Monday, March 18, 2013

Randy Wray — Eric Holder Makes it Official: Crime Is The Economic Model

It’s official. The nation’s top cop, Attorney General Eric Holder, has clearly articulated the administration’s policy on crime at the biggest banks: it will not be prosecuted. Indeed, as we’ve long expected, the criminals in top management will not be investigated, they will not be indicted, they will not be prosecuted, and they will not be punished.
Period.
Economonitor— Great Leap Forward
Eric Holder Makes it Official: Crime Is The Economic Model
L. Randall Wray | Professor of Economics, UMKC

This is an indictment rather than a take-down.

Oh, and what was that about the purpose of business is profit-maximization?

Remember General Electric—Thomas Edison’s industrial giant? Jack Welch took it over and ran it like a financial firm—reporting profits of 20% quarter after quarter through, shall we say, “creative accounting”. He drove up the stock price by 4000% over his tenure, then cashed out, making a reputed half a billion dollars for himself. He was a key figure in promoting the notion that generous compensation for top management—much in the form of stock options—properly aligns incentives.
As Bill Black notes, what this does is to provide spectacular rewards to control frauds and to ensure massive losses for average shareholders and employees of the firms when stock prices collapse. Shortly after Welch took the money and ran, GE’s stock price fell by two-thirds and the firm had to take big write-offs for the phony profits it had been reporting. While GE stocks slowly recovered in the mid-2000s boom, they collapsed to 5 in the GFC and in the current, historic, stock bubble GE is only in the low twenties. Welch is still treated as a corporate hero. And teaches his business philosophy to MIT students.

6 comments:

Matt Franko said...

Maybe according to Holder but not Bernanke.

As per Bernanke's latest HH testimony in response to E. Warren's questioning, the Fed "now has the tools" to resolve even the largest banks...

Here's the video:

http://www.youtube.com/watch?v=Ihj_JcrYi30

rsp,



Bob said...

Yes Welch is a womanizing scoundrel who ripped off the retirees benefits, and his Warren Buffett type dirty Re-insurance ponzi scheme in Europe was so fine, and I am still trying to recover from the woman asshole who was on the committee to figure out how to repair the control frauds, she was the ahole who was in charge of the control frauds for GE financial in europe and here she is giving the double speak on how to fix it. What a cesspool.

Bob said...

the only tool is Bernanke

Bob said...

go to cspan when Simpson Bowel movement meetings sanctioned by Obama, to fix the control frauds, the black woman who was an x executive for GE Financial was giving advice to the panel on how to make the economy better, she is a tool also although her name escapes me, check it out on CSPAN archives.

Matt Franko said...

Bob,

What woman are you talking about?

Who worked for GE Europe?

rsp,

Matt Franko said...

Bob,

Task at yahoo reported yesterday that the banks have been coming under pressure lately... maybe everyone is finally getting sick of these assholes...

http://finance.yahoo.com/blogs/daily-ticker/suddenly-things-going-terribly-wrong-big-banks-165904042.html

But I would point out that even if we cut the balls off all of the bankers and then feed them all to the lions, that still doesnt help eradicate the debt/deficit moronhood which is the core problem...

rsp,