This fall will mark the five-year anniversary of Lehman Brothers filing for bankruptcy, sparking the biggest financial crisis since the Great Depression. When the anniversary hits, many legal experts agree, any chance federal prosecutors will have had to hold Wall Street accountable will have come and gone with the passing of the statute of limitations.
So is Wall Street breathing a sigh of relief?
In The Untouchables, which re-airs tonight on FRONTLINE (check local listings), correspondent Martin Smith examines why not one major Wall Street executive has been prosecuted for fraud tied to the sale of bad mortgages.
Many of the same issues examined in the film will take center stage tomorrow during a hearing of a House Financial Services Subcommittee. Among the questions expected to come up is which outside experts the Justice Department consults with when considering whether to prosecute large financial institutions.
That question first drew the attention of lawmakers shortly after the The Untouchables premiered. A week after the film, Senators Sherrod Brown (D-Ohio) and Chuck Grassley (R-Iowa) sent a letter to Attorney General Eric Holder asking whether the “too big to fail” status of some banks undermines the government’s ability to prosecute wrongdoing.
The letter cited remarks made in the above excerpt from the film by Lanny Breuer, the former head of the Justice Department’s criminal division. Breuer told FRONTLINE:
Category Archives: Financial Crisis
When is the economic collapse going to happen? Just open up your eyes and take a look around the globe. The next wave of the economic collapse may not have reached Wall Street yet, but it is already deeply affecting billions of lives all over the planet. Much of Europe has already descended into a deep economic depression, very disturbing economic data is coming out of the second and third largest economies on the globe (China and Japan), and in most of the world economic inequality is growing even though 80 percent of the global population already lives on less than $10 a day. Just because the Dow has been setting brand new all-time records lately does not mean that everything is okay. Remember, a bubble is always the biggest right before it bursts. The next major wave of the economic collapse is already sweeping across Europe and Asia and it is going to devastate the United States as well. I hope that you are ready.
The following are 10 scenes from the economic collapse that is sweeping across the planet…
Faber: “What was the trigger of the ‘87 crash when markets fell 21 per cent in one day? What was the trigger of the Nasdaq crash in 2000? What was the trigger of Japanese crash of 1989? What was trigger of 2007 crash that brought global stocks down 50 per cent? We don’t know these things ahead of time, but something will always move markets up and something will always move them down. I would guess at the present time, given markets from the 2009 lows have in many cases increased by as much as 100 per cent, that they are no longer very cheap. …. Something could come along, geopolitically or otherwise. I would be very careful being overweight equities. I still have 25 per cent in equities and 25 per cent in corporate bonds.”
“In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality … Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.
“Something will break very bad.”
ALBERT EDWARDS: The Party Is Over, The US Is Just One Recession Away From Japan-Style Doom – Business Insider
Here’s your happy thought of the day from SocGen strategist Albert Edwards:
Over the last 15 years most investors have refused to contemplate that events in the West are playing out in a similar fashion to Japan in the 1990s. But the latest inflation data out of both the US and eurozone should ram home the fact that we are now only one short recession away from Japanese-style outright deflation. Similarly, investors refuse to believe that equities can fall in an environment of rampant QE. They are wrong.
Basically, we’re so close to deflation, that all it will take is another downturn, and we’ll be toast.
Too big to fail. Interest rates. Borrowing. Fire-sales. The Flash Crash. Risky loan deals. Libor. Cyber attacks. Europe. Japan. China.
Cattle plague was not on the list.
On Thursday, the super council of bank regulators created after the financial crisis put out a list of their best guesses as to what could cause the next financial crisis. The most surprising thing about the list: It’s length.
That alone should be enough to rattle your faith in Dodd-Frank, the set of banking regulations that were passed in 2010. Nearly three years later, the number of things that could blow up the financial system still seems way too high.
The overhang of debt in Europe and the US has made recovery from the global financial crisis particularly tenuous.
Is there a dramatic and simple way out of all this? Some argue that there is: a “debt jubilee”. Drawn from the Old Testament book of Deuteronomy, the concept derives from the biblical injunction for a day of rest one day out of every week, a “sabbath” day that reflects the teaching the God rested on the seventh day after creating the world in six.
There is another injunction for a sabbath year every seventh year, in which people are to not work and on the year after the seventh of those sabbatical years , i.e. the 50th, (one year after the 49th) there would be a jubilee year during which any slaves would be emancipated and everyone would return to their land and family to live off of natural providence. A clear implication of this teaching is that all obligations, including debt obligations, would be forgiven in the process.
A debt jubilee is equivalent to democratic elections in the economy. Both represent controlled burns or controlled collapses. Since collapses will always happen in societies, the best way to handle them is regular controlled collapses. In governance that would be elections. In the economy that would be automatic debt release at timed intervals.
I cover this issue in more detail here: How to Build a Better Economic Model | 1913 Intel.
The euro-zone crisis has slipped off the radar screen during the past couple of weeks as gun control and the Boston bombers have dominated U.S. news. But none of the euro zone’s problems have gone away. Political crises beset France, Italy and Spain. Smaller countries, from Portugal to Cyprus, face even more pressing financial troubles. Germany grows less and less willing to foot the bill for bailouts. And for the first time, serious public figures in Europe have begun openly discussing the pros and cons of allowing countries to default on their national debt.
There is, in fact, a historical case for tolerating default. …