“Believe it,” said the current Prevaricator-in-Chief, in the conclusion to his annual litany lies. President Obama’s specialty, honed to theatrical near-perfection over five disastrous years, is in crafting the sympathetic lie, designed to suspend disbelief among those targeted for oblivion, through displays of empathy for the victims. In contrast to the aggressive insults and bluster employed by Republican political actors, whose goal is to incite racist passions against the Other, the sympathetic Democratic liar disarms those who are about to be sacrificed by pretending to feel their pain.
Barack Obama, who has presided over the sharpest increases in economic inequality in U.S. history, adopts the persona of public advocate, reciting wrongs inflicted by unseen and unknown forces that have “deepened” the gap between the rich and the rest of us and “stalled” upward mobility. Having spent half a decade stuffing tens of trillions of dollars into the accounts of an ever shrinking gaggle of financial capitalists, Obama declares this to be “a year of action” in the opposite direction. “Believe it.” And if you do believe it, then crown him the Most Effective Liar of the young century.
Lies of omission are even more despicable than the overt variety, because they hide. The potentially most devastating Obama contribution to economic inequality is being crafted in secret by hundreds of corporate lobbyists and lawyers and their revolving-door counterparts in government. The Trans Pacific Partnership (TPP) trade deal, described as “NAFTA on steroids,” would accelerate the global Race to the Bottom that has made a wasteland of American manufacturing, plunging the working class into levels of poverty and insecurity without parallel in most people’s lifetimes, and totally eviscerating the meager gains of three generations of African Americans. Yet, the closest Obama came to even an oblique allusion to his great crime-in-the-making, was to announce that “new trade partnerships with Europe and the Asia-Pacific will help [small businesses] create even more jobs. We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment and open new markets to new goods stamped ‘Made in the USA.’” Like NAFTA twenty years ago – only far bigger and more diabolically destructive – TPP will have the opposite effect, destroying millions more jobs and further deepening worker insecurity. The Trans Pacific Partnership expands the legal basis for global economic inequalities – which is why the negotiations are secret, and why the treaty’s name could not be spoken in the State of the Union address. It is a lie of omission of global proportions. Give Obama his crown.
The president who promised in his 2008 campaign to support a hike in the minimum wage to $9.50 by 2011, and then did nothing at all to make it happen, says this is the “year of action” when he’ll move heaven and earth to get a $10.10 minimum. He will start, Obama told the Congress and the nation, by issuing “an executive order requiring federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour because if you cook our troops’ meals or wash their dishes, you should not have to live in poverty.” Obama neglected to mention that only new hires – a small fraction, beginning with zero, of the two million federal contract workers – will get the wage boost; a huge and conscious lie of omission. The fact that the president does not even propose a gradual, mandated increase for the rest of the two million shows he has no intention of using his full powers to ameliorate taxpayer-financed poverty. We can also expect Obama to issue waivers to every firm that claims a hardship, as is always his practice.
What is Obama’s jobs program? It is the same as laid out at last year’s State of the Union, and elaborated on last summer: lower business taxes and higher business subsidies. When you say “jobs,” he says tax cuts – just like the Republicans, only Obama first cites the pain of the unemployed, so that you know he cares. “Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home.” Actually, Obama wants to lower tax rates for all corporations to 28 percent, from 35 percent, as part of his ongoing quest for a Grand Bargain with Republicans. For Obama, the way to bring jobs back to the U.S. is to make American taxes and wages more “competitive” in the “global marketplace” – the Race to the Bottom.
In the final analysis, the sympathetic corporate Democrat and the arrogant corporate Republican offer only small variations on the same menu: ever increasing austerity. Obama bragged about reducing the deficit, never acknowledging that this has been accomplished on the backs of the poor, contributing mightily to economic inequality and social insecurity.
