“Too big to fail is too big” ----From the ‘Quotations of Chairman Joe’
Last week PBS aired a segment of its “Frontline” program entitled “The Untouchables” about the Wall Street barons who have heretofore escaped criminal prosecution for their part in creating the financial crisis of 2007. The tale is, by now, a dog-eared one, worn thin by constant repetition to the point where the nature of the crisis is generally understood and the reasons for the lack of the response by the Justice Department are not.
Senator Sam Ervin, head of the special Senate committee investigating Watergate was moved to famously quip “If it looks like a horse, walks like a horse, smells and eats like a horse, one can confidently conclude that it’s a horse”. The judgments of the American People, instinctively following a similar path of reason, have come to the same conclusion.
Throughout the segment FRONTLINE reporters unearthed mid-level “Due Diligence” loan officials representing the major banks that reviewed loans from the likes of Countryside and other loan originators saying on the record that they reviewed packages of documents in which up to 50 and 60 percent of the loans did not meet their banks’ criteria as a sound investment. These loans went under subsequent re-evaluation in which they were then approved in their near entirety and passed on to the banks investors by senior management as sound investments. This is, at least, prima facie securities fraud yet no legal action by the Department of Justice has been initiated against any Wall Street executive. The program leaves the lingering question “why not”?
It’s a good question and goes to the heart of the Obama administration. Listening to the DOJ attorneys one got the impression that the congress and the people were in the eyes of one Senate staffer “being gamed”. DOJ officials testifying before congress responded to specific questions with broad and vague assertions that such cases are difficult, complex, and, most importantly, hard to win. One DOJ attorney even went so far as to assert that bringing such action may be deleterious to the financial institutions being prosecuted resulting in broad ranging economic impact.
This response smacks of the attitude emanating from the Attorney General, the Department of the Treasury and, indeed the White House. Don’t rock the boat. So Justice is now being held hostage by the “fragility” of the very house of cards that had brought on this mess in the first place.
This begs a second and equally compelling question: Why has there not been any meaningful anti-trust action taken by this administration?
We have reached again a stage of national economic development where our national economy is, in each of its major industries, in the hands of a very few institutions. The banks are an excellent example. Six banks control 66 percent of the national economy. These banks, leveraging the massive government bailout with huge campaign contributions have become a power unto themselves. Powerful enough, it appears to cower the National Government. The problem with concentrating economic power into so few hands is not simply that it masks a huge maldistribution of wealth, but the health of the national—indeed the world—economy depends on their well-being. In a word they are too big to fail.
A good maxim is “Too big to fail is too big”. Under this dictum the question remains “Where is the Justice Department?”
It would be easy to blame some assistant Attorney General for lack of zeal in the enforcement of law. I think, given the realities of power, that it’s a cop-out to hold such a view. The lack of proper legal response to the financial industry reflects a core conviction of this White House which from the beginning has been a shill for Wall Street. It began with Paul Volker standing attentively behind the President and watching over his shoulder in the early days of his first Administration. The appointment of Timothy Geitner, A Wall Street impresario and one of the authors of the financial crisis as his first Secretary of the Treasury. And last, but not least, the appointment of Eric Holder as attorney General. The DOJ has not only failed to prosecute Southern States under the Voting Rights Act of 1965 for the purging of the voting rolls and other acts at voter intimidation and suppression, but it has singularly failed to act with regard to not only prosecuting Wall Street malfeasance but the Anti-Trust laws that made this crisis possible in the first place.