Thursday, February 23, 2012

Janet Tavakoli: Financial Sector Executives Commit Fraud, Avoid Prosecution, and Make Future Crises Inevitable

Janet Tavakoli discusses her new book, The New Robber Barons:

On how money is used to prevent enforcement of criminal law: When trillions of dollars are at stake, no one tells the truth and everyone plays for keeps. We have had sufficient legislation and regulation on the books, but our laws have not been enforced. Instead, bankers use their massive wealth to lobby Congress and to get off with a slap on the wrist. They have successfully prevented prosecution for widespread, massive fraud.

On the fraud committed in the C-Suites: At the top of these institutions, we had CEO's and CFO's who signed off on accounting statements that were false. In 2007, HSBC wrote down massive losses. Our banks did not. Under Sarbanes Oxley, they signed off on statements that they knew, or should have known, to be false.

On how CFO's and CEO's have used campaign contributions to place themselves above the law: They have bought off Congress through campaign contributions - in order to prevent investigations and prosecutions. We should be seeing multiple thousands of indictments - and not just people at the bottom, but also the people at the top who were in charge of our largest banks during the financial crisis.

On whether we have taken steps to prevent another financial crisis: We are vulnerable for a repeat. When fraud goes unpunished, the stage is set for ever greater financial failure. This is exacerbated by having printed money indiscriminately to try to bail people out of the previous failure.

Janet Tavakoli is President of Tavakoli Structured Finance. She has been a member of the CWF A-List since its inception.

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