I’ve been a critic of President Obama and Eric Holder’s decision to ultimately not prosecute any of the major (or even minor) perpetrators involved in the 2007 housing crash ever since I started this website a couple of years after the actual 2007 Housing Crash. In fact, it was my frustration over that absence of prosecution that set me off and onto my soapbox of exasperation with the Republicans AND DEMOCRATS for doing less than nothing over the past decades by letting “Wall St.” get away with such blatant un-American, un-Capitalistic, and Elitist crap while tens of thousands of hard-working Americans lose everything they worked their entire lives for.
But I recently read, The Chickenshit Club (Simon & Schuster), by Jesse Eisinger. It’s a captivating financial history, an excellent example of investigative journalism, but in some staid circles, somewhat controversial. Nevertheless, it’s a first-rate study of Wall Street hubris and their complete lack of fear of reprisal for fraudulent practices, deceit, and destructive greed with complete indifference for the victims—in short, the whole American shit show that our so-called Capitalism has wrought upon the 99%, especially with a Congress and Departments of Justice under multiple administrations too lazy or unwilling to take the necessary actions to keep the same thing from happening again and again. It’s enlightening to read but a real downer in that it’s a magnifying glass focused squarely of the failure of our Congress and presidential administrations to implement that which the founders had envisioned–nation which is of, for and by the PEOPLE.
The book highlights a tour of the last century of white-collar crime—beginning with what Al Capone called “the legitimate rackets.” The persistent conclusions in all manner of white collar crimes are that the government is terrible at prosecuting them. “There has never been a golden age of white collar prosecutions,” Eisinger writes. “The rich and powerful have always been rich and powerful.” In my estimation, the lack of “want to” has killed as many Americans as whites have killed and /or displaced Native Americans and African Americans combined; while treating them all with copious amounts of indifference.
There are various sound explanations for this. Edwin Sutherland, the renowned sociologist who coined the phrase “white collar crime,” argued in 1940 that such criminals “are oriented basically to legitimate and respectable careers,” and their social class status manipulates the law’s administration “to its own interests” by recognizing bribery of officials as just another cost of doing business. The best example resides in the White House this very minute. And the supposedly, intended, third branch of government, (the federal court system) whose sole purpose was to throttle back any skullduggery perpetrated by failures to govern under the auspices of the Constitution, by applying the guiding legal principles as dictated in the Constitution, but was decimated in one fell swoop by codifying Citizen’s United which essentially put our democracy up for sale to the highest bidder.
One result is that white collar offenders are often otherwise “respectable” citizens, however deficient their outrageous displays of of basic human decency their behavior exemplifies. The inventive geniuses for many kinds of white collar crimes are generally lawyers, but even lawyers take a back seat to politicians, who take the roles of rationalization and hypocrisy to astronomical heights. This is a central tenet of Eisinger’s book, which is primarily concerned with why so few people went to jail after the 2007 financial meltdown. The U.S. Securities and Exchange Commission and the U.S. Department of Justice—are perpetually outgunned: Laws are purposefully ambiguous, which sets impossibly high bars for proving crimes, defense attorneys are skillful, and the criminal mind is endlessly innovative.
On occasion, though, ambitious and charismatic bureaucrats have tilted this cat-and-mouse game in favor of the government (and therefore “the people”), in what Eisinger calls “silver ages” of prosecution.
The dissolution of Enron Corp. in 2001 (Stop the GOP Assault on the U.S. Economic Future by Harvey_Gold • May 10, 2012 http://progresshg.com/2012/05/10/gop-assault-our-economic-future/), provided one such quintessential moment.
The DOJ went all-out. It indicted Big Eight Accounting behemoth, Arthur Andersen LLP. Texas Senator, Republican Phil Gramm was just beginning his all out-assault on the U.S. economy, his wife Wendy Gramm (who was bribed with over $2million back when that was a lot of money and oversaw the donation of $97k to Phil Gramm’s Senate campaign back when that, too, was a lot of money) was Reagan’s Chairwoman of the Commodities Futures Trading Commission who applied for and was subsequently granted government exemption for energy commodities from government or public disclosure.
It assembled a federal task force—with some 40 FBI agents and 10 prosecutors—to go after top executives and the accountants and bankers who enabled them. Hoping to get erstwhile Chief Financial Officer Andrew Fastow to flip on his former colleagues, prosecutors indicted his wife. Ronald Reagan’s more than two dozen people were eventually prosecuted in connection with the scandal. Ken Lay, the former chairman, died of a heart attack before he could appeal.
It was, from a certain perspective, a golden age. And then, the backlash. The Supreme Court unanimously overturned the Andersen verdict in 2005. Crucial Enron convictions were likewise reversed. After other blunders and a blitz of corporate and media pressure, the DOJ revised its policies on convicting companies. Courts across the country became skeptical of prosecutorial power, as did many in Congress. In the years that followed, Eisinger says, the DOJ grew systematically cowardly, fearful of bringing tough cases and all too willing to settle with companies for cash and quasi-contrition. He delineates several reasons for this—the book is a stunning work of research—but his main argument is that by the time the 2007 financial crisis hit, the department lacked the guts and wherewithal to go after executives.
Even worse, anyone under the age of 50 probably doesn’t even remember the collapse of the Savings & Loan industry that had been a highly successful mortgage lender and savings banking system until Republicans, once again, rolled back regulation that would’ve prevented the shoddy business practices so reminiscent of the 2007 financial crisis.
In his famous study of bureaucracies, political scientist James Wilson wrote that “agencies, much more than business firms, are likely to have general, vague, or inconsistent goals about which clarity and agreement can only occasionally be maintained. Often any effort to clarify them will result either in the production of meaningless verbiage or the exposure of deep disagreements within Congress.” The DOJ, post-crisis, became a font of both. Objectives clashed, political rancor intensified, and energy dissipated.
The results, by Eisinger’s reckoning, were devastating: “One by one, the financial crisis criminal investigations fell to the decisions not to take the risk: Countrywide, Washington Mutual, CDO wrongdoing, mortgage-backed securities transgressions, Lehman Brothers, Citigroup, AIG, valuation games, Bank of America, Merrill Lynch, Morgan Stanley. There were no indictments.”
The scope of that list alone ought to scare the hell out of anyone with an IQ higher than their number of teeth. Eisinger quotes an email from an SEC official named Reid Muoio to his troops, referring to the crisis: “I suggest that we keep in mind that the vast majority of the losses suffered had nothing to do with fraud and the like, and are more fairly attributable to lesser human failings of greed, arrogance, and stupidity.”
Eisinger doesn’t agree with that conclusion and frankly neither do I. He argues that prosecutors should stop being chickenshits and start putting more bankers in the gray bar hotel. I couldn’t agree more and is by far my biggest disappointment in the Obama/Holder stint in that administration. Don’t misunderstand me, I expect this of Republicans, who view government regulations with the same disdain crooks view police. But for the persistent propaganda spread by the National Chamber of Commerce and the Republican Party have convinced the general public that those evil government regulations hinder new businesses, maybe Americans would realize that anti-regulation fanatics are wolves in sheep’s clothing solely because regulations only exist to promote true Capitalism; the definition of which is quite simple:
“Capitalism only works if greed and avarice are offset by laws and regulations to prevent fraudulent and deceptive practices.”