Just Fine: Don’t Bank on the Justice Department to Prosecute Big Banks

DeptofJusticeSubmitted by Elaine Magliaro, Guest Blogger

Last December, I wrote a post titled You Call This Justice? DOJ Criticized for Its Settlement with “Too Big to Jail” Bank HSBC. It appears that the US Justice Department isn’t too keen on bringing criminal charges against ANY wealthy bankers—not just those who work for HSBC, a huge international bank that has knowingly laundered money for drug cartels and murderers. The unethical shenanigans of the banksters of Wall Street that led to the near collapse of the US economy and to a recession don’t seem to merit jail time for the perpetrators—just a slap on the wrist and a fine.  No individual fines are paid though. The mega banks pay the fines and the banksters continue to go about their business…and continue to earn hefty salaries and bonuses.

At “Wall Street Reform: Oversight of Financial Stability and Consumer and Investor Protections,” the first Banking Committee hearing attended by Senator Elizabeth Warren (D, MA), Warren asked bank regulators how tough they really are on the biggest financial institutions on Wall Street and about the last few times they actually took any banks all the way to a trial.

A few weeks ago, Bill Moyers sat down with Matt Taibbi to talk about the HSBC settlement, UBS and the Libor Scandal, Lanny Breuer, Mary Jo White, and the revolving door in Washington, D.C.

Not long after Taibbi’s appearance on Bill Moyers’s program, his article on HSBC , Gangster Bankers: Too Big to Jail, was published in Rolling Stone.

Quoting from Taibbi’s article:

For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico’s Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years – people so totally evil, jokes former New York Attorney General Eliot Spitzer, that “they make the guys on Wall Street look good.” The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

“They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. “They took every imaginable form of illegal and illicit business.”

That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist slap for HSBC might undermine the world economy. “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

It was the dawn of a new era. In the years just after 9/11, even being breathed on by a suspected terrorist could land you in extralegal detention for the rest of your life. But now, when you’re Too Big to Jail, you can cop to laundering terrorist cash and violating the Trading With the Enemy Act, and not only will you not be prosecuted for it, but the government will go out of its way to make sure you won’t lose your license. Some on the Hill put it to me this way: OK, fine, no jail time, but they can’t even pull their charter? Are