I heard someone smart remark recently that thus far in the discussion of the financial crisis we haven’t heard that much of the “f” word—fraud. And when we have heard it, it’s tended to be with reference to micro-fraud—borrowers lying on their mortgage applications. But as Steve Coll says we’re almost certain to learn more [...]
I heard someone smart remark recently that thus far in the discussion of the financial crisis we haven’t heard that much of the “f” word—fraud. And when we have heard it, it’s tended to be with reference to micro-fraud—borrowers lying on their mortgage applications. But as Steve Coll says we’re almost certain to learn more about corrupt activity on the part of bank executives, which makes it all the more puzzling that the administration seems determined to keep these same executives in place:
Why, for example, would the Obama Administration wish to forge a bet-the-Presidency partnership with Kenneth Lewis, the C.E.O. of Bank of America, who bought the sub-prime lender Countrywide at the top of the housing market, and who then, as this enormous mistake became evident, extravagantly overpaid for Merrill Lynch? What absolves Lewis of responsibility for these colossal errors in business judgment? This week, Andrew Cuomo, the attorney general of New York, has been deposing Lewis about his tone-deaf decision, instigated by Merrill’s John Thain, to award more than $3 billion in bonuses to Merrill employees in December. In December—a month of cascading layoffs, rising public anger, falling stock prices, and the dawn of a new national politics. And what of the management of Citigroup, with which Summers, among others in the Administration, enjoys close connections? Vikram Pandit, the current C.E.O., took office recently and is not responsible for all of the bank’s problems, but he is part of a board and management group that has an almost comically awful record dating back years. How much more bad judgment must a board and an executive team display before it departs to exile?
Just as important, the Cuomo investigation reminds us that we don’t yet know the full scope of terrible judgment, ethical lapses, and outright fraud that occurred within the banking and financial industries last autumn. It was a time of great turmoil and very high stakes. More shoes will drop; Obama and company might want to slide out of the way before they do.
It’s all the more puzzling to me that this is being done while there are literally no subcabinet officials in place at the Treasury. I’m told this relates in part to the fact that the administration is having trouble coming up with people who wouldn’t appear “tainted” by association with the bad stuff here. But keeping the government understaffed because we don’t want to give jobs to financiers with the one hand, and then forking over vast sums of taxpayer money to the very same financiers seems bizarre.
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