The following is an excellent excerpt from the book “WITH LIBERTY AND JUSTICE FOR SOME: How the Law Is Used to Destroy Equality and Protect the Powerful” by Glenn Greenwald from Chapter 3 on page 130 and I quote: “Evidence of Criminality Ignored – The immunity enjoyed by financial elites in America is particularly striking when compared to other nations’ responses to financial crises. In Iceland, for instance, not only have numerous bank officials been criminally investigated and charged, but, as Jurist news service reported in September 2010, “An Icelandic parliamentary commission. . . recommended that the country’s former prime minister be tried for negligence” for his role in the country’s 2008 financial crisis. Indeed, the subpoena-empowered commission conducted a thorough and very public investigation into the events leading to Iceland’s crisis and then published a 274-page report—which, among other things, accuses the former prime minister of having been aware of the underlying crisis but purposely refraining form taking action to stop it. Based on those findings, the commission’s report urges that the former prime minister be “tried and punished” for the role he played.
There is little doubt that a corresponding culpability exists in the American political establishment. Still, holding political leaders legally accountable is virtually unimaginable in the United States today, and the same is true for financial leaders.
Criminally prosecuting Wall Street executives and firms for their role in the financial crisis would not be a simple task. At issue are complex transactions, dispersed throughout multiple large institutions, and carried out under a deliberately vague and permissive legal regime. Indeed, in his 2003 condemnation of derivative instruments, Warren Buffet candidly acknowledged that the complexity of these transactions meant that neither he nor anyone else truly understood their value, impact, or interrelationships. Real investigations would require substantial time and resources and would encounter legitimate obstacles.
That said, large-scale criminality clearly played a major role in engendering the crisis. Even without subpoena power and other instruments of compulsion, many experts and commentators have compellingly documented numerous clear acts of illegality. Professor Bill Black comprehensively examined public documents to demonstrate that only “willful blindness” among lenders and credit ratings agencies would have led them to tout and endorse financial instruments that were essentially worthless. Yet virtually none of this evidence has even been meaningfully examined by the authorities, let alone pursued by prosecutors. As Newsweek’s Michael Hirsh lamented two years after the crisis, speaking about the role played by credit agencies: “One of the most distressing things about the current financial scandal is that there has been no . . . reckoning against the firms that were supposed to be watching the system for the investment public.”
This “no-accountability” approach is of course just a slightly altered variant of the mentality that led to the pardon of Nixon and the subsequent granting of immunity to powerful political criminals. Likewise familiar is the rationale now routinely invoked to justify the lack of prosecutions of financial elites: given their importance, it is vital that we not disrupt their efforts and actions by bothering them with investigations for their crimes. As Hirsh wrote about the prospects of prosecuting the credit agencies: “The government is simply too afraid to let that happen. Like many of the big banks, the ratings agencies have been deemed too big or important to the system to fail.”
In her book ECONned, Yves Smith—who spent much of her career on Wall Street, including a stint at Goldman—extensively details the fraudulent accounting practices that preceded the downfall of Lehman Brothers and other banks. As she notes, “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.” Smith points out in particular the proliferation of the kind of pay-for-play that was exposed in the JPMorgan/Jefferson County case discussed earlier in this chapter:
“Municipal finance has long been a cesspool, but blatantly corrupt behavior was, not that long ago, for the most part limited to backwaters and bucket-shop operators. Now, it isn’t just Jefferson County, but pretty much every big-name financial firm is involved in multiple cases of stuffing local governments and their pension funds, with derivatives that had all sorts of tricks and traps or toxic CDOs, sometimes with the liberal applications of bribes, sometimes merely with fast talk and omission of key details. Often, these government entities hired “experts” who simply sold them out for fat fees.”
Perhaps the most notable argument for clear-cut lawbreaking as the cause of the financial crisis came from a very unlikely source: the longtime Federal Reserve chairman Alan Greenspan, who spent much of his career demanding fewer and fewer regulatory restraints on Wall Street. In the wake of the economic collapse, Greenspan admitted that he had been wrong to oppose increased regulations, telling a House committee, “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” and acknowledging that the crisis had exposed a “flaw” in his free-market ideology. But, after spending decades insisting that fraud was not a real problem on Wall Street, Greenspan also argued that much of the problem was due not to lax regulations but to outright criminality:
Well, first of all, remember you have to distinguish between supervision and enforcement. A lot of the problems which we had in the independent issuers of subprime and other such mortgages, the basic problem there is that, if you don’t have enforcement, and a lot of that stuff was just plain fraud, you’re not coming to grips with the issue.”
When even a longtime Wall Street servant such as Alan Greenspan admits that a substantial cause of the financial crisis was “just plain fraud,” the almost complete absence of criminal consequences is clearly an extraordinary injustice.
