Why There’s No Jail Time for Wall Streeters

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Wall Street is a "protected" operation. Protected means cops are aware of illegal activity, but are paid off to look the other way and even protect businesses from potential harm.

So, if you're waiting to get back into the markets once the trash has been taken out, you're about to find out your wait may be a lot longer than you expected.

The scheming racket that too many aspects of Wall Street have become reminds me of an old Clint Eastwood movie.

It's the one where Dirty Harry goes into a porno shop with a hooker hotel above it and the thug behind the desk tells him, "You can't come in here, this is a protected joint."

But Harry sets him straight. "To them you're something," he says, "but to me you're just a maggot that sells dirty pictures."

While Wall Street doesn't sell dirty pictures, it does sell the prospect of a glossy future full of positive investment returns when their "products" are embraced, as in bought and sold– but mostly bought, for the investor's long-term good, of course.

In Wall Street's world, the beat cops are their regulators, including the SEC and the CFTC. Above them are the Federal Reserve and an untold number of politicians and legislators who pimp and pander on behalf of banksters by writing laws with loopholes so their donating "constituents" can always get out of jail free.

There are plenty of examples, but the mortgage-backed securities bubble and its related fallout is, to date, the biggest and most obvious example of how protected the Street is.

While obvious maggots like Bernie Madoff and Alan Stanford are thankfully rotting in jail, not a single Wall Street executive, lieutenant or soldier responsible for the pump-and-dump mortgage-backed racket that decimated America's most prolific dream machine and economic engine has come close to being locked up.

Don't even get yourself started on the whole Jon Corzine of collapsed MF Global fame. If you look up the word "protected" in the dictionary, you will see a picture of J.C. with his resume as former governor, former senator and former head of Goldman Sachs — now that's protected.

So, let's just stick with the housing scheme of dreams.

Sympathy for the Devil

The big picture is this: Wall Street was not discriminating in screwing a huge swath of Americans to line their pockets.

But the truth is too many out of that swath aided and abetted the housing bubble for their own greedy prospects. Which reminds me of the Rolling Stones' line in "Sympathy for the Devil," when Mick Jagger sings, "I shouted out who killed the Kennedys, when after all it was you and me."

The cover that regulators and their overseers are giving banksters is that there aren't any singularly obvious culprits here.

We, meaning millions of Americans, were drawn into the game and played our part with some modicum of understanding of the pyramid scheme, if not some conspiratorial part in it.

Maybe that's why there's some sympathy for the devil, maybe we don't want to admit we, too, (not you, of course) are they.

It was all going to work, if only you could have sold your house or condo at the top, or locked in your profits on your housing stocks or mortgage bonds at the top.

We knew it was a bubble; we were all helping to inflate it. Well, obviously not all of us. But you get my drift.

So the house of cards falls and the finger pointing begins. Are there culprits on Wall Street? Sure, but it's more the "system" or "them" than any individual, though some individuals are guilty of crimes where there are laws on the books.

But, none of that matters when the "house" is protected in the first place. You see, Wall Street is protected. Want proof?

Why, after the world came close to financial collapse, did the new American president decide to focus on healthcare rather than go after Wall Street?

There's no maybe about it. While the rhetoric was harsh against the banks, the Obama team embraced one of the establishment's own to become the next Treasury Secretary. Why? In order to coddle the bankers and institutions it knew it needed and wanted future political donations from, as it had just received so generously.

And why is the fundamental legislation that finally (two years later) arrived, the Dodd-Frank spaghetti-western whose script is 2,300 pages, still essentially in draft form?

In a word, loopholes…

The Big Sleight of Hand

Loopholes are to be woven into the fabric of the new unwritten laws. That's because the Street is protected by the chiefs of police who get paid in campaign dollars to write love stories that banks and the Street can embrace.

The sleight of hand you can't see in the protection apparatus is further evident in the resources that are applied to ferreting out the banker criminals. As in, what resources?

