Overseers Contributed To Wall Street Collapse

[Policing Wall Street]

On January 7, 2010 William D. Cohan wrote an opinion article in The New York Times, “The Three Magi” naming the three individuals most responsible for the financial meltdown: Hank Paulson, Secretary of the Treasury; Timothy Geithner, President of the New York Federal Reserve and currently Secretary of the Treasury; and, Ben Bernanke, Chairman of the Federal Reserve. 

The Three Magi brought the gift of redemption to Bear Stearns-and most assuredly not to the Western World, whose economies they wrecked.

Cohan claimed in the article that the meltdown started with the takeover of Bear Stearns in March 2008.  Wrong; the collapse started years earlier with criminal acts that were not prosecuted.  

Cohan goes on to say that it would have been better if The Three Magi had permitted Bear Stearns to go into bankruptcy, than have J P MorganChase take over Bear Stearns for $10 a share with a $30 billion government guarantee for Bear’s bad debts.

Perhaps. But the meltdown actually began in 1993, when Arthur Levitt, then Chairman of the Securities and Exchange Commission (SEC); Robert Morgenthau, then Manhattan District Attorney; and Alan Greenberg, then Chief Executive Officer of Bear Stearns, interfered with a federal investigation into narcotics smuggling, money laundering, and a Mafia stock fraud, known as PNF.  

As I have stated in previous articles I had been wired by the Federal Bureau of Investigation for an investigation into money laundering and narcotics smuggling involving Robert VanCaneghan and Louis Miceli, members of the Board of the American Stock Exchange. VanCaneghan and Miceli had been laundering money from the Cayman Islands and Miceli had been smuggling cocaine while they were managing directors of Bear Stearns. After leaving Bear Stearns in 1991 Miceli and VanCaneghan laundered money via Spear Leeds and Kellogg.

Moreover, Bear Stearns was aware that VanCaneghan had sexually assaulted some of his clerks. I had written to Alan Greenberg, CEO of Bear Stearns, about these attacks. Ed Guttman, a senior managing director of Bear Stearns who at that time ran the company's operations on the floor of the Amex, confronted VanCaneghan about the assaults. This meeting occurred at 86 Trinity Place in the offices of Miceli-VanCaneghan, the Amex specialist firm.  Guttman screamed at VanCaneghan and told him that this must never occur again. (The men’s room was adjacent to the offices of Miceli-VanCaneghan and the confrontation could be heard).

The investigation got nowehere thanks to Levitt and Morgenthau. Once Bear Stearns knew that it could get away with sexual assault by an employee, narcotics smuggling and money laundering, it knew that it could get away with anything. The rest, as they say, is history.

For example Bear cleared for A R Baron, a notorious bucket shop that sold worthless stocks to the public.  Bear knew through its clearing operation, the most profitable clearing operation on Wall Street, that Baron was violating federal law by charging greater mark-ups on stocks, which it was selling out of its own inventory, than was permitted- and therefore could have been indicted.

Bear could have been put Bear out of business. How did Bear know that A R Baron was illegally profiting at the expense of its customers?  Simple: The trading sheets broke down the amount of money A R Baron made in commissions and mark-ups for every stock that it sold- and Bear Stearns could see mark ups of 100% instead of the 10% permitted.

Instead, a settlement was reached. Monetary damages were assessed and no one at Bear went to prison.  Bear Stearns paid a $40 million fine, equivalent to what the public had lost, and made some changes to its clearing operations.

Levitt should have given the information, garnered by the SEC of which he was Chairman, to Mary Jo White, United States Attorney for the Southern District of New York-as was required by federal law. Bear could have been indicted under the Racketeering Influence Corrupt Organizations Act (RICO).

Even if Bear had not been put out of business, a federal indictment would have led to major changes being undertaken at Bear Stearns-and Greenberg would have been given the old heave-ho. The catastrophic collapse of last year might have been avoided long ago.

That is the problem with America. People, who are supposed to be the guardians of the American public and who are charged with enforcing the law, frequently protect their friends to the detriment of the American and global economy.  
 

Manfredonia is writing a book about corruption on Wall Street and can be reached via edward@blackstarnews.com

"Speaking Truth To Empower."