Obama offers nothing of substance, because he is not authorized by his corporate masters to do so. He takes his general orders from the same people as do the Republicans. That’s why Obama only speaks of minimum wage hikes while Republicans are in power, rather than when his own party controlled both houses of Congress. Grand Bargains are preferred, because they are the result of consensus between the two corporate parties. In effect, the Grand Bargain is the distilled political will of Wall Street, which feeds the donkey and the elephant. Wall Street – the 1 percent – believes the world is theirs for the taking, and they want all of it. Given this overarching truth, Obama has no choice but to stage a festival of lies.
Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com
Since December 16, major business media have failed to dig deeper into a potentially blockbuster story involving the Justice Department’s refusal to honor a Wall Street regulator’s request for a subpoena against JPMorgan Chase to obtain Madoff related documents the firm was refusing to turn over. JPMorgan Chase was Madoff’s banker for the last 22 years of his fraud. The Trustee in charge of recovering funds for Madoff’s victims, Irving Picard, said in a filing to the U.S. Supreme Court this Fall that JPMorgan stood “at the very center of Madoff’s fraud for over 20 years.”
It’s a big story when a serial miscreant like JPMorgan – which has promised its regulators to change its jaded ways in exchange for settlements – risks obstruction of justice charges by denying one of its key regulators internal documents. It becomes an explosive story when the Justice Department, the highest law enforcement agency in the land and the regulator’s only source of help in enforcing a subpoena for the documents, sides with the serial miscreant instead of the regulator.
The story began on December 16 when Scott Cohn of CNBC posted a story with this headline: “Feds Probe JPMorgan Interference in Madoff Case.” The article revealed that the Office of the Comptroller of the Currency (OCC), a JPMorgan Chase regulator and part of the U.S. Treasury Department, had been so riled by JPMorgan’s refusal to turn over documents related to what its employees knew about the Madoff fraud that it referred the matter to the Treasury Department’s Inspector General.
The article quotes Richard Delmar, legal counsel to the Inspector General, who explains that “This office was looking into allegations made by JPMC’s regulator, the Office of the Comptroller of the Currency (OCC) that its oversight of the bank was being impeded, specifically with respect to the bank’s provision of banking services to Madoff.”
The Inspector General’s office clearly believed there was merit to the OCC’s claim because it issued its own administrative subpoena for the documents, according to the CNBC story. JPMorgan refused that request as well, leading the Inspector General to ask the Justice Department to enforce the subpoena – a request it refused to honor.
When the Justice Department refused to enforce this subpoena, it went against not one, or two, but three sets of investigators who had found a serious basis for suspecting JPMorgan of wrongdoing in the Madoff fraud.
Irving Picard, the Madoff victims’ fund trustee, had already filed a lower court lawsuit mapping out his case against JPMorgan. Picard told the court:
“Evidence of Madoff’s fraud permeated every facet of JPMC [JPMorgan Chase]. It ran from the Broker/Dealer Group, where BLMIS [Bernard L. Madoff Investment Securities LLC] maintained a bank account that no one honestly could have believed was serving any legitimate purpose, to Equity Exotics, where JPMC learned of the red flags inherent in BLMIS’s investment strategy, to JPMC’s London office, which learned that individuals might be laundering money through BLMIS feeder funds, to the Private Bank, which maintained intimate relationships with one of BLMIS’s largest customers, to Treasury & Security Services, which was responsible for investing the balance of the 703 Account in short-term securities.”
In a more recent filing with the U.S. Supreme Court seeking to overturn lower court findings that he lacked standing to sue JPMorgan and other banks, Picard further detailed his case against JPMorgan, explaining that JPMorgan was well aware that Madoff was claiming to invest tens of billions of dollars in a strategy that involved buying large cap stocks in the Standard and Poor’s 500 index while simultaneously hedging with options. But the Madoff firm’s primary bank account at JPMorgan, which the bank had intimate access to review for over 20 years, was devoid of evidence of stock or options trading.
