Attorney James Kidney, who was retiring from the Securities and Exchange Commission, gave a widely reported speech at his retirement party. He said that his bosses were too "tentative and fearful" to hold Wall Street accountable for the 2008 economic meltdown. Kidney, who joined the SEC in 1986, had tried and failed to bring charges against more executives in the agency’s 2010 case against Goldman Sachs. He said the SEC has become "an agency that polices the broken windows on the street level and rarely goes to the penthouse floors. ... Tough enforcement, risky enforcement, is subject to extensive negotiation and weakening," he said.
The too big to jail position was put forth by Attorney General Eric Holder, with his remarks before the Senate Judiciary Committee last May in which he suggests that some banks are just too big to jail:
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to—to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large. Again, I’m not talking about HSBC; this is just a more general comment. I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate.”
In 1999, when Eric Holder was a deputy attorney general in Clinton’s administration, he wrote a memo that has now come to be known as "the Holder Memo." originally considered a get-tough-on-corporate-crime memo, because it gave prosecutors a number of new tools with which they could go after corporate criminals. But at the bottom of it, he laid out what is called the "collateral consequences doctrine." And what "collateral consequences" meant was that if you’re a prosecutor and you’re targeting one of these big corporate offenders and you’re worried that you may affect innocent victims, that shareholders or innocent executives may lose their jobs, you may consider other alternatives, other remedies besides criminal prosecutions—in other words, fines, nonprosecution agreements, deferred prosecution agreements.
Lanny Breuer in 2012 was the assistant attorney general, number two in the Justice Department, the head of the Criminal Division, so he’s basically the top cop in America, who spoke before the New York City Bar Association:
“I personally feel that it’s my duty to consider whether individual employees, with no responsibility for or knowledge of misconduct committed by others in the same company, are going to lose their livelihood if we indict the corporation. In large multinational companies, the jobs of tens of thousands of employees can literally be at stake. And in some cases, the health of an industry or the markets are a very real factor. Those are the kinds of considerations in white-collar cases that literally keep me up at night, and which must, must play a role in responsible enforcement.”
Federal Judge Jed Rakoff speaking last November at the University of Pennsylvania Law School, responded to this admission by saying:
“ To a federal judge, who takes an oath to apply the law equally to rich and poor, this excuse, sometimes labeled the too-big-to-jail excuse, is, frankly, disturbing for what it says about the department’s apparent disregard for equality under the law.”
This leads to the retort what about a single mother on welfare who is going to lose her kids because she’s going to lose custody in an $800 welfare fraud case and the many knock-on personal consequences of practically every crime. Does Breuer lie awake at night, thinking about the consequences that ordinary people suffer when they are caught up in the criminal justice system. Of course, not. Nor does it apply to lesser financial criminals
Manhattan District Attorney Cyrus Vance Jr. announced the indictmentof Abacus Federal Savings Bank, which is a small, community bank and the first bank to be indicted in Manhattan in over two decades:
“Today we are announcing the indictment or guilty pleas of 19 individuals on charges including mortgage fraud, securities fraud and conspiracy, as well as the indictment of Abacus Federal Savings Bank, a federally chartered bank that has been catering to the Chinese immigrant community since 1984. Now, these defendants—the bank and former employees and managers from its loan department—are charged with engaging in a systematic scheme to falsify and fabricate loan applications to the Federal National Mortgage Association, commonly known as Fannie Mae, so that borrowers who would otherwise not legally qualify for Fannie Mae’s mortgages could obtain them unlawfully. This is a large-scale mortgage fraud case that we estimate to include hundreds of millions of dollars’ worth of falsified loan applications. If we have learned anything from the recent mortgage crisis, it’s that at some point these schemes unravel, and taxpayers can be left holding the bag. Financial institutions, in short, have to obey the law and follow the rules. Our financial system is predicated on this basic concept.”
The 19 defendants were litrally chained together and hauled before the court. Three of the defendants had actually already been arraigned, but they asked them to volunteer to come down to the courthouse for the photo op that day, brought them in, chained them up to the rest of the defendants so they could be re-arraigned for the benefit of the cameras. These were working-class Chinese immigrants. The highest-ranking official in this entire case made $90,000 a year. Many of them didn’t speak English. This is a small bank wedged between two noodle shops in Chinatown. This was the target they chose to go against as a symbol of the financial crisis by the government, a stone’s throw from all these gigantic skyscrapers, you know, housing all of these other major banks that committed crimes that were hundreds of times worse than Abacus was even accused of.
