The Sunday opinion section of the New York Times has an editorial they could have run every day for the last four years, asking why nobody has been prosecuted for the greatest financial collapse since the Great Depression. It’s really a familiar story, and while I appreciate seeing it in their pages, I hold no hope that it will spur activity of any kind. And neither does the Times ed board, I should say.
Proving federal fraud requires evidence of intent, no small lift. But proving intent does not require a smoking gun. The financial crisis, fomented over years by big banks and presided over by executives, involved reckless lending, heedless securitizations, exorbitant paydays and illusory profits, all of which led to government bailouts and economic calamity. Is it plausible that none of that broke the law and that none of the people in positions of power and authority knew what was going on?
It seems likelier that it’s not intent that’s missing, but creative thinking on the part of federal prosecutors about the web of federal statutes that could be brought to bear on potential cases. As far back as 2009, when the Justice Department lost a financial fraud case against a pair of hedge fund managers at Bear Stearns, it seems to have made an institutional determination that it could not win against big banks and top bankers. That stance has dovetailed with the Obama administration’s emphasis on protecting the banks from any perceived threat to their post-bailout recovery.
It’s deeply ironic that the biggest prosecution to date, of Lee Farkas from Taylor Whitaker, came about largely due to the efforts of Neil Barofsky while the Special Inspector General for TARP. Needless to say, the Justice Department or Treasury Department would not be super-willing to share that credit.
Adam Levitin picks this up and notes that the statutes of limitations under FIRREA last 10 years, which means there’s actually still time for prosecutions. But they’re not going to happen, and the closing of the books on things like the Goldman Sachs violations detailed in Carl Levin’s Senate report proves this. We may get an October surprise in the form of some Libor prosecutions (specifically relegated to small traders and not executives), but that’s about it.
Levitin writes:
My prediction is that when the history of the Obama Administration is written, there will be some positive things to say about it, but also two particular blots on its escutcheon. First, the failure to act decisively to help homeowners avoid foreclosure, and second, the failure to hold anyone accountable for the financial crisis. These two failures are intimately tied, of course. Both are explained by the “Obama administration’s emphasis on protecting the banks from any perceived threat to their post-bailout recovery.”
The logic here is that financial stability and economic recovery are more important than rule of law. There’s an argument to be made that law has to give way to basic economic needs. I, however, would reject the choice as false. Instead, the best way to restore confidence in markets is to show that there is rule of law. The best route to economic recovery was through rule of law, not away from it. (Yes, I realize there are those who would argue that the GM/Chrysler bankruptcies and cramdown aren’t rule of law, but rule of law can include flexible systems like bankruptcy, rather than just rigid rules.)
I obviously agree. It’s also the best route to future stability in the financial system and the broader economy. There wouldn’t be a whole lot to worry about from rental revenue securitizations if the people who designed and packaged the very similar mortgage backed securities were picked up and thrown in jail for their fraudulent misconduct. Instead, they’ll be the same people putting together these new deals.
This has led to the same zombie banks running the show. I really don’t think that Mitt Romney has anything radically different to offer than what he described this weekend as “four more years of the big banks getting bigger, the small banks getting smaller.” But I cannot say he doesn’t have a point.




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government bailouts my ass
TAXPAYER sweat equity payouts is more like it
lets hear from Bill Prince of Chevron Keller
How is it a failure of creative thinking to have the Comptroller of the Currency instruct the national banks to stonewall the 50 state Attorney General foreclosure fraud investigation? Or to tell the American people in whispered tones of amazement that the Federal Gov’t is putting together a crack 55 member task force to tackle a financial crime wave 70 times the size of the Savings & Loan scandal that required 1,000 investigators to resolve? Brilliant!
Good post. This festering wound to America will be what is most remembered about Obama. The ACA will be remembered as a pimple on the ass of the American healthcare industry failure.
The lack of prosecutions will continue until the morale improves.
Finished Barofsky’s book this weekend. (Nice shoutout to Dday.)
Definitively answers the question, “Stupid or evil?”
so what was the answer (i vote for both).
Amen.
Absent the Rule of Law … there is no just future, merely continued deceit.
Thank you, David Dayen, for your continuing and consistent effort, over the last four years, to bring awareness and ” the conversation” to the point where the New York Times can, finally, run an editorial about the criminal fraud and placidly lament that NO consequence of any significance will befall those who engaged in, and profited from, that fraud … which almost destroyed the economic viability of civil society and the political class which also benefited, as the Times did NOT really point out, from the largess of the fraudulent elite and then scuttled the Rule of Law to protect their benefactors, which the Times alludes to, but does NOT underline sufficiently that no one might fail to understand what, precisely, occurred, and its long-term and inevitable effect upon civil society and the people who comprise that society … now much less civil, honorable,and honest, and the elite who control it, now far more greedy, complacent and protected than ever.
DW
Evil. The only stupidity was thinking that stroking the banksters, making them fat and happy,
would somehow keep Wall Street loyal and lead to re-election.
No posts on cop killings.
This point needs to be made over and over and over again. Jane Mayer’s recent piece in the New Yorker magazine about Obama’s campaign and the 0.01% and how they feel he’s not kissing their asses enough while he’s not that into fundraising does provide some context for this. Despite their enormous wealth and power, it seems our wealthy class feels it is not getting enough respect from the peasantry. To sic the prosecutors on them would just be adding insult to injury and so much undeserved ingratitude. So many of them feel this way despite the lack of prosecutions, they want Mitt to be our leader just to remind us all who’s really in charge.
