Big banks, business and butter: Q&A on corporate impunity

Reporter Jesse Eisinger offers his thoughts on the lack of white-collar prosecutions, journalism and the Green Bay Packers

On the heels of ProPublica story last week with the New York Times Magazine on the rise of corporate impunity, reporter Jesse Eisinger took to Reddit to answer readers’ questions on regulatory challenges, changing the status quo and what it was like to star in “The Facebook movie.”

Below, a selection of the best. (We really recommend reading the whole thing.)

Q: What would it take to change the status quo? Frajer

A: A change in the culture of the Department of Justice (DoJ), where the leaders were more ambitious, were less afraid to fail and devoted more resources to the most complex cases. Also, the DoJ needs to start thinking about statutory fixes to address its loss of tools over the last decade.

Q: What one proposed law or legal change do you think would make the most significant difference?karmanaut

A: I don't think enough attention has been paid to the fact that the white collar laws are inadequate, so there haven't been many proposed remedies. One thing the DoJ should use is the "willful blindness" or "conscious disregard" charge. As Judge Jed Rakoff wrote recently in the New York Review of Books: Such a charge "is a well-established basis on which federal prosecutors have asked juries to infer intent, including in cases involving complexities, such as accounting rules, at least as esoteric as those involved in the events leading up to the financial crisis. And while some federal courts have occasionally expressed qualifications about the use of the willful blindness approach to prove intent, the Supreme Court has consistently approved it."

Q: Is part of the regulatory problem that technology (financial, corporate, communications etc) is evolving too fast for regulators to keep up?dvonya

A: Absolutely. They are outgunned technologically. The markets have become too complex for them. But that's not the only problem. A lot is will and leadership.

Q: Is a Pulitzer Prize a medal, a statue, or a certificate? Can you wear it around your neck?Ballacaust3000

A: It's a certificate but they make a statue of you out of butter and put it on the lawn in the middle of the Columbia campus.

Q: How much does wanting to get a job at these firms for big paydays affect the lack of prosecution of these executives? Should we restrict how easy is to go from the DoJ or the SEC to a financial firm?jerk40

A: This is a huge part of the problem. As a partner at a huge law firm, you can make ten times what you made as a prosecutor. If you are too aggressive or break the unwritten rules, that harms your future earnings. You go after easier cases to get wins and it helps if they are sexy cases (rather than boring, complex cases).

Q: Is the criminal behaviour limited to theft/ fraud, or are there specific types of financial transactions corporations engage in that are/should be outlawed?ningrim

A: Fraud writ large yes. There were many misrepresentations to the public that I think were worth deeper, more aggressive investigation. I write about the Lehman Brothers executives' representations of their liquidity in the weeks and months leading up to their collapse, which was clearly factually and materially inaccurate. Did they know it at the time? I don't believe the DoJ adequately investigated that question. And Lehman isn't alone.

Q: So in your opinion, what would it take to properly sanction big business? Also is it fair or right that a corporation is considered a person with rights equal to an individual?kevinb2k6

A: To properly sanction corporations, indictment has to be on the table. That includes seeking admissions of guilt and/ or being willing to take corporations to trial. However, I think prosecutors are justified in being concerned about an indictment leading to a corporate death penalty. But doing justice may require it. A dangerous, recidivist company might deserve to be put out of business.

Also, they must go after individuals as well. One way to do this should be to try to design fines that hit individual executives, not shareholders. Another is to charge individuals.

Corporations have rights as individuals and responsibilities. This is a long established precedent and won't be overturned anytime soon. I don't think the principle is a problem; corporations can make contracts, be sued, etc.

Q: What was the biggest threat you ever got from a major political/ business figure?bobthebobd

A: Well, financial reporters got it pretty good. The worst that happens to us most of the time is that high-priced PR people yell at us on the phone. Once, in the late 1990s, two detectives from the Manhattan DA's office were sicced on me by someone about a story I wrote on a Canadian billionaire pharmaceutical fraudster. I was so naive, I thought they were coming to feed me some information about their investigation of the guy. I didn't realize they were questioning ME until halfway through our meeting. Another time, my boss at the WSJ and current boss at ProPublica was summoned when he was on his honeymoon in Paris by Bernard Arnault, the French billionaire who owns LVMH, to complain about some of my columns. My columns stood up to the scrutiny and my boss backed me. I was deeply sorry my boss had to talk about accounting arcana on his honeymoon but very glad that I had pissed off Arnault that much.

Q: What would you consider the biggest mistake of your career? dvonya

A: I have made so many mistakes, I've given speeches about them. Fortunately, I've never made the kind of huge factual error that meant the story required retraction. Thank God.

