Now this is interesting. Fidelity was able to flag an individual account for insider trading, presumably because suspicious patterns arose in the trading, leading to the arrest of a small-time player in the financial industry.
The party in question, an accountant with KMPG, traded insider information for a Rolex watch, some Springsteen tickets, and (according to some sources) about a hundred thousand dollars. His "client" made about a million dollars before turning state's evidence after Fidelity tipped the Feds to some funny transactions on his account.
And yet, despite handling his account for years, JPMorgan Chase never noticed anything suspicious about Bernie Maddoff's enormous operation.
Funny how that happens, isn't it? Steal a million, you get a knock on the door. Steal a billion, you're a hero. Steal $100 billion, they float your name as Treasury Secretary.
More on the Libor scandal, this time from Robert Reich, who explains what it really means for American investors. He says the time to scream for more bank reform is now:
There are really two different Libor scandals. One has to do with a period just before the financial crisis, around 2007, when Barclays and other banks submitted fake Libor rates lower than the banks’ actual borrowing costs in order to disguise how much trouble they were in. This was bad enough. Had the world known then, action might have been taken earlier to diminish the impact of the near financial meltdown of 2008.
But the other scandal is even worse. It involves a more general practice, starting around 2005 and continuing until – who knows? it might still be going on — to rig the Libor in whatever way necessary to assure the banks’ bets on derivatives would be profitable.
This is insider trading on a gigantic scale. It makes the bankers winners and the rest of us – whose money they’ve used for to make their bets – losers and chumps.
What to do about it, other than hope the Justice Department and other regulators impose stiff fines and even criminal penalties, and hold executives responsible?
When it comes to Wall Street and the financial sector in general, most of us suffer outrage fatigue combined with an overwhelming cynicism that nothing will ever be done to stop these abuses because the Street is too powerful. But that fatigue and cynicism are self-fulfilling; nothing will be done if we succumb to them.
The alternative is to be unflagging and unflinching in our demand that Glass-Steagall be reinstituted and the biggest banks be broken up. The question is whether the unfolding Libor scandal will provide enough ammunition and energy to finally get the job done.
He's right. There's very little news coverage of this issue, thanks to a far-too-compliant corporate media. The bad guys managed to lobby Congress enough to yank the teeth out of Dodd-Frank, insisting the vast majority of bankers were doing the right thing and that they shouldn't all be punished as a result.
Boy, that little dog-and-pony show sounds hollow now.
Do you suppose there's any connection between this story and this picture?
I'm so very shocked. Aren't you? To think that our Congress members would personally benefit from their positions is just unthinkable -- if you're a moron. Nah, the real shocker is that it's perfectly permissible under Congressional "ethics" rules.
I learned this the hard way during my reporter days. Crazy Curt Weldon (PA-7) was trying to pass a piece of legislation that would have the feds pick up the bulk of the cost of major earthquake damage. At the time, he was on leave from CIGNA -- which, quite coincidentally, was the only company writing earthquake coverage in California at that time. I had a chat with a staffer on the House Ethics Committee and was surprised to learn this wasn't enough of a quid pro quo for them to care. Apparently you have to catch a member taking an envelope of cash before the ethics committee will even bother:
One-hundred-thirty members of Congress or their families have traded stocks collectively worth hundreds of millions of dollars in companies lobbying on bills that came before their committees, a practice that is permitted under current ethics rules, a Washington Post analysis has found.
The lawmakers bought and sold a total of between $85 million and $218 million in 323 companies registered to lobby on legislation that appeared before them, according to an examination of all 45,000 individual congressional stock transactions contained in computerized financial disclosure data from 2007 to 2010.
Almost one in every eight trades — 5,531 — intersected with legislation. The 130 lawmakers traded stocks or bonds in companies as bills passed through their committees or while Congress was still considering the legislation. The party affiliation of the lawmakers was almost evenly split between Democrats and Republicans, 68 to 62.
