The following is an excellent excerpt from the book “THE DIVIDE: American Injustice in the Age of the Wealth Gap” by Matt Taibbi from Chapter 1 titled “Unintended Consequences” on page 48 and I quote: “Why Abacus? Why not, say, JPMorgan Chase? Jamie Dimon’s megabank was caught up in dozens of scandals during the same period covered by the Abacus investigation—everything from money laundering to energy price manipulation to mismanaging customer funds to robo-signing to antitrust violations to charging excess overdraft fees to hiding billions of dollars of losses in the infamous “London Whale” episode, in which the bank hid the fact that one of its lunatic traders in Europe had nearly destroyed the firm by doubling and tripling down on exotic bets on corporate credit.
All told, in just three years since Vera Sung stumbled into Ken Yu’s real estate closing, Chase—again, a Covington & Burling client—had paid out more than $16 billion in regulatory settlements. The $16 billion represented an incredible 12 percent of its net revenue during that time period. This was before a $13 billion settlement in the fall of 2013, a deal that ate up about half of the bank’s net for that year.
Yet throughout all this time, neither the bank nor any of its high-ranking employees were ever once criminally indicted. No Chase employee in any of those cases ever felt handcuffs on his wrists. In fact, Chase was not even forced to admit wrongdoing in most of these settlements.
This seemed to be Collateral Consequences in action, but no one could say for sure.
It was easier to be sure once Abacus was indicted. Two seemingly small details in the case are what seem to confirm the thesis.
First, Abacus was never offered a deferred prosecution agreement by the state. Vance’s office took a hard line, apparently not willing to accept anything less than a plea to actual criminal charges. The reader is asked to remember this detail as he or she goes forward through the numerous tales of nonprosecution or deferred prosecution agreements that are yet to come in this book.
The second fact is that at the very moment Vance was marching his defendants into court on the day of the indictment, the FDIC and the OCC were in the Abacus offices, preparing to take action if the negative publicity resulted in a run on the bank.
“They were worried about a run,” says Thomas Sung. “They knew something could happen.”
This is significant because it says something about the government’s willingness to conduct a prosecution that it knew might result in a bank failure, job losses, and/or other “collateral” damage.
Both state and federal authorities apparently had no problem taking that risk with little, politically unconnected Abacus.
A defender of the Justice Department in this instance will naturally protest that the Abacus case had nothing to do with Eric Holder, because Abacus was not prosecuted federally. But upon closer examination, Collateral Consequences showed loudly in this case.
Mainly, it showed in those “extraneous matters”–in the non-prosecution of every other bank in America that really was guilty of responsibility for the financial crisis. Those noncases certainly can be laid at the institutional feet of Holder’s Justice Department.
And if Eric Holder’s voice wasn’t the direct inspiration, the spirit of Collateral Consequences certainly moved Cyrus Vance, who sent subpoenas to many Wall Street firms but chose to indict only a small, globally nonconsequential Chinatown bank.
Abacus isn’t just the only bank in the entire country to face indictment since the financial crisis. It’s also the first company that we know of that was officially deemed small enough to destroy. Too-big-to fail, meet small-enough-to-jail.
The case of Abacus Federal Savings showed everyone the outlines of the now obvious, but still unofficial, selective-leniency doctrine. The absurdity of its application in the world of white-collar crime was clear enough. We were letting major systemic offenders walk, bypassing the opportunity for important symbolic prosecutions, and instead committing the limited resources of the nation’s financial police to putting the smallest of small fry on the rack for negligible offenses.
But there was another major flaw in the new approach that nobody in charge had likely bothered to consider.
It may have been unknown to the Ivy Leaguers like Holder and Tim Geithner who were crafting the new policy, or maybe they simple didn’t care, but the Collateral Consequences idea had been dreamed up at a time when local police departments all over the country were instituting new statistics-based policing strategies that functioned according to logic that was exactly opposite that of the Holder memo.
These were programs like the infamous CompStat system and other lesser-known outgrowths of the celebrated “broken windows” urban policing strategies, programs whose effectiveness depended upon massive numbers of low-level arrests for minor violations.
All over America, indigents or the merely poor were being hauled in in ridiculous numbers, often detained even if just for a short time, given tickets, and searched. These cast-a-wide-net street-policing strategies were ostensibly designed to snag illegal guns or serious criminals with outstanding warrants, but they didn’t always work out that way. At exactly the time Holder was penning his famous memo in the late 1990s, the abjectly purposeless arrest was becoming more and more common, even as, perversely, the numbers of actual violent crimes committed had begun to drop precipitously.
