How to Explain the Number of Financial Crimes on Wall Street
Robert Lenzner, 17 June 2021
I ask everyone how to explain the stunning number of financial crimes we have witnessed the last several years and never get an adequate clear answer. The reason: it’s not easy to grasp why Bank of America , Citigroup , BNP-Paribas, UBS , Credit Suisse, JP Morgan Chase and a bevy of giant hedge funds are sweating their way through the demand for fines in the tens of billions or potential jail sentences as long as decades.
One reason it’s hard is that prosecution of the crimes comes so many years later than the crimes themselves. It’s hard to contemplate so many banks of marketing garbage mortgages, or laundering money for Iran, Sudan, and other rogue nations or radical groups, or secret bank accounts in Switzerland. The cops on the beat take much more time to act than the actual crimes took.
I was reminded of the pattern by the revelation this morning in a New York Times column that there may be insider trading going on in 25%, that’s one out of every four mergers or acquisitions, and going on in the derivatives market where the leverage of buying a call on a stock can pay off big-time. The temptation to make a quick pile using a tip on a deal has always been prevalent. Just look at the 80 or so hedge fund managers who are either in jail or sentenced to jail.
Some observers think the crimes are a result of the financialization of America and the globe’s financial system, that the process of collecting and distributing large amounts of money around the globe from institution to institution is too tempting an arena to give up. When markets are booming and interest rates are low and the cops on the beat few and thus unaware what goes in the nontransparent web of finance anything goes.
