By Means Vile
The lack of money is the root of all evil.
– Mark Twain
Scratch the surface of any powerful organization, no matter how spiritual its avowed ideals, and one is likely to find the lifeblood of money coursing beneath it. The New York Times says that undergirding Hezbollah’s ostentatious piety is a network of criminal funding through which vast amounts of laundered money flow. “They operate like the Gambinos on steroids.”
In all, hundreds of millions of dollars a year sloshed through the accounts, held mainly by Shiite Muslim businessmen in the drug-smuggling nations of West Africa, many of them known Hezbollah supporters, trading in everything from rough-cut diamonds to cosmetics and frozen chicken, according to people with knowledge of the matter in the United States and Europe. The companies appeared to be serving as fronts for Hezbollah to move all sorts of dubious funds, on its own behalf or for others.
The plumbing for the money was the Lebanese banking system with pipes to socially prominent individuals and famous banks overseas. Money derived from drugs, contraband and other dark enterprises was generated and passed around the Middle East, Central Asia, South America and both sides of the Atlantic. The network of corruption was so extensive that even now it is uncertain whether it may have tainted the very agencies now tasked with rehabilitating the banks infected by Hezbollah operations.
As part of its own agreement with Treasury officials, Lebanon’s Central Bank set up a process to scrub the books. But compliance officers at S.G.B.L.’s French partner, Société Générale, were skeptical of the Central Bank’s choice of investigators. One of them, the local affiliate of the international auditing firm Deloitte, had presumably missed the drug-related accounts the first time around, when it served as the Lebanese Canadian Bank’s outside auditor. … As an extra step, to reassure wary international banks, the chairman of S.G.B.L., Antoun Sehnaoui, commissioned a parallel audit, with the help of Société Générale’s chief money-laundering compliance officer.
Did they miss the evidence the first time? Well to err is human. Besides, in some cases, the digital accounting track simply vanished into a trail of diamonds and similar types of untraceable wealth as shadowy individuals willing to handle the hot money flourished like Mayflies only to disappear as quickly.
At the center of many of these webs were companies trading in diamonds, which experts say are fast replacing more traditional money-laundering vehicles because they are easy to transport and are generally traded for cash. Large transactions leave no paper trail, and values can be altered through bogus transactions. A number of these dealers had been implicated in the buying of “conflict diamonds” and other minerals used to finance civil wars and human-rights abuses in Africa.
The world as seen through the prism of money could be a very different place from that depicted by Hollywood if in actuality it were some turbaned Ayatollah not a redneck Afrikaner racist who was really behind “blood diamonds”, crack cocaine and gun smuggling.
Has the Lebanese banking sector been cleaned out? The jury, the NYT says, is still out. That probably means ‘no, it hasn’t been cleaned out’ and people are just waiting for the heat to die down.
Treasury officials have no illusions that their work here is done. From the beginning, the blacklisting was also intended as a wider warning to a banking industry that, with secrecy to rival the Swiss, forms the backbone of Lebanon’s economy: henceforth, other bankers did business with Hezbollah at their peril.
If there’s a moral to this story someone ought to bottle it and put it on display. Other than as seen in moral hazard, morals appear to be a rare commodity in the world of high finance. In the United States the SEC was trying to attempting to come to terms with another financial debacle. “In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.”
The investigators allege that both Fannie and Freddie completely misled investors with respect to their exposure to subprime loans. It was as it turned out, larger than it seemed.
Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. That same year, Mudd told two congressional panels that Fannie’s subprime loans represented didn’t exceed 2.5 percent of its business.
The SEC says Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Freddie told investors in late 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. And Syron, in a 2007 speech, said Freddie had “basically no subprime exposure,” according to the suit.
The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008. …
So far, the companies have cost taxpayers more than $150 billion — the largest bailout of the financial crisis. They could cost up to $259 billion, according to their government regulator, the Federal Housing Finance Administration.
But no one is likely to go to jail. The Washington Post article said that Goldman Sachs, JPMorgan Chase & Co and Citigroup also confessed to misleading investors but wound up simply paying fines. There were no charges against top executives there and none are expected against the former brass of Fannie and Freddie either. It is no big deal.
Mudd, who now runs the Fortress Investor Group says everyone was in the know. “Every piece of material data about loans held by Fannie Mae was known to the United States government and to the investing public,” Mudd said. Syron’s lawyers said the term “subprime had no uniform definition in the market” at that time. Nothing was kept back, and there was nothing to say either.
The New York Times says everyone has moved on since then. “Fortress … which is based in New York, was started in 1998 by five former executives of Lehman Brothers and Goldman Sachs. … hired Mr. Mudd in July 2009, nearly a year after the government forced him out as Fannie’s C.E.O.” He maintains a philosophical attitude toward events. “This is no joyful state of affairs for us as human beings, but it is actually a very good investment environment,” he said. “Maybe the best we’ve seen in our lifetime.”
And maybe that’s how it is, from Lebanon to Manhattan. Only chumps come to the table expecting justice. The players know better. All there is, and all there ever was, was a slice of the action.
