Wall Street, like the mafia, but more ambitious

In Rolling Stone, Matt Taibbi is his usual incandescent self in reporting on the United States of America v. Carollo, Goldberg and Grimm, a bid-rigging trial against brokers at GE Capital, which implicated virtually every bank on Wall Street (and many overseas banks) in a multibillion-dollar municipal bond bid-rigging fraud, a fraud that skimmed a piece of every substantial municipal project in America, from public pools and baseball diamonds to subway stations and housing projects. Bid-rigging, a process perfected by the mafia, has been practiced by the financial sector on a scale never dreamed of by the simple men of the crime syndicates, and the scam is starting to unravel.

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. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.

The Scam Wall Street Learned From the Mafia (via Naked Capitalism)


  1. Hey Cory, I know incandescent is a pretty good word to describe Taibbi when he talks about the fucking banksters et al, but IIRC, you seem to be wearing it out a bit.

    How about, I dunno, volcanic or something?

    Hey – spitting brimstone.

    As we should all be, over these society-hijacking cunts.

  2. And Rolling Stone will certainly bring great justice.

    Forgive my cynicism (or don’t, whatever, nobody ever does), but I’ll get enthusiastic when any individual with any actual power who participated in any of these monumental systemic scams pays the slightest price for perpetrating them. When. Not before.

    1. Exactly, as long as these banks and their lobbyists have the cash to influence the power brokers in DC, nobody big is going down for any of these crimes no matter how blatant.

      1. Well, it only works when the financial chicanery in question is actually criminal.  Unfortunately, far too much of it absolutely legal.

        1. Many things are legal because you cannot legislate against everything undesirable. Everything legal is not necessarily moral or ethical.

          1. Right, and the power of money in the political system means that socially harmful activity will probably remain unregulated.  So it appears we’re doomed not to learn from history but to repeat it …

          2. Sure you can. Tie corporate charters to acting in the public good. If they’re found to have not done so, revoke the charter automatically.

            It doesn’t even have to disrupt the business. The government can hold it for income, or auction it off.

          3. @foobar and while lawyers are getting rich defining the public good who gets fucked by corporate greed?

    2. Absolutely right. They reap billions in ill-gotten profits, pay “mere” millions in fines (which are doubtless prefigured into the “price of doing business) and walk away scot free. Unless We The People can figure out a way to get the money out of politics, and soon, the “American Experiment” will be truly over.

      1. Nothing will change as long as  Two-Party Patriots insist that my refusal to vote for the people who make this possible is somehow a bad thing because some Democratic crook may lose to a Republican crook. People get the government they deserve because they insist on re-electing it. There is NO other reason.

        1. Western democratic process has been simplified to choosing which particular set of millionaires is least likely to fuck up your lifestyle.

        2. Nothing will change as long as people like you insist on supporting the most crooked and viscous thugs because the less crooked and viscous thugs are not perfect.

    3. ??? You know, someone has to report this stuff. If the New York Times is not going to do it, then why not Rolling Stone?

  3. Tip of the iceberg. Or, possibly a more apt metaphor: there’s never just one cockroach.

    Large institutions of all kinds perpetrate this level of financial rape on us: banks, insurance companies, utilities, oil companies, hospitals… the list goes on and on. Their main weapon is representative government, an inherently corrupt system.

    1. Yeah, but if you follow the general global economic trend, this kind of behavior just won’t last. It’s slowly dying. Unlike the “Great Depression” this is a slow equalization that I think will help rebalance things in the long run.

  4. I would just like to mention the awesomeness of the illustrations that go with Taibbi’s RS articles. He’s my dad though.

    1. Matt Taibbi ? Or the illustrator ?

      Also, now’s a good time to share one of my favourite videos : Matt Taibbi on the Kaiser report. The outrage is delicious.

  5. Create an atmosphere where the least ethical behavior generates the greatest financial rewards, and in which the “legislators” responsible for writing laws routinely beg for table scraps from the richest people….what could possibly go wrong?

    1. I’m not sure they regard it as ‘going wrong’ when it does exactly what they want. These people don’t actually believe they’re evil. They believe they’re OK guys.

  6. Browsing through the case file ( http://www.justice.gov/atr/cases/f261600/261602.htm ), it looks like the municipal bond issuers followed IRS regulations correctly, got defrauded anyway, and now the fraudsters are on trial — albeit years later.

    In other words the system is working as designed.

    The IRS regulations could probably be tightened up, or the bidding process made more open. Harsher penalties could help too, though if they’re too harsh it could scare buyers away from municipal bond reinvestment entirely.

    No system is perfect though. The best way to reduce this kind of fraud on the public is to reduce the amount of money involved and the number of times it changes hands.

  7. Banksters! I’lll let you off easy.  Sharlotte “Grandma Suicide” sells a kit, use them for their intended purpose and you are forgiven.

  8. This type of collusion by the banksters is what brought down the world’s economy to new depression levels and its still happening. Its really a small cabal of people acting through their minions, the hundreds of thousands of employees of banking institutions, to steal the very land you cumber.

    The banksters lent/borrowed trillions from each other and stuck the people of the entire world with the tab.

    Ask the Europeans where all that money went.

    Ask the average American enterprise or individual where the trillions of dollars of valuation disappeared.

    The answer is that it didn’t exist in the first place except in our minds. Just like the supposed debt doesn’t exist except as fluxes of magnetic oxyde on some disks in the banksters databases.

    The Acropolis, the Coliseum, the Sagrada Familia are all up for sale to raise capital, who’s buying? The transportation systems, the highways and byways, the rivers the railroads and the lands they occupy, are all up for sale, at the buyer’s price. Now that they’re interested in.

    This is a further theft by the banksters who want to own it all.

    The mafia, and criminal states, will threaten you with physical violence.

    The banksters just hand you a pen.

    They won’t be happy until the rules of inheritance are rewritten so that you can inherit your parents your parents/siblings debt. (Of course corporations can just be disolved without attaching liens on the management’s property.)

    1. I’m a huge fan of your work!  All the italics and bold and ‘cumber’ and conspiracy…  oh!  it makes me giddy!  I feel like the world has both a single great question *and* an answer!

  9. FWIW, Dan Ariely says he recently tried to test who was more likely to cheat, Wall Street people or Congressional aides in DC. He says the banksters were significantly more likely to cheat. However, he pointed out, the DC subjects were mere aides.
    I haven’t read the new book yet, but at his talk Ariely didn’t mention testing mafiosis in his cheating/corruption study. Wouldn’t it be great if his cross-cultural cheating study managed to include US, Italian and Russian mafiosos. And Somali pirates.

    1. If I recall correctly, in “Predictably Irrational”, Ariely found that students were significantly more likely to cheat when they knew/believed that the chances of getting caught were small.  (For example, when they graded their own papers.)  

      Interestingly, they also cheated more when they were primed to think in terms of gain-or-loss, rather then right-or-wrong.  Simply asking people to write as many of the ten commandments (or any other moral code, really) before being presented with an opportunity to cheat made a big difference in the incidence of bad behavior.  Maybe Wall Street types should have to swear a version of the Hippocratic Oath?

  10. Fantastic post, Cory, great stuff and much appreciated.

    To really grasp the historical context of this all, and to better understand real history as opposed to so much revisionism crapola we’ve been exposed to, might I humbly suggest reading the following brilliant — and short — book by Prof. Donald Gibson:

    Battling Wall Street:  The Kennedy Presidency

    Prof. Gibson presents and exhaustively researched explanation of how we got here, and who those Wall Street banksters are intimately connected.


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