No sooner had I finished writing a Noticing New York article suggesting that the New York Times start reporting that local New York government officials are looking at suing Barclays Bank than the Times ran its first (very short) article to that effect. (See: Noticing New York’s Wednesday, August 15, 2012, With Discordant Synchronicity The “Barclays” Center Will Open At LIBOR Scandal’s Peak: What The New York Times Is And Isn’t Covering, and the New York Time’s August 15, 2012, State Regulators Widen Libor Investigation, by Ben Protess.)Times Starts Reporting (Sparsely) About New York Attorney General’s Subpoenas Served on Barclays and Several Other Banks
The Times article didn’t report that the New York government lawsuits against Barclays Bank would occur, ironically, just as the New York taxpayers are providing massive subsidy for the promotion of Barclays Bank with the opening of the Ratner/Prokhorov basketball arena to which the “Barclays” name is being affixed. My Noticing New York article made the point that in reporting about Barclays, the Barclays Center and the LIBOR rate-fixing scandal for which the “Barclays” name has become a near synonym, the Times reporting needed to be less compartmentalized and more integrative.
The brief Times website article (which I was unable to find in my print edition) actually provided very little information. It wasn’t integrative. It was fairly cryptic actually. For more (a lot more) of what the Times could be reporting on this see these two recent Noticing New York articles on this subject, including links back to earlier Noticing New York Articles (that go back to mid-July): Saturday, July 28, 2012, More On Why Sued-For LIBOR Losses May Be Substantial And More On Figuring Why Mayor Bloomberg Is Minimizing The Public's Loss and Thursday, July 26, 2012, “Barclays” Center Opening Pending; Fellow Government Officials Don’t Back Bloomberg Re Minimizing NY Lawsuits Against Barclays Bank.
The Times story told us that in pursuing the investigation of the rate-rigging case Eric Schneiderman, the New York Attorney General, recently served subpoenas on Barclays and several other banks (four other banks are named in the article). Barclays' $450 million settlement is mentioned without mention of it being a record amount or that it was with the U.S. and U.K. governments. The settlement will also serve to limit criminal prosecution of the bank. The article says, “News of the subpoenas was first reported by Bloomberg News.”
The article also tells us that the “New York regulator’s push to ramp up his investigation reflects the broader escalation of the rate-rigging case” and that the Connecticut attorney general has joined in the New York investigation and state attorneys general in Massachusetts and Maryland have each opened similar investigations.
Potentially Relevant Background Respecting Attorney Generals Office And Atlantic Yards
On an integrative note, Mr. Schneiderman, when running for the office of Attorney General once dangled the promise that elected as attorney general he would investigate the Atlantic Yards mega-monopoly of which the “Barclays” Center is a part (you see he could be conducting two investigations involving "Barclays" name) and that he would act to prevent such eminent domain abuse in the future. Based on those remarks Noticing New York endorsed voting for him. Making that endorsement Noticing New York offered these words:
It really would be a shame if our next New York State Attorney General doesn’t investigate the misconduct of state officials with respect to Atlantic Yards and the associated abuses of eminent domain there and elsewhere in New York State. And it will be a glorious new day if they do investigate and bring the powers of that office to bear on those problems.(See: Monday, September 13, 2010, It Now Comes Down To This: Democrats Should (Run Off and) Vote Tomorrow For Eric Schneiderman as Attorney General.)
Asked about Atlantic Yards and projects that abuse eminent domain Mr. Schneiderman said:
Also, the Attorney General can also just conduct investigations into the way these projects are carried out. Because even if they are technically complying with some of the laws I assure you that there are other issues that can be raised by an attorney general willing to take a look aggressively at the way these folks are proceeding.And,
The idea [of eminent domain] was not to get land so someone can build a megadevelopment for a shopping mall or something else. This is just completely out of balance. Now if I’m in the Attorney General’s office- - * * * The next Attorney General’s ability to move program bills which is part of the Attorney Generals’ function * * * I would move program bills to correct this and I would enforce them rigorously.The same night Mr. Schneiderman provided this envisioning of his own elected future, Eric Dinallo, another candidate running against Mr. Schneiderman for the same office, said that the recent “complete” change in interpreting eminent domain to allow seizure of one private owner’s land to turn it over to another private owner for that other owner's private benefit was wrong and that he would:
. . . use the appeals and opinions section of the attorney general’s office to issue a revisitation of it. So I think the office now has such prominence both in the state and across the country that I would issue an opinion that would explore this again and disagree with it pretty clearly and then lead that into the signaling of a potential lawsuit around getting the laws changed and in an approach that I think should include returning back to more of a public enterprise condemnation proceeding and not a private taking.The bottom line is, as most of the candidates in that night’s forum helped make clear: There are things an elected attorney general could now be doing respecting the improprieties reflected in Atlantic Yards and the “Barclays” Center.