For example, funding for Obama's much ballyhooed Residential Mortgage-Backed Securities Working Group, of the Financial Fraud Enforcement Task Force, announced on January 27, 2012 (a little after the fact, don't you think?) was denied in the House back in May.

Momentum, however, has picked up at the Department of Justice-led task force.

After a non-start start, where fewer than 50 neophyte lawyers from Justice and other new regulatory divisions were enlisted– a number half of what was dedicated to determining if Roger Clemens shot steroids into his butt to throw baseballs faster– the DOJ says it now has over 200 folks working hard on their softball pitches.

What are they working on?

According to Adora Andy of DOJ, "This RMBS Working Group effort is focused on a narrow issue that was one of many factors that contributed to the financial crisis. This is a targeted strike, specifically examining whether those who originated the underlying loans and sold them to securitizers, as well as the actual underwriters and securitizers responsible for packaging and selling the RMBS offerings, made any false claim or other misrepresentation or omission regarding the ability and likelihood of the borrowers to repay their mortgage loans, the value of the collateralized property, and whether the underlying mortgage loans and properties complied with certain underwriting guidelines and standards. Right now, there are other active efforts underway by untold numbers of staff, at the Justice Department and in many other agencies, regarding many of the other illegal factors that contributed to the financial crisis."

Do you get that? They are not focusing on Wall Street.

Instead, they are focusing on the "they" as in "after all it was you and me." We did this; we lied and cheated when we conspired with mortgage brokers taking our applications.

Yes, it's us and them, those hundreds of thousands of folks who aren't in the business of writing loans any more because there are no jobs there any more and they've all gone back to being used car salesmen, because there are plenty of cars out there that folks bought, leased (whose leases were securitized, don't you know) and had to abandon when they lost their jobs.

So, while Rome burnt to a crisp, the protectors did their thing and are continuing to do it.

And, they'll do it as long as it takes for the statutes of limitation on these crimes to run out. Which is happening, starting already.

Will anything change? No. That's because Wall Street is protected.

So, don't waste your time waiting to see who goes to jail. Get yourself a Wall Street camera and start taking some good old dirty pictures.

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About the Author

Shah Gilani is the Event Trading Specialist for Money Map Press. He provides specific trading recommendations in Capital Wave Forecast, where he predicts gigantic "waves" of money forming and shows you how to play them for the biggest gains. In Short-Side Fortunes, Shah shows the "little guy" how to make massive size gains – sometimes in a single day – by flipping large asset classes like stocks, bonds, commodities, ETFs and more. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.

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  1. tim judge | September 14, 2012

    Why isn't this story on the front page of Yahoo and
    the New York Times ?

  2. Richard Guthrie | September 14, 2012

    Cracking article,..

    Hitting winners out of the ball park on almost every paragraph,..

  3. Joseph Cardona | September 14, 2012

    These obscenities are literally ruining humanity.

  4. Renee Ringstad | September 14, 2012

    I would like to subscribe

  5. C Steve Kime | September 14, 2012

    You make a compelling case for the third party, the Dumocrats & Repukelicans will never change, voting for the lessor of two evils is still voting for evil folks!

  6. Louise Cave | September 14, 2012

    An excellent commentary, written so entertainingly, on an enormous problem!

  7. DVM | September 14, 2012

    Right on Shah! We are all in collusion because we tolerate theft and a political system (funding of campaigns) that overlooks protection of the citizenry to protect the interests of the well-heeled. We need a revolution in thought in this country. It is sad that the occupy Wall Street bunch were essentially a bunch of fringe elements. And you're right Obama wasted huge political capital trying to change health care when the elephant in the room was the economic collapse. Chock it up to bad advice.
    The unfortunate fact is that those who purvey these schemes to steal from us don't think they are doing anything wrong because "everyone was doing it" or: "I'm just part of the big picture". Those of us with integrity know the difference. This is not the first time or the last time the thieves will be in the pocketbooks of average Americans.

