Is the U.S. government just going to go down the line now?
UPDATE: Looks like Credit Suisse just got a subpoena from the SEC.
Government bodies suing everyone one of the institutions that together helped cause the financial crisis is a great idea.
The firms given TARP got it in a dire moment. TARP receivers defend themselves by saying that everyone else (unintentionally) did it, too. Yet all of the emails that have surfaced as a result of the various fraud lawsuits that are linked to the crisis make it seem like they (stupidly) thought it was funny to “dupe” fools into buying shitty assets stuffed full of crap that blows (all are actual quotes). For the people who are still out of a job, it must be infuriating.
Huge, equity crushing, PR-damaging lawsuits might be an appropriate way for the government to make some of the money they lost via TARP back (though if the size of them is anything like Goldman’s settlement, it’s insignificant) and “punish” the TARP-takers for using a trillion dollars of taxpayer money. And for the firms who took stimulus money, it’s a way to take limited responsibility and appear to make a meaningful attempt to ensure it doesn’t happen again.
The funny thing about both the lawsuit against Goldman and Deutsche Bank is that the government bodies who sued them didn’t warn the banks before launching the lawsuits. Lloyd Blankfein said he was “stunned” by the SEC lawsuit. A couple of hours after Deutsche Bank was sued, their only comment was that they were “reviewing” the lawsuit, so obviously it came as a surprise to them.
Is that payback for the surprise! The collapse of the financial industry is imminent message that financial firms delivered Geithner and Hank Paulson that caused panic and ultimately, TARP?
If so, JPMorgan might be next.
Last month, Irving Picard’s huge lawsuit against JPMorgan revealed that the firm did a cost-benefit analysis to see if it was worth keeping a ponzi scheme on as a client. The client: Madoff. They kept him on.
Also in April, a retirement fund, a client of JPMorgan, sued JPMorgan for investing money in the failure of its investment. JPMorgan’s risk manager, John Hogan, emailed saying that it was “his view” that the firm should trade against clients.
One of the tricky things with just going down the line is that other firms that didn’t take TARP, like ratings agencies, also benefited from it. Even though they were some of the “fools” getting duped by banks, ratings agencies were saved, too. Had their biggest clients gone insolvent, they’d be toast.