Picard’s petition to the Supreme Court reads: “As JPM [JPMorgan] was well aware, billions of dollars flowed from customers into the 703 account, without being segregated in any fashion. Billions flowed out, some to customers and others to Madoff’s friends in suspicious and repetitive round-trip transactions. But in the 22 years that JPM maintained the 703 account, there was not a single check or wire to a clearing house, securities exchange, or anyone who might be connected with the purchase of securities. All the while, JPM knew that Madoff was using the account to run an investment advisory business with thousands of customers and billions under management and knew that Madoff was using its name to lend legitimacy to his enterprise…”
Picard also informed the Court that employees inside JPMorgan were well aware of the suspicions surrounding Madoff. JPMorgan’s Chief Risk Officer, John Hogan, had warned his colleagues 18 months prior to Madoff’s confession of his Ponzi scheme that “there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a ponzi scheme.”
Rather than reporting their concerns to the Justice Department, according to Picard, JPMorgan invested over $250 million of its own money with Madoff feeder funds while it simultaneously created structured investment products that allowed its own investors to make leveraged bets on the returns of the feeder funds invested with Madoff.
In September 2008, just two months before Madoff would confess to running an unprecedented fraud that bilked investors out of over $17 billion in real money and $65 billion in assets shown on customer statements, JPMorgan conducted a new round of due diligence and decided it was time to get out of its $250 million investment involving the feeder funds to Madoff.
One week ago, David Cay Johnston picked up on the subpeona story for Newsweek, writing: “Bernard Madoff’s principal bank, JPMorgan Chase, has for years obstructed federal bank examiners trying to ascertain what it knew about his gigantic Ponzi scheme, an official document obtained by Newsweek shows.”
Johnston cited an internal document he had obtained from the Government Attic, a public interest website that posts documents it obtains from Freedom of Information Act requests. Johnston said that “The JPMorgan memos Justice declined to pursue are almost certain to show that years earlier the bank had grounds to suspect Madoff was running a fraud.”
The most critical aspect of this subpoena story has thus far been overlooked. It may well be that there is an official position at the U.S. Department of Justice not to issue any subpoenas against the largest Wall Street firms.
On January 22 of this year, the award-winning producer, Martin Smith, aired a Frontline program for PBS titled “The Untouchables.” Smith had this to say on air:
“We spoke to a couple of sources from within the Criminal Division, and they reported that when it came to Wall Street, there were no investigations going on. There were no subpoenas, no document reviews, no wiretaps.”
One day after that program aired, the Washington Post reported that Lanny Breuer, head of the Criminal Division of the U.S. Department of Justice was stepping down from his post.
Now it would appear that the Justice Department’s problem of quashing subpoenas against Wall Street did not end with the departure of Lanny Breuer.
- New Revelation that AG Eric Holder Is Protecting JPMorgan Chase NYC From Criminal Investigation (truth-out.org)
- JPMorgan May Face Criminal Charges for Blowing the Whistle on Madoff – To the Wrong Country (blacklistednews.com)
- New Revelation that AG Eric Holder Is Protecting JPMorgan Chase NYC From Criminal Investigation (blacklistednews.com)
Obscure Government Agency Brings Criminal Charges against 107 Bankers, but Stays Clear of Wall Street
A little-known federal office has demonstrated that bankers have not avoided criminal prosecution altogether since the 2008 financial crisis. Experts note, however, that those thrown in jail have largely been from small institutions, leaving counterparts at Wall Street powerhouses untouched.
The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) was originally created to oversee the government bailout of the auto and financial industries. But it has used its congressional authority to pursue bank executives who misused bailout funds.
To date, SIGTARP has gone after 107 senior bank officers, most of whom have been sentenced to prison, according to The Washington Post. Its work also has produced $4.7 billion in restitution paid to victims and the government.
Not bad for an agency with only 170 employees and a budget of $41 million, putting them at a disadvantage in terms of resources and manpower compared to government regulators like the Securities and Exchange Commission and the Office of the Comptroller of the Currency.