Since arrive in office, Mr. Schneiderman was presented with at least one very clear and obvious opportunity to tackle the sort of Atlantic Yards issues that, as Mr. Schneiderman put it, could be raised by, an “attorney general willing to take a look aggressively at the way these folks are proceeding,” but as Atlantic Yards Report’s Norman Oder identified, Schneiderman did not. . .
. . Schneiderman ended an investigative probe with a settlement wherein the New York City's economic-development agency admitted illegal use of local development corporations to lobby the City Council for tearing down and rebuilding Willets Point and Coney Island, both major multi-acre projects that were, like Atlantic Yards,l favorites of Mayor Bloomberg. Very similar lobbying activities had been engaged in by the Downtown Brooklyn Partnership in connection with a Downtown Brooklyn rezoning and for state approval of Atlantic Yards. Though the Attorney General’s investigation was reported as having been extended to the Downtown Brooklyn Partnership, nothing dealing with it was reflected in the settlement finally arrived at. (See: Wednesday, July 04, 2012, Missing from the AG's settlement with NYC EDC: a mention of the Downtown Brooklyn Partnership and Atlantic Yards.)
NY State Investigation Garners $340 Million Settlement From Another British Bank
Meanwhile, another story about New York regulators pursuing a British bank broke at almost the exactly the same time as the Times story about the Schneiderman subpoenas: Standard Chartered Bank which was being investigated for colluding with the Iranian government to launder billions of dollars entered into an agreement with the New York State Department of Financial Services (the recently consolidated banking and insurance departments) to pay New York State a $340 million settlement and submit to two years of monitoring. (See:August 15, 2012, UK bank settles Iran money probe in NY for $340M.)
In case one is wondering about how jurisdiction works and who can investigate banking misconduct it is useful to note that, “Manhattan District Attorney Cyrus Vance has been investigating Standard Chartered, with federal partners, for more than a year. His office declined to comment on the settlement.”
Putting $340 Million Settlement In Context For New York Taxpayers
WNYC News added a nifty contextually interpretive twist: It pointed out that the $340 million settlement being taken in by the investigating regulators could assist substantially in closing the state’s budget gap. (See: WNYC News- Settlement With Bank Over Iran Money Laundering Could Aid NY’s Budget, Wednesday, August 15, 2012, By Ilya Marritz.)
The WNYC story pointed out that the $340 million amounted to “about a third of next year's anticipated budget gap of $982 million” and that the amount “comes to more than the entire budget for state parks and historic sites ($284.9 million and $298.7 million, respectively).”
Noticing New York has done such financial comparisons in the past and it is instructive to note that the $340 million being looked at with such salivation is just a small fraction of the $2-$3 billion in subsidy that is supposed to get plowed into the Atlantic Yards mega-monopoly, albeit that the $2-$3 billion in subsidy going into that single developer/subsidy collector’s Atlantic Yards mega-monopoly is supposed to be spent over a period of time, not all in a single budget year.
The Banking Benefits of Paying a $340 Million Settlement Fine
Notwithstanding WNYC’s analysis that $340 million being paid by Standard Charter is so significantly sized that it can salve New York’s budget woes for an entire year, the story that the New York Times wrote about Standard Chartered paying the multi-million fine is that the agreement for the bank to pay that huge amount caused the bank’s shares to rally, rising about 5% in London afternoon trading. (See: August 15, 2012, Standard Chartered’s Shares Rally on Settlement, by Mark Scott.)
Apparently, this “positive reaction” was because the agreement to pay the fine terminated “speculation that Standard Chartered might lose its New York State banking license” and the market was relatively unconcerned about the bank being monitored for the next two years.
