The “Chicken(expletive) Club”

By James Kwak

Update: See notes in bold below.

The only “Wall Street” “executive” to go to jail for the financial crisis was Kareem Serageldin, the head of a trading desk at Credit Suisse, according to Jesse Eisinger in a recent article. Serageldin pleaded guilty to—get this—holding mortgage-backed securities at artificially high marks in order to minimize reported losses on his trading portfolio.

Now if that’s a crime, there are a lot of other people who are guilty of it. In fact, a major premise of the federal government’s crisis response strategy was exactly that: allowing banks to keep assets at inflated marks in order to pretend they were solvent when they weren’t. FASB changed its rules in April 2009 in order to make it easier for banks to inflate their marks. And the Obama administration’s “homeowner relief program” was designed to allow banks to delay realizing losses on their mortgage loans by dragging out—but generally not preventing—foreclosures. (Remember “foam the runway”?)

Combine Serageldin’s story with the story of the vigorous prosecution of Abacus Federal Savings Bank—a little Chinatown bank that, if anything, was probably allowing its borrowers to underreport their income on loan applications—which Matt Taibbi tells in the first chapter of his latest book, and the picture you get isn’t pretty. It’s a picture of the immense resources of the American criminal justice system being deployed against bit players, with no consequences for the people responsible for the financial crisis. The judge in Serageldin’s case even called his conduct “a small piece of an overall evil climate within the bank and with many other banks.”

Eisinger’s article attempts to explain why the Justice Department hasn’t even tried to convict anyone at a bank with any significant responsibility. And it’s not like they haven’t been given the opportunity. What about Standard Chartered, where manually overtyping data fields to circumvent money laundering controls was a written procedure? According to Eisinger, it’s a combination of blowback from the Arthur Andersen conviction, lack of resources, lack of practice in prosecutions, and court cases disallowing some of the DOJ’s more aggressive tactics.

There are also the usual suspects. There is the Federal Reserve protecting the banks, warning the DOJ not to go after PNC Bank because of financial stability concerns. There is the revolving door: “According to numerous former criminal-division employees, [Lanny] Breuer almost immediately signaled his interest in bigger things.”

There is the thrill of the easy victory. Exhibit A: Preet Bharara’s 80–0 record in insider trading cases. As a former Southern District prosecutor said: “They made our careers, but they don’t change the world.” [I originally wrote that Bharara himself said this, but I misinterpreted the subject of the sentence in Eisinger's article.] By contrast, Eisinger quotes James Comey, a deputy attorney general in the second Bush administration: “We have a name for prosecutors who have never lost — the ‘Chicken(expletive) Club.'”

What’s missing is any reason to think things will change. Basically, everyone is well served by the current arrangement. Prosecutors rack up impressive winning records, the revolving door spins, and the banks continue doing what they do. Even as we amass more evidence of their basic incompetence and out-of-controlness, in the form of Lehman CFO Ian Lowitt saying the bank had $42 billion of liquidity—five days before it went bankrupt. “When Lowitt came to talk to Jenner & Block,” Eisinger continues, “he explained that he had not fully understood the issues when he assured investors of its liquid assets.” Not very reassuring.

26 responses to “The “Chicken(expletive) Club”

  1. Two (2) guys walk into a bar............

  2. anyone else notice that whites of European descent never seem to be those singled out for prosecution?

  3. It’s just these few players and the kings will just keep on rolling down money lane. We are reaching the point of full on corruption. In the future there will be the real laws for the many and nearly no laws for the insider group. The fact that the top 12 banks are still intact without divesting some of their divisions, assets, units is still surprising from a logical view, but not so much from a realistic view.

  4. rjs: as a white male of European descent – Yup, I noticed…:(.

  5. Reblogged this on A Keen Grasp of the Obvious and commented:
    Surprise!

  6. Some small fry must be prosecuted to save face. The real culprits are the powerful members of Congress, the Fed, and the banks which went along because they are supplicants to crony capitalism.

    Our recession was promoted by collapsing home prices and mortgage losses, after an extended period of government providing easy money and guarantees to support Fannie Mae, Freddie Mac, and the entire banking system. The government is still doing this. The bad housing policy was designed, encouraged, and required by government, mostly by Democrats.