What it lacks in size it makes up for in terms of criminal authority authorized by Congress. Unlike regulators, SIGTARP can issue search warrants, seize property and even make arrests.
But those targeted by SIGTARP have run community banks, not the national institutions that dominate Wall Street.
“Essentially, we’re looking for lies and greed,” SIGTAR chief Christy L. Romero told the Post. “Usually, people have gone to such great lengths to try to hide the schemes that we find that they end up violating several laws, which leads to long sentences.”
The average sentence given to those convicted of crimes as a result of SIGTARP investigations is five years and nine months, which is twice the length of the average sentence for white-collar crime in the U.S. SIGTAR currently has 150 ongoing criminal and civil investigations.
Mark Williams, a former bank examiner who teaches finance at Boston University, told the Post that it’s been less difficult for SIGTARP to go after the small fish.
“The amount of direct evidence of banker wrongdoing in these smaller bank cases is easier to show,” he said.
Williams added that SIGTARP’s work nonetheless sets “an important precedence that bad banker behavior will not be tolerated and [will be] aggressively prosecuted.”
To Learn More:
SIGTARP Proves That Some Bankers Aren’t Too Big to Jail (by Danielle Douglas, Washington Post)
Treasury Dept. Fails to Implement Two-Thirds of Post-Bailout Recommendations (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Some 47 million poor Americans – one in four children – see their already meager federal food allowances slashed this week.
The cuts amount to $4 billion a year over the next decade.
That $4 billion figure should ring a bell. It is equivalent to the official annual subvention that the US government sends to Israel – courtesy of the American taxpayer.
This week that $4 billion annual donation to the regime in Tel Aviv was on display with the following items: Israeli tanks, warplanes and troops carried out deadly raids on occupied Palestinian territories, resulting in at least nine deaths and dozens of wounded; dozens of Palestinians continued to be kidnapped (“arrested”) from their homes and streets by Israeli troops; also the dominant Likud party of Benjamin Netanyahu announced that illegal settlements in the West Bank and East Al Quds “will be intensified” with plans to build an additional 5,000 housing units.
The accelerated construction on Palestinian land is in blatant contravention of international law.
In other words, this week, as in every other week, the war crimes that the US-backed Israeli regime has been committing since at least 1967 continued apace. This in the same week that millions of Americans are on notice that they are being put on starvation rations because their government would rather send $4 billion to a genocidal regime than pay for basic human nutrition.
The fact is that the Israeli criminal regime gets away with this genocide only because the US rulers hand over $4 billion every year to a state that comprises some seven million Israeli nationals.
It is astounding that tens of millions of Americans are going hungry because the same amount of money being cut from their social welfare is bankrolling Israel.
Ironically, some 900,000 of those hungry Americans are believed to be former US soldiers, many of whom are mentally and physically broken from fighting in the so-called Wars on Terror in Iraq and Afghanistan.
The Israeli regime, its American lobbyists and its bought-and-paid-for politicians created the false premises for these criminal wars – and many others besides.
But the men and women who served as cannon fodder in these criminal wars are now being abandoned in hunger, while the regime that helped cause their misery is still creaming off American taxpayers.
Hunger, poverty, suffering, death, genocide are all consonant and consistent in this grotesque system deified as capitalism.
Here are a few other figures to round out the abject picture. If just 0.6 per cent were shaved off the annual $700 billion US military budget, that would be enough to cover the cuts in the food stamp program this year.
If the $52-billion-a-year NSA spying program that is operated against our own citizens was cancelled that would pay for the immediate food needs of all Americans and, moreover, help build an economy for genuine social development, with good paying jobs, welfare and infrastructure. But, again, that won’t happen because the US economy is a war economy based on fear and paranoia.
US lawmakers, both Republican and Democrat – they are all the same puppets – want to axe a total of $40 billion from the food program over 10 years. This is the same figure – $40 billion – that these same minions throw at Wall Street and the mega-banks every two weeks under the scam known as “Quantitative Easing.” Taxpayers, many of them on food stamps, are bailing out corporations that crashed the world economy and which are up to their necks in militarism. Yet, this bloated elite turns around and snatches the crumbs out of people’s mouths.