The Times article furnished information about how far apart the bank and the regulators were in their assessment of the situation when they agreed to settle: The regulators measuring in hundreds of billions, the bank accused of misbehavior measuring in tens of millions:
New York authorities had claimed that Standard Chartered schemed for nearly a decade with Iran to hide 60,000 transactions worth $250 billion from regulators. The bank has maintained that the transaction value of the laundering activities had totaled only $14 million.A banking analyst, Ian Gordon at Investec in London, was quoted assessing the situation with British cool:
“Whilst disproportionate, the settlement protects shareholder and customer interests against the regulatory assault,” . . . “In our view, Standard Chartered has acted with pragmatism and integrity in the face of extreme provocation.”A Missing $1 Billion ($1.6 Billion?) For Which Financial Executives Can’t Be Prosecuted
The next day the Times ran a shocker about the impunity with which those in the financial world can behave very badly: According to the Times no criminal charges are likely in the case of MF Global, the 8th largest bankruptcy in history, where over $1 billion in costumers’ private investor money disappeared after being improperly accessed and raided in a flailing and failed last minute attempt to prevent the company from going under from risky financial bets it had made. (See: August 15, 2012, No Criminal Case Is Likely in Loss at MF Global, by Azam Ahmed and Ben Protess.- Note that Ben Protess’ byline is also on the Times story about Barclays being sued.)
The MF Global failure involves the famous internal e-mails that were seemingly going to implicate Jon Corzine, former New Jersey Governor and former Goldman Sachs chief in connection with the accessing and disappearance of the $1 billion in costumer funds.
Not surprisingly the Times site was instantly deluged with 300 comments on this story, the “Reader Picks” all being in the same vein: “This is just sickening. The entire financial machine now operates with impunity and in collusion with the government to pillage the populace.”
The article, written from the point of view of the vaguely identified “criminal investigators” and “federal authorities” who are apparently deciding they won’t prosecute Corzine and his confederates, was likely mostly sourced via communications with those “federal authorities.”
For a very good overview and feel for what actually happened at MF Global I recommend watching PBS Frontline’s 21-minute Six Billion Dollar Bet (May. 22, 2012) which, as of May, estimated the disappeared client funds higher than the Times, $1.6 billion as opposed to $1 billion. The Frontline Corzine coverage was presented as essentially a coda to Frontline’s superb April/May four-part, four-hour documentary series “Money, Power & Wall Street” (April 24 & May 1, 2012) that chronologically provides a careful anatomy of the global financial crisis. The series was quite respectful of the Occupy Wall Street view of the crisis and of the likelihood that those within the OWS movement may be able to provide solutions. Like the MF Global Corzine coda the series is available to watch on-line, something I heartily recommend. The 21-minute MF Global Corzine coda makes clear that, four years into the crisis, nothing has changed to prevent such extraordinary financial abuses in our economy.
WNYC News immediately followed up on the article that was handed to the Times with a much fuller story, including an interview that drilled down on the frustrating absurdity that something like MF Global can happen and yet those charged with law enforcement can throw up their hands asserting that nothing can be done about it. (WNYC News Blog, Criminal Charges Against Corzine, MF Global Execs Unlikely, Thursday, August 16, 2012, by WNYC Newsroom.)
I endorse the perspicacity of the questions WNYC’s Amy Eddings asks in her interview of lawyer Robert Mintz, a former federal prosecutor (Can’t financial executives be sued for negligence?). In response Mr Minz correctly identifies the kinds of reasons that can be given for decisions not to prosecute abuses (You have to have clear fact trail) but I can’t endorse his abject despair about the impossibility of prosecuting financial executives for recklessness they indulge in with a calculating eye for what will benefit them at the expense of everyone else. (Listen to the 8-minute interview below.)
Michael Powell on Unrepentant Impunity
In a Michael Powell column that appeared a little earlier this month in the New York Times, Mr. Powell reported that he recently visited Manhattan Criminal Court to witness people answering charges for such things as being in a neighborhood park after hours (shades of the Bloomberg removal of Occupy Wall Street from Zucotti Park! Are we all constrained to keep corporate hours and lead cooperate lives?) Mr. Powell commented that afterwards he was hankering “for a more ambitious, not to mention less repentant, class of wrongdoer.” - By this he specifically meant corporate executive bankers. (See: In the Financial Industry, a Less Scrupulous Class of Lawbreaker, by Michael Powell, August 6, 2012.)