One of my best stories was also one of my biggest mistakes. In October 2007, I wrote for Conde Nast Portfolio that the Wall Street investment banks were going to fail. I wrote that it would be Bear Stearns first, then Lehman Bros, and maybe even Merrill, Morgan Stanley and even Goldman. Pretty good, right? But I didn't follow up on it, probe deeper, write more. So I kind of blew the opportunity of a lifetime to really own the story of the biggest financial crisis since the Great Depression. Oh well.

Q: I have a list of questions:

As a journalism student in college, what should i be doing to get a job as a reporter when I graduate?

Did you naturally gravitate towards covering wall street or was it an assignment?
What's it like to win a Pulitzer?

Do you think the seahawks can repeat for the title? and if not who do you think will win?

Thanks for doing the AMA! – squirtgunheadphones

A: 1. Read as much journalism as you can, figure out what you like and who you like, cold call those reporters and try to meet and get a coffee. Study something that imparts real knowledge: science, statistics, economics, history etc. so you have some knowledge base and skill set. Look at all the start-ups: Vox, 538, Fusion, BuzzFeed (which is established, of course) and seek to get in on the groundfloor of those places.

2. I fell into it 20 odd years ago by luck. I honestly didn't know the difference between a stock and a bond. But I liked it, soon realizing that is where the power structure of society lay. So to understand how the country works, you need to understand finance.

3. It was great and I felt very lucky. But soon I started to worry that it would be my professional peak and that scared the shit out of me.

4. Obviously not and it will be apparent on week one, when the Packers crush them in Seattle.

Q: You were great in The Social Network and Zombieland. You're like Michael Cera except more awkward, its awesome black_caddy

A: I know it. I was robbed of the Oscar for both of those roles. Cera is a punk.



Nifty, Sensex may rally: Weekly Market Report

Nifty has to remain above 6650 and close above 6740 for a rally

The BSE 30-share Sensex closed the week that ended on 2nd May, at 22403.89 (down 284 points or 1.25%), while the NSE’s 50-share Nifty closed at 6694.80 (down 88 points or 1.30%) for the week. We had mentioned in the past week  that this reporting week may see some more decline. During the week the market closed lower on every trading session though the fall was a gradual one.

On Monday the weakness on the bourses continued with the Nifty closing at 6,761 (down 21 points or 0.32%). The negative move throughout the global indices played on the sentiments back home as well. The domestic indices continued to be weak on Tuesday inspite of its Asian counterparts closing in the green. Nifty closed at 6,715 (down 46 points or 0.68%). A report by the National Association of Realtors showed residential real estate were starting to stabilise as contracts to purchase previously owned US homes climbed in March by the most in almost three years. Back home the Supreme Court of India indicated it would pass an interim order on a plea for stopping illegal mining activities in Odisha and the priority before it would be to halt 40 out of 56 iron ore mines operating under deemed-renewed leases.

On Wednesday, the market closed in the negative for the fourth consecutive session. The oil ministry will declare new gas prices only after the Election Commission (EC) formally notifies the election result. The new gas price formula approved by the cabinet last year, may almost double the rate. Nifty closed the day at 6,697 (down 19 points or 0.28%).

US consumer confidence dipped in April but remained near a six-year high, while home prices rose in February.

The stock market remains closed on Thursday, 1 May 2014, on account of May Day.

After a holiday, the Indian market opened Friday on a positive note but the indices could not sustain the momentum. This resulted in the fifth consecutive session when the indices closed in the negative. Nifty closed at 6,695 (down 2 points or 0.02%).

HSBC India Manufacturing PMI (PMI) for April 2014 remained unchanged from March's reading of 51.3, the seasonally adjusted PMI indicated a further improvement in operating conditions during April. News from US showed that unemployment benefits climbed to a nine-week high last week, while consumer spending surged in March by the most in almost five years. But the US added 288,000 jobs in April - the biggest increase in more than two years, way above the consensus figure of 210,000, that suggests the economy is accelerating after weak first-quarter growth.