In December 2010, ProPublic reporter Jesse Eisinger—who covered the financial crisis from the start—protested the lack of prosecutions in the New York Times, noting that even on Wall Street, “everyone is wondering: Where are the investigations related to the financial crisis?” Eisinger’s article summarized the shocking state of affairs:
Nobody from Lehman, Merrill Lynch or Citigroup has been charged criminally with anything. No top executives at Bear Stearns have been indicted. All former American International Group executives are running free. No big mortgage company executive has had to face the law. . . .The world was almost brought low by the American banking system, and we are supposed to think that no one did anything wrong? . . . As a society, we have the bankers we deserve. Sadly, it’s looking as if we have the regulators and prosecutors we deserve, too.”
A blue-ribbon report did get issued in January 2011 by the government’s Financial Crisis Inquiry Commission. It was a typical Beltway piece of obfuscation and whitewashing, a work with little real insight and even less consequence. Although the commission found that the crisis cold have been averted with greater government regulation and was largely caused by industry-wide fraud, it identified no specific culprits and failed to call for any criminal investigations. Like most panels of its kind, the FCIC did not threaten the perpetrators with any real consequences, despite some harsh language blaming the financial industry as a whole. The report’s release was, in the words of Joe Nocera of the New York Times, “almost comical” and failed in its only real mission: to “propose a satisfying theory that explains why so many people did so many wrong, and wrong-headed, things in the years leading up to the financial crisis.” As a result, it did absolutely nothing to bring any real accountability to either the financial elites responsible for the crisis or the government regulators who had allowed it to happen.
What’s perhaps even more astounding than the lack of criminal prosecutions is that, years later, the original practices behind the crisis have hardly been constrained at all. In January 2010, the Treasury Department’s independent watchdog over the Wall Street bailout, Neil Barofsky, issued a scathing report documenting that many of the factors behind the financial crisis are still with us, and that in some respects the situation has actually worsened. “It is hard to see how any of the fundamental problems in the system have been addressed to date,” Barofsky wrote. Banks that were said to be “too big to fail” are now “even larger,” and Wall Street is “more convinced than ever” that it will be saved from failure by the government, thus increasing the motivation to take enormous risks. Wall Street bonuses in the year immediately after the crisis reveal “little fundamental change” in troublesome compensation schemes, while federal efforts to support the housing market “risk reinflating that bubble.” Moreover, the so-called financial regulation legislation enacted by Congress in the summer of 2010 was so diluted by lobbyists and donors from the very industry it purported to regulate that the primary causes of the crisis—including the “too-big-to-fail” quandary and unregulated derivatives markets—went almost entirely unaddressed.”
(WHEN COMPARED TO OTHER COUNTRIES, OUR PROSECUTIONS OF WALL STREET AND THE LEVERAGE AND THE DERIVATIVES THEY’RE USING DOES SEEM TO BE DELIBERATELY COVERED-UP. WARREN BUFFETT’S COMMENT CONCERNING THE ISSUE EVEN VERIFIES THAT. THERE AGAIN, THOUGH, THE PROBLEM LIES IN THE FACT THAT THE BANKS HAVE 3,000 LOBBYISTS COVERING-UP ANYTHING THAT THE GOVERNMENT IS ATTEMPTING TO DO. THAT’S WHY IT’S GOING TO TAKE MORE INVESTIGATIVE REPORTING, SUCH DOCUMENTARIES AS PBS’s FRONTLINE AND BILL MOYERS JOURNAL AND CBS’s 60 MINUTES AND TO IGNORE ALL THE DOZENS OF EXCELLENT-WRITTEN BOOKS DOCUMENTING THE HISTORY OF HOW THINGS DETERIORATED SO BAD, LEADING UP TO THE CRISIS OF 2008. ALSO THERE WAS A FANTASTIC MOVIE “TOO BIG TO FAIL” BASED ON ANDREW ROSS SORKIN’S BOOK OF THE SAME TITLE WHERE TREASURY SECRETARY HANK PAULSON, ALONG WITH HELP FROM FED CHM BERNANKE AND TIM GEITHNER, WHERE THEY CALLED IN 13 BANKERS AND READ THE RIOT ACT TO THEM.. THIS IS THE PART OF OUR HISTORY THAT THE REPUBLICAN PARTY WOULD JUST AS SOON FORGET ABOUT BECAUSE THEY WERE THE PARTY OF DEREGULAITON IN BANKS AND VIRTUALLY EVERYTHING ELSE AND STILL ARE. UNTIL THEY CHANGE THEIR WAYS AND CREATE A BALANCE IN WHAT IS THE ROLE OF GOVERNMENT IN KEEPING THE INVESTMENT BANKERS IN LJNE, MAYBE IT’S ITME THE REPUBLICAN PARTY GET TOTALLY VOTED OUT OF OFFICE IF THEY’RE UNABLE TO ENDORSE PRACTICAL CHANGES THAT WILL MAKE OUR ECONOMY AND THE WORLD ECONOMY IMPROVE AT THE SAME TIME SO WE DON’T END UP LIKE BANGLADESH, WHERE GARMENT WORKERS ARE PAID 18 CENTS AN HOUR AND ORDERED TO GO INTO A BUILDING ABOUT TO COLLAPSE, WHERE.OVER 1,000 PEOPLE DIED.
LaVern Isely, Overtaxed Independent Middle Class Taxpayer & Public Citizen & AARP members