Does anybody know why these people aren't in jail?
Two years before the financial crisis hit, Merrill Lynch confronted a serious problem. No one, not even the bank’s own traders, wanted to buy the supposedly safe portions of the mortgage-backed securities Merrill was creating.
Bank executives came up with a fix that had short-term benefits and long-term consequences. They formed a new group within Merrill, which took on the bank’s money-losing securities. But how to get the group to accept deals that were otherwise unprofitable? They paid them. The division creating the securities passed portions of their bonuses to the new group, according to two former Merrill executives with detailed knowledge of the arrangement.
The executives said this group, which earned millions in bonuses, played a crucial role in keeping the money machine moving long after it should have ground to a halt.
“It was uneconomic for the traders”—that is, buyers at Merrill—“to take these things,” says one former Merrill executive with knowledge of how it worked.
Within Merrill Lynch, some traders called it a “million for a billion”—meaning a million dollars in bonus money for every billion taken on in Merrill mortgage securities. Others referred to it as “the subsidy.” One former executive called it bribery. The group was being compensated for how much it took, not whether it made money.
The group, created in 2006, accepted tens of billions of dollars of Merrill’s Triple A-rated mortgage-backed assets, with disastrous results. The value of the securities fell to pennies on the dollar and helped to sink the iconic firm. Merrill was sold to Bank of America, which was in turn bailed out by taxpayers.
What became of the bankers who created this arrangement and the traders who took the now-toxic assets? They walked away with millions. Some still hold senior positions at prominent financial firms.
Really, this is the main point: the Randian free market profiteers like to say that, well, justice was served because Merrill Lynch failed and paid the price for poor decisions. The problem is that Merrill Lynch is not a person and has not suffered. All the people who took these bribes still got to walk away with their ill-gotten millions and are in many cases still employed by other financial firms, meaning that the disincentive for failure never trickled down. The free market is kind of broken here, don't you think?
I’m waiting for the New York Times to run a sob story on how the crashed economy has affected these guys. Like maybe they had to fire one of the gardeners and give up the $3000 lunches and it makes them very depressed. Perhaps it was more severe than that…they had to give up their third home in the Hamptons…oh, the unfairness, oh the shame of it all! To actually have to give up something for having fucked millions of people and send the country into financial ruin.
And we have many of them to thank; but the one who started it was one of the worst Presidents we ever had.
SOURCE: http://www.dailykos.com/
