Will banksters get away with it?
Wall Street crime goes deeper: The system means prosecutors
fail to jail corporate criminals.
Danny Schechter Last Modified: 26 Feb 2011 17:21 GMT
Hats off to Matt Taibbi for staying on the Wall Street crime beat, asking
in his most recent report in Rolling Stone: "Why Isn't Wall Street in Jail?"
"Financial crooks," he argues, "brought down the world's economy —
but the feds are doing more to protect them than to prosecute them."
True enough, but that’s only part of the story. The Daily Kos called his investigation
a "depressing read" perhaps because it suggests that the Obama Administration
is not doing what it should to reign in financial crime. Many of the lawyers he calls
on to act come from big corporate law firms and buy into their worldview.
Kos should be more depressed by the failure of the progressive community to focus
on these issues, and not pressing the government to do the right thing.
There is much more to this story. It's also more about institutions than individuals,
more about a captured system that enables and covers up crime and, then, deflects
attention away from the deeper problem.
You could see that when television host Bill Mahrer pressed Taibbi to name
the biggest Wall Street crooks, on his weekly political comedy show,
he didn't fully understand what we are really up against.
Here are ten of well-planned but flawed factors that help explain the procrastination
and rationalisation for inaction. The government is not just to blame either.
Several industries working together, through their firms associations, and well-paid
operatives, collaborated over years to financialise the economy to their own benefit.
Personalising bad guys makes for good TV without offering a real explanation.
When financial institutions and services became the dominant economic sector,
they, effectively, took over the political system to fortify their power. It was a done
incrementally, over years, with savvy, foresight and malice.
First, many of those who might be charged with financial crimes and fraud invested
in lobbying and political donations to insure that tough regulations and enforcement
were neutered before the housing bubble they promoted took off.
After hundreds of bankers were jailed in the wake of the Savings and Loan crisis,
financial fraudsters pushed for weakened regulations, guaranteeing that their
colleagues wouldn't be jailed in when the next crisis hit.
In effect, their deregulation strategy also deliberately "decriminalised" the environment
to make sure that practices that led to high profits and low accountability would be
permissible and permitted. What was once illegal soon became "legal".
The cops and watchdogs were taken off the beat. Anticipating and then dissolving
restraints, they engineered a low-risk crime scene in the way the Pentagon systematically
prepares its battlefields. This permitted illicit practices, to be encouraged by CEOs in a
variety of control frauds to keep profits up so that the executives could extract more revenue.
Today’s proposed Republican cutbacks of the funding of regulatory bodies aims to undercut
recently passed financial reforms. One Commissioner of the Commodity Futures Trading
Commission said if the budget is slashed, "there would essentially be no cop on the beat...
we could once again risk another calamitous disintegration." He added, according to a
New York Times report, "the process will mean nothing, squat, diddley … if we get cut
we're going to be in a world of hurt."
Second, the industry invented, advertised and rationalised exotic financial instruments
as forward looking "innovation" and "modernisation" to disguise their intent while
enhancing their field to maneuver.
This was part of creating a shadow banking system operating below the radar of effective
monitoring and regulation. Where is the focus on controlling the out of control power of the
leverage-hungry gamblers at unregulated hedge funds?
Third, the industry promulgated economic theories and ideologies that won the backing
of the economics profession which largely did not see the crisis coming, making those
who favored a crackdown on fraud appear unfashionable and out of date.
As economist James Galbraith testified to Congress: "…the study of financial fraud
received little attention. Practically no research institutes exist; collaboration between
economists and criminologists is rare; in the leading departments there are few
specialists and very few students. Economists have soft-pedaled the role of fraud in
every crisis they examined, including the Savings & Loan debacle, the Russian transition,
the Asian meltdown and the dot.com bubble. They continue to do so now."
Fourth, prominent members of the financial services industry were appointed to top positions
in the government agencies that should have cracked down on financial crime, but instead
looked the other way. The foxes were indeed guarding the chicken coop guiding institutions
that tolerated if not enabled an environment of criminality.
Alan Greenspan and Ben Bernanke were repeatedly warned by underlings at the Federal
Reserve Bank about pervasive predatory practices in the mortgage and Subprime markets
and they chose to do nothing. Now Greenspan acknowledges pervasive fraud but decries
the lack of enforcement while Bernanke wants to run a Consumer Protection Agency after
ignoring consumer complaints for years. Even as the FBI denounced "an epidemic of
mortgage fraud" in 2004, their white-collar crime units were downsized.
Fifth, the media has been complicit, seduced, bought off and compromised. The housing
bubble mushroomed in the very period that the media was forced to downsize.
Dodgy lenders and credit card companies pumped billions into advertising in radio,
television and the internet almost insuring that there would no undue media investigations.
Financial journalists increasingly embedded themselves in the culture and narrative of
Wall Street by hyping stocks and CEOs. The "guests" routinely chosen by media
outlets to explain the crisis were often part of it.
Foxes guarding the chicken coop
"Many of the ‘experts' whom I read or see on TV seem clueless, [and] full of hot air.
Many of their predictions turn out wrong even when they seem so self-assured and
well-informed in making them," writes Jim Hightower,
His advice: "Don’t be deterred by the finance industry’s jargon (which is intended to
numb your brain and keep regular folks from even trying to figure out what’s going on)."
Sixth, politicians and corporate lawyers fashioned settlements of abuses that were
exposed rather than prosecutions. The government benefited by getting large fines
while businessmen avoided jail.
