When Wall Street Writes Its Own Rules, It’s An Age of Unprecedented Corruption

From today’s New York Times:

On July 25, 2013, a high-ranking federal law enforcement officer took a public stand against malfeasance on Wall Street. Preet Bharara, then the United States attorney for the Southern District of New York, held a news conference to announce one of the largest Wall Street criminal cases the American justice system had ever seen.

Mr. Bharara’s office had just indicted the multibillion-dollar hedge fund firm SAC Capital Advisors, charging it with wire fraud and insider trading. Standing before a row of television cameras, Mr. Bharara described the case in momentous terms, saying that it involved illegal trading that was “substantial, pervasive and on a scale without precedent in the history of hedge funds.” His legal action that day, he assured the public, would send a strong message to the financial industry that cheating was not acceptable and that prosecutors and regulators would take swift action when behavior crossed the line.

Steven A. Cohen, the founder of SAC and one of the world’s wealthiest men, was never criminally charged, but his company would end up paying $1.8 billion in civil and criminal fines, one of the largest settlements of its kind. He denied any culpability, but his reputation was still badly — some might argue irreparably — damaged. Eight of his former employees were charged by the government, and six pleaded guilty (a few later had their convictions or guilty pleas dismissed). Mr. Cohen was required to shut his fund down and was prohibited from managing outside investors’ money until 2018.

Now, with the prohibition having expired in December, Mr. Cohen has been raising money from investors and is set to start a new hedge fund. He’ll find himself in an environment very different from the one he last operated in. His resurrection arrives as Wall Street regulation is under assault and financiers are directing tax policy and other aspects of the economy — often to the benefit of their own industry. Mr. Cohen is a powerful symbol of Wall Street’s resurgence under President Trump.

As the stock market lurched through its stomach-turning swings over the past week, it was hard not to worry that Wall Street could once again torpedo an otherwise healthy economy and to think about how little Mr. Trump and his Congress have done to prepare for such a possibility. Stock market turbulence typically prompts calls for smart and stringent financial regulation, which is not part of the Trump agenda. One of Mr. Trump’s first acts as president was to fire Mr. Bharara, who made prosecuting Wall Street crime one of his priorities. Mr. Trump has also given many gifts to people like Mr. Cohen.

Read the complete article here.

No Accounting Skills? No Moral Reckoning

From NYT’s “The Great Divide” Blog by Jacob Soll:

“A population well-versed in double-entry accounting will not immediately solve our complex financial problems, but it would allow average citizens to understand the nuts and bolts of finance: balance sheets, mortgage interest, depreciation and long-term risk. It would also give them a clearer sense of what financial accountability really means and of how to ask for and assess audits. The explosion of data-driven journalism should also include a subset of reporters with training in accounting so that they can do a better job of explaining its central role in our economy and financial crises.

Without a society trained in accountability, one thing is certain: There will be more reckonings to come.”

Read the entire article here.