Offensive Ends

Lots of words, each adding to the cacophony we describe as The Great Recession: subprime housing loans, credit default swaps, over-leveraging, fraudulent credit ratings, derivative-trading, de-regulation, etc., etc. After inflicting what global economists see as at least $30 trillion of global financial losses, one has to ask the question: what do the most senior managers on Wall Street – the ones that took that litany of words into harsh practices that defined the Financial Crisis of 2007-2008 – have in common?

Despite crushing, life-destroying financial wrongs that decimated our home values, ripped jobs and job prospects from the hands of millions of workers and the fact that they imperiled our economy, not one single solitary senior Wall Street manager who directed these evils has been prosecuted and convicted of any serious crime. No orange jump-suits. Not even a bunk in Lompoc! Nothing! Most kept their jobs or moved into new, even more lucrative employment. Bernie Madoff perpetrated a fraud, dubbed the largest accounting fraud in U.S. history, which cost his investors an estimated $55 billion, was convicted and is serving a 150 year sentence in a maximum security penitentiary. But his crime, as egregious as it clearly was, cost the overall economy chump change compared to what the Wall Street biggies inflicted – knowing that they were manipulating the system – on… er… everybody on earth!

Federal and state prosecutors faced the prospect of charging and mounting a prosecution against the most well-heeled defendants in the world, folks capable of hiring legions of the best defense lawyers (read: each case would have cost millions and millions of dollars to pursue), able to mount the most effective political pressure (including career-destroying measures against prosecutors who pushed against those big campaign contributors) with the hidden threat of destabilizing America’s biggest and most vital financial institutions.

Instead, we bailed them out with taxpayer money, passed a very watered down Dodd-Frank federal financial-regulatory statute that Congress underfunded and that proved rather ineffective in our politicians’ “never-again” pledge against such financial collapse happening again. The big boyz promised to be good. They said they understood and would tighten their own operations. They lied. There were new global conspiracies to fix lending rates, new ways to deal with terrorist and criminal enterprises, using fed funds intended to be placed into the credit markets to fund their own investment activities, more questionable derivatives trading and reporting practices, tax avoidance schemes that would embarrass most Americans, etc., etc.

But federal prosecutors seemed to be tiptoeing around a direct frontal assault against the big Wall Street firm even with this new bad behavior, choosing instead to mount their initial assault against foreign banks with U.S. operations… knowing that the big U.S.-based financial institutions have their own litany of culpability. Perhaps, by firing some shots across the bow of international players, the domestic banks would get the message and prepare to bend over and see the risks. And trust me, the prosecutors are acutely aware of how badly these American players have behaved, but foreign banks just don’t have the same political clout here as these local boyz.

“It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave… A mixture of new issues and lingering problems could violate earlier settlements that imposed new practices and fines on the banks but stopped short of criminal charges, according to lawyers briefed on the cases. Prosecutors are exploring whether to strengthen the earlier deals, the lawyers said, or scrap them altogether and force the banks to plead guilty to a crime.

“That effort, unfolding separately from a number of well-known investigations into Wall Street, has ensnared several giant banks and consulting firms that until now were thought to be in the clear…

“Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it transferred billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank’s earlier settlement.

“New York State’s banking regulator is also taking a fresh look at old cases, reopening a 2013 settlement with the Bank of Tokyo-Mitsubishi UFJ over accusations that the bank’s New York branch did business with Iran, according to the lawyers who were not authorized to speak publicly…

“PricewaterhouseCoopers, the influential consulting firm that advised the Japanese bank on that case, is also under investigation, according to the lawyers briefed on the matter. The Manhattan district attorney’s office is examining whether the firm watered down a report about the bank’s dealings with Iran before it was sent to government investigators.” New York Times, October 29th.

Nice, but even when violations are found, the cost is almost always only a fine – getting bigger all the time in the hopes that behavior will change if the dollars are big enough (it doesn’t) – but orange jump suits and real criminal prosecution against the individual senior managers who are responsible for all this… never happens. If there is a criminal prosecution, it is always a junior manager who is tossed to the wolves as a necessary sacrifice; the senior managers make sure there is always a sacrificial lamb to kill.

“Typically, when banks have repeatedly run afoul of the law, they have returned to business as usual with little or no additional penalty — a stark contrast to how prosecutors mete out justice for the average criminal.

“When punishing banks, prosecutors have favored so-called deferred-prosecution agreements, which suspend charges in exchange for the bank’s paying a fine and promising to behave. Several giant banks have reached multiple deferred or nonprosecution agreements in a short span, fueling concerns that the deals amount to little more than a slap on the wrist and enable a pattern of Wall Street recidivism.

“Even now that prosecutors are examining repeat offenses on Wall Street, they are likely to seek punishments more symbolic than sweeping. Top executives are not expected to land in prison, nor are any problem banks in jeopardy of shutting down.” NY Times. Money, they’ve got, and they can always jack up rates and charges to consumers to recoup the fines. Listen to the laugher rolling down the halls of the financial elite. Two classes of laws: one for the mega-rich and politically-connected, another for the rest of us. Exactly how do you sell a “law-abiding” commitment from our general citizenry when those at the top have a perpetual “get out of jail free” card no matter how much damage they inflict on the rest of the world?

Why do you think that coterie of rich at the top can pretty much buy influence (between direct campaign contributions with eroding limits plus a horrible Citizens United decision), have an entirely different tax code with loopholes specifically designed for them and are exempt from so many criminal statutes controls the overwhelming accumulation of wealth and earning in this country. And exactly how long can a society that embraces such offensive polarization expect to survive as an intact United States of America?

I’m Peter Dekom, and at what point do we realize that allowing such unchecked behavior to continue actually jeopardizes the long-term viability of the United States itself?