Tuesday, October 20, 2009

The Plank in the DOJ's Eye

"A federal grand jury accused the former chief executive of a defunct soft-drink-maker and four others connected to the company of perpetrating an $806 million bank fraud, much of which allegedly went to the ex-CEO and his family. Gregory Podlucky, 48 years old, of Ligonier, Pa., provided financial institutions and equipment supplies 'with dramatically false financal statements' to get equipment leases and loans for Latrobe, Pa.-based Le-Nature's Inc., said US Attorney Mary Beth Buchanan [MBB]", WSJ, 29 September 2009, link: http://online.wsj.com/article/SB125418410762448011.html.

What's wrong with this story? Not Podlucky's being indicted, assuming MBB is correct. But that executives of America's largest banks haven't also been indicted for having their banks prepare and disseminate false financial statements. If you commit fraud against a bank you get indicted; if you commit fraud for a bank, the bank gets bailed out. What a country. Even if Podlucky did everything he's accused of, how different is that from Wall Street's current "heads we get bonuses, tails the public pays" compensation system? I wonder if MBB, 46, is being groomed to become the new Mary Jo White, 61? Compare this to Citigroup's $800 million Old Lane purchase, my 24 June 2008 post: http://skepticaltexascpa.blogspot.com/2008/06/citis-800-million-man.html.

1 comment:

Anonymous said...

When you challenge officials at the Fed and Treasury about TBTF and systemic risk, they point to the fact that using bankruptcy to resolve complex institutions is too damaging to "confidence."

Vince mentions in his fine presentation that avoiding damage to confidence is a top-level priority for policy makers.

We must avoid damaging sacred confidence.

But if you have such a rule, then you cannot have a true market system.

Markets must be allowed to go from exuberance to terror in order to have a free market system and also a free and democratic society.

Investors, bank managers and politicians can only be held accountable if failure is allowed to occur.

If we allow government to legislate confidence via the imposition of "systemic risk" regulators and rules such as TBTF, then I suggest that we will not be a free society for much longer.

And if we allow banks to show "cooked" books then they remain TBTF and control all.

It's hard to decide whether Wall Street has throughly captured the members of government or if it's the gestalt of the Treasury, Fed and Congress they have captured.

The "grooming" that you mention... sure... a new Mary Jo... ping pong Mary Jo... while she flits back and forth between public service and private work our nation suffers under the yoke of trillions of dollars of bank bailouts... Mary Jo... the public needs defenders more than those who run banks and crashed the system...