‘Too Big To Fail’
‘Too Big To Jail’
Why Wall Street's leaders have escaped prosecution for the
2008 financial crisis or any fraud related to the sale of bad mortgages.
The Untouchables: How the Obama administration protected
Wall Street from prosecutions
A new PBS Frontline report examines a profound failure of
justice that should be causing serious social unrest
Glenn Greenwald
theguardian.com, Wednesday 23 January 2013 12.27 GMT / dhttp://www.theguardian.com/commentisfree/2013/jan/23/untouchables-wall-street-prosecutions-obama
PBS' Frontline program on Tuesday night broadcast a new
one-hour report on one of the greatest and most shameful failings of the Obama
administration: the lack of even a single arrest or prosecution of any senior
Wall Street banker for the systemic fraud that precipitated the 2008 financial
crisis: a crisis from which millions of people around the world are still
suffering. What this program particularly demonstrated was that the Obama
justice department, in particular the Chief of its Criminal Division, Lanny
Breuer, never even tried to hold the high-level criminals accountable.
What Obama justice officials did instead is exactly what
they did in the face of high-level Bush era crimes of torture and warrantless
eavesdropping: namely, acted to protect the most powerful factions in the
society in the face of overwhelming evidence of serious criminality. Indeed,
financial elites were not only vested with immunity for their fraud, but
thrived as a result of it, even as ordinary Americans continue to suffer the
effects of that crisis.
Worst of all, Obama justice officials both shielded and
feted these Wall Street oligarchs (who, just by the way, overwhelmingly
supported Obama's 2008 presidential campaign) as they simultaneously prosecuted
and imprisoned powerless Americans for far more trivial transgressions. As
Harvard law professor Larry Lessig put it two weeks ago when expressing anger
over the DOJ's persecution of Aaron Swartz: "we live in a world where the
architects of the financial crisis regularly dine at the White House."
(Indeed, as "The Untouchables" put it: while no senior Wall Street
executives have been prosecuted, "many small mortgage brokers, loan
appraisers and even home buyers" have been).
As I documented at length in my 2011 book on America's
two-tiered justice system, With Liberty and Justice for Some, the evidence that
felonies were committed by Wall Street is overwhelming. That evidence directly
negates the primary excuse by Breuer (previously offered by Obama himself) that
the bad acts of Wall Street were not criminal.
Numerous documents prove that executives at leading banks,
credit agencies, and mortgage brokers were falsely touting assets as sound that
knew were junk: the very definition of fraud. As former Wall Street analyst
Yves Smith wrote in her book ECONned: "What went on at Lehman and AIG, as
well as the chicanery in the CDO [collateralized debt obligation] business, by
any sensible standard is criminal." Even lifelong Wall Street defender
Alan Greenspan, the former Federal Reserve Chair, said in Congressional
testimony that "a lot of that stuff was just plain fraud."
A New York Times editorial in August explained that the
DOJ's excuse for failing to prosecute Wall Street executives - that it was too
hard to obtain convictions - "has always defied common sense - and all the
more so now that a fuller picture is emerging of the range of banks' reckless
and lawless activities, including interest-rate rigging, money laundering,
securities fraud and excessive speculation." The Frontline program
interviewed former prosecutors, Senate staffers and regulators who
unequivocally said the same: it is inconceivable that the DOJ could not have
successfully prosecuted at least some high-level Wall Street executives - had
they tried.
What's most remarkable about all of this is not even Wall
Street had the audacity to expect the generosity of largesse they ended up
receiving. "The Untouchables" begins by recounting the massive
financial devastation the 2008 crisis wrought - "the economy was in ruins
and bankers were being blamed" - and recounts:
"In 2009, Wall Street bankers were on the defensive,
worried they could be held criminally liable for fraud. With a new
administration, bankers and their attorneys expected investigations and at
least some prosecutions."
Indeed, the show recalls that both in Washington and the
country generally, "there was broad support for prosecuting Wall
Street." Nonetheless: "four years later, there have been no arrests
of any senior Wall Street executives."
In response to the DOJ's excuse-making that these criminal
cases are too hard to win, numerous experts - Senators, top Hill staffers,
former DOJ prosecutors - emphasized the key point: Obama officials never even
tried. One of the heroes of "The Untouchables", former Democratic
Sen. Ted Kaufman, worked tirelessly to provide the DOJ with all the funds it
needed to ensure probing criminal investigations and even to pressure and
compel them to do so. Yet when he and his staff would meet with Breuer and
other top DOJ officials, they would proudly tout the small mortgage brokers
they were pursuing, in response to which Kafuman and his staff said: "No.
