The Corruption Of Wall Street
Every once in a while, I have a moment of hesitation when I see demonizations of Wall Street. After all, I believe in markets and I wonder, do we have to live with some excesses to get the benefits of markets. Then I read something like this by Matt Taibbi—
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States,” according to one settlement. And they did it so cleverly that the victims never even knew they were being cheated. . .
Who ultimately loses in these deals? Well, to take just one example, the New Jersey Health Care Facilities Finance Authority, the agency that issues bonds for the state’s hospitals, had their interest rates rigged by the Carollo defendants on $17 million in bonds. Since then, more than a dozen New Jersey hospitals have closed, mostly in poor neighborhoods.