Contrast that with Jamie Dimon, the head of JPMorgan Chase, a bank which paid $20 billion in fines last year which beats by a factor of five the record for the largest amount of regulatory fines in a single year, which was previously held by BP for their Deepwater Horizon incident. They were accused of an extraordinary array of things, everything from being Bernie Madoff’s banker and not raising red flags early enough, to manipulating energy prices in Michigan and California, to failing to disclose to investors the extent of losses in the London Whale episode, to abuses during the subprime mortgage period by some of their subsidiaries. The list of things goes on and on. if this were translated into common criminal law it would mean hundreds of years in prison for many different people. Instead, Dimon, of course, gets a 74 percent raise. They essentially paid for $20 billion fines by laying off 7,500 lower-level workers that year.
If in the case of a company like HSBC, which admitted to laundering $850 million for a pair of Central and South American drug cartels, somebody has to go to jail in that case. If you’re going to put people in jail for having a joint in their pocket or for slinging dime bags on the corner in a city street, you cannot let people who laundered $800 million for the worst drug offenders in the world walk. HSBC, one of the world’s largest banks, Europe’s largest bank got caught for money-laundering offenses for two drug cartels, one in Mexico and one in South America, and including the notorious Sinaloa drug cartel in Mexico that is suspected in thousands of murders. The bank paid a $1.9 billion fine. And some of the executives had to defer their bonuses for a period of five years—not give them up, defer them. But there were no individual consequences for any of the executives. Nobody had to pull money out of their own pockets for permanently. And nobody did a single day in jail in that case.
In New York City it’s not illegal to carry a joint around in your pocket. It was decriminalized in the late '70s. But with stop-and-frisk, what they do is they would stop you, and then they would search you and force you to empty your pockets. When you empty your pockets, now it's no longer concealed, and now it’s illegal again. So they had—in that year, they had 50,000 marijuana arrests, even though marijuana—having marijuana was technically decriminalized at the time. Somebody at the bottom of the illegal narcotics business, goes to jail, and these people who are at the very top of the illegal narcotics business, they get to walk.
There was another case involving a company called General Reinsurance where executives were charged with a $750 million stock fraud, more than the total value of all the cars stolen in the American Northeast that same year. So think about everybody who’s doing time for a stolen car that year and these guys ultimately got off on a technicality.
The government always says in response to the question of why aren’t these guys in jail, they always say, "Well, we don’t have enough evidence. These cases are hard to make." But my question is, over and over again, they somehow seem to have enough leverage to get billions of dollars of fines out of these companies, but not enough leverage to get even a day in jail for any of their executives? It doesn’t add up. Logically, it’s a total non sequitur. There’s no way you can have a company paying that much money and not have somebody guilty of a crime. It’s just—it’s not possible. Again compare this with the treatment of the poor. In San Diego where if you apply for welfare, the state gets to pre-emptively search your house to make sure that you’re not lying about, for instance, having a boyfriend. You know, so you’re a single mom. You go to the welfare office. You need financial assistance. You represent on the form that you’re not cohabiting with anybody. And just to check, they tell you to go sit tight in your house for a week, not knowing when the inspector is going to come, because if you’re not there when they come, you don’t get your welfare. So, the person comes finally. It’s not a social worker. It’s very often a law enforcement official. They go in, and they search your house. It’s very striking that the recipients of bailouts, we don’t have the right to go in and check their books, but somebody who applies for federal assistance to feed their kids, we have the right to go through their underwear drawer.
Richard Fuld, the final chair and chief executive officer of bankrupted Lehman Brothers who loaded up his company with deadly leverage and making a string of irresponsible decisions to over-invest in subprime mortgages, and the collapse of the company resulted in all of us having to pay these enormous bailouts. But Fuld walked away with, by his count, $300 million but $350 million, or by the count of some others, more closer to half-a-billion dollars, and he kept the money. And that is a consistent theme of the financial crisis. Not only were the guilty not prosecuted, they got to keep all of their money, all of the ill-gotten gains that they made during these periods. The way the media covers, and the prosecutors go after or don’t, these institutions, it’s all from the perspective of those who would be or should be charged.