But we return to the Zionist regime. These crimes are subsidized and enabled by money that would otherwise feed hungry Americans. People will die this year in the US simply from poverty and the lack of food. These American deaths will be for the same reason that Palestinians will die from poverty and hunger.
The choice is revealingly simple. Stop funding genocide in the Middle East or start feeding Americans.
The economic crash of 2008 left people in their millions across the globe bewildered and shocked by the catastrophe and devastation inflicted on their lives: the hopelessness of the unemployed young facing a bleak uncertain future, pensioners struggling to survive on pensions that have lost their value, the employed poor accepting a cut in their working hours and wages to avoid losing their jobs, the very poor, the sick and disabled trying to survive the cuts to the welfare safety net. People find it difficult to comprehend how a few powerful bankers could cause so much damage and misery to the lives of countless millions.
In a previous article (Dissident Voice), two years ago, I wrote:
How did it come to this? What sort of a system have we created that gives so much power to these people? How is it that these people, who are entrusted with the money made by working people, end up gobbling up the money for which people have laboured so hard? How were they ever allowed to have such a stranglehold on the lives of millions? Where were the people we elected to look after us when such a distorted, corrupted form of capitalism was being developed? Were they so incompetent, or have they become part of an oligarchy that enriches them as well as the gamblers of the market?
So what has happened since then; have the masters of the universe who caused the crash changed their ways? Are they contrite for the misery they have caused? Have our politicians taken the necessary action to prevent another crash happening, or at least if it happens, ensure that it doesn’t threaten the entire economies of nations?
I meet a lot of these people on Wall Street on a regular basis right now…I am going to put it very bluntly: I regard the moral environment as pathological. And I am talking about the human interactions … I’ve not seen anything like this, not felt it so palpably…. They have no responsibility to pay taxes; they have no responsibility to their clients; they have no responsibility to people, to counterparties in transactions.… We have a corrupt politics to the core, I am afraid to say, and … both parties are up to their neck in this. This has nothing to do with Democrats or Republicans.
It is clear that the “moneymen” have not changed their behaviour; their arrogance is undiminished, with no recognition of their responsibility to society. The politicians, it seems, are unwilling or unable to take action to protect society from the next crash, which will surely happen if the necessary rules, laws, and regulations are not in place. Every attempt at reform is vigorously resisted with the argument that it interferes with the sanctity of the free market.
What is a free market? Is it something that can be objectively defined? Professor Ha-Joon Chang of Cambridge University argues this point thus:
The free market does not exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them…There is no scientifically defined boundary for a free market. If there is nothing sacred about any particular market boundaries that happen to exist, an attempt to change them is as legitimate as the attempt to defend them. Indeed, the history of capitalism has been a constant struggle over the boundaries of the market.
He cites the legislation in 1819 to regulate child labour in Britain as an example. This was a law prohibiting the employment of children under nine in cotton mills, which were considered particularly hazardous to workers’ health. This caused a huge controversy with opponents seeing it as ”destroying the very foundations of the free market.” No one, I hope, in the industrialised rich nations today, is suggesting that we should bring back child labour as part of liberalising our labour laws.
Our government, using hundreds of billions of pounds of our taxes, rescued the banks from collapse. Have they got the guts to do what is required to save us from the next collapse? I am not holding my breath.
Dr Adnan Al-Daini (PhD Birmingham University, UK) is a retired University Engineering lecturer. He is a British citizen born in Iraq. He writes regularly on issues of social justice and the Middle East.
Bank lobbyists have a direct influence on financial legislation drafted in Congress, and are in some cases even writing the measures themselves. Citigroup this month drafted a regulation bill that has already passed through a House committee.