Sen. Tom Coburn (R-Okla.) reported buying $25,000 in bonds in a genetic-technology company around the time that he released a hold on legislation the firm supported. Rep. Ed Whitfield (R-Ky.) sold between $50,000 and $100,000 in General Electric stock shortly before a Republican filibuster killed legislation sought by the company. The family of Rep. Michael McCaul (R-Tex.) bought between $286,000 and $690,000 in a high-tech company interested in a bill under his committee’s jurisdiction.
The trades were uncovered as part of an ongoing examination by The Post of the intersection between the personal finances of lawmakers and their professional duties. Earlier this year, Congress responded to criticism of potential conflicts of interest by passing the Stock Act, which bars lawmakers, their staffs and top executive branch officials from trading on inside information acquired on Capitol Hill.
Oh, big whoop. The inside traders shouldn't be the biggest priority. I want the bastards who designed the system that stole people's homes and crashed the economy ... and bought off enough politicians to get away with it. It wasn't a crime of individuals, it was widespread and systemic mortgage banking fraud against ordinary people, and it ruined their lives and everyone else's at the bottom of the heap.
Bankers are like gremlins—you water one, and another hundred of them take its place. You have to strike at the root, not chip around the edges:
NEW YORK — The federal government took down the biggest Wall Streeter yet in its battle against insider trading: Rajat Gupta, a former director of Goldman Sachs who once headed powerful consulting firm McKinsey & Co.
Gupta's conviction on securities fraud and conspiracy charges in federal court in Manhattan on Friday may embolden government efforts to weed out white-collar corruption using wiretaps, tools traditionally used against mobsters and gangsters.
"It's a cat-and-mouse game," said Michael Weinstein, a former federal prosecutor who represents clients facing white-collar investigations. "This is just the latest example of the feds being one step ahead."
Federal prosecutors in Manhattan have scored 62 convictions in the 68 insider-trading cases since 2009, following a sweeping FBI investigation into illicit information trafficking called Perfect Hedge. The FBI has even enlisted actor Michael Douglas, who played the fictional crooked financier Gordon Gekko in the 1980s movie "Wall Street," to star in a commercial aimed at deterring insider trader.
[...] Gupta, 63, faces a maximum of 65 years in prison for three counts of securities fraud and a fourth of conspiracy. His was the highest-profile conviction since that of fallen hedge fund titan Raj Rajaratnam, to whom Gupta was accused of feeding secret information.
Last night's 60 Minutes segment suggesting people run for Congress to profit from insider trading was pretty puffy in a number of ways. It seems, for example, pretty stupid to suggest Nancy Pelosi benefited from an IPO investment in Visa in 2005 when she was instrumental in pushing through credit card industry regulation in 2009 as Speaker of the House. Likewise, John Boehner most certainly reaped more benefit from passing out checks from tobacco industry lobbyists on the House floor than he did with any insider trading on stock deals to defeat the public option.
But there is definitely one Congressman who has profited much from inside deals: Rep. Spencer Bachus (R-AL), current Chairman of the House Financial Services committee. Bachus has been unrelenting on his opposition to any derivatives regulation and why not?
Pat Garafalo at ThinkProgress reports that Bachus was hedging on the failure of the economy in 2008 while receiving confidential briefings about it.
Bachus, who was the ranking member of the Financial Services committee at the time (since the Democrats held the house) made about 200 trades as the financial crisis peaked, netting about $28,000. “What we know is that those meetings were held one day and literally the next day Congressman Bachus would engage in buying stock options based on apocalyptic briefings he had the day before from the Fed chairman and Treasury Secretary,” said Peter Schweitzer, a fellow at the conservative Hoover Institution, whose work was the basis for CBS’ report. “I mean, talk about a stock tip.”
I'm not in love with the capitalist system, especially the steroid-bloated version of the past 30 years. But if we're going to have capitalism, the only way it can work for small investors is if we have access to accurate information about the risks. In a system rife with insider-trading, small investors don't have a ghost of a chance, so I hope this investigation ends with some high-profile indictments and convictions:
Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.
