According to Forbes, Jim Chanos, renowned short seller and the activist hedge fund manager, best known for outing Enron on its accounting practice spoke out at a conference Wednesday night, that bank executives should be prosecuted for their roles in the banking system crisis:
James Chanos, a well-known short seller and hedge fund manager, said banks knowingly booked inflated earnings when selling the financial products that led to their downfall and the government bailout. The earnings wound up in bonus pools and banker's pockets.
"It's the heart of one of the greatest heists of all time," he said, without naming specific banks. Their executives probably won't be prosecuted because explaining how investment banks created and sold collateralized debt obligations and other structured financial products would test a jury's attention span. "The jury's eyes would glaze over."
The top underwriters of collateralized debt obligations from 2005 to 2007 were Bank of America-Merrill Lynch and Citigroup with $237 billion of the $724 billion sold during that period. Representatives from both banks either didn't return calls or declined to comment.
Read the rest of this story here.
The fury against the culprits of this decade's market meltdown is coming to a boil as more and more information about the causes of the credit debacle percolate in the market, and around the judicial system, about who's to blame. A few days ago, we covered what appears to be an organized comeback by Eliot Spitzer, former governor of New York.
Sptizer appears as a familiar face from the past, but with a fresh new voice, and if you listen and watch closely, you can see that the re-invigorated Spitzer is on a mission, or rather a new crusade, though this time, it is not as a lawmaker. Yet.
So is it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?
Read more here, The Former Sheriff of New York.
Sources:
Forbes.com
Slate.com
Reckless bank Execs-- Nassim Taleb should be brought into the picture with his thesis that the bank Execs and their risk managers were using a false formula for assessing risks of financial products.-
The risk algorithm used by banks does not apply to financial products at all, and gave bankers a false sense of security.
The formula, based on the Gauss's Bell curve does only apply to natural things like height of men or size of cattle herd estimates-- it does not apply to financial data at all.