Storming the Castle at Amazon Kindle for $3.99
No Way In at Amazon Kindle $3.99, print $9.99
Tip Jar or Subscribe for $5
If Obambus would get these people prosecuted, stripped, and jailed, I might vote for him. Hell, it might even pay for five years of Obamacare. But he won’t. And their defense, that everyone knew, is true, as could probably be proven just by quoting WSJ articles and editorials 2001-2008. What is more, the problem is NOW with 50% to 100% of their portfolio, so why this focus on 2% or 10%? As I repeat at every opportunity, it was the larger banking system and Wall Street that were more responsible. And just because a crime is done in broad daylight does not make it legal.
Regarding Moslem criminal networks, I gather these are traditional going back centuries, and were the basis for the “Sangaree” in the Glen Cook “Starfishers” trilogy … wherein Federation ends up, after appropriate (brief and constrained by overwhelming events) soul-searching, destroying their home world.
However, if they want to deal in diamonds, might be an interesting opportunity for the CIA to profit by selling them artificial diamonds, made in bulk. Rumors are such have been possible for decades but suppressed legally or otherwise by DeBeers. OTOH it might hurt DeBeers worse than Hizboolah. Well, tough, that, I guess, but you could finally buy the wife that 10-carat ring, or that 60-carat necklace, she always wanted. Of course the gold mountings for such aren’t cheap anymore …
–
Roughcoat, apologies if anything I said on the previous thread was taken badly, I certainly meant nothing of the sort, and certainly have my own circle of friends who are good people and yet, somehow, managed to vote for Obambus, and some who might even do so again. When I try to figure out just how that happens it can be hard to keep it entirely diplomatic, the required rationalizations hurt the head, I’m sure you know what I mean.
The juxtaposition of the two halves of this post are important. The corruption of Barney Frank was not simply business as usual. It was not like traditional scandals simply a means for a greasy blowhard to arrange a payoff for their sexual partner and various clubhouse grifters. It was a deliberate poisoning of the markets and paralyzing of the safeguards needed to protect us from real enemies both domestic and foreign. Objectively, as the Old Left liked to phrase things, Barney and his cohorts created the conditions in which Hezbollah and their Iranian masters could thrive. They acted as agents of a hostile foreign power engaged in a long term planned war against the United States and her allies in which thousands of people have died and millions are at risk.
1. Josh:
Thanks, Josh. I appreciate your note. No worries. We’re good. I do indeed know what you mean–only too well. My head hurts a lot.
If you keep poisoning your customers with a bad product they’ll eventually stop buying ….or hang you from a lamp post.
One of them, the local affiliate of the international auditing firm Deloitte, had presumably missed the drug-related accounts the first time around, when it served as the Lebanese Canadian Bank’s outside auditor.
Deloitte??? Where have I heard that before?
Ah, yes. When they were breaking up the #OccupyWallStreet encampment in the park in NY; there was a series of stories about the leadership of the Vanguard of the Proletariat not staying under the tarps like the peasants, but rather in $2000 a night hotel rooms. And the New York Post caught them, and took their pictures. Staying with that leadership [and being both pictured and interviewed by the reporter], was a junior executive from ….. Deloitte. Based on the West Coast, supposedly, and on TDY in New York.
Remember, “Deloitte Touche Tohmatsu Limited” is not an American corporation, being very multi-national, and has no loyalty to this country. Further, even though it is one of the “big 4″ international accounting and auditing firms; we have found to our cost that quis custodiet ipsos custodes? of late is more than a rhetorical question.
If we cannot trust our own government, why should we trust a foreign financial entity whose clients may be far more profitable for them than we are?
Given the nationwide untraced flows of money into and out of the #Occupy movement around the country, it would not be too surprising if there may be some money laundering that now ties into other hostile flows of money. And, shall we say that the Venn Diagram of their views and those supported by various overseas enemies of our country does have significant intersection of sets.
Just sayin’.
Subotai Bahadur
Louis Mountabatten said, when his lifejacket saved him after his destroyer sank, that “scum always rises to the surface”. There’s some truth to that.
When an industry, like the financial industry, gains in relative power and importance in a global, informational economy, one would expect the bad guys to cluster round it like lions cluster around a Serengeti waterhole. Like Willy Sutton said, “it’s where the money is.” When that rises to the surface, the scum follow.
Proposals which merely increase regulation never answer the question: who guards the guardians? The basic merit of Leo’s devolution idea is that it distributes power and thereby dilutes the scum, which must disperse to follow the several opportunities. The more you concentrate the power, the greater the incentive for the perps to concentrate.
The global crisis, whatever it its destructive power, is also destructive of what gave rise to it in the first place. By the end of it, the limits and weaknesses of the financial system will be shown up in stark contrast; and with it the limits and weaknesses of centralized power into the bargain. For they shadow each other most remarkably well.
The NYT article is also interesting for this insight. Don’t follow the gunpowder. Follow the money. The money buys the bullets. Now while that might not be entirely true, it may be fundamentally correct. The role of the bullets is to protect the money, but it is the money that rules.
