co. was fined $50,000 Monday by the Securities and Exchange Commission (SEC) and ordered to return $142,000 to some of its advisory customers for failing to maintain adequate compliance and ethics codes at the firm.

The findings were contained in a cease-and-desist order in which Feltl agreed to take the appropriate steps to comply with SEC rules and the Investment Advisers Act. As part of the order, Feltl neither admitted nor denied the findings.”

10 thoughts on “My Idea of Man of the Year, 2011.

  1. Newt says:

    You would be hard pressed to find a crook (whether in Congress or one Wall Street) more complicit in America’s fiscal collapse than Barney Frank. The sooner that whore leaves government, the sooner we have a shot at recovery.

  2. tombartel622 says:

    The basic problem with the SEC is that they have a limited amount of lawyers, as opposed to the people they regulate. They’re, quite simply, outgunned. They can’t afford to take a case all the way. But, until they do, every thief will just count their fines as “cost of doing business” and keep it up.

  3. john sherman says:

    Nick Hanauer, a godzillionaire, writes in Bloomberg how for the good of the economy, people like him should be taxed a lot more and the rest of us taxed a lot less: http://www.bloomberg.com/news2011-12-01/raise-taxes-on-the-rich-to

    The problem is that no matter what the trial uncovers, the media coverage will be lousy. In the first place, the media is incapable of covering a story more complex than Herman Cain’s zipper. A fair amount of the coverage will be in the tank from the get go; the financial press has a long record of sucking up to the malefactors.

    Whatever happens we’re still screwed unless there’s some way of reversing Buckley and Citizens United wherein all those strict constructionist orginalists on the Supreme Court discovered that when the founders said people, they meant corporations.

    Still, I think it is worth fighting for transparency; I notice a drumbeat of conservative argument around the anti gay marriage amendment holding that the people funding the campaign should be able to do so anonymously. I know my copy of the Constitution isn’t the same as the one conservatives own, but mine doesn’t say anything about the right of speech to be anonymous. And in Doe v. Reed (2009) the Supremes treated that idea with a certain amount of disdain.

    1. And note Freedom Works, etc. campaigning for limiting even what little disclosure there is to Super PAC contributions … again, as you say, on the rationale that contributors would be victimized by critics.

      1. john sherman says:

        You notice what they mean by victimization; it’s not that somebody is going to firebomb offices or shoot staff (only the right-to-lifers get to do that), but that people may chose to buy their goods and services elsewhere. Kersten in the strib instanced the possibility that someone might change dentists on learning his current dentist was a homophobe as an example of victimization. Consumers (and shareholders) have no right, in the conservative world, to information which they might, or might not, find useful in making economic decisions.

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