For perhaps the first time, President Barack Obama was forced to explain why there have been no prosecutions of Wall Street executives for their fraudulent actions during the run-up to the financial crisis. Asked by Jake Tapper to explain this behavior, Obama basically suggested that most of the actions on Wall Street weren’t illegal but just immoral, and that his Administration worked to re-regulate the financial sector with the Dodd-Frank reform legislation.
“Banks are in the business of making money, and they find loopholes,” the President said. Apparently forging and fabricating documents to prove ownership of homes that are subsequently stolen from borrowers is now a loophole.
Many of the practices on Wall Street “weren’t necessarily against the law but they had a huge destructive impact,” said the President. The work of Bill Black, the Financial Crisis Inquiry Commission, the Senate Permanent Subcommittee on Investigations, and a host of other official studies, analyses, and even court cases cut against that. Just the other day, a new whistleblower lawsuit against banks for setting illegal fees against military personnel wasn’t joined by the Justice Department.
In a follow-up, the President said that “if somebody they violated laws on the books, they need to be prosecuted, and that’s the Attorney General’s job.” Of course, investigations have to actually be carried out, and the President’s Justice Department has been at the lead of a foreclosure fraud settlement which would bail out banks that would otherwise owe in the trillions for fraudulent practices with the origination and securitization of loans, for a pittance of a sum. Only the work of a few Justice Democrats have put a stop to this.
The question came up in the context of Occupy Wall Street, the series of protests in New York City and across the country over the past few weeks. Obama, much like his Chief of Staff, Treasury Secretary and Federal Reserve chief, made some guarded remarks about how the protesters were speaking to a general frustration with some problem that he claimed to have worked to solve. Obama confined his remarks to Wall Street and particularly the Dodd-Frank financial reform, which the Republicans want to roll back. He touted the Consumer Financial Protection Bureau, whose director nominee, Richard Cordray, just passed the Senate Banking Committee on a 12-10 vote. But he did not seem to understand the broader context of the protests, against an economy that only works for the top 1% at the expense of the other 99%.
Obama also added this, approximately: “I expended a lot of political capital to keep the banks afloat, and I have the scars to prove it. And I still think it was the right thing to do, because otherwise our economy would have been worse off.” This is the President taking ownership of TARP, which did not pass under his Presidency but which he whipped as a candidate for President in 2008. He took ownership of the extraordinary financial support given to banks as they teetered on the verge of collapse. And this is a central grievance of the protesters on Wall Street and across the country.