    The government’s ability to issue guarantees is an unlimited, off-budget, extremely dangerous power. Guarantees were granted to Fannie Mae and Freddie Mac (among other institutions) above and below the table. They used these guarantees to borrow and lend massive capital resources. This power was used unwisely to build houses that could not be paid for. This has caused our financial crisis.

    We Guarantee It – The government’s housing policies caused the economic crisis

  7. Anonymouse

    Stick around Andy, I think it was more than that.

  8. One more time for the “D” students, the PLAN was always to “eliminate” the jobs that allowed people to “afford” the homes – scheesh, what r u people, stupid?

    The “new” aristocracy is nothing other than the “old” aristocracy that oozed up out of the slime of time from the Dark Ages to be “virtual” lice tormenting people’s pubis.

    NEVER bending my knee to the same ol’psychotic and depraved GLOBAL War, Drug and Slave Lords.

    Stop calling them “aristocrats” – they are liceforms.

    THEY TRASHED THE PLANET WITH INDUSTRIAL POLLUTION

    Keep driving yourselves insane with made-up majik juju political words all you want, you will never square the circle with this “math”

    Every HUMAN BEING has the right to make their lives less miserable through honest work (“sustainable” winners are peoples smart enough to figure out the man to land ratio AND STICK TO IT)

    being FORCED into believing that the “math” that allows any global “economy” to exist is:

    More misery for others = More $$$$ for ME ME ME

    And whackos get on their high horse mocking people who “believe” in a Creator….who “believes” their schtick??!! That without them twirling the FIAT paper or bitcoin or sea shells through their extracting algorithm cluster fck, there would be no “economy” among HUMAN BEINGS making their lives less miserable through HONEST WORK?

    Talk about “believing” in what PHYSICS will tell you is impossible!

    No one has power over you that you did not give them.

    Everyone had their fun with massive psychobabble blather knocking down the person they were jealous of since grammar school, or their ex, or whomever, to get more $$$$ for ME ME ME – now what? Their incompetence is EXTREME – they can’t even get a website up and running for people to enroll into “health care”….not that it matters, in reality. The website is not an app that you can wave your butt over and be “cured” of the poisoning from today’s sushi special – “Fuk-u-sima Tuna”…is it?

    When the liceform aristocracy WAVES their lawlessness in your face, what do their psychobabblists channeling voices in their head expect to be the “normal” reaction in return….??!!

  9. (NOT) Waiting for Hillary

    “The Sovereign Society was conceived in 1998 by a group of four uncompromising advocates of liberty and free markets. We felt strongly that individuals are born sovereign over themselves, not as chattels of governments.”

  10. BTC v TBTF

  11. You can’t water daily Main Street commerce with bitcoins, so it is just another scheme to keep currency away from where it needs to flow.

    And does the double-entry bookkeeping ledger account look like?!

    GOVERNMENT exists to protect the INDIVIDUAL against force and fraud.

    “Politics” built on shifting sands definitions for majik juju political words is NOISE. It’s nothing more than wandering around the “virtual” mental institution (AKA “internet”) listening to the “residents” concocting and then believing the biggest LIES ever – LIES that go against everything that people experience as “real” in the philosophic and physical aspects of life.

    I cannot experience “republican” or “democrat” – I can only experience HUMAN.

    What has changed in the secret bowels-of-hell “machine” that manufactures USA “presidents” since Hillary ran for Pres and LOST to Obambi?

    Nothing.

    Her crowning achievement, if she were to prove herself as an honest broker of “power”, would be to tell the same Saudi et al “dark money” that knocked her off her destiny to stuff it now.

    Heck, based on what MSM is populated with puerile snarky pundits (martha stewart-ing Putin!), who would be surprised if they go, instead, for a fascist good looking gay guy as Prez next….right?

    Remember who these “dark pool” nimrods are – they called me a schizoid feminist because I said that everyone must get into the game of “eliminating” jobs via technology – who wants to clean the puke off Vegas hotel toilets and hallways after “March Madness”?! So to throw people off the stench of their massive economic genocide, they seized the holier-than-thou bully pulpit by knocking out a “racist” basketball team owner….”Moses” calling me a schizoid feminist because my “start-up” is eliminating the JOB of mano et mano puke cleanups is okay, though, right? Because cleaning puke off toilets after the billion $$ “industry” of March Madness is the new climb of a “job” to the “middle class” for women immigrants…?