Adapted from an interview on Democracy Now
The too big to jail position was put forth by Attorney General Eric Holder, with his remarks before the Senate Judiciary Committee last May in which he suggests that some banks are just too big to jail:
“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to—to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large. Again, I’m not talking about HSBC; this is just a more general comment. I think it has an inhibiting influence, impact, on our ability to bring resolutions that I think would be more appropriate.”
In 1999, when Eric Holder was a deputy attorney general in Clinton’s administration, he wrote a memo that has now come to be known as "the Holder Memo." originally considered a get-tough-on-corporate-crime memo, because it gave prosecutors a number of new tools with which they could go after corporate criminals. But at the bottom of it, he laid out what is called the "collateral consequences doctrine." And what "collateral consequences" meant was that if you’re a prosecutor and you’re targeting one of these big corporate offenders and you’re worried that you may affect innocent victims, that shareholders or innocent executives may lose their jobs, you may consider other alternatives, other remedies besides criminal prosecutions—in other words, fines, nonprosecution agreements, deferred prosecution agreements.
Lanny Breuer in 2012 was the assistant attorney general, number two in the Justice Department, the head of the Criminal Division, so he’s basically the top cop in America, who spoke before the New York City Bar Association:
“I personally feel that it’s my duty to consider whether individual employees, with no responsibility for or knowledge of misconduct committed by others in the same company, are going to lose their livelihood if we indict the corporation. In large multinational companies, the jobs of tens of thousands of employees can literally be at stake. And in some cases, the health of an industry or the markets are a very real factor. Those are the kinds of considerations in white-collar cases that literally keep me up at night, and which must, must play a role in responsible enforcement.”
Federal Judge Jed Rakoff speaking last November at the University of Pennsylvania Law School, responded to this admission by saying:
“ To a federal judge, who takes an oath to apply the law equally to rich and poor, this excuse, sometimes labeled the too-big-to-jail excuse, is, frankly, disturbing for what it says about the department’s apparent disregard for equality under the law.”
This leads to the retort what about a single mother on welfare who is going to lose her kids because she’s going to lose custody in an $800 welfare fraud case and the many knock-on personal consequences of practically every crime. Does Breuer lie awake at night, thinking about the consequences that ordinary people suffer when they are caught up in the criminal justice system. Of course, not. Nor does it apply to lesser financial criminals
Manhattan District Attorney Cyrus Vance Jr. announced the indictmentof Abacus Federal Savings Bank, which is a small, community bank and the first bank to be indicted in Manhattan in over two decades:
“Today we are announcing the indictment or guilty pleas of 19 individuals on charges including mortgage fraud, securities fraud and conspiracy, as well as the indictment of Abacus Federal Savings Bank, a federally chartered bank that has been catering to the Chinese immigrant community since 1984. Now, these defendants—the bank and former employees and managers from its loan department—are charged with engaging in a systematic scheme to falsify and fabricate loan applications to the Federal National Mortgage Association, commonly known as Fannie Mae, so that borrowers who would otherwise not legally qualify for Fannie Mae’s mortgages could obtain them unlawfully. This is a large-scale mortgage fraud case that we estimate to include hundreds of millions of dollars’ worth of falsified loan applications. If we have learned anything from the recent mortgage crisis, it’s that at some point these schemes unravel, and taxpayers can be left holding the bag. Financial institutions, in short, have to obey the law and follow the rules. Our financial system is predicated on this basic concept.”
The 19 defendants were litrally chained together and hauled before the court. Three of the defendants had actually already been arraigned, but they asked them to volunteer to come down to the courthouse for the photo op that day, brought them in, chained them up to the rest of the defendants so they could be re-arraigned for the benefit of the cameras. These were working-class Chinese immigrants. The highest-ranking official in this entire case made $90,000 a year. Many of them didn’t speak English. This is a small bank wedged between two noodle shops in Chinatown. This was the target they chose to go against as a symbol of the financial crisis by the government, a stone’s throw from all these gigantic skyscrapers, you know, housing all of these other major banks that committed crimes that were hundreds of times worse than Abacus was even accused of.
