What Does It Take to Get a Banker to Perp Walk?

Thank you, Gretchen Morgenson, for regularly asking the right questions. I have complained before (most recently here and here) that bankers -- despite nearly imploding the US economy -- have never had to undergo an individual "perp walk" but have merely paid (at a corporate level) fines.

In the business section of Sunday's The New York Times, Morgenson asked, "How can we expect Wall Street's me-first culture to change when regulators won't pursue or even identify the me-firsters who are directly involved?" (full column, here)

In a settlement between the Securities and Exchange Commission and Citigroup, the bank has agreed to pay $180 million, mostly to investors, for a "disastrous" municipal bond deal that Citigroup "concocted and peddled" to wealthy investors from 2002 until 2008, which ended up losing said investors some $2 billion.

As is often the case in these settlements, the bank "neither admitted nor denied" the allegations. And the bank has already paid out over $700 million to compensate some of its investors for some of their losses. But....

The SEC case also comes more than seven years after the Citigroup investment strategy imploded. Unfortunately, six years is the time limit given to clients wishing to bring an arbitration case. So the facts laid out in the SEC's complaint against Citi are of no help to any investor who had not yet sued to recover from the bank.

Most disturbing, though, is the settlement's lack of accountability. As is all too common, Citigroup's shareholders are footing the $180 million bill associated with it. But they didn't devise the toxic bond strategy, sell it or hide its risks to investors. 

That was the work of Citi employees, as the SEC's order makes clear. Indeed, it contains chapter and verse about the crucial role played by the fund manager overseeing these investments. Some 50 references to actions taken by the fund manager and his staff are contained in the order.

What the SEC's order doesn't do, however, is name that fund manager. Morgenson has done her research, however, and does. That may embarrass that former Citi employee, but what I want to know is...

Why hasn't he been charged with anything?

The Merchants of Doubt Are Back in Town

In 2010, historians of science Naomi Oreskes and Erik Conway published a terrific book called The Merchants of Doubt (the book was followed last year by a documentary of the same title, directed by Robert Kenner).

In their book, Oreskes and Conway outlined the way some key scientists, political conservatives, have manipulated scientific data to cast doubt on the dangers of smoking, the reality of human-caused climate change, the existence of a hole in the earth's ozone layer, etc.  (More information about the book can be found at the Merchants of Doubt website.)

Coca-Cola seems to have found the technique compelling.

In today's New York Times, Anahad O'Connor reports that Coca-Cola is providing funding to scientists who argue that obesity is caused, not by eating too much, but by exercising too little (full article, here).

Global Energy Balance Network, the non-profit receiving Coke funds, is described on its website as "a newly formed, voluntary public-private, not-for-profit organization dedicated to identifying and implementing innovative solutions -- based on the science of energy balance -- prevent and reduce diseases associated with inactivity, poor nutrition and obesity. It is a premier world-wide organization led by scientists working on the development and application of an evidence-based approach to ending obesity." ("Energy balance" is the simple equation of calories in, from food and drink, to calories out, from physical activity.)

So much for all that pesky criticism about the role that sugary soft drinks play in weight gain and obesity.

So it's really all about getting up off that couch, and not so much about getting your hand out of the cookie jar, right?

Sadly, no.

As Aaron Carroll wrote in the New York Times last June, research clearly shows that, to lose weight, eating less is far more effective than exercising more (article, here).

Among other points, Carroll noted that studies have shown that "total energy expenditure and physical activity levels in developing and industrial countries are similar, making activity and exercise unlikely to be the cause of differing obesity rates."

Moreover, exercise can raise appetite, so if all you do is exercise more... you may find that you're eating more too.

That's not to say exercise is unimportant. Carroll wrote that:

Many studies and reviews detail how physical activity can improve outcomes in musculoskeletal disorders, cardiovascular disease, diabetes, pulmonary diseases, neurological diseases and depression....

But that huge upside doesn't seem to necessarily apply to weight loss. The data just don't support it. Unfortunately, exercise seems to excite us much more than eating less does.

So why would Coca-Cola be funding this Global Energy Balance Network? Let's see...

As O'Connor reports today, regular Coke sales are down ("In the last two decades, consumption of full-calorie sodas by the average American has dropped by 25 percent."), there are widespread efforts to tax sugary drinks and/or to remove them from school vending machines.

Hmmmmmm.