If you want to really get into this fraud you should read Bill Black or Randall Wray. Wray has a post up now: ” Why is the Obama administration incentivizing fraud?” You can check it out here.
One small quote:
Kinda what DD was saying, eh?
Between 2003 and 2009 China investigated 240,000 cases of corruption, in 2009 3,193 people were punished for offering bribes.
In 2009 the US Justice Department’s Public Integrity Section charged 36 people for corruption and related offenses.
It seems the Dictatorship in China is not only kicking our ass in the Market but in the application of the Rule of Law.
Capitalism is fraud.
I’m afraid this is apples and oranges. Even leaving aside that China has four times our population, the vast majority of US public corruption cases are prosecuted by US Attorneys, state Attorneys General, and district attorneys. (This is not meant to excuse the Public Integrity Section, which has indeed been an abysmal failure.)
Lets protect the slave-holders……………..
“… when the history of the Obama Administration is written, there will be some positive things to say about it…”
No, there won’t.
Barry I will never forgive you for this, but I might vote for you because I think Romney/Ryan might be worse. This country is in big trouble. Either way we lose.
How tacky, to even think of looking backward at the crimes committed against the people of the United States by the rich and/or powerful! (Is any individual powerful these days, who is not also rich?)
For those the rich and/or powerful and only for them, we are classy enough to look only forward. And, indeed to elect them to govern us and then to re-elect them and then to elect the people whom they endorse.
The American people get commended for the wrong things, like their endless tolerance. We could damn well use some lack of tolerance for thugs in suits.
The New York Times-led journalistic watchdogs have been as complicit in the lack of any major prosecutions by the O’bama team. The Times and other media continue to make excuses for the banks and their bankster executives, expecting us to believe they’ve made missteps, and oversaw “reckless lending, heedless securitizations, exorbitant paydays and illusory profits.”
In reality, it has been a coldly calculated conspiracy among the political leaders and banksters, begun by Summers, Clinton, Graham, Greenspan and the like who abolished Glass-Steagall, and utilized fraud, power, brainwashing, bribery, extortion, theft and terrorism to achieve greater wealth and power for the greediest of the 1 percent.
It was Bush with his perceived electoral “mandate” and his team led by Paulson that blew open the doors and bring about the Wild West looting of America. The white collar cops at the Justice Department were taken off the Wall Street beat, and the SEC turned its shoulder or was complicit.
Then they get bailed out by the taxpayers when they couldn’t keep the ponzi scheme going.
And then the O’bama dream team (Romney would do worse, no doubt) of Obama himself, Summers, Geithner, Holder and Rahmbo provided the cover and are thus so complicit that any true investigation and prosecutions would ruin all of them.
The worst thing is, this worldwide ponzi scheme is still going on — fueled by the Fed’s QE money printing and draining of national resources. Nobody’s holding the Fox who’s watching the henhouse accountable. I guess they figure by the time we get a grip on this, they’ll be long gone with their riches while we get stuck buried in a mess too big to imagine.
Especially socialized capitalism.
It is called RAPE…………….
The rule(s) of law today are for those who buy it, protecting business models and profits. The second set of laws are for us, to stifle dissent. It is called Corporate fascism, bought and paid for with your money!
“The logic here is that financial stability and economic recovery are more important than rule of law.”
Reminds one of the logic used to justify slavery. The rule of law states clearly, ” All men are created equal…,” except if you are a “slave.” We will niche a little exception in the “rule of law,” calling you inferior for the economic benefit of select group of “individuals,” for economic stability? Did not work to well in America’s past and it is not a solution for the future as the cost for that stability ultimately led to civil war, The ultimate instability?
Congress protects slavery, discrimination, unequal pay under the color of law more often than equal protection under the law. In fact American’s suffer from dementia and unequal protection under the law, servile to corporate, as slave was owned by slave-owner. BTW how much money will you waste out your tailpipe this week, instead of buying food in addition to the New American Life tax to be paid for “existing,” now under fear of a punitive coercing tax penalty?
Life, Liberty and Pursuit of Happiness, in accordance with the dictates of corporate scum who buy law is not American!
Last week I encouraged my state senator to add “fighting corruption” to his campaign platform. He suggested it’s not a concern for people and therefore it didn’t interest him.
I noted the August Gallup poll that asked to questions about people’s priorities. The first was open-ended, asking for feedback. In that question, no one mentioned corruption. The second was closed and explicitly asked if “corruption” is a concern. Corruption was the response of 87% of people, behind jobs, but ahead of healthcare, national security et al.
Obama’s failure to prosecute W$ is because the system is corrupt. Everyone knows this. But I suspect that everyone also knows that Romney would similarly ignore the Rule of Law and let W$ walk.
As a result of this, I *think* that it’s been discounted as an issue among the voters… there is simply no choice. And therefore people don’t discuss it much.
However, I do believe that *corruption* will be a leading force in a relatively depressed turnout in November.
Are you referring to monopolistic control of the distribution of all necessity goods and services including health care?
Monopolies in commerce and trade are as much a threat to liberty as where the, slave-owner’s enjoyment of a “codified monopoly” on labor?
Not even if I were referring to it’s greatest con.