Wall Street Has No Worries – Obama and Holder Are Shooting Blanks
by Arlen Grossman
“Why Can’t Obama Bring Wall Street to Justice?” ask Peter Boyer and Peter Schweizer in Newsweek this week. It’s a question a lot of Americans are asking, but the answers so far have been less than satisfying.
“It’s perplexing at best, it’s deeply troubling at worst,” complains Phil Angelides, a former California treasurer who chaired Congress’s Financial Crisis Inquiry Commission. The FCIC reported that reckless Wall Street firms and weak federal regulators were to blame for the 2008 financial crisis. But we have yet to see any prosecutions of high-ranking financial executives.
In reality, the lack of accountability and prosecution is not perplexing at all. It’s all very predictable. The important fact to understand is that the biggest contributors to Obama’s 2008 presidential campaign were financial firms. Wall Street gave him $16 million compared to $9 million for his Republican rival. Goldman Sachs executives alone donated $1 million to Obama’s campaign.
That turned out to be a great investment for the Big Banks. Instead of having to face a tough Attorney General, their quid pro quo was the nomination of corporate lawyer Eric Holder, who spent ten years at the Covington & Burling, a law firm whose clients happen to include Goldman Sachs, Bank of America, Citigroup and all the other major financial institutions. Not surprisingly, Holder went after Wall Street with the vengeance of a toothless chihuhua. By the time he finished spitting them out, Obama’s Justice Department had racked up a total of zero criminal charges against the major banks.
That compares with the thousand or so prosecutions (90 percent ending in convictions) resulting from the Savings and Loan scandals in the 1980s. One of the government regulators back them was William Black, now a professor at the University of Missouri. Newsweek quotes Black as saying the difference between then and now is a matter of will and priorities. President Obama has talked tough, but has failed to deliver.
“There hasn’t been any serious investigation of any of the large financial entities by the Justice Department” notes Black. Financial-fraud prosecutions are down 39 percent since 2003 under both the Bush and Obama Justice Departments. Professor Black also points to the revolving-door between the Justice Department and law firms representing Wall Street. “Everybody knows there is a problem with that.”
Three different government investigations led to Justice Department referrals for possible criminal investigation that so far have led nowhere. A Newsweek inquiry determined that, in the weeks prior to and after a scathing 2011 Senate committee report formally recommended a criminal inquiry into suspicious Goldman Sachs transactions, several company executives, some donating for the first time, made maximum-limit contributions to the President’s re-election campaign. For Goldman Sachs, it was one more investment that paid excellent dividends, i.e. no prosecution.
Attorney General Holder has tried to explain that as bad as Wall Street’s behavior has been, proving that they’ve broken laws is not an easy task. But Professor Black posits a number of possible federal charges: “securities fraud for false disclosures, wire and mail fraud for making false representations about the quality of the loans and derivatives they were selling, bank fraud for false representations to the regulators.” But to make them stick would require a strong prosecutor and an administration willing to go to battle. So far, neither one has showed up.
A New York Times article quotes David A. Skeel, a law professor at the University of Pennsylvania: “If you look at the last couple of years and say, ‘This is the big-ticket prosecution that came out of the crisis,’ you realize we haven’t gotten very much.” Many Americans worried that different rules would be applied to this financial crisis, and that appears to be the case. “It goes to the whole perception that Wall Street was taken care of, and Main Street was not.”
In spite of the kid glove treatment from the Obama Administration, Wall Street looks forward to even better treatment from a Romney administration and has poured money into the Republican’s campaign at Obama’s expense. Apparently the President’s occasional scoldings and minor rule changes annoy the bankers enough to drive them into his rival’s camp. Any fears of major prosecutions have apparently dissipated, leaving the banksters confident that even more goodies will be forthcoming from their traditional GOP allies.
The world of Big Finance continues its high-flying lifestyle and powerful grip on the eager politicians eyeing the bottomless supply of contributions that Wall Street is happy to provide. It’s a win-win for the banksters and politicians, while the rest of America waits impatiently for their so-far elusive economic recovery.