Financial executives were often rewarded with bonuses and huge compensation for
practices that skirted or crossed the line of criminality.
Intentional violations of the spirit and letter of laws were justified because
"everyone does it" by high priced legal firms that often doubled as lobbyists.
Conflicts of interest were sneered at. Judges, dependent on industry donations for
reelection looked the other way.
Seventh, as the economy changed and industries that were once separated began
working together, laws were not updates. Financial institutions worked closely with
Insurance companies and real estate firms. Yet law enforcement did not recognised
this new reality.
Financial crime was still seen almost entirely under the framework of securities laws
that are designed to protect investors, not workers or homeowners who suffered far
more in the collapse. Cases are framed against individuals with a high standard of
proving intent, not under other kinds of laws used to prosecute organised crime and
By defining crimes narrowly, prosecutions became few and far between.
"Cases against Wall Street executives can be difficult to prove to the satisfaction of
a jury because of the mind-numbing volume of emails, prospectuses, and memos
involved in documenting a case," Reuters news agency reported.
Convicted financial criminal Sam Antar who appears in my film Plunder is contemptuous
of how government tends to proceed in these cases, in part because they don’t seem to
understand how calculated these crimes and their cover-ups are. "Our laws—innocent
until proven guilty, the codes of ethics that journalists like you abide by limit your behavior
and give the white-collar criminal freedom to commit their crimes, and also to cover up
their crimes," he said.
"We have no respect for the laws. We consider your codes of ethics, and your laws,
weaknesses to be exploited in the execution of our crimes. So the prosecutors,
hopefully most prosecutors, are honest if they're playing by the set of the rules; they're
hampered by the illegal constraints. The white-collar criminal has no legal constraints.
You subpoena documents, we destroy documents; you subpoena witnesses, we lie.
So you are at a disadvantage when it comes to the white-collared criminal. In effect,
we're economic predators. We're serial economic predators; we impose a collective
harm on society, time is always on our side, not on, not on the side of justice, unfortunately."
Eighth, even as the economy globalises, and US financial firms spread their footprint
worldwide, there was little internationalisation of financial rules and regulations.
Today, even as the French and the Germans propose such rules, Washington still opposes
a tough global regime of codes of conduct.
Overseas, in Greece and England, and other parts of Europe, there has been an indictment
of American corporate predators, especially Goldman Sachs. They are being denounced as
"financial terrorists" and discussed in terms of their links to various elite business formations
like the Bilderberg Group.
Ninth, With the exception of softball inquiries by a financial crisis inquiry commission,
there has been no intensive investigations in the United States even like the tepid 9/11 Commission.
While Senator Carl Levin of Michigan did spend a day aggressively grilling Goldman Sachs on one
deceptive practice, their defense was more telling about the real nature of the problem: "everyone did it".
The case for criminality has still not achieved critical mass as an issue to become a dominant
explanation for why the economy collapsed. In fact, it is still being sneered at or ignored.
Finally, tenth, a big problem in my countdown, are the progressive critics of the crisis who
also largely ignore criminality as a key factor and possible focus for an organizing effort.
They treat the crisis as if they are at a financial seminar at Harvard, focusing on the complexities
of derivatives, credit default swaps and structured financial products in language that ordinary
people rarely can penetrate. They argue that banks should not be too big to fail, but rarely they
are not too big to jail.
Few progressive activist groups stress the immorality of these practices, much less their
criminality after all these years! There is little active solidarity even in the progressive community
with the newly homeless or jobless.
Where is the active empathy, compassion and the caring for the victims of the financial crimes?
A populist response to the crisis has been muted. There is little pressure from below on the
Administration and Justice Department—which has now created a financial crimes task
force—to take real action. It is as if this crime crisis within the financial crisis does not exist.
Curiously, as they refuse to discuss the pervasive fraud that did occur, the Obama administration
is considering a "global settlement" of all housing fraud to get the issue off the table.
They a proposing a $20bn dollar deal to bury the problem.
By all means, workers should rally to protect their jobs and pensions as they have in Wisconsin,
but they should realise that it is the banks who are ultimately to blame for the financial pressures
behind the attack on them. Pension funds have lost billions because of Wall Street scams. State
governments have taken a big hit.
Why have the unions and leftist groups been mostly silent on these issues?
Even after the markets melted down, even after Wall Street bonus scandals and bailout disgraces,
Wall Street has hardly been humbled. It is still spending a fortune on PR and political gun slinging
with 25 lobbyists shadowing every member of Congress to scuttle real reform.
Its arrogance is evident in an email the Financial Times reported was "pinging around" trading desks.
It reads in part:
“We are Wall Street: It’s our job to make money. Whether it’s a commodity, stock, bond, or some
hypothetical piece of fake paper, it doesn’t matter. We would trade baseball cards if it were profitable…
Go ahead and continue to take us down, but you’re only going to hurt yourselves. What’s going to
happen when we can’t find jobs on the Street anymore? Guess what: We’re going to take yours...
We aren’t dinosaurs. We are smarter and more vicious than that, and we are going to survive."
Perhaps it’s not surprising, that in an act of preemptive anticipation, some years ago,
Wall Street firms began financing the construction and administration of privatised jails.
They know how to profit from incarceration too.
When will we call a crime a crime? When will we demand a jail-out, not just more bail-outs.
Unless we do, and until we do, the people who created the worst crisis in our time will,
in effect, get away with the biggest rip-off in history.