    I wage a JUST WAR against the “moses” CLASS….anyone too chicken to join me, get the $#*&% out of the way, especially the internet liceform lurking perverts who in “real” life are greedy, soulless, hedonistic hooligan Nihilists…male and female alike….

    http://en.wikipedia.org/wiki/Just_war_theory

    Got “metadata”?

  12. So to throw people off the stench of their massive economic genocide, they seized the holier-than-thou bully pulpit by knocking out a “racist” basketball team owner….”Moses” calling me a schizoid feminist because my “start-up” is eliminating the JOB of mano et mano puke cleanups is okay, though, right?

  13. http://rt.com/usa/156800-americans-economy-unemployed-work/

    And “investors” can’t find anything to invest in….?!

    USA business model, exporting worldwide NOW, is the “exceptional” leader because its economic genocide is the most efficient – took out 102 million “middle class”….

  14. I suspect the reason for no prosecutions is much more political. Yes, all these reasons are true – but an aggressive US AG would ride rough-shod over them. So why doesn’t Main Justice make this a priority? Because both parties are falling over themselves trying to lure Wall Street and its billions into their party as a permanent member of their coalition.

    The leaders of the Dems say to Wall Street, “the Republicans are a bunch of religious kooks and extractive industry billionaires. You want to be with us – with Tech and Hollywood. We’re the future.”

    The Republicans say, “we will do whatever you want whenever you want it – cut taxes, deregulate. And you can’t trust those Dems, what if Elizabeth Warren gets into power?”

    And both sides say, “Prosecute you guys for crimes? Heaven forfend! We would never be so rude to you!”

  15. Moses Herzog

    As a long-term commenter on this site I found two of my most recent comments were filtered on this blog. There were no vulgarities used (certainly nothing that would get a person in trouble with say, for example, the FCC). I guess Kwak only wants either nutjob talk that makes his posts seems highly cogent by comparison (Of which I’m sure Annie can provide him with a lifetime supply) or just hygienic talk like the Comptroller of the Currency perennially supplies the American Bankers Association.

    In the spirit of hygienic talk of which James Kwak apparently prefers I want everyone to know I think Pop Weaver Gourmet Microwave popcorn is quite tasty together with RedBull soda pop. Hope this doesn’t offend any young Koreans who no doubt have ALREADY learned any words their parents are currently attempting to shelter them from.

  16. BTC blockchain (bookkeeping)

    BTC disruptive? Possibly.

    BTC “revolutionary”? Hardly.

    Beta testing, continues.

  17. “Even as we amass more evidence of their basic incompetence and out-of-controlness, in the form of Lehman CFO Ian Lowitt saying the bank had $42 billion of liquidity—five days before it went bankrupt. “When Lowitt came to talk to Jenner & Block,” Eisinger continues, “he explained that he had not fully understood the issues when he assured investors of its liquid assets.” Not very reassuring.”

    ooopsie?

    Meanwhile, the burning issue for “moses” today are Korean parents retaining control over what their kids are taught…why he has proclaimed himself as someone who can critique Korean education with “authority”, no one knows….

    Anyone think RedBull is going to be around 50 years from now as a “liquid asset”? Probably only if they can add Corexit to it….

    “….bless me father for I have sinned….”

    but wait – they’re not “christians” in the Vatican….they’re a sex cult…..everyone knows that true medical research ended with the discovery of Viagra….

    bat sht crazy liceforms….oooopsie….

    http://www.washingtonpost.com/business/economy/no-company-is-too-big-to-jail-holder-says-of-justice-dept-probes/2014/05/05/e133e49c-d45f-11e3-aae8-c2d44bd79778_story.html

    Firing squads have been known to miss – yup, all of the shooters were unable to hit the target, go figure….when that amazing incident happened, you got it, the prisoner walked away and could never be brought up in front of another firing squad for the same crime….this AG should be just as entertaining….

