While I am not a fan of strategic default–borrowers should make a good-faith effort to make good on their debts–it is quite ironic that an organization that preaches about “moral obligation” of borrowers not to default, would engage in the practice.
Day: October 12, 2010
Slight Correction for Denninger
I agree with Karl Denninger most of the time. He nailed it on the mortgage mess and foreclosuregate. I find almost nothing about which to disgree with him regarding the state of the economy. But he sort of got some facts wrong here:
But it seems that in the 1990s this very same scam – selling worthless paper to people through the deceptions and frauds in representation, became an art form that was beyond prosecution. Other than ENRON and MCI, two high-profile cases where a handful of executives were placed in the dock, nobody was indicted, and specifically, none of the bankers were indicted, prosecuted and imprisoned, and not one dollar has been clawed back from these institutions and their executives.
He might be hyperbolizing a bit, but there were more prosecutions–and convictions–in the aftermath of the dot-bomb blast. Back in 2006, the WSJ–keeping a tally–had this to say:
Convictions (through March 2006)
Chief Executive Officers: 82
Presidents: 85
Vice Presidents: 102
Chief Financial Officers: 36
Chief Operating Officers: 14
Total convictions: More than 1,000Penalties (through March 2005)
Restitution: $2.2 billion
Recoveries: $34.6 million
Fines: $79.1 million
Seizures: $27.9 million
In fact, I highlighted some of the “catches:”
(1) We nailed the Rigas family (John and Timothy) in the Adelphia case.
(2) We nailed Bernie Ebbers and Scott Sullivan in the Worldcom case.
(3) We nailed Ken Lay, Jeff Skilling, Andrew Fastow, and other perps in the Enron case.
(4) We nailed six different CFOs in the HealthSouth case.
(5) We torpedoed Arthur Andersen, a large accounting firm.
(6) We nailed CEO Dennis Kozlowski and CFO Mark Swartz in the Tyco scandal.
(7) We nailed Sam Waksal (and Martha Stewart) in the Imclone insider trading scandal.
(8) We nailed Jamie Olis in the Dynegy scandal.
Denninger may argue–and I would agree with him–that this was still a miniscule list in which government often majored in the minors to overstate their accomplishments. Still, there was more to this than Enron and Worldcom. And the Bush DoJ had far more convictions then, than Obama’s DoJ has now.
I would otherwise concur with Denninger’s take on what is going on.