Contrast that with Jamie Dimon, the head of JPMorgan Chase, a bank which paid $20 billion in fines last year which beats by a factor of five the record for the largest amount of regulatory fines in a single year, which was previously held by BP for their Deepwater Horizon incident. They were accused of an extraordinary array of things, everything from being Bernie Madoff’s banker and not raising red flags early enough, to manipulating energy prices in Michigan and California, to failing to disclose to investors the extent of losses in the London Whale episode, to abuses during the subprime mortgage period by some of their subsidiaries. The list of things goes on and on. if this were translated into common criminal law it would mean hundreds of years in prison for many different people. Instead, Dimon, of course, gets a 74 percent raise. They essentially paid for $20 billion fines by laying off 7,500 lower-level workers that year.
If in the case of a company like HSBC, which admitted to laundering $850 million for a pair of Central and South American drug cartels, somebody has to go to jail in that case. If you’re going to put people in jail for having a joint in their pocket or for slinging dime bags on the corner in a city street, you cannot let people who laundered $800 million for the worst drug offenders in the world walk. HSBC, one of the world’s largest banks, Europe’s largest bank got caught for money-laundering offenses for two drug cartels, one in Mexico and one in South America, and including the notorious Sinaloa drug cartel in Mexico that is suspected in thousands of murders. The bank paid a $1.9 billion fine. And some of the executives had to defer their bonuses for a period of five years—not give them up, defer them. But there were no individual consequences for any of the executives. Nobody had to pull money out of their own pockets for permanently. And nobody did a single day in jail in that case.
In New York City it’s not illegal to carry a joint around in your pocket. It was decriminalized in the late '70s. But with stop-and-frisk, what they do is they would stop you, and then they would search you and force you to empty your pockets. When you empty your pockets, now it's no longer concealed, and now it’s illegal again. So they had—in that year, they had 50,000 marijuana arrests, even though marijuana—having marijuana was technically decriminalized at the time. Somebody at the bottom of the illegal narcotics business, goes to jail, and these people who are at the very top of the illegal narcotics business, they get to walk.
There was another case involving a company called General Reinsurance where executives were charged with a $750 million stock fraud, more than the total value of all the cars stolen in the American Northeast that same year. So think about everybody who’s doing time for a stolen car that year and these guys ultimately got off on a technicality.
The government always says in response to the question of why aren’t these guys in jail, they always say, "Well, we don’t have enough evidence. These cases are hard to make." But my question is, over and over again, they somehow seem to have enough leverage to get billions of dollars of fines out of these companies, but not enough leverage to get even a day in jail for any of their executives? It doesn’t add up. Logically, it’s a total non sequitur. There’s no way you can have a company paying that much money and not have somebody guilty of a crime. It’s just—it’s not possible. Again compare this with the treatment of the poor. In San Diego where if you apply for welfare, the state gets to pre-emptively search your house to make sure that you’re not lying about, for instance, having a boyfriend. You know, so you’re a single mom. You go to the welfare office. You need financial assistance. You represent on the form that you’re not cohabiting with anybody. And just to check, they tell you to go sit tight in your house for a week, not knowing when the inspector is going to come, because if you’re not there when they come, you don’t get your welfare. So, the person comes finally. It’s not a social worker. It’s very often a law enforcement official. They go in, and they search your house. It’s very striking that the recipients of bailouts, we don’t have the right to go in and check their books, but somebody who applies for federal assistance to feed their kids, we have the right to go through their underwear drawer.
Richard Fuld, the final chair and chief executive officer of bankrupted Lehman Brothers who loaded up his company with deadly leverage and making a string of irresponsible decisions to over-invest in subprime mortgages, and the collapse of the company resulted in all of us having to pay these enormous bailouts. But Fuld walked away with, by his count, $300 million but $350 million, or by the count of some others, more closer to half-a-billion dollars, and he kept the money. And that is a consistent theme of the financial crisis. Not only were the guilty not prosecuted, they got to keep all of their money, all of the ill-gotten gains that they made during these periods. The way the media covers, and the prosecutors go after or don’t, these institutions, it’s all from the perspective of those who would be or should be charged.
Adapted from an interview on Democracy Now
1 comment:
'equal under law' - is just another of those neo-liberal oxymorons! Abolishing capitalism, and by extension money, is the only way to bring about a just world.
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