Sunday, October 23, 2011

Occupy Wall Street is Important: for Justice, for Investors, and for Our Future

Having walked through Occupy San Diego last week, I must say that my in-person experience was not exactly inspiring. There were numerous tents set up and many people milling about with signs. What really caught my eye, was the food area. In it were homeless people who I recognized from my years seeing clients in the area. They had stopped by for lunch.

Unfortunately, there are media outlets that would take the above scenario and run with it: A bunch of out-of-work - probably drunk or high - miscreants hitting the all-you-can-eat at the local Occupy... What a joke - hippies giving out free tofu to a bunch of drunks, depriving neighborhood businesses of lunch-time traffic. That's going to hurt the local economy even more. OWS is essentially a group of stupid, lazy, cry-babies who are shooting themselves in the foot.

That would be dishonest reporting. But it is not far from what the Erin Burnetts of the world are doing. It is important to get beyond irresponsible journalism and to consider what OWS may be able to accomplish.

If you have spent the last few years wondering if it is possible for criminal bankers to have pulled off the greatest train-heist in history without repercussions, you are interested in what happens at Occupy Wall Street.

For the past 3 years, it has appeared as though the Jamie Dimons of the world, with the aid of the Robert Rubins of the world, were going to exit the crisis with their personal hundreds of millions of dollars intact, regardless of their having made that money by taking on risk on a scale that would threaten the world's economy. That's recklessness. And when you act recklessly and it damages other people, you are liable for damages. And, often, you are also liable for criminal sanction.

Of course, recklessness is insufficient to describe what the banks did leading up to the bailouts. Along with their recklessness, they committed fraud. Fraud, deceit perpetrated for profit, is always a criminal offense.

There is no secret as to why fraud has not been pursued; when you appoint or elect individuals who have no interest in pursuing criminal fraud charges, criminal fraud charges are not pursued. Had Bush or Obama been interested in pursuing bad guys on Wall Street, they would have brought in Bill Black. Bill Black is the most important individual who must be brought in to clean up the mess that the bailouts allowed to persist on Wall Street.

Bailing out banks and AIG and Freddie and Fannie reinforced the idea that executives and employees of those companies have no skin in the game - as in, they are perfectly situated to take massive risks, enjoy royalty-level rewards when things go well, and then socialize losses when the entire foreseeably-unsustainable frenzy of steroid-based (aka synthetic-derivative-based) finance comes crashing down.

Had we ring-fenced the banks and AIG, and allowed them to fail, it would still be necessary to prosecute the crimes that were committed. But it would not be quite so dangerous not to do so. Given the bailouts, the perps are still in positions of power. They are still dictating corporate culture and whether or not reckless behavior will be tolerated - or encouraged. They will eventually bring us back to the brink. It is just a matter of time.

Which brings us to Occupy Wall Street. Bush, as lead thinker for the Republican Party in 07 and 08, had the chance to pursue the crimes committed against America. He is a staunch conservative so he must have been devastated when we Americans socialized the losses of private banks. Oh wait... It was George W. Bush who bailed out those banks. And Obama, as lead thinker for the Democratic party since then, has had the chance to pursue the crimes committed against America. He is a man of the people so I'm sure he is devastated by us having thrown trillions of dollars at the wealthiest and highest-compensated of Americans. Oh wait...

Which is why we need Occupy Wall Street. We must do what we can to funnel the right people into the movement. It was encouraging to see David DeGraw inviting Bill Black to join them at OWS to help set an agenda and to take a leadership position when it comes to prosecuting those crimes. Bill Black accepted the invitation. There is no greater sign that this movement has the potential to move us in the right direction. If Bill Black is brought in to prosecute, it will be meaningful in in a number of ways:

1. Criminal justice. People who commit white collar crime must be prosecuted, regardless of how wealthy, well-connected, or powerful they are. Even when those people are charged with crimes, they have an enormous advantage; the ability to hire the best attorneys completely changes the landscape for defendants. A Jamie Dimon will be able to hire an OJ-esque criminal defense team. That's an entirely different universe of "justice" from the typical perp who gets a court-appointed public defender. We are not suggesting that anyone deprive the alleged criminals of lawyering-up; we are saying it is time to give them a reason to do so.

2. Economic justice. Failure is necessary for capitalism to be sustainable. Once a corrupt political class bails out failed industry, the only way for the public to hack away at individuals responsible for erecting a criminal enterprise is by subjecting them to criminal investigations. OWS may our last chance to weed out some of the criminal elites who we bankrolled.

3. For Investors. If you have owned any shares in bailed-out banks over the past few years, either you do not understand corporate structure and finance, or you are banking on the US government saving not only bondholders, but shareholders.  The bailed-out Systemically Dangerous Institutions in the USA are essentially zombies. They exist because of our collective largesse, and are still riddled with the corporate culture that brought our world to the brink of disaster. Their balance sheets are opaque and they do not mark their assets to market. As in, you cannot trust what they say their assets are. Getting rid of the dishonest individuals in those institutions would change our investing climate considerably. How can any intelligent person trust that their money will be safe in the stock market when our economy is still threatened by the same people who brought us our last crisis?

The USA needs a rudder. This ship has sailed, and it is heading in the wrong direction. Democrats and Republicans are compromised. Occupy Wall Street is not. Occupy Wall Street may be the only chance we have to get a Bill Black appointed.

Yes, there were homeless people eating lunch at Occupy San Diego last week. But that does not diminish the potential this movement has. We need OWS because there currently exists no way to vote against criminality in the banks and compromised individuals in our government. Will it go the way we hope? No one knows. But if the right people are recruited, we may be able to force some honesty back into our political economy. And we should be able to start turning this ship around.

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