I would be remiss if I didn’t note this New York Times report on prison sentences for former insiders at Milberg Weiss for their roles in the former high-flying class action law firm’s kickback scheme. Interestingly, both former partners, Steven Schulman and David Bershad, reportedly cooperated with federal investigators to provide critical detail on the law firm’s misconduct.

There’s a certain level of sad irony in this. I won’t defend Milberg Weiss. They did wrong, and the take down is the right result. But the sad thing is that their securities work was one of the few thin forms of protection when Wall Street engaged in misconduct.  So I’m hoping that these take downs are just a prelude for the next round. Because I have to imagine that there are some people at AIG, at Bear Stearns, at some of the investment firms and credit rating agencies who did similar or worse.

David Sugerman

Two stories in today’s news provide court-side glimpses of two forms of market abuse that led us skipping down the garden path to the cratered economy. In this one from the Oregonian you can learn all about the alleged scams by various Oregon flimflam men who saw that the trough was unguarded. They apparently goosed up the value of properties, got inflated appraisals, and borrowed way out of proportion to the collateral, pocketing the overage.

They could act with impunity because the banks were turning their paper to Wall Street and didn’t have any reason to scrutinize loan applications.

And of course the liar loans promoted by banks were being bought by Bear Stearns. Here’s an update on criminal proceedings against former Bear Stearns managers facing indictments. Apparently, they knew that the loans they were buying were bunk.  Going to be fun to hear them explain why they kept hyping their hedge funds while secretly selling their own shares before it all crashed down.

All of this highlights the dark underbelly of deregulation.  Want a chuckle? Remember the movie, Wall Street? “Greed is good,” we were told by pop culture, by politicians and by professors.

So this is what they meant by “Good.”

David Sugerman

ps to regular readers-I’m out of here for a couple of weeks for vacation. While David Paul may pick up the slack, the blog may well go dark while I’m away. I’ll be back to it after the 4th of July weekend.