Hammering inside traders and hedge funds -- while bigger problems fester
Filed under: Economy, Investing, IBM, Intel, AMD
Two weeks after billionaire hedge fund manager Raj Rajaratnam was handcuffed and walked out of his New York apartment by authorities at dawn, the roster of corporate brass at some of America's biggest companies brought down by the Galleon scandal continues to grow.On Monday, former Advanced Micro Devices (AMD) CEO Hector Ruiz (pictured) stepped down as chairman of Globalfoundries, a chip manufacturer that was spun off from AMD. While at AMD -- the world's second-largest chipmaker -- Ruiz allegedly provided an accomplice of Rajaratnam's with insider information and joins senior executives at corporate titans like IBM (IBM), Intel (INTC) and McKinsey who have seen their careers come to an abrupt end following the allegations.
Ruiz's resignation follows another insider-trading allegation, this time against the former chief financial officer of activist hedge fund ValueAct Capital. The Securities & Exchange Commission has also broadened its inquiry into the Galleon case to include a former executive at hedge fund giant SAC.
On the surface, the crackdown on insider trading seems like a welcome show of force by authorities after years of corporate excess and questionable practices that helped plunge the economy into a steep recession.
Pursuing Justice -- or Saving Face?
However, going after a handful of hedge funds and executives for insider trading could just be a face-saving distraction with little benefit. Rajaratnam's arrest for $20 million in trading gains coincided with the filing of a lawsuit claiming that the SEC might well have been aware of the $60 billion fraud being perpetrated by Bernie Madoff in what was widely known to be a sex- and drug-fueled workplace.
Indeed, according documents released last week by H. David Kotz, the Securities & Exchange Commission's inspector-general, even Madoff was "astonished" that the authorities did not catch on to him sooner.
While insider trading might be rampant in the piranha-like hedge fund world, some make the case that fighting it is a poor use of limited government resources and essentially a victimless crime.
When it comes to tacking real obstacles facing the economy -- such as the lack of loans available to small businesses despite the billions pored into big banks -- officials seem incapable of doing anything. This weekend, for example, Treasury Secretary Timothy Geithner cited the unwillingness of banks to make loans as a risk that could undermine the fragile economic recovery taking shape.
Curious Timing
Hundreds of billions of dollars in taxpayer funds were used to bail out banks and guarantee their bonds so that they could start lending to small business again. Instead, small businesses remain squeezed, and banks have used the access to cheap funds, thanks to taxpayer guarantees, to ring up massive trading profits. Where's the government's effort to lean hard on banks that aren't lending?
Given the public outrage, it also seems suspicious that the initial Galleon arrest came in the wake of the first reports of massive year-end bonuses in the works at investment bank Goldman Sachs (GS). In its insider-trading crackdown, the SEC seems to be trying to create an image of going after the bad guys, but one could argue that in reality it's just part of Washington's fiddling while the financial system is burning.
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Reader Comments (Page 1 of 2)
11-02-2009 @ 5:23PM
Don said...
That's exactly what it is fiddling. Where is the crackdown on oil speculation and the investigation into the federal reserve and it's criminal type activity linked with Goldman who in my mind is the Fed. The pay packages granted to the thieves running out the door of their failed banking institutions.
WTF needs to happen before we all go down in a spiral of a collapsing dollar. People are starving, no money for healthcare or infrastructure and the same ole just keeps happening. There would be plenty of money for everything if we did away with the Fed and it's power to print money and then lend it to the government with interest due.
Anyone with any sense, knows this cannot continue.
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11-02-2009 @ 5:30PM
Hector Hater said...
Hector is a P.O.S. who deserves to lose all his stolen money. His incompetence was without boundaries yet he got golden parachute after golden parachute and now we know why. He should share a cell with Madoff.
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11-02-2009 @ 5:42PM
Lazbo said...
