Year End Rants: Graft in the Corporate World
Apparently the US government’s crackdown on corporate malfeasance in the wake of Enron’s 2001 collapse hasn’t done much to reduce white collar crime. If prizes were handed out for creativity in the art of stealing other people’s money, several worthy candidates would deserve consideration this year.
The Madoff-Ponzi
The Securities and Exchange Commission was once able to protect investors from crooks like Bernard Madoff. Now the toothless SEC is packed with industry cheerleaders. Since the SEC conducts its investigations in private, no one knows if the agency was even aware of Madoff’s illegitimate business practices.
Of course it’s a bit late to investigate Madoff. He has already bilked investors out of $50 billion or so, a number that would make a small time crook like Charles Ponzi blush. Madoff’s downfall has shaken financial institutions that were already staggering from the recent economic downturn.
Pass the Bundle
Fannie Mae and Freddie Mac help American homeowners by selling federally insured mortgage loans. But as publicly traded companies, they also need to turn a profit. That means taking chances is part of the game.
Risk management experts at Fannie Mae and Freddie Mac warned their bosses about the dangers of investing in sub-prime loans and alternative mortgages. Those warnings were ignored. Instead these quasi-public institutions bundled their bad loans together and sold them as securities to investors. I guess it’s not a Ponzi scheme when the government does it.
Bad Moody Ratings
Independent credit rating agencies like Standard and Poor’s, Moody’s and Fitch Ratings are supposed to warn people about risky investments. Now Congress is investigating why these agencies repeatedly gave credit worthy ratings to companies on the verge of bankruptcy.
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