There's no shortage of candidates for this year's "Mighty Capitalist of the Year Awards."
Some of these folks are headed for the history books, courtrooms and possibly jail and many of them already adorn the dart boards of their former employees and clients. We can't cover the universe, but any list would have to include:
Alan Greenspan, dubbed "maestro" for what was once considered a majestic orchestration of the economy. But the retired Federal Reserve boss increasingly emerges as all-powerful enabler of the mortgage boom-to-bust fiasco, which snowballed into the biggest financial crisis since the Great Depression. Greenspan failed to outlaw products such as "no-documentation" and "low-documentation" loans, despite protests from regulators in Minnesota and elsewhere that some mortgage brokers and lenders were ramming through the securitization pipeline doomed-to-fail loans that were being packaged into lucrative securities and sold to pension funds and other investors. Moreover, the maestro failed to heed warnings for a decade that the financial system was awash in trillions worth of derivatives, sold ostensibly to juice returns or hedge investors against risk. Greenspan was a favorite of the Wall Street set that escaped with hundreds of millions before the collapse. Main Street is struggling with the devastating fallout of a government that failed to regulate prudently.
Thomas J. Balko and Jonathan E. Helgason, co-owners of TJ Waconia of Roseville, who pleaded guilty in federal court this year to a three-year mortgage-fraud scheme that devastated three north Minneapolis neighborhoods involving more than 150 properties and $35 million in mortgages. The swindlers were discovered by neighbors, who complained to City Council Members Barbara Johnson and Don Samuels and alerted the FBI.
Ralph Cioffi and Matthew Tannin, principals in a Bear Stearns hedge fund, were accused of encouraging investors to keep their money in the funds that were exposed to subprime mortgages even though they knew the funds were in serious trouble last spring. These were the first criminal charges to hit Wall Street in the housing market meltdown. The eventual implosion of their two hedge funds cost investors $1.8 billion and started the domino effect that led to the demise of Bear Stearns.
Former Minnesota Rep. Vin Weber and other high-bucks lobbyists who successfully fought Rep. Mike Oxley's 2005 bill to tighten the underwriting at Freddie Mac and Fannie Mae, the huge government-sponsored mortgage wholesalers that were declared insolvent and taken over by the Feds a few months ago. Oxley, a Republican who has since retired from Congress, told the Star Tribune last fall: "The [mortgage] brokers were dragging people in and they were targeting low-income and minority communities. We had old bankers saying: 'What planet are you on?'"
Bernie Madoff, the self-confessed architect of a $50 billion, 20-year-long Ponzi scheme disguised as a hedge fund, is a leading contender for top honors. The collapse of Madoff's New York-based investment firm, which claimed consistently better-than-market returns but never said exactly how it achieved them, has left thousands of investors around the world and here in Minnesota with billions in losses. Madoff makes Joe Lunchpail feel smart for only being down 35 percent this year in an off-the-shelf Fidelity 401(k) account.
Tom Petters stands accused of bilking investors of about $3.5 billion, according to federal investigators and former associates, in what would be the biggest Ponzi scheme in Minnesota history. Of course, the Madoff scheme, which broke after the Petters scheme, leaves Minnesotans in the familiar "also-ran" mode. No, we're not New York, but Petters was peddling a heck of a story to bring in that kind of money.
