As Mayor of a small western village nestled in the Sierra Nevada(Snowy Mountains), I enjoy reading about the "real" world of high finance courtesy of various print media outlets. Despite the best efforts of these media outlets, the criminal behavior of Wall St. companies is never ending. It has become so common place that the exposure of their many wrongs barely elicits a yawn from: the public, the regulators, the bankers, and politicians who generally can't be bothered as they have elections to win(or lose). But, every now and then a massive fraud scheme is revealed with some eye-popping numbers.
Indictments today and yesterday of principals of Archegos Capital Management illustrate how the world of high finance is often a game of inflated substance based on suspect evidence unquestioned by insiders themselves. Bill Hwang, a founder of the company, is under arrest and free on $100 million bail. His finance chief, Patrick Mulligan, has also been indicted. They claim complete innocence. The U.S. Attorney for the Southern District of New York says the elaborate scheme was basically a "pump-and-dump plan". The company holdings and values increased dramatically from about $36 billions to $160 billions in a matter of months. Hmmmm? Would that have caused some heads to turn? The best part of the whole scheme, in my High Sierra eyes, is the revelation that the cream of the crop of investment banking firms(the usual scum @Goldman Sachs, Morgan Stanley, and Credit Suisse) believed what they were t-o-l-d by Mr. Hwang instead of trust-and-verify, again. So, it confirms what we all suspect: despite the outrage among regulators and politicians, things continue pretty much as always despite the hot air.
The FED actually stated that the tactics of Archegos Cap. threatened the entire banking system. Imagine that! One man/one company putting the financial lives of all Americans in jeopardy; it's enough to make you wonder about all the academic power available in America, and all the pronouncements of economists, and all the fear created by media about the fiscal health of the working stiffs in the country. Yes, there will always be problems, but it seems that the problems we face these days are bigger and more concentrated in fewer places-Wall Street/ Washington/ K-Street.
The U.S. Attorney will have his work cut out for this case unless he can provide recording of the statements provided to lenders/bankers that convinced them what he claimed had some veracity. If not, Bill Hwang could get off free like Bernie Madoff. Oh, wait, Bernie went to prison and died there, and his wife died penniless, and a son committed suicide. One could say he paid a heavy price for his fraud.
Have a nice day.
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