Yeah, they'll probably miss some of the arrogant, greedy bastards, but I'm lovin' the fact that ol' Raj had to go cuffed into the breaking dawn. But, get as many of them as possible, nail their asses and then go looking for the ones that are still out there. Throw their fat butts in there with Bernie and let 'em spend the rest of their lives sharing stories about how they shafted regular Americans who were naive enough to believe that the little guy really has a shot.
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11-02-2009 @ 6:02PM
Edward said...
Gordon Gecko in Wall Street stated, ( Money is not lost or made it is simply transferred, I create nothing I own everything ). What we have here is a transfer of wealth from the middle class to the Big Corporations and Wall Street. It is inconceivable that the American taxpayer is being punished for the excesses of others. Folks there is something very wrong with this picture. Washington represents special interest and a foreign government and not the American people. Our system is broke. It is corrupt and needs to be changed. It is too cumbersome and unresponsive to the American people, and nobody in Washington is ever held accountable.
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11-02-2009 @ 6:12PM
John said...
The republicans were indeed held accountable for the criminal filth that was the bush "administration." That's why they were voted out of power last November.
11-02-2009 @ 6:08PM
Edward said...
The stock market is one big ponzi scam. Any idiot knows that big money gets all the inside info. This is the way wall street has always been run and it ain't going to change. Sure they will pinch some small fry like Martha Stewart just to keep the sheep in so they can be fleeced, but be assured the sheep are playing against a loaded deck.
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11-04-2009 @ 5:36AM
murray said...
amen,brother,amen
11-02-2009 @ 6:41PM
Gere said...
I guess catching the small fry passes for fiscal tightening of the belt in the Geitner/Summners led Obama economic team. Their past employer and Treas. Sec under Clinton Rubin is nowhere to be found and they continue on running an out of control economy as if nothings happened under their stewardship. I recommend all Americans viewing Fronline's recent documentary about how these same aholes ignored warning after warning about the derivitives schemes that were looming as Clinton was in the middle of getting impeached. The current SEC is just a new spinoff of the same incompetent team that failed us back then, yet Obama has complete faith in their abilities today.We are being screwed once again, but this time with a different colored dildo.
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11-02-2009 @ 6:47PM
Starr1sg said...
This article is simply and attempt at deflection. They should dismantle all hedge funds, they are the playground for the rich and corupt. Banks are corporate thieves true and they are sitting on a ton of cash, but that does not deminish the outradgious amount of cash the hedge funds are ripping off. victomless crime he says, hum, tell that to all the people that lost thier ass in the stock market when the hedge funds bet on short sales and made millions because they had insider information.
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11-02-2009 @ 7:07PM
jerry mcdonald said...
unfortunately they are still breathing!
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11-02-2009 @ 7:14PM
paul harris said...
Names may change...but the games the same! Unless the american people wise up and throw out ALL INCUMBENTS...this will continue. There is no 2 party sytem...there is just bipartisan incompetence and greed. Throw the bums out!!!
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11-02-2009 @ 11:07PM
Jerry said...
Paul, you are absolutely right. It is the incumbents that gave us this mess and until we throw them all out the mess will get bigger. It does not matter, Democratic or Republican throw them all out. Let's start again with new faces and new ideas.
11-02-2009 @ 8:23PM
Bill said...
Ridiculous article. Should these thieves just get a pass??? Victimless crime?????you must be kidding! Go after big business and leave the over indulgers who are taking advantage of a corrupt system alone?
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11-02-2009 @ 8:16PM
Richard said...
When will Gietner and his cronies get prosecuted. Bailing out banks (giving public money to private citizens who worked with the "giver"). This is criminal and it isn't working in balance to ther dollars spent.
Most painfull is the fact that the banks are not funding commerce. A capitalist system is dependant on capital. It is the banks resopnsibility to get dollars into the system. We don't need them taking up valuable space if they can't put money into the economy. If the "Stimulus" was given to the citizens (was it really $30,000.00 for every man woman and child?) the economy would be back on track and the banks would have it in their system anyway. It would also be in the mnarketplace.
we need to rebuild the whole economy. We need to end "Free Trade". We need to stop all immigration until the minimum wage is usless because everyone is making twice that to start any job.