  18. Anonymouse

    Now Moses, you know how I feel about Annie and her short comings, but I also believe you are about to get yourself (and others) into trouble as well, on a much grander and larger scale. Using wisdom to intentionally hurt someone has the troubling consequences already attached to it. And what you are not considering are the consequences of failure, some of which you may not even see, yet are ever present none the less. Start playing the catastrophic what if cards, with the rerun clause involved, and you will see life in a different light. Once there, you can see the end very clearly, but wish you could not feel it’s pain. I know when I’m getting played, and the joker aint the only fool, who will do anything for the queen. Plus you have a history of not wanting to put out unintentional fires. Start thinking cause there aint much time to prepare for the worst any MOORE.
    I’ll give ya a hint, next time she comes out in pairs and under different circumstances.

  19. SO OUT OF LINE….there ARE consequences, big time, coming:

    http://rt.com/usa/157164-israel-spying-us-industrial-secrets/

    And the continuing story about “unintended consequences” of pre-emptive war madness coming out of my childhood town (“Trenton Makes, The World Takes”) – Gen X sycophants are retards when it comes to right and wrong “for the greater good”…..remember the TIMING of this closing of lanes on the GWB – Sept 11 – press them Mkultra PSYCHObabble FEAR buttons:

    http://www.nj.com/politics/index.ssf/2014/05/former_christie_aide_testifies_in_bridge_scandal_hearing.html

    Just curious, what’s Boko Harem’s gun? A Kalishnikow? I can’t tell…

    http://www.mirror.co.uk/news/uk-news/boko-haram-329-schoolgirls-stolen-3489356

    Meanwhile, here’s Procol Harum :-))

  20. Whatever imagined or real shortcomings “annie”s have in the meager imagination of a religious economist, the truth is that no “annie” has the kind of spiritual or intellectual or ethical shortcoming that it takes to do this – from the article:

    “….Even as we amass more evidence of their basic incompetence and out-of-controlness, in the form of Lehman CFO Ian Lowitt saying the bank had $42 billion of liquidity—five days before it went bankrupt….“

    That’s criminal negligence, at the very least….

    But I guess men btch slapping women still gets their fellow monkey brains to BELIEVE that they’ve hidden their own “short come-ings”….

    NO ONE has the duty to tolerate that level of ECONOMIC incompetence.

    The DUTY is to remove the criminals and make the citizens financially whole again – ESPECIALLY when it is FIAT $$$$!

    Even the Swiss get it that there might be no other way than to give everyone a yearly stipend of FIAT $$$$ until the wheels start turning again like they are supposed to in order to answer the challenges of the current time – pollution taking out oceans and lands of food supply, extreme weather, overpopulation, and Global Nihilism (pre-emptive war).

  21. Anonymouse

    Your right Annie, we need a financial emancipation now, just like the slaves were going to need one one hundred and fifty one years ago. But today’s politicians (president?) don’t have the kahunas or the collateral to provide one to the slaves of money, because today’s money is backed by a cancer causing cocaine, (full faith and credit of) which has consumed all their time, energy and resources trying to reverse the side effects of something they won’t admit is occurring. They are caught in a hypocritical three ring circus ready to defend their beliefs to the death, preferably others because once your number one, their ain’t no other way to go but lights out, and that is the last option. So you see, annie s of the world, the solution will come from a God most people don’t believe in, and as such, will not be conscious of it’s arrival. The ultimate surprise.

  22. For the GLOBAL record, check into the history books for what cultures and countries NEVER went into Africa to get what they needed. Not all white men come from the same gene pool, that is a FACT.

    Introducing “slavery” into USA as LATE as the 19th century says it all about where the genetic inheritance of INCOMPETENCE in managing a FIRST WORLD economy came from, doesn’t it?

    BTW, God DELEGATES to human beings the task of taking care of the earth.

  23. Never mind women going on Shark Tank looking for “investment” in a self-cleaning toilet….an old fashioned deep hole in the ground outhouse would be “innovation”….

    http://www.huffingtonpost.com/2014/05/08/one-billion-open-defecation_n_5289049.html?utm_hp_ref=mostpopular

    Everything is an opportunity to “make $$$$” – set up surveillance and if it’s a good looking woman out in the open, a porn industry agent can get free talent – after all, someone who just took a Viagra needs a fetish boost to kick it in…

    from the article: “….”What is shocking in India is this picture of someone practising open defecation and in the other hand having a mobile phone,” said Maria Neira, director of Public Health at the WHO…..”.

    Keep investing y’all….

  24. The only way I see out of this is private prosecutions, which they still have in England. As long as the DOJ has a monopoly on prosecution, they can be bribed, and then get away with anything.