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A SMALL PIECE OF WALL STREET FINALLY COMES TO TRIAL
Independent, UK - Amidst the economic wreckage, after 7 million job losses and approaching 2 million home foreclosures in the US alone, with businesses and consumers around the world still struggling to get finance after the long credit crunch, Wall Street is finally on trial. A little piece of Wall Street, at least.
In the first major case against bankers at the heart of the financial meltdown, a jury of 12 mainly working-class New Yorkers will decide the fate of the two Bear Stearns managers whose hedge funds imploded in 2007, signaling the start of the crisis. Ralph Cioffi, 53, and Matt Tannin, 48, pocketed millions of dollars in pay during the boom years, but the events of 2007 left their investors nursing losses of $1.6bn and ruined forever the reputation of Bear Stearns, one of the oldest investment banks on Wall Street.
Dressed as if for a funeral, the pair sat impassively in the brightly lit courtroom in downtown Brooklyn yesterday as assistant US attorney Patrick Sinclair recounted what he said was a litany of lies that they told to investors. The two men were desperate to stop investors deserting their funds when the sub-prime mortgage market began to plunge, Mr Sinclair said. Mr Cioffi alone was paid $32m in the two years before the funds collapsed.
They "violated a special relationship of trust" between fund managers and investors, he added. "They lied to investors to save their multimillion dollar bonuses. In the US, that is a crime, a serious crime. It's called securities fraud." The prosecution plans to lean heavily on private emails written by the men which suggest they knew much earlier that the sub-prime market was – in a word used by Mr Tannin – "toast". Yet the men glossed over the situation and deceived investors in two ways, it is alleged.
First, Mr Tannin said he was putting more of his own money into the funds, when in fact he did not invest a single cent of the $1m that was available in his bank account. Mr Cioffi, meanwhile, secretly withdrew $2m of his money. Second, Mr Cioffi denied any major investor was planning to pull out, when he had already received a major redemption request.
In the first major case against bankers at the heart of the financial meltdown, a jury of 12 mainly working-class New Yorkers will decide the fate of the two Bear Stearns managers whose hedge funds imploded in 2007, signaling the start of the crisis. Ralph Cioffi, 53, and Matt Tannin, 48, pocketed millions of dollars in pay during the boom years, but the events of 2007 left their investors nursing losses of $1.6bn and ruined forever the reputation of Bear Stearns, one of the oldest investment banks on Wall Street.
Dressed as if for a funeral, the pair sat impassively in the brightly lit courtroom in downtown Brooklyn yesterday as assistant US attorney Patrick Sinclair recounted what he said was a litany of lies that they told to investors. The two men were desperate to stop investors deserting their funds when the sub-prime mortgage market began to plunge, Mr Sinclair said. Mr Cioffi alone was paid $32m in the two years before the funds collapsed.
They "violated a special relationship of trust" between fund managers and investors, he added. "They lied to investors to save their multimillion dollar bonuses. In the US, that is a crime, a serious crime. It's called securities fraud." The prosecution plans to lean heavily on private emails written by the men which suggest they knew much earlier that the sub-prime market was – in a word used by Mr Tannin – "toast". Yet the men glossed over the situation and deceived investors in two ways, it is alleged.
First, Mr Tannin said he was putting more of his own money into the funds, when in fact he did not invest a single cent of the $1m that was available in his bank account. Mr Cioffi, meanwhile, secretly withdrew $2m of his money. Second, Mr Cioffi denied any major investor was planning to pull out, when he had already received a major redemption request.
2 Comments:
Where were the regulators and the accountants. They, too, are culpable! Are they to be tried also? And, all the while our Congressional Neros fiddled and fibbed. It's no wonder the voters are angry, enraged, and cynical.
Of course, there are a few elements that happened to make that economic 'perfect storm' happen.
First, Dubya's administration with its massive tax breaks, war mongering, and payouts to theocratic wonks doubled the long-term National Debt, caused the U.S. Dollar to be devalued, and caused foreign investors to start looking for more stable places.
Second, Congress' demand to banks that sub-prime loans be available to lower income people.
Third, Lenders loaning money for 125% of the home value.
Forth, the actual worst element, was to sell sub-prime loan paper bundled as high-quality investments.
This forth item seems just as bad as what Tannin and Cioffi did, only more 'Institutional' and therefore affected more people both here and abroad.
Why is it that we only 'go after' some poor (or not-so poor) slob, rather than getting management people that set policy. Sure, we all say "The pen is mightier than the sword", but we don't seem to care what people do with them... as long as the right people make some profit.
I liked that article about Economic Populism a few days ago, maybe what we need is to get people elected in Washington that express opinions in favor of limiting the upward flow of money, and of course better campaign financing regulations.
-DaTheorist
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