They call it the “perp walk”, where high profile alleged crims are taken into custody in full media view, walked to the police cars in handcuffs and then into court in full media gaze. It’s happened in the cases of Enron and Worldcom, OJ Simpson and a string of other cases. It’s done regularly for the Mafia heavies in New York, murders and others whose arrests will get TV coverage and a big splash in newspapers and online.

It’s very American and designed to send two signals: that the authorities are on the case in controversial cases and that the people concerned might be guilty even though they are presumed innocent, and in many cases have been paraded before being charged.

No worries about civil or human rights in the US, despite the Constitution: it’s supposed to be about freedom of speech when in fact its designed to get nosey media and critics off the backs of the Administration and authorities.

And so it is with the subprime mess and credit crunch.

Yesterday we saw a very obvious strategy. Hit Wall Street and the people who brought you the subprime mess in the first place, investment bankers running hedge funds (all together now, ooohhh ahhhh) and then the low level shysters and fraudsters who sold dodgy products and made what was an American dream, owning your own home, into an American nightmare: the subprime crisis, credit crunch and recession.

The FBI chose two former Bear Stearns hedge fund managers whose funds collapsed a year ago, which triggered the start of the credit crunch as investors started realising that the subprime problems were more than just an isolated event in the housing market: hundreds of billions of dollars in losses, plus trillions of lost value in markets, US home values and other assets. It’s clear no one in the US knew what was going on.

The US Government prosecutors said the two former Bear Stearns hedge fund managers were being prosecuted for what they did at their funds, not for Bear’s failure or the whole subprime mess. But they had better get a big fish or two soon or these two will be the ones wearing all the blame.

And, yet, of all the people who brought you the mess (from Citigroup to UBS, Congress, accountants, and Merrill Lynch to name just a few), two fund managers have been chosen as examples to help the Republicans (and indeed all in Congress) convince millions of American voters who have lost their houses, or who have seen the value of their homes plummet, or who have lost their jobs, that something is being done.

The two former Bear Stearns hedge fund managers were indicted on securities fraud charges. Their arrest and charging is a crock of sh** because of the obvious political nature and the way the media has climbed all over it, without standing back and wondering why now.

Because it’s a year ago the two hedge funds started imploding at a cost of $1.5 billion, and that triggered the long slow decline of Bear Stearns that ended in its rescue and sale. But the board and senior management at Bear Stearns all share culpability.

In a separate mortgage fraud probe charges against more than 400 people have been laid this week after a series of arrests across the country.

Reuters reported the arrests as “the Bush administration cracked down on abuses that deepened the credit crisis”. That’s exactly the line the Bush Administration wanted the media to take. It’s more a case of rounding up the usual suspects: these are all people who allegedly sold or mis-sold subprime mortgage products.

The US Justice Department said that the more than 400 people charged in a nationally coordinated investigation were involved in mortgage fraud that led to an estimated $1 billion in losses.

But what about those responsible at the top of Wall Street for the tens of billions of losses in the US, Europe, Asia and Australia as a result of the subprime debacle?

Peter Fray

Inoculate yourself against the spin

Get Crikey for just $1 a week and support our journalists’ important work of uncovering the hypocrisies that infest our corridors of power.

If you haven’t joined us yet, subscribe today to get your first 12 weeks for $12 and get the journalism you need to navigate the spin.

Peter Fray
Editor-in-chief of Crikey