This is the third installment in my Sorkin Saga. The saga was prompted by Andrew Ross Sorkin’s (ARS) video in which he “outed” himself as the leader of an undercover effort by the journalists of the New York Time’s “Dealbook” and CNBC to discover and “out” the “criminal element” among the elite bankers. Here is the key passage from his video.
“If there’s one question that I get just about more than any other, ‘So why didn’t anybody go to jail, and did nobody try?’ And there’s an answer to that too.
A lot of people had an incentive to try to find a way to bring not justice, but to put people away. Prosecutors, law enforcement, journalists; it would have been a better story. But for the last five years we’ve tried, all of us have tried, to find that criminal element. And while things happened that were upsetting and frustrating and unethical and immoral sadly, it may not have been criminal.”
ARS has also become the anti-Diogenes. ARS has conducted his search not by embracing extreme poverty and mocking the wealthiest and most powerful members of his city but by appearing to embrace luxury (his ode to his $40 tee shirts that cost more than my entire outfits was a brilliant example of how he “sold” his “cover”) and glorifying the elite bankers who dominate his city. Instead of looking for an honest man, ARS has looked in every three star restaurant near Wall Street for a dishonest banker – and found none.
The great irony is that ARS’ clever ploy that allowed him to hear the unvarnished truths directly from the mouths of our most aristocratic bankers has proven conclusively that while they had every financial incentive to use the “sure thing” of fraud and every ability to do so with complete immunity from prosecution, not a single member of the banking aristocracy succumbed to such mundane financial incentives and formed a “criminal element.”
Earlier in the video ARS describes the bank CEOs’ bonuses as “worse” than “repugnant.” By posing as fawning friends of the elite bankers, ARS and CNBC were able to obtain access to the CEOs. This allowed them to witness the side of the CEOs their press flacks try so hard to hide. ARS found them to be “unethical and immoral” failures who used their control over the banks to force the shareholders who they had harmed so greatly to suffer even greater losses in the form of bonuses that were “worse” than “repugnant.”
ARS recognizes the CEOs’ manifold defects – incompetent, unethical, immoral, and so avaricious, so devoid of integrity, and so willing to abuse their power that they compound the severe losses their inept management causes the shareholders with bonuses that are “worse” than “repugnant.” Implicitly, ARS is also telling us that the CEOs have selected board members who are so despicable that they approve rewarding incompetent managers who cause losses so large that they would destroy the bank but for the federal bailout bonuses that are worse than repugnant. We know therefore that ARS recognizes that the most elite banks have no meaningful controls that will prevent their CEOs from engaging even in the most despicable abuses of power. ARS also knows that because of the collapse of the criminal referral process at the banking regulatory agencies and the Department of Justice’s “too big to jail” policy the CEOs of our elite banks recognized that they could lead accounting control fraud with total personal impunity from criminal prosecution and that they could keep the massive personal wealth that such frauds produce as a “sure thing.”
Why would incompetent, greedy, unethical, and immoral CEOs running our largest banks who enrich themselves through “worse” than “repugnant” abuses of their totally dominant power over their bank’s impotent internal controls refuse to take advantage of the “sure thing” of obtaining massive wealth by leading control frauds when they know there is no risk of prosecution? White-collar criminologists have never studied an industry for five months (much less five years) without being able to identify at least one official who is likely engaging in fraud. Self-reporting surveys of bank officials indicate that bankers admit that insider fraud is common in banking. In past financial crises such as the savings and loan debacle the National Commission on Financial Institution Reform, Recovery and Enforcement (NCFIRRE) reported its finding that:
“The typical large failure [grew] at an extremely rapid rate, achieving high concentrations of assets in risky ventures…. [E]very accounting trick available was used…. Evidence of fraud was invariably present as was the ability of the operators to “milk” the organization” (NCFIRRE 1993).
The Enron-era frauds were all led by senior officers. Enron’s frauds were eagerly aided and abetted by many of the world’s most elite banks.
ARS does not answer the question of why this is the first Virgin Crisis. It is not clear that he recognizes the question. It is ironic that he views reporters’ incentives as decisive in determining their actions, but does not examine the incentives of the banks’ CEOs that by the same logic should have produced endemic control fraud.
ARS believes in the Virgin Crisis because the CEOs he dines with deny being frauds. My readers who have witnessed the less than terrifying zeal with which ARS interrogates elite bank CEOs on CNBC may be inclined to be skeptical that the CEOs’ protestations of innocence should be treated as revealed truth. But I caution my readers to reread my first column in the Sorkin Saga. ARS was simply “selling” his “cover” by sending a steady diet of 60 mph (not very) fastballs over the heart of the CEOs’ plate.
I have seen the NSA videos of ARS “wine boarding” Jamie Dimon in a banker’s club. He tied Dimon to a sumptuous leather recliner and poured box after box of wine onto a rag covering Dimon’s mouth. I cannot convey the horror in Dimon’s face as he realized that he was gagging on the contents of $5 liter boxes of a vile, non-vintage faux Merlot blend – which ARS did not even allow to breath! Oh, the humanity! Believe me; Dimon’s continued protestations of innocence after a torture this grotesque prove he is innocent.