Ed Koch Commentary: Wall Street Knows No Shame By Edward I. Koch
The current effort to control Wall Street with appropriate regulations will reduce the likelihood of that industry again ripping off and beggaring American investors. It will help prevent unscrupulous brokers from again bringing the United States to the precipice of financial chaos and ruin. New regulations will more likely succeed if the government employs the talent of some former Wall Street robber baron who has gotten religion and who now wants to atone for past misdeeds by pointing out what needs to be done to prevent future excesses.
I don’t trust Senator Chris Dodd to protect the American public. The Republicans say his bill to regulate Wall Street to a greater degree, and include non-regulated derivatives and hedge funds, does not go far enough, But few people, and I am not one of them, trust the Republicans, particularly on this issue. Is there a Joe Kennedy out there, father of Jack, Bobby and Ted who was himself a major robber baron (read that as the master of Wall Street rip-offs), who will step forward and offer his/her expertise to cover the waterfront and protect the American public from future excesses?
The rating agencies failed us. The New York Times of April 24th reported, “The major credit rating agencies, Moody’s, Standard & Poors, and Fitch, drew renewed criticism on Friday on Capitol Hill for failing to warn of the dangers posed by complex investments like the one that has drawn Goldman Sachs into a legal whirlwind. But while the agencies have come under fire before, the extent to which they collaborated with Wall Street banks has drawn less notice.”
Wall Street knows no shame. When Judgment Day comes, will any of these "masters of the universe" be able to pass through the eye of a needle? Both Democrats and Republicans have contributed to the loss in faith that the average American has in government at every level.
I have to apologize for a possible inaccuracy that appeared in my commentary of April 19th. I reported on the SEC’s civil lawsuit against Goldman Sachs. In error, I stated the firm made a billion dollars on the transaction. The firm says it did not and alleges that in fact, it lost $90 million. The New York Times of April 25th reports, “The messages, released Saturday by the Senate Permanent Subcommittee on Investigations, appear to contradict statements by Goldman that left the impression that the firm lost money on mortgage-related investments. In the messages, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November 2007 that the firm had lost money initially. But it later recovered by making negative bets, known as short positions, to profit as housing prices plummeted. ‘Of course we didn’t dodge the mortgage mess,’ he wrote. ‘We lost money, then made more than we lost because of shorts.’”
The Wall Street Journal of April 20th describes the transaction as follows: “The SEC alleges that in a 2007 deal, Goldman deceived clients by selling mortgage securities secretly designed by hedge fund king John Paulson to profit on a plunge in housing prices.”
I doubt there is a way that would meet constitutional safeguards to prevent the enormous differential between the incomes of average American workers and those at the top of their professions in commerce, sports, arts and theater. Maybe there shouldn’t be any limits, and recoup with additional income tax brackets for multi-millionaires and billionaires. I for one support the “flatter tax” which would tax both earned and unearned income, the latter being excluded under the flat tax proposed by Steve Forbes. My flatter tax proposal would also have different tax rates, depending on income. I have no doubt that millions of Americans resent the obscenity of the highs and the sadness of the income lows. If this be puerile populism, make the most of it.
The best discussion concerning Wall Street and its recent abuses can be found in a transcript of the Bill Moyers’ Journal dated April 23rd, when Moyers interviews William K. Black, now teaching economics and law at the University of Missouri-Kansas City, who wrote the book, “The Best Way to Rob A Bank Is To own One.”
The New York Times reports that Arizona’s governor, Jan Brewer, signed a bill into law intended to “identify, prosecute and deport illegal immigrants.” I am opposed to the proposal of President Obama, former President George W. Bush and Senator John McCain which will provide illegal aliens amnesty and a path to citizenship. However, the newly-enacted Arizona law is an outrage that should be overruled by the Congress which should preempt the entire area of legislation respecting the identifying and arresting of illegal immigrants, so as to stop the Arizona monstrosity. I have compared the Arizona law with the efforts of Nazis engaged in Jew catching, stopping people on the streets of Berlin and elsewhere in Nazi Germany demanding identification, and if not produced, arresting, imprisoning and, in the case of Jews, sending them to death camps where they were murdered.
Of course, government can and should ask employers and employees at the workplace if they are legal immigrants or citizens, entitled to work or illegal immigrants, not allowed to work and doing so in violation of the law. If employers were pursued criminally when they intentionally violate the law and hire illegal immigrants, the latter when no job opportunities are available, will go back to their countries of origin.
I feel sorry for Senator John McCain who has established himself as a decent, thoughtful American leader. The Times reports on April 24th, “Mr. McCain, locked in a primary with a challenger campaigning on immigration, only came out in support of the law hours before the state senate passed it Monday afternoon.” Senator McCain is a bona fide hero of the Vietnam War where he withstood the physical cruelties of his North Vietnamese captors and upheld the finest traditions of the United States Navy while imprisoned in the “Hanoi Hilton.” Yet, in fear of losing a primary election, he succumbed to the pressure of the heated primary and his opponent’s attacks. He will regret it after the election is over, whether he wins or loses. Integrity is more important than winning, and often its very presence is responsible for winning.
The Honorable Edward Irving Koch served New York City as its 105th Mayor from 1978 to 1989.