For the week, among the other indices on the NSE, the only top performers was Pharma (2%) while the worst two performers were Metal (6%) and Realty (5%).
Among the Nifty stocks, the top five stocks for the week were Dr. Reddy's Laboratories (4%); Oil & Natural Gas Corp (3%); Cipla (2%); HDFC (2%) and Tech Mahindra (2%) while the top five losers were Jindal Steel & Power (13%); D L F (9%); Tata Steel  (9%); Hindalco  (8%) and Sesa Sterlite (7%).
Of the 1,423 companies on the NSE, 460 companies closed in the green, 933 companies closed in the red while 30 companies closed flat.
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
Top ML sectors   Worst ML sectors  
Farm & Farm Inputs 4% Steel -5%
Pharma 2% Con_EPC_Infra -5%
Oil & Gas 1% Real Estate -5%
Software & I T Services 0% Telecom Services -5%
Industrial Intermediates 0% Non-Ferrous Metals -4%



Nifty, Sensex headed for a small jump

Nifty has to stay above 6650 for a short rally

The S&P BSE Sensex opened Friday with a highest opening gap since 2 April 2014. However, the gap up opening was used by investors to sell. Each effort of reviving was followed with the indices moving lower. In the last few minutes of the session the benchmarks entered in the negative zone and finally closed marginally lower.

The Sensex opened at 22,494 while the NSE 50-share Nifty opened at 6,710. Sensex moved lower to the level of 22,387 after reaching upto 22,576 and closed at 22,404 (down 14 points or 0.06%). Nifty hit a high of 6,738 and moved lower to the level of 6,690 and closed at 6,695 (down 2 points or 0.02%). The NSE recorded a low volume of 67.35 crore shares.

Eight core sector industries increased their output by 2.5% in March as against 7% in the same month in 2013. On account of higher output from coal, petroleum, steel and electricity, the eight key infrastructure industries grew by 2.5% in March. The core sectors grew by 4.5% in February, while in January, the industries had grown by 1.6%. Overall, the core sector industries grew by 2.6% in FY14 compared to the 6.5% in FY13.
Coal production grew by 0.7% in March 2014 compared to the same month in 2013. Steel production and electricity generation also grew by 5.4% each in March 2014 compared to March 2013.

Market today awaited Markit Economics to unveil HSBC India Manufacturing PMI (PMI) for April 2014 today. Unchanged from March's reading of 51.3, the seasonally adjusted PMI indicated a further improvement in operating conditions during April.

Coal India was among the top three gainers in the Sensex 30 pack. Coal India clsoed 1.3% up at Rs295.5 on the BSE. The union government has set unrealistic targets for Coal India this year after the company fell 4.21% short of its production target to 462.53 million tonnes (mt) in 2013-14. The production and offtake targets for 2014-15 are 507 mt and 520 mt, respectively. The company’s performance grew only 2.3% and 1.4%, respectively, on these indicators in the last financial year.

Maruti Suzuki car sales in April 2014 fell by 11.40% over the year ago period. During the month, the carmaker  sold 86,196 units compared with 97,302 units in the corresponding month last year. The highest fall was witnessed in sales of SX4 while the compact segment comprising Swift, Estilo, Ritz and Celerio recorded a growth in sales of 9.9%. Maruti Suzuki was among the top five losers in the Sensex 30 stock. It ended 1.7% down at Rs1885.5 on the BSE.

After posting a marked growth in the revenue for March 2014 quarter Marico today came up a top gainer in ‘A’ group on the BSE.

Jindal Steel is in news for competing in talks to buy parts of insolvent Italian steelmaker Lucchini. Italy's steelmaker has tried to sell itself for years but has so far failed to attract investors. Jindal Steel was the top loser today in ‘A’ group on the BSE. Jindal Steel ended 6.5% down at Rs238.9 on the BSE.

US indices closed flat on Thursday.

Data showed applications for US unemployment benefits climbed to a nine-week high last week, while consumer spending surged in March by the most in almost five years as warmer weather brought shoppers back to auto-dealer lots and malls.
The US non-farm payrolls data is due later today.

The Institute for Supply Management's factory index rose to 54.9 in April from 53.7 in the prior month, the Tempe, Arizona-based group's report showed today. Readings above 50 indicate expansion. The ISM's factory gauge averaged 53.9 for all of last year.

Hang Seng (0.57%), NZSE 50 (0.46%) and Taiwan Weighted (0.86%) ended up. All all the other Asian indices trading today closed in the red. Straits Times (0.37%) was the top loser. China's official manufacturing purchasing managers' index rose to 50.4 in April.

European indices are trading in the green while US Futures are trading marginally higher. Euro-area manufacturing grew at the fastest pace in three months in April on accelerating expansion in Germany and Italy, evidence the currency bloc's recovery remains on track. A Purchasing Managers' Index increased to 53.4 from 53 in March, Markit Economics said in a statement today. That exceeded a preliminary reading of 53.3 published on April 23. The measure has exceeded the level of 50, indicating expansion, for the past 10 months.


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