To soften financial regulations, bank lobbyists frequently ‘assist’ lawmakers in writing draft legislation that serves to benefit them at the expense of American taxpayers, according to a New York Times investigation.
Lobbyists working for Citigroup Inc., a multinational financial services corporation, wrote 80 percent of a regulation bill that was approved by the House Financial Services Committee this month. Citigroup wrote 70 lines of 85-line bill, which exempts “broad swathes of trades” from new regulation, the Times reported based on e-mails it obtained.
Two paragraphs of the bill were copied “nearly word for word” from what Citigroup drafted. The only difference between the versions were two words, which lawmakers changed to make plural.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in 2010, inflicted heavy financial regulatory reform following the most recent recession. The bill was pushed into law by Democrats, but now, both Democrats in the House and Senate are siding with bank lobbyists to roll back parts of the regulation overhaul.
The bill drafted primarily by Citigroup this month was starkly opposed by the Treasury Department, but easily made it through the House Financial Services Committee, the Times reports. MapLight, a nonprofit group that analyzes campaign finance records, found that lawmakers who supported Wall Street’s legislation received twice as much in contributions from financial institutions than those who opposed such measures, which appears to indicate that lawmakers’ support can be bought.
This month, Wall Street groups also held fundraising dinners for lawmakers who co-sponsored the bills they backed and in some cases co-wrote. As a reward for siding with bank lobbyists, these lawmakers were granted a dinner in which attendees paid up to $2,500 for a plate.
When questioned by the Times, bank industry officials said that helping draft legislation was a common practice on Capitol Hill, but argued that they do not undermine Dodd-Frank.
“We will provide input if we see a bill and it is something we have interest in,” said Kenneth E. Bentsen Jr., a Wall Street lobbyist. Bentsen is a former lawmaker himself, and many financial institutions’ lobbyists have worked as Capitol Hill aides and staffers before taking on their current roles.
Jeff Connaughton, a former lobbyist and former congressional staffer, said that Wall Street has so much influence on the Hill that it “skews the thinking of Congress.”
“It’s appalling, it’s disgusting, it’s wasteful and it opens the possibility of conflicts of interest and corruption,” Rep. Jim Himes, a top recipient of Wall Street donations and a former banker at Goldman Sachs, told the Times, admitting his own faults. “It’s unfortunately the world we live in.”
Proving that those who are not punished for their misdeeds are allowed to repeat them, the Wall Street banks that created and sold risky combinations of mortgages and loans during the pre-2008 boom—and crashed the world economy with them—are doing exactly the same thing again. Once again, financial products with obscure, complex-sounding names like “collateralized debt obligations” and “securitized mortgage instruments,” are being sold by Wall Street to people on Main Street.
The ominous return from the dead of these investments, also called structured financial products, has largely evaded new regulations meant to avert another crisis, prompting concern from financial industry observers. Manus Clancy, managing director at commercial real estate research firm Trepp, worries that “All of this seems like a fairly quick round trip. You are seeing a fair number of sins being forgiven.”
And the sinners who committed those sins are acting like they’ve been forgiven as well. “The players in the business are generally the same as they were before,” noted Tad Philipp, a commercial real estate analyst at Moody’s. “Because it’s the old players, they know how to push the boundaries.”
Wall Street is certainly pushing boundaries on securitized commercial mortgage-backed securities, in which a pool of commercial mortgages are mixed together into bonds, ranked by varying levels of risk. So far in 2013, banks have issued $33.5 billion in such bonds, slightly more than they did in early 2005. Before the 2008 crash, 57% of the outstanding money in such securities was in high-risk interest-only loans, a number that fell hard and fast, to just 11% two years ago. Today, that number has more than tripled to 34%.
Even faster to revive have been collateralized loan obligations, which are pools of loans given to companies with junk ratings. In the first quarter of 2013, banks issued about $26 billion of them—more than in the same period of the last boom year of 2007. Demand has been so strong that banks have started to loosen underwriting standards on the underlying loans and bonds, prompting the Federal Reserve to warn last month that “prudent underwriting practices have deteriorated.”