  8. G L Bailey | September 14, 2012

    Did anyone read the Bloomberg magazine report written on 11-29-2011 by Richard Teitelbaum how Sec Henry Paulson in June and July 2008 went to congress and testified that Fannie nad Freddie were Ok and one week later went to NY and met with more than 20 hedgefund managers and told them how bad it was? then next week goes back to congress and tells them how bad it was. H3ell all managers and congrewssmen and senators knew to sell securities and short the market. If that is not corrupt what is corrupt????

  9. Richard Lefcourt | September 14, 2012

    Shah: It still bothers me when I read articles that don't address the fundamental cause of the housing and economy bubble bursts: the Community Revitalization Act. It was this Barney Frank creation, premised on the do-good thinking that everyone ought to be able to buy a house, that has led to this world-wide recession. All the lenders did was obey the mandate and then took steps to protect themselves from the enormous risk the Leftists imposed on them. And the same Leftists used our tax money to reimburse those lenders after the house of cards collapsed. Sure, there was plenty of lying on the loan apps, but this was secondary. Certainly widespread out-sourcing destroyed the ability of lots of borrowers to keep up with their mortgages. But the Leftists were aware this was occurring and didn't care. I feel that this is where the focus of your article ought to be: the practice of Liberals forcefully transferring wealth to their supporters without consideration of, or care for the ultimate effect.

  10. J. Scott Williams | September 14, 2012

    I was reading somewhere recently that the US bankters were celebrating that they had successfully taken over the US government. Your article confirms that statement is true.

    -jscott-

  11. Tom Hogshead PhD | September 15, 2012
  12. mickeymike30 | September 15, 2012

    I think this is slanted to scare… No big conspiracy… I truly believe the agency watch dogs just dont have enough staff to police ALL dealings that happen… Simple, the Govt cant watch everything the crooks want to do, period. Which makes more sense to me – Govt is more inept than prescient IMHO…

  13. Ann Love McPherson | September 15, 2012

    I appreciate your comiing out with this important information Shah. As a Republic, "we the people" must work on dismanteling the strangle-hold being held against us on this subject. It has to be done, otherwise we lose our Freedom, Liberty and our way of Life. This criminal/greed is not the American way. I believe main stream Americans cherish this country and will do what it takes to get it back to straight arrow behavior to protect all we have from our homes, town, counties, states, Fed, military and the good we all stand for. It reads like the attitudes in other countries who get by with bribes, lies, graf and general sleeze. I realize the media is also wrapped up in this with winks and avoidance of truth. It has no place in America. We need to plan to correct this.

  14. tc menninger | September 15, 2012

    We need more than a revolution in thought; we need a revolution in the streets, and I don't mean the ignorant, impotent, diaper exchange known as the "Occupy Movement". A two month open season on politicians and bureaucrats would be a good start (sort of like "Dick Cheney's friend strikes back"). During the sixties this mess would have evoked an avalanche of active dissent. Now, we all just "…go gently into that [not so] good [nursing home]…". With Halloween rapidly approaching, it seems apropos to take at least a few dozen (or gross) of rotten eggs for special high-impact delivery to the White House, Congressional Offices, and money center banking offices all over the country. It high time we foreclosed on our (so-called) leadership and flushed the toilet we call Washington D.C.

  15. me | September 15, 2012

    Do you ever give specific stock buy recommends….??

  16. Patrick Graham | September 22, 2012

    I have one comment, one thing that is not correct is that the folks returning to sell used cars will not find an abundance of inventory to work with because after the cash for clunkers program and other economic situations the inventory has dwindled and the prices of cars is higher and this is from a dealer that has been in the business for over 40 years. So good luck on buying a good used car for a cheap price. Dont try and manipulate the markets, it will never work, as Larry Kudlow says let the free market prevail.

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