by James J. Devine
The question that ought to be on every American’s mind right now is: Why are crimes valued in billions being ‘punished’ with settlements or fines worth only millions?
Attorney General Paula T. Dow announced that New Jersey municipal bond issuers will be paid upwards of $2 million in restitution as part of a $59 million settlement between a multi-state task force and Wachovia Bank and its successor, Wells Fargo Bank.
The settlement resulted from an ongoing national investigation of anti-competitive and fraudulent conduct in the municipal bond derivatives industry.
About $391 billion worth of municipal bonds were issued in 2008, and nearly $196 billion through the first two quarters of 2009, according to the Securities Industry and Financial Markets Association. The total United States municipal bond market itself is valued at approximately $2.6 trillion.
A substantial portion of the approximately $400 billion annually spent on municipal bonds is invested annually in municipal derivatives, which are like interest bearing savings accounts where borrowed money is kept until it is actually spent.
Since these are public funds, selections are based on competitive bidding among various banks and other financial industry firms.
Investigators discovered that it was a fairly common practice where company executives secretly manipulated the bidding process by designating in advance who would be the winner for certain investment agreements.
The banks involved exchanged kickbacks from bidders, asked certain others to submit intentionally losing bids, and provided co-conspirators with information on the offers of competitors.
Among the corporations involved were AIG Financial, Bank of America, AIG SunAmerica, Bear Steams, FGIC, FSAHL, FSAI, GE Funding, GE Trinity, Genworth Financial, IXIS, JP Morgan, Piper Jaffray, Societe Generale, UBS, Wachovia, XL Asset Funding, XL Life Insurance, Morgan Stanley, NatWest, CDC, CDR, First Southwest, Winters, Morgan Keegan, MGIC, Baum, Kinsell, PackerKiss, and Sound Capital.
Many of these same companies are among the recipients of $700 billion from the TARP bailout, $600 billion in FDIC guarantees, and the recently revealed $16 trillion no-interest loans from the Federal Reserve Bank.
When taxpayers generously fork over $17.3 trillion to corporations and company executives still feel compelled to steal from the public, then people have to go to jail and those businesses must receive the equivalent of the death penalty, which is a revocation of their charters.
Angry Americans who have turned out in force all across the nation — represented as the Tea Party or Occupy Wall Street or the 99% or any other designation — have wide variations on their perceived solutions to the problem but there is near unanimous agreement in the desire for justice.
A multi-million dollar fine is a slap on the wrist to corporations like Wells Fargo and Bank of America. These settlements ought to be rejected as unsatisfactory and politicians who brag about them should be forced out of office.
Let the punishment fit the crime by dissolving or nationalizing some of these companies that are ‘too big to fail’ or brace yourself for a repeat performance because currently, there is no deterrent.
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