It’s almost comforting to find a spate of financial scandals which involve simple, easy-to-understand illegal and unethical behavior, after all these years rummaging around in synthetic mezzanine collateralized debt obligations and the like. Three have particular salience right now:
There are lots of different flavors of wrongdoing in the world of finance. At companies like Enron, it’s illegal and extremely complicated. With individuals like Bernie Madoff, the scheme can be large and complex, but at heart the idea is pretty simple. And at banks like Goldman Sachs and Citigroup, which are paying the SEC hundreds of millions of dollars to settle charges that they did bad things in the synthetic CDO market, there’s an ongoing debate about whether their actions were wrong or illegal at all, and a huge chunk of Wall Street continues to believe that they weren’t.
With these latest allegations, however, we’re moving back to the kind of obvious wrongdoing uncovered by Ferdinand Pecora in the early 1930s. The world of global finance has certainly become more sophisticated and complex since those days, but the easy and obvious graft never disappears.
Paying SEC fines and settlements is but a cost of doing business. By rarely, if ever, prosecuting even the most egregious criminal behavior the powers that be undermine their own regulations. Financial punishments for financial crimes are just a tax, and tax rates won’t stop people from trying to make money.
On a smaller scale, it reminds me of the local walmart paying the fine every year for filling in a wetland instead of building a smaller parking lot.
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