Don't show me small-time mortgage guys in California. This is totally about
what went on in Wall Street. . . . We are talking about investigating senior
level Wall Street executives, even at the Board level". (The same Lanny
Breuer was recently seen announcing that the banking giant HSBC would face no
criminal prosecution for its money laundering of funds for designated terrorist
groups and drug networks on the ground that the bank was too big to risk
prosecuting).
As Kaufman and his staffers make clear, Obama officials were
plainly uninterested in pursuing criminal accountability for Wall Street. One
former staffer to both Biden and Kaufman, Jeff Connaughton, wrote a book in
2011 - "The Payoff: Why Wall Street Always Wins" - devoted to
alerting the nation that the Obama DOJ refused even to try to find criminal
culprits on Wall Street. In the book, this
career-Democratic-aide-turned-whistleblower details how the levers of
Washington power are used to shield and protect high-level Wall Street
executives, many of whom have close ties to the leaders of both parties and
themselves are former high-level government officials. This is a system, he
makes clear, that is constituted to ensure that those executives never face
real accountability even for their most egregious and destructive crimes.
The reason there have been no efforts made to criminally investigate
is obvious. Former banking regulator and current securities Professor Bill
Black told Bill Moyers in 2009 that "Timothy Geithner, the Secretary of
the Treasury, and others in the administration, with the banks, are engaged in
a cover up to keep us from knowing what went wrong." In the documentary
"Inside Job", the economist Nouriel Roubini, when asked why there
have been no such investigations, replied: "Because then you'd find the
culprits." Underlying all of that is what the Senate's second-highest
ranking Democrat, Dick Durbin, admitted in 2009: the banks "frankly own
the place".
The harms from this refusal to hold Wall Street accountable
are the same generated by the general legal immunity the US political culture
has vested in its elites. Just as was true for the protection of torturers and
illegal eavesdroppers, it ensures that there are no incentives to avoid similar
crimes in the future. It is an injustice in its own right to allow those with
power and wealth to commit destructive crimes with impunity. It subverts
democracy and warps the justice system when a person's treatment under the law
is determined not by their acts but by their power, position, and prestige. And
it exposes just how shameful is the American penal state by contrasting the
immunity given to the nation's most powerful with the merciless and brutal
punishment meted out to its most marginalized.
The real mystery from all of this is that it has not led to
greater social unrest. To some extent, both the early version of the Tea Party
and the Occupy movements were spurred by the government's protection of Wall Street
at the expense of everyone else. Still, Americans continue to be plagued by
massive unemployment, foreclosures, the threat of austerity and economic
insecurity while those who caused those problems have more power and profit
than ever. And they watch millions of their fellow citizens be put in cages for
relatively minor offenses while the most powerful are free to commit far more
serious crimes with complete impunity. Far less injustice than this has spurred
serious unrest in other societies.
New feature
We're going to institute a new feature tomorrow (Thursday),
beginning at 10:00 am EST: a live question-and-answer session between myself
and readers regarding columns I've written over the last month. At that time
tomorrow morning, a column will be posted here in which readers can leave
questions, and from 2:00 pm to 4:00 pm EST, I'll be here live to answer
selected ones. The exchange will then be posted in a form similar to this one
previously done by the Guardian with Clay Shirky. The Guardian has several
really good ideas for maximizing the involvement of and interaction with
readers in the journalism that it does - a goal that has been important to me
since I first began writing about politics online - and this is the first of
the features we'll try in pursuit of that end. I hope everyone inclined to do
so is able to participate.
UPDATE
The New York Times' Dealbook section hosted a Q-and-A today
with Martin Smith, the producer of "The Untouchables". Here is one
quite revealing exchange from that (via @QuietAmerican55):
dealbook untouchables
The Obama administration is not accustomed to actual
adversarial journalism that sheds light on their malfeasance. They do not like
it. And when they see it, they respond about as petulantly as possible: we will
never cooperate with you again! It's not Frontline's fault that the Obama
administration actively shielded Wall Street from all forms of criminal
accountability. If, as seems to be the case, that fact embarrasses them, they
should blame those responsible (themselves), not those reporting it.
UPDATE II
The Washington Post is reporting this afternoon that Breuer
is planning to leave the DOJ. Don't worry: he'll be fine. Given how valiantly
he protected Wall Street and HSBC, one need not be Nate Silver to predict with
a fair degree of confidence that he'll land on his feet. When public officials
use their government power to serve the interests of private sector elites,
they are often lavishly rewarded by the faction they served upon leaving
government. That's one of the key dynamics greasing the sleazy revolving door
of Washington. Beyond that, Breuer's contacts in and influence with the DOJ
will be in high demand by corporations, banks and other assorted oligarchs
seeking to exercise the legal immunity which US political culture has bestowed
on them.
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