We could use a "New Deal". The old (new deal) would work.
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11-02-2009 @ 8:27PM
Don said...
Folks, It is not about the politicians ! They are only puppets,
the real problem is this and this alone. Since 1913, The Federal Reserve, an entity that is NOT part of the U. S. Government but a private banking cartel highjacked our currency through political means (Woodrow Wilson election)
Since that day, instead of the U.S. Government having the right to print (manufacture) it's own currency, that power was given to the private banking cartel known as the federal reserve. Our deal with this banking cartel is this,they will print the money, they will then lend it to the government with principal and interest due. That is what technically happens, however it is cloaked with the transaction going
like this. The govt. needs money, they issue bonds, the fed
treasury, buy the bonds using the money they printed or
(manufactured). The govt then pays the interest to the bond holder who of course is the federal reserve. And at maturity of the bond, the principal is then paid back to the federal reserve. Now who out there thinks this is how it should be ?
Imagine no federal reserve, the govt. needs money for jobs , healthcare, infrastructure, retirement benefits etc. The U.S. Government makes it's own currency and distributes as needed through the banking system, however, this time there is no interest to pay back !!!
We have been screwed for decades, this is not about Obama, or Bush, right, left, it's about a financial system
that was stolen from the government by the banking cartel without almost anyone realizing what the hell happened.
Google, Goldman Sachs and the Federal Reserve, and I am most certain you will not like what you find out. But you will be enlightened to what is going on before your very eyes.
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11-02-2009 @ 8:34PM
Don said...
Paul Patriot, You are so right ! It was the biggest theft in history and most do not even realize wht they witnessed.
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11-02-2009 @ 9:42PM
thnkugal said...
Couldn't agree more with this astute columnists assessment of the overall dour state of criminality occurring at all levels of finance, and all of it thriving, without adequate regulatory law- and teeth to enforce it all.
I personally, have given up much hope on all of it. All I can do is refuse to invest what little remains of my IRA in ANYTHING even remotely fly by nite. Add in the mutual fund feeing scandal- whereby the entire MF industry is fee raping single entity buyers in favor of megalithic pension groups- who- pay half if even that- in same exact fees.
Like healthcare, a finance and banking system left in its current form- will be the second wave of cancer that will put us all in the grave at the end of the day. A runaway train with no brakes is the only metaphor I can attach to it all.
A federal stimulus program hell bent on stoking consumerism and leak stopping the bleeding of the unemployed- instead of long term stimulus on innovation and small business lending. In health care- Medicare for the old folks for care; Medicaid for the poor. Nothing for the low to middle class. We're just supposed to- well, die or die yelling about it all.
A recipe for complete middle class disaster.
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11-02-2009 @ 11:03PM
Robin said...
If expecting the government to help you, then GOD help you. There's a great little free book floating around the internet called WEALTH FROM THIN AIR. It's worth the read, and you don't even have to give your email address or anything. Can probably find it on Google - that's how I got it. It helps. Just good, common sense that does not seem to be so common anymore. Whatever you do - DO SOMETHING!
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11-02-2009 @ 11:10PM
Jake said...
BUSH CHENEY RUMSFELD OIL INC cartel was the biggest SCAM ever ... they destroyed hte USA and BANKRUPTED the country for good measure, even bigger than the Regan Savings and Loan robberies.
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11-03-2009 @ 12:21AM
Alnusw said...
In the 1980's, Ronald Reagan de-regulated Wall Street, Banking and pretty much everything else. As far as Wall Street and the Banks are concerned, those regulations were there for good reason... a fact which many hopefully now realize. A lot of Wall Streeters and there apologists are fond of saying that the average person should quite "whining" because they do not have a "Constitutional Right" to a job, a house or even a good standard of living. To them I would say that no Wall Streeter has a "Constitutional Right" to make obscene profits and destroy this Country's Economy, manipulate markets or bury Congress in mountains of lobby money so they will ignore the will of the People.
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