The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.
The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.
One focus of the criminal investigation is examining whether nonpublic information was passed along by independent analysts and consultants who work for companies that provide "expert network" services to hedge funds and mutual funds. These companies set up meetings and calls with current and former managers from hundreds of companies for traders seeking an investing edge.
Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries.
"I have no comment on that," said Phani Kumar Saripella, Primary Global's chief operating officer.
Primary's chief executive and chief operating officers previously worked at Intel Corp., according to its website.
In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.
There was clearly a systemic failure in our finance system, but it required people like Angelo Mizolo to fully exploit it in order to make it collapse. Hopefully this is only the beginning (I'd still like to see Phil Gramm go down):
Angelo R. Mozilo, the self-made man from the Bronx who built Countrywide Financial into the nation’s largest mortgage lender before the credit squeeze hit, has been charged with securities fraud and insider trading in a civil suit brought by the Securities and Exchange Commission.
Citing e-mail messages in which Mr. Mozilo referred to Countrywide loan products as “toxic” and “poison,” S.E.C. officials said that he had misled investors about growing risks in the company’s lending practices from 2005 through 2007. During this time he also generated $140 million in profits by selling stock in the company, the S.E.C. said.
“This is the tale of two companies,” said Robert Khuzami, enforcement director at the S.E.C. “Countrywide portrayed itself as underwriting mainly prime-quality mortgages, using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk.”
At a news conference announcing its filing of the suit, the most prominent against an executive involved in the mortgage crisis, Mr. Khuzami said the S.E.C. had made it a priority “to pursue cases at the root of the financial crisis.” As the nation’s largest mortgage lender, Countrywide helped fuel the housing boom by offering loans to high-risk borrowers.
Isn't it great, how our SEC is such an ardent watchdog of Wall Street's wrongdoing?
CBS News has learned that two attorneys at the Securities and Exchange Commission (SEC) are under "active" criminal investigation by the FBI for trading stocks based on inside information.
Accusations against the two lawyers - a man and a woman whose names have not been released - are detailed in a report by the SEC inspector general obtained exclusively by CBS News.
The report, based on a review and analysis of "more than two years of e-mail and brokerage records," puts increased pressure on a commission that has come under fire lately for failing to detect the $60 billion Bernard L. Madoff Ponzi scheme, and turning a blind eye to the Wall Street financial crisis.
"We ought to be outraged if there is one insider trading information that’s leading to personal profit," Sen. Charles Grassley, R-Iowa, the ranking member of the Senate Finance Committee, told CBS News.
In response to the IG report, Grassley sent a letter to SEC Chairman Mary Schapiro expressing that outrage and requesting detailed information about the stock holdings and trading practices of all SEC employees.
"It’s hard to imagine a more serious violation of the public trust than for the agency responsible for protecting investors to allow its employees to profit from non-public information about its enforcement activities," Grassley said in his letter to Schapiro.
According to the report, the male attorney under investigation by the FBI works in the Office of the SEC's Chief Counsel and "has access to a tremendous amount of nonpublic information."
The report alleges both the male attorney and female attorney - who works in the enforcement division - "traded in the stock of a large financial services company" despite being told by another SEC employee of ongoing "investigations of that company." The report calls this is a direct violation of SEC rules.
That's not what he said, but Jack blitzed Wolfie today as they were laughing at some of the predictions Cafferty got right on previous shows. Wolf asked Jack for some stock picks and Jack gave him something a little more.
Jack: Couldn't the republicans find somebody to show the new supreme court nominee around besides the guy who is under investigation by the SEC and the justice department. I mean Bill Frist has a rather large cloud hanging over his head based on--alleged insider trading deals..
Blitzer: He's still the majority leader, but let's....
Wolf quickly changed the subject due to "time constraints."