Those willing to learn from history will recall that securitization—the bundling of many loans into one investment—proved dangerous during the real estate bubble because when the bubble burst, investors learned that the complexity of the instruments had obscured their real risks, leading to unexpected losses by those investors, chaos in the financial system and the Great Recession. They will also recall that those who created these “shoddy deals” and then defrauded their investors escaped wealthy but largely unpunished, and are still working on Wall Street today.
To Learn More:
Wall St. Redux: Arcane Names Hiding Big Risk (by Nathaniel Popper, New York Times)
SEC Tricks Judge to Help Citigroup (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Why No Prison for Banksters Who Caused Financial Crisis…Yet? (by David Wallechinsky and Noel Brinkerhoff, AllGov)
The revolving door between Wall Street and its government regulators has been spinning at warp speed lately. Two recent cases involve high-level officials whose jobs were to regulate Wall Street’s practices and prosecute Wall Street’s crimes. Despite the massive and systemic fraud that led to the financial collapse of 2008, both failed to win a single major enforcement against Wall Street, and now they are being rewarded with lucrative jobs there.
Mary Schapiro, who took over a demoralized Securities and Exchange Commission (SEC) that repeatedly failed to head off financial disasters involving Bear Stearns, Lehman Brothers and Bernard Madoff, did not win a major civil action against any Wall Street executive who was part of the subprime mortgage scam that led to the crash during her four years as SEC chair. One low point came the day federal judge Jed Rakoff refused to approve SEC’s $285 million settlement with Citigroup because, just as with Goldman Sachs, SEC failed to get an admission of wrongdoing. Schapiro did open a new tips database and a whistleblower office.
Lanny Breuer worked the criminal side of the street as head of the Justice Department’s criminal division for the past four years, yet he failed to win a single major criminal conviction against a Wall Street executive. He resigned shortly after a recent “Frontline” documentary implied that he had been ineffectual in bringing justice to the financial industry. His public defense of his own lack of criminal prosecutions was also widely panned.
Now both are returning to the other side: Schapiro has taken a job as a managing director and chair of the governance and markets practice at Promontory Financial Group, which advises financial firms on regulation, while Breuer is going back to Covington & Burling, a major law firm that defends financial clients, as vice chair of the firm. Although salary data are unavailable, both can be expected to earn at least $500,000 annually from their new gigs.
“It used to be called ‘selling out,’ ‘cashing in,’ or ‘influence peddling.’ Now it’s referred to politely as the ‘revolving door,’” Dennis Kelleher, president of Better Markets, a nonprofit that wants stronger regulation of the financial industry, told the National Journal. “But whatever it’s called, nothing is more corrosive to the American people’s trust in government than when former senior public officials turn their so-called public service into multimillion-dollar riches unimaginable to almost all Americans.”
Even more insidious than outright corruption, argue such critics, is the fact that the continually revolving door between Wall Street and its regulators creates a financial industry culture shared by both bankers and their regulators, who come to see themselves as part of the financial system—and hope eventually to be rewarded by the profit-making companies they are supposed to regulate and prosecute.
To Learn More:
Mary Schapiro and Lanny Breuer Give Us the Ultimate Dog-Bites-Man Story (by Michael Hirsh, National Journal)
Justice Dept. Defends Not Prosecuting Corporate Leaders for White-Collar Crime (by Noel Brinkerhoff and David Wallechinsky, AllGov)
SEC Chair Schapiro Retains a Lawyer (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Revolving Door at SEC is in a Whirl as Hundreds Hired by Industry they Regulated (by Noel Brinkerhoff and Danny Biederman, AllGov)
- Where Bank Regulators Go to Get Rich – Bloomberg (bloomberg.com)
- Schapiro’s move to consultant prompts ‘revolving door’ critique (blogs.marketwatch.com)
- Washington’s Revolving Door Keeps Spinning (billmoyers.com)