Inside Job: The Financiers Who Pulled Off the Heist of the Century:
Since the 1980s, much of the global financial sector has become criminalised, creating a culture that tolerates or even encourages systematic fraud. The.. mortgage bubble and financial crisis of 2008 was a natural outcome & continuation of this pattern... This behaviour is criminal. We are talking about deliberate concealment of financial transactions that aided terrorism, nuclear weapons proliferation and large-scale tax evasion..
Bernard L Madoff ran the biggest Ponzi scheme in history, operating it for 30 years and causing cash losses of $19.5bn. Shortly after the scheme collapsed and Madoff confessed in 2008, evidence began to surface that for years, major banks had suspected he was a fraud. None of them reported their suspicions to the authorities, and several banks decided to make money from him without, of course, risking any of their own funds. Theories about his fraud varied. Some thought he might have access to insider information. But quite a few thought he was running a Ponzi scheme. Goldman Sachs executives paid a visit to Madoff to see if they should recommend him to clients. A partner later recalled: "Madoff refused to let them do any due diligence on the funds and when asked about the firm's investment strategy they couldn't understand it. Goldman not only blacklisted Madoff in the asset management division but banned its brokerage from trading with the firm too."
UBS headquarters forbade investing any bank or client money in Madoff accounts, but created or worked with several Madoff feeder funds. A memo to one of these in 2005 contained the following, in large boldface type: "Not to do: ever enter into a direct contact with Bernard Madoff!!!" JPMorgan Chase had more evidence, because it served as Madoff's primary banker for more than 20 years. The lawsuit filed by the Madoff bankruptcy trustee against JPMorgan Chase makes astonishing reading. More than a dozen senior JPMorgan Chase bankers discussed a long list of suspicions.
The Securities and Exchanges Commission has been deservedly criticised for not following up on years of complaints about Madoff, many of which came from a Boston investigator, Harry Markopolos, whom they treated as a crank. But suppose a senior executive at Goldman Sachs, UBS or JPMorgan Chase had called the SEC and said: "You really need to take a close look at Bernard Madoff. He must be working a scam." But not a single bank that had suspicions about Madoff made such a call. Instead, they assumed he was probably a crook, but either just left him alone or were happy to make money from him.
It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud. The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident. This behaviour is criminal. We are talking about deliberate concealment of financial transactions that aided terrorism, nuclear weapons proliferation and large-scale tax evasion; assisting in major financial frauds and in concealment of criminal assets; and committing frauds that substantially worsened the worst financial bubbles and crises since the Depression.
And yet none of this conduct has been punished in any significant way. Total fines on the banks for their role in the Enron fraud, the internet bubble, violation of sanctions against countries including Iran and money-laundering activities appear to be far less than 1% of financial sector profits and bonuses during the same period. There have been very few prosecutions and no criminal convictions of large US financial institutions or their senior executives. Where individuals not linked to major banks have committed similar offences, they have been treated far more harshly...