Matt Taibbi's Must-Read Hatchet Job on the SEC

I think Matt Taibbi of Rolling Stone is the second greatest financial journalist of our generation after Michael Lewis. I did not see his latest piece, "Is the SEC Covering Up Wall Street Crimes?" on businessinsider so I decided to post it.

Against National Archive rules, the SEC has been destroying documents from MUI (investigations that did not result in prosecutions) that they should have been keeping for 25 years. This has the effect of whitewashing suspicious but legally unprovable activity. It also eliminates the possibility of investigators seeing a pattern.

I came away from the article with the realization that the culture of the SEC has not changed even after the Madoff fraud and a financial crisis that almost brought the country to its knees. The current director of enforcement at the SEC, Robert Khuzami, was hostile to the whistleblower Darcy Flynn when he brought the improper destruction of documents to his attention. Khuzami also refused to cooperate with a recent inquiry from Senator Grassley about the infamous hedge fund SAC.

I am scared for investors. Read Taibbi's article. Just not before bed or it will give you nightmares.

Goldman Gouges the Poor Again

While Matt Taibbi's of Rolling Stone colorful description of Goldman Sachs as a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money could be interpreted as anti-Semitic by some, there is some truth to the description. The New York Post reports today that Goldman Sachs and Veritas Capital plan to turn a quick profit on their investment in Global Tel Link (GTL), which is the largest provider of phone services in prisons. Goldman Sachs earned that profit from prisoners and their families, who often are poor or middle class.

Prisoners can only make outside calls by calling collect in most prisons. These calls can be as much as 630% higher than a regular consumer call. GTL, which has consolidated the industry, charges some of the highest per minutes rates in the country. Prison Legal News found the rate for interstate collect calls in Arkansas'prisons is $10.70 for 15 minutes.

The cost of the actual telephone call is not the end of the cost. GTL charges family members a $4.75 service fee for each $25.00 payment to a prepaid phone account via credit card, which is a 20% markup for using credit cards. If an account is not used for 90 days, the balance is not returned to the owner of the account, but kept by GTL.

GTL wins a majority of their contracts by paying kickbacks as high as 60% to the states that award them the contracts. While the kickbacks are legal and part of the bidding process, they further burden the families of prisoners. After a hard fought campaign, then Governor Eliot Spitzer eliminated the commission payouts in New York State. Not surprisingly, Goldman Sachs did not lift a finger to end the commissions even though the abolition did not cut into their profitability.

While many are not sympathetic to prisoners, it is the families of these prisoners that bear the lion's share burden of the phone calls. Often, they are forced to choose between eating and letting a child talk to their parent in jail.