Bank Fraud Apparently is not a Crime
May 1 was Law Day, so this month is a great time to consider law enforcement concerning those banking gangsters –“banksters” – who violated laws and went unpunished.
In 1958, when Republican President Dwight Eisenhower established Law Day, he said, “The world no longer has a choice between force and law. If civilization is to survive it must choose the rule of law.”
But Wall Street’s banksters are choosing force – the force of influence, intimidation and economic power that has government cowering.
While people accused of nonviolent drug offenses, shoplifting, etc. face incarceration, most white-collar criminals since 2008’s financial meltdown have avoided prosecution for their destructive acts – much less prison. Investigative reporter Matt Taibbi, author of “The Divide: American Injustice in the Age of the Wealth Gap,” said, “If you’re going to put people in jail for having a joint in their pocket, you cannot let people who laundered $800 million for the worst drug offenders in the world walk.”
Affluent and influential banksters provoke memories of the Woody Guthrie lyric, “Some will rob you with a six-gun, and some with a fountain pen.” Yes, people were robbed, and not just by “bad business” decisions. Crimes like fraud were committed.
Economist Dean Baker commented, “Issuing a mortgage that is known to be based on false information and then selling it in the secondary market is fraud and punishable by time in jail.”
But such fraud allegedly was committed by the powerful. The six largest banks (Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo) dominate the financial sector, with more than two-thirds of its assets, according to Fortune magazine. Journalist Michael Hiltzik in the Los Angeles Times wrote, “The financial sector still wields excessive control over the economy, the big players have grown even bigger, and the regulators have been systemically emasculated.”
However, Attorney General Eric Holder came from New York’s Covington & Burling law firm, which has represented many of the big banks. That employment merry-go-round is probably the origin of the Justice Department’s business-oriented mindset of negotiating for settlements instead of nabbing and trying suspects in courts of law. So, in the incident Taibbi alluded to, HSBC admitted laundering $850 million for two drug cartels with links to Russian gangs and even Al Qaeda, and was fined $1.9 billion. Sure, some executives had to defer bonuses for five years (“not give them up, DEFER them,” Taibbi said), but no one faced a trial or jail.
Last May Holder suggested to a Senate committee that some banks are too big to control, saying, “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to … prosecute them. If you do bring a criminal charge, it will have a negative impact on the national economy.”
But common sense may be inching into this Crazytown. Federal Judge Jed Rakoff in the New York Review of Books dismissed prosecutors’ excuses. Their rationalizations, Rakoff wrote, include that such cases are difficult, hard to prove that victims relied on the claims banksters made, and could hurt the economy
Rakoff wrote, “To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse – sometimes labeled the ‘too big to jail’ excuse – is disturbing, frankly, in what it says about the department’s apparent disregard for equality under the law.”
Instead, he added, it’s not unreasonable to speculate that the government itself was involved.
Elsewhere, James Kidney, as he recently retired from the Securities & Exchange Commission, said regulators are afraid of Wall Street. And in Detroit, federal Judge Miriam Cedarbaum in March denied Goldman Sachs’ request for the dismissal of a civil suit accusing the bank of misleading a pension fund about mortgage-backed securities.
The government’s failure to prosecute has sent a signal that it’s taking a “hands off” approach, so why shouldn’t culprits do it again? Wall Street banks handed out $26 billion in bonuses to 165,000 execs and staff last year, the New York state comptroller reported – enough to double the pay of every American working for minimum wage. Les Leopold of the Labor Institute says, “The fees Wall Street extracts from public entities could total more than $50 billion a year — enough to provide free tuition at every public college and university in the country.” And a study from the Fix LA Coalition confirms that, showing that Los Angeles spends more on brokerage fees, pension-fund management, etc. than it does to fix its streets.
Why should banksters change if there are no consequences?
Contact Bill at Bill.Knight@hotmail.com; his twice-weekly columns are archived at billknightcolumn.blogspot.com
The opinions expressed are not necessarily those of Tri States Public Radio or Western Illinois University.