Considering the misdeeds going on in the banking sector he noted how HSBC bank:
. . . let Mexican drug cartels launder money on a grand scale, according to a Senate report, and it evaded laws intended to stop banks from doing business with Iran and North Korea. Perhaps most astonishing, the report said it had conducted business for many years with Al Rajhi, a bank in Saudi Arabia whose founder was an Al Qaeda benefactor.He observed:
The financial industry in 2012 New York City offers itself as almost a Medellín cartel of shady and unscrupulous dealings.And focused attention on Barclays:
Northeast of HSBC’s headquarters sits that of Barclays, a venerable bank that of late admitted to fixing Libor, an obscure interest rate that underpins trillions of dollars in investments. A wee nudge here and there, and a clever bank insider could make tens of millions of dollars. If such corruptions result in New York City’s paying a million dollars more to build a block of low-income housing, que sera sera and all that.He scolds Wells Fargo for its “habit of systematically targeting blacks and Latinos for the worst loans” and JPMorgan Chase’s Jamie Dimon “for losing a few, maybe 10, billion dollars” from “badly supervised trades.” (It was curious fun to watch how JPMorgan slowly rolled information about exactly how many billions had been lost in these trades, increasing the acknowledged amount with each new round of trade releases.)
Unrepentant Impunity Carried Over To The Real Estate Community
That sense of unrepentant impunity Mr. Powell picks up on is true about the banks for whom seeming large fines loom as only small practical inconveniences and whose senior executives routinely escape criminal prosecution (See Noticing New York’s discussion here.) It is also all part of the same fabric and tableau that extends to the interrelated New York City real estate industry with the corrupt abuse of eminent domain and direction, without bid, of vast public subsidy into the Forest City Ratner Atlantic Yards mega-monopoly.
While this is all best reported as interrelated, who knows whether the Times will start reporting it that way. In the same Noticing New York article where I wondered whether the Times would start reporting about the possible suits by local government officials I wondered whether the Times would decompartmentalize its reporting to acknowledge in articles about promotion of the “Barclays” Center that the bigger story is that the “Barclays” Bank name being promoted with taxpayer dollars is tainted by serious scandal. My wondering was answered immediately by a 1587-word Front Page Times story specifically about the promotion of the arena where the arena’s troublesome “Barclays” name was mentioned only twice and the associated scandal was mentioned not at all. Not to do so only further emboldens those who already have that sense of unrepentant impunity.
Schneiderman Criticized For Not Investigating. . . The National Mortgage Fraud Task Force He Headed
Despite the minimal reporting it is getting in the Times, the question of whether Attorney General Eric Schneiderman will vigorously pursue and bring home the bacon in connection with the Barclays scandal is an important one. As attorney general Schneiderman was once investigating the mortgage fraud in the banking industry. He was viewed as being aggressive in this regard, even antagonizing the Obama administration which was perceived as wanting instead to let bygones be bygones. Ultimately, that perception of aggressiveness changed in the view of many after Schneiderman was appointed by President Obama (announced in his January State of the Union speech) to help lead a national Mortgage Fraud Task Force charged with investigating the cause of mortgage meltdown, the efforts of that task force were viewed by many as a sham and the settlement it inaugurated was similarly viewed by many as a sweetheart deal for the banks, neutralizing the possibility of further investigation and prosecution. Many often refereed to the task force as the “Schneiderman Task Force.”
See:
Eric Schneiderman, Feds On Defensive About Mortgage Fraud Task Force ,04/19/2012,Potentially, Schneiderman could, by suing Barclays, bring home for New York much more than the $340 million the New York State Department of Financial Services garnered from Standard Chartered Bank. But will he? Why didn’t Schneiderman act on his promises to investigate Atlantic Yards? Because its developer/subsidy collector contributed politically to Governor Cuomo? If Schneiderman was unwilling to upset the "Barclays" applecart by taking action with respect to Atlantic Yards and the arena, would he be willing to upset Barclays or other New York banks by being too aggressive in pursuing the LIBOR scandal? And will the New York Times put pressure on the attorney general by putting all the actions he is taking in a bigger context where the outcomes from what he does and does not do are perceived as important to the public? If the Times doesn't, wouldn't that further embolden those enjoying that sense of unrepentant impunity? They are clearly bold enough already!
SUNDAY, APRIL 29, 2012, Memo to Schneiderman Mortgage Task Force: When You are in a Hole, Quit Digging,
Eric Schneiderman's Office Spars With Foreclosure Activist, Blogger,06/08/2012
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