"As you know, we're working through a difficult period in our financial markets right now, as we work off some of the past excesses."
-----Treasury Secretary Henry Paulson, White House press conference, September 15, 2008, with the U.S. economy on the brink of collapse
"Who is going to buy this shit?"
-----Vice-chairman of JP Morgan-Chase James B. Lee Jr., same day, referring to the need to unload "toxic" assets, upon which the entire financial system was based
Nowhere has Barack Obama failed the country more than in his refusal to confront the Wall Street criminals that first reaped huge profits creating an unsustainable housing bubble, then earned another windfall betting on its inevitable collapse. Trillions of dollars of wealth were sucked out of the real economy to pay for the paper illusions peddled by glorified swindlers, who had been issued a license to steal by deregulation policies dating back to the Carter era.
Obama appointed a coterie of Wall Street insiders to staff his administration, all of whom opposed enforcing laws against securities and accounting fraud, or even simply breaking up the largest banks and closing legal loopholes. He also opposed efforts to reform executive compensation, even for companies dependent on federal bailout money, as most of them were in the aftermath of the 2008 crisis. The Obama administration took no effective action on the foreclosure crisis, and played almost no role in the investigations carried out by the Senate Permanent Subcommittee on Investigations and the Financial Crisis Inquiry Commission. In fact, the administration limited FCIC's budget to a paltry $6 million, sharply resticted its subpoena power, and scheduled its report to come out only after the 2010 midterm elections.
Worse, the Obama Justice Department proved completely uninterested in prosecuting banks and bankers for white collar crime (Obama insists no laws have been clearly broken), which was assigned a very low priority. The administration chose not to appoint a special prosecutor, not to create a task force, not to even investigate major securities and accounting crimes related to Wall Street's engineering of the housing bubble and its subsequent collapse. Investigations against Countrywide, Angelo Mozilo, AIG, Joseph Cassano, and others were dropped. The few financial crime cases pursued, such as those involving Wachovia's bid-rigging, were settled without fanfare based on deferred prosecution and fines. To this very day there has still not been a single bubble-related criminal prosecution, of either a company or a senior financial executive, by the Obama administration. As Uruguayan author Eduardo Galeano points out, there are people in jail all over the world for stealing a couple of chickens, but no one has even been indicted for looting trillions of dollars in home equity and retirement pensions while gutting America's job base.
The Securities and Exchange Commission has pursued only a handful of civil cases, which have eventuated in mostly trivial fines, with no institutional or individual admission of wrong-doing. In no case has an individual executive been required to pay more than a tiny fraction of his net worth or ill-gotten gains from the bubble.
In fact, when a few state attorneys general failed to understand that corporate predators enjoy impunity under capitalism, trying to get a little tough with a few banks in 2011, the Obama administration forced them to stop. A few slaps on the wrist were the order of the day, and even these were only applied after prosecutors surrendered all future rights to sue banks for fraud.
But with the coming of the Occupy Movement and the approach of the 2012 elections, Obama felt obliged to at least pay lip service to the problem. In his 2012 State of the Union address, therefore, he announced the formation of a federal-state task force focused on financial crime. However, one of the co-chairman appointed to it was Lanny Breuer, who was the head of the criminal division that hadn't brought any criminal cases in the prior four years, and the other was New York state attorney general Eric Schneiderman, who had backed off from getting tough with the banks when the Obama administration told him to. The task force was assigned a total of ten F.B.I. agents, and was projected to have a total of 55 employees when fully staffed. This to investigate some of the largest financial institutions in the world, possessed of truly global reach.
The outcome was, predictably, pitiful. Three Credit Suisse traders were arrested for a minor fraud supposedly committed in 2007, and which victimized Credit Suisse, not investors and homewners. After this, state foreclosure cases were settled for a mere $26 billion. Less than a million people who lost their homes were slated to receive checks averaging $2000 each. Another million were to receive some mortgage relief. Over twenty million others whose mortgages were underwater, have gotten nothing.
Obama has been similarly useless in confronting the issue of executive compensation, even though foreign governments saw fit to take action on this. In 2009, Great Britain established a fifty percent tax on banking bonuses. The same year Christine Lagarde (then French Foreign Minister) and six other European finance ministers published a joint letter in the Financial Times calling for G20 nations to reign in financial compensation, arguing that "the bonus culture must end." Most of the G20 did end up adopting executive pay controls, including mandatory "clawbacks" of bonuses when losses occurred subsequently. Such clawbacks were implemented in Europe, forcing senior executives of Barclays, Lloyds, and several other European banks to give back millions of dollars they had previously received in bonus payments. But in the U.S. the Obama administration said and did nothing.
Sources:
Sorkin, Andrew Ross, "Too Big To Fail - The Inside Story of How Wall Street and Washington Fought to Save the Financial System - and Themselves," (Viking: 2009)
Ferguson, Charles H. "Predator Nation - Corporate Criminials, Political Corruption, and the Hijacking of America," (Crown: 2012)
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