And as every individual who’s ever been charged with a crime knows, anyone facing criminal arrest can expect collateral consequences. A single drug charge can ruin a person’s chances for obtaining a student loan or a government job. It can nix his or her chances of getting housing aid or a whole range of services—even innocent members of your family may lose access to government benefits. You can lose your right to vote and your access to financial aid. You can even have your children taken away.
But no police anywhere were officially asked to weigh the collateral consequences of arrests for prostitution, stealing cars, assault, selling weed, jumping turnstiles, even the simple offense of being homeless. There’s no memo in the Justice Department that wonders aloud what happens to the families of those sorts of arrestees. Instead, the new trend in policing is and has been to aggressively no longer care about any of it.
Indeed, it looked very much like someone was trying to implement Collateral Consequences in a vacuum. Well-heeled lawyers seemed to be working to make the traumatic consequences of arrest obsolete for the clients of other well-heeled lawyers, all the while pretending, or maybe asserting, that this could be done without considering the rapidly expanding role of the police and the criminal court system in the lives of ordinary people.
Whether they knew it or cared about it, that’s what the new policy was turning out to be: For the small subset of offenders who are guilty of truly systemic, transformative, organized crime, for offenders to whom losing a big case could be politically embarrassing, let’s carefully consider the collateral consequences of criminal prosecution. But for everybody else, let’s ignore them more than ever before.
The architects of Collateral Consequences seemingly didn’t realize they were starting a revolution. They were accelerating a government-sponsored sorting of the entire population into arrestable and nonarrestable classes.”
(MATT TAIBBI WROTE AN INTERESTING BOOK, PARTICULARLY SINCE IT’S DIFFERENT FROM THE FACT THAT WHEN HE COMPARES THE LIFESTYLES OF THE WALL STREET BANKS TO THE LIFESTYLE OF SOMEONE POOR AND VIRTUALLY A STREET PERSON FOR MANY YEARS WHEN HE WAS YOUNGER. IN FACT, HE WROTE A WHOLE CHAPTER ON THIS BLACK MAN, ANDREW BROWN, LIVING IN NEW YORK CITY, COMPARING HOW THE POLICE PICKED UP THE POOR FOR VIRTUALLY NO REASON, WHILE THE VERY RICHEST INVESTMENT BANKERS WERE IGNORED BY AUTHORITIES, AS HIGH AS THE U.S. ATTORNEY GENERAL. SOME OF THE BIG INVESTMENT BANKS WERE EVEN LAUNDERING DRUG MONEY. YOU CAN EASY UNDERSTAND WHY THERE’S GETTING TO BE CLASS WARS ALL AROUND THE WORLD, WHEN AUTHORITIES ARE PROSECUTING THE POOR AND IGNORING THE RICH. ONE OF THE MORE INTERESTING ADMISSIONS FROM PAGE 60 BY LANNY BREUER, HEAD OF THE CRIMINAL DIVISION OF THE JUSTICE DEPARTMENT, WAS WHEN HE WAS TESTIFYING IN FRONT OF THE PERMANENT SUBCOMMITTEE ON INVESTIGATIONS LED BY SENATOR CARL LEVIN, A DEMOCRAT FROM MICHIGAN AND MR BREUER SEEMED TO MAKE EXCUSES FOR THE JUSTICE DEPARTMENT. A LITTLE LATER, IN JANUARY 2013, MR BREUER WAS INTERVIEWED ON PBS’s FRONTLINE PROGRAM, WHICH I VIEWED AND THE SAME PATTERN OF EXCUSES WERE MADE. LESS THAN A WEEK LATER, HE RESIGNED. AFTER THAT, ALL THE RESPONSIBILITY FELL ON THE SHOULDERS OF ATTORNEY GENERAL HOLDER. I’LL BE PUTTING IN MORE DETAILS IN MY NEXT EXCEPT AND YOU CAN JUDGE IF THESE PROFESSIONALS MADE ANY SENSE. WITH THAT ATTITUDE, ARE WE EVER GOING TO GET THIS VERY SERIOUS INVESTMENT BANKING PROBLEM UNDER CONTROL?
LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members