What happens if fraud and misrepresentation of risk is expunged from the U.S. financial system? In President Bush’s memorable phrase: This sucker’s going down.
There is a fascinating disconnect between the “law and order” society ceaselessly depicted on TV and the realities of the American financial system, which is now totally dependent on lies, fraud, embezzlement and misrepresentation of risk.
Remove those and the system implodes.
As I observed in Fraud and Complicity Are Now the Lifeblood of the Status Quo:
Fraud, collusion, embezzlement, manipulation and misrepresentation of risk are not isolated incidents, they are now the essential fabric of our entire financial system.
Though fraud and complicity are presented in the mainstream media as isolated conspiracies outside the status quo, the truth is that the status quo is now entirely dependent on fraud and complicity for its very survival. Every level of the status quo would immediately implode were fraud and complicity suddenly withdrawn from the system.
Bernie Madoff’s Ponzi Scheme was systemically ignored despite its blatant transparency and warnings submitted to authorities. Even a financial neophyte could see that Madoff’s options bets were an order of magnitude too small to generate the vast profits he was claiming.
Why were warnings ignored? Because the Status Quo implicitly understands that misrepresentation and fraud are the essential lifeblood of America’s financial empire. Impose “law and order” on the Wall Street/mortgage crowd and what do you get? “This sucker’s going down.”
Indeed, if we parse President Bush’s inimitable summary closely, we discern a pre-existing awareness that this possibility was not a surprise but rather an anticipated consequence of systemic Ponzi fraud.
Americans love to see street criminals and petty gangsters brough to “justice,” but we turn a blind eye to organized financial crime. Why is this so? Is it just that systemic financial fraud is not very dramatic? Is it that financial forensics are so boring compared to a decomposing corpse?
I think the truth is much more self-serving.
The Power Elites of the status quo, both political and financial, are well aware of the system’s total dependence on legerdemaine, misrepresentation of risk, manipulation, lies, fraud and well-oiled machines of embezzlement (for instance, the entire mortgage and mortgage-backed securities markets).
Bringing “law and order” to Wall Street and the banking/mortgage sectors would mean indicting your pals and contributors, and bringing down the entire house of cards which has enriched and empowered you. No wonder indictments have been piecemeal and modest in scope: a few probes into insider trading, a few fines here and there–not what anyone would characterize as “cleaning house.”
Here is an illustration of the dominoes I saw falling in mid-2006 once the system of mortgage/credit fraud unraveled. Not every detail fell into place as predicted, but the rough course of events is certainly accurate: when the global credit/housing/mortgage fraud imploded, it took the global banking sector which had grown dependent on debt addiction and misrepresentation of risk down, too.
The Power Elites of the U.S. are now dependent on an organized financial crime syndicate. Like parasites living the high life in a household funded by the Mafia’s trading in addiction and corruption, the American Power Elites don’t dare allow “law and order” to sweep through Wall Street and the bankin/mortgage sector, lest their privileged lifestyle abruptly end.
So next time you see a TV broadcast schedule loaded with crime dramas and forensic programs, ask yourself: where are the real-life investigations, financial forensics and indictments in the financial system? Where are the dramas about bringing the bankers and Wall Street fraud packagers to justice?
The answer is self-evident: if law and order were imposed on America’s fraud-dependent system, then “this sucker’s going down.” As well it should. Parasitic organized financial crime is bleeding the real economy dry as it siphons off hundreds of billions and redistributes it to the nation’s Power Elites.
Enjoy the bread (extended unemployment) and circuses: “law and order” dramas about “bringing criminals to justice.”
Submitted by Charles Hugh Smith from Of Two Minds
Guest Post: The United States Of Organized Financial Crime – “If the Fraud Stops, The Financial System Collapses” | zero hedge