SEC, regulations, justice system or not, the best defense is caveat emptor. It doesn’t take a rocket scientist to figure out that if one subprime credit is a bad risk, a few thousand of them cobbled together as a mortgage-backed security CANNOT be an AAA credit. Yet, many people, even professionals who you would’ve thought knew better, fell for it.
bof @ 7: Yet, many people, even professionals who you would’ve thought knew better, fell for it.
Many people, who you would’ve thought knew better, created it, and paid themselves a trillion dollars over ten years for their brilliance and creativity. “Paid themselves” being a euphemism for being rent-seeking parasites privatizing the gains and socializing the losses. And that doesn’t even count the “watchers” at the SEC or Greenspan at the Fed, who only facilitated it.
Yet, if they had not, we may have had an economic collapse ten to twenty years earlier, though a much gentler version, nor do we know how the story we are in ends up. Like Wiley Coyote painting a tunnel on a mountain for the road runner to smash against, only to see the road runner run into it and then a train come back out of it, the world can be a twisty place, just ask Jon Corzine.
“No worries. We’re good.” I do apologize to Wretchard for exceeding the four post guideline in the previous thread.
I started to write something from personal experience that would confirm Subotai’s story about the Big 4 and their ‘employees’ being involved in all sorts of legends (well what the hell, it beats that old Vietnam era CIA standby USAID) including in the former USSR, but thought better of it. Fortunately upon reloading the long and short version disappeared.
I like having a job and not sleeping in my car as Senor Equis almost had to do before fleeing to find work in Muscovy. Best to lay low for a while then.
None of this is news. So why now? All of this has been known for some time. Simple answer would seem to be that the administration is trying to surf on the back of OWS.
IIRC, wasn’t it the NY Times that exposed the Bush Administration program to track Terrorist dollars?
Oh, that right, it was the evil Bushchimphitler that tried to stop the money flow to terrorists. If the Times wasn’t giving aid and comfort to the Enemy, nobody ever has or ever will.
Ah good old Douche n Toillete. They came through asked questions and then told upper management what to do, which was basically what middle, lower management, and three quarters of the line grunts had been trying to tell them do for free.
“Hi there! we are ISO certified, we have all our incompetent, inane, and illogical practices documented and placed into three ring binders that are gathering dust over in a cabinet in an off site latrine.”
Predators around the old watering hold are to be expected, it’s when the Hyenas start driving prey for the lions and the Leopards that things spin out of control.
5. Subotai Bahadur
Ezra Levant visited Occupy Toronto at 4:00am with heat sensing equipment and found that most of the tents were empty. The protesters probably went back to their mom’s at night to sleep.
Those big international accounting firms, as I’m sure you know, may have a conflict of interest. I am told that they are allowed to provide general accounting services and to provide auditing services, within a single corporate entity. Their audits may not always be at arms length. “Who will keep the keepers?” Well we know that it won’t be Barney Frank.
I love that “subprime had no uniform definition in the market” statement. So the banking crooks discover Algores’ “No controlling legal authority” excuse.
If you read “The Big Short” you will find that some companies who said that they were into the subprime market by 20% were actually in it by 80%. It is difficult to decide if it is worse if they really believed the 20% business or if they lied – and the answer is that they probably did both, depending on who it was in the company you asked.
Subotai #5:
Read a little piece on the OWS people a couple of weeks back. They now have offices – on Wall St.- as a result of an unnamed benefactor – with cubicles, computers, etc. They expect their “volunteers” to get salaries in the near future.
Y’know, all this could be an “X-Files” script — a story so shadowy and convoluted that only Scully and Mulder could grasp its outlines. And the public, having watched this episode, would only say “Wow! What a far-out, paranoid premise” and change the channel.
t @ 12: They came through asked questions and then told upper management what to do, which was basically what middle, lower management, and three quarters of the line grunts had been trying to tell them do for free.
yeah, but did management listen even so?
(I’ve been on every side of this game, but y’know, “a consultant is the guy who, when you ask him what time it is, borrows your watch to get the answer.”)
When the Belmont Club reads like Zero Hedge, and Zero Hedge reads like The Survivalist Blog you know that our tottering world is going down and a much quicker rate than the day before.
To quote from another blog, “Got militia? and “Got community?” It’s going to take more than you and yours to get by in the future. Get to know your neighbor, seek out those whom you can trust and, acquire more of the precious metals, brass and lead.
Sindarian
Josh,
Blood diamonds leave Africa for Antwerp and beyond uncut. Not sure if that has been perfected. Diamond has the highest thermal conductivity of any known material (known by me anyhow) so that is how they test it by the heat flow across the surface amongst other tests. Yes diamond film is used for semiconductor substrates.
These stories just go to show that all religions are the same. Ya know, doesn’t the pope sell heroine in South America and run murder for hire scams? /sarc
#18 Annoy Mouse – Maybe the Pope doesn’t do those things. However, he does oversee coverups of paedophile priests and sadistic monks and nuns. “For the good of the Church”.
Maybe a way to get better enforcement of regulations and detection of criminality it to give the enforcement people as individuls a ten percnt cut of fines and penalitys. Nothing like a little monetary incentive to make a pencil necked geek into a Conan the Barbarian.