Given the virus of corruption that seems to have infected the financial community (http://goo.gl/vJ5jQ), is it possible that Sarbanes-Oxley, Dodd-Frank and other regulations are not strict enough to bring this contagion under control? American’s trust in our banks and financial institutions is at an all-time low, with confidence at 21% in a recent Gallop poll (though not as low as Congress at 13%). In 2007, prior to the recession, confidence in the banks was at 41%, which was not exactly a rousing endorsement.
It seems that new evidence of corrupt behavior at banks and financial institutions, here and abroad, surfaces every day, making one wonder if the regulations in place are stringent enough to control the miscreants who infest the financial industry. Indeed, in another recent survey, 26% of senior executives in the US and UK noted that they had seen or had firsthand knowledge of corrupt conduct in the workplace. (http://goo.gl/i0xAS) And 24% reported they believed that professionals in the financial services industry may need to engage in unethical or illegal conduct in order to be successful. These numbers are symptomatic of a culture in the financial industry that says anything goes to make money.
The problem with LIBOR manipulation by Barclay’s Bank that was revealed recently has not fully played out yet. This activity apparently involved multiple other major banks both in the U.S. and abroad. These institutions illegally fixed LIBOR to improve their own profits, disregarding the fact they were bilking customers and investors. Other illegal behavior disclosed last week includes HSBC’s money-laundering activities in America. And Peregrine Financial in Iowa was found to have stolen over $200 million from its customers.
Though Barclay’s paid a $450 million fine for its illegal conduct, no criminal actions have yet been pursued against its executives or any of the employees involved in the rate manipulation. Unfortunately, this has been the pattern of the Justice Department and the government regulatory agencies. The institutions who have contravened the law pay fines and the executives do not go to prison. Financial establishments merely see this as a cost of doing business and it generally has little impact on their bottom lines and does not change their conduct.
This happened previously with the corrupt mortgage loans by the banks and the bundling of sub-prime mortgages together for investment vehicles. None of the executives of the banks or financial institutions that urged or condoned these activities were criminally charged, though the institutions and some of the executives had to pay monetary penalties. While the government has aggressively pursued some insider trading and sent some of those involved to jail, it has not done the same for other institutional financial crimes.
Until the executives of the banks and financial institutions know they will face prison time for unlawful activities, they will continue, the fines inconsequential to these establishments that are too big to fail. The problems are not the laws in place but the failure to criminally enforce them
Resurrecting Democracy
A VietNam vet and a Columbia history major who became a medical doctor, Bob Levine has watched the evolution of American politics over the past 40 years with increasing alarm. He knows he’s not alone. Partisan grid-lock, massive cash contributions and even more massive expenditures on lobbyists have undermined real democracy, and there is more than just a whiff of corruption emanating from Washington. If the nation is to overcome lockstep partisanship, restore growth to the economy and bring its debt under control, Levine argues that it will require a strong centrist third party to bring about the necessary reforms. Levine’s previous book, Shock Therapy For the American Health Care System took a realist approach to health care from a physician’s informed point of view; Resurrecting Democracy takes a similar pragmatic approach, putting aside ideology and taking a hard look at facts on the ground. In his latest book, Levine shines a light that cuts through the miasma of party propaganda and reactionary thinking, and reveals a new path for American politics. This post is cross posted from his blog.
Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020