“Traditionally, a bank would tell the Department of Justice when an employee engaged in crimes, but what do you do when the bank itself is run by a criminal enterprise? – Solomon L. Wisenberg, former chief of a Justice Department financial institutions fraud unit.
A society is in serious trouble when its political pariahs have at the core of their demands a return to the rule of law. This inversion, with our political and cultural outcasts demanding a respect for law, highlights the awful fact that the most radical and retrograde forces within the body politic {the Right—D.K.} have seized control. – Chris Hedges
In 2005, Michael Greco, the President of the American Bar Association, decided he had to come to the defense of the rule of law in the US. A variety of Bush administration practices, such as signing statements, struck Greco as dangerous transgressions against the constitution, and he commissioned three research reports on the subject from groups of ABA specialists who had deep experience working within the executive branch, including the FBI, the CIA, the NSA, and the Justice Department. Each report identified serious violations of the constitution, and expressed alarm at the gravity of the consequences should they go unchecked. Greco made the reports public, and delivered them to the White House, only to be met with silence from the media and the political establishment.The rule of law, it seems, was no longer a concern to the US establishment, even when the legal profession's umbrella association was weighing in with stern warnings.
However indifferent the establishment may have become to the rule of law by 2005, a large proportion of American citizens were not willing to tolerate brazen illegality at the top.Indignation at the Bush administration's disregard for the law played a significant role in delivering the Presidency and majorities in both chambers of Congress by 2008. President Obama's own background as a one-time teacher of constitutional law conditioned optimism that his administration would honor the rule of law, and would hold many Bush administration officials accountable for their transgressions. Such was the spirit of 2008.
Alas, Obama moved to temper expectations for justice as soon as he assumed office, famously declaring his preference for “moving forward” rather than dredging up the sins of the just concluded Bush administration. Obama's policy made quite an impression, given the scale of the crimes—which included launching a war of aggression in Iraq on false pretenses, the systematic use of torture on prisoners, and the widespread orchestration of federal prosecutions for partisan (Republican Party) political purposes. The implications of non-prosecution are momentous, of course. It serves to establish the practices of the Bush administration in precedent, and leaves such practices available to future administrations.
“Traditionally, a bank would tell the Department of Justice when an employee engaged in crimes, but what do you do when the bank itself is run by a criminal enterprise? – Solomon L. Wisenberg, former chief of a Justice Department financial institutions fraud unit.
As grievous as the lack of accountability in the executive branch may be, Americans have still held out some hope for accountability in the economic realm, chiefly as regards the major Wall Street banks and the specialized mortgage lenders (Countrywide being the most famous) that did so much to foment the financial crisis. The contours of the criminality are sufficiently clear. To consider just one of many vectors, mortgage lenders systematically and surreptitiously falsified documentation from mortgage loan applicants, so as to ensure the approval of these loans, and payment for themselves when they sold ownership of the loans on to banks, for repackaging into MBS (mortgage-backed securities) the banks hawked worldwide.
It is worth a moment to contemplate the scale of just this one dimension of Wall Street crime in the lead-up to the crisis of 2008. According to former Citigroup VP Richard Bowen, who led the group evaluating mortgages bought from lenders like Countrywide, about 60% of 2006 vintage mortgages were defective. He reported this up channels to the top of consumer lending group, but the business was highly profitable, so the bank took no corrective action. It continued to declare that the mortgages underlying its MBS met internal Citigroup lending standards. The defective rate hit 80% in 2007. Bowen notified everyone at the very top of Citi, including the Board of Directors and CEO Charles Prince. But Prince took no action, and signed off on SEC filings that all within his company and its MBS offerings was in order, thus leading investors worldwide over a cliff.
While the Justice Department and the SEC claim to be investigating MBS fraud and other criminal machinations of the banks and lenders, they have pursued only trivial prosecutions to date. When asked point-blank on Friday (December 9th) how the Justice Department could possibly be so inert, the President dodged, deferring to the Justice Department. Facing the same question, the official in charge of the investigations there, Lanny Brewer, insists they are investigating everything, and that they have not experienced any interference from anywhere else in the government asking them to go easy on the big banks. At the very least, this tells us that Obama and his upper advisers are not keen on prosecutions. The President could certainly bolster and accelerate the investigations. To leave himself out of the process is to invite Justice Department officials to collude with the large banks, so as to secure lucrative “revolving door” jobs for themselves in the near future.
The public's suspicions that Wall Street is above the law look all the more accurate in the light of recent revelations that the Justice Department consciously withdrew resources from financial crime investigations back in 2005. Under pressure from President Bush's attorney general, the Justice Department outsourced investigations of wrongdoing to the banks themselves, allowed a gray zone between guilty and not guilty assessments, deferred prosecutions, etc. And the picture darkens further when we learn that 1) the SEC systematically and illegally shredded materials from 18,000 investigations over the last decade; 2) this was an SEC-wide policy, per a discovered internal memo; 3) that the SEC tried to cover up their cover-up; and 4) that the SEC has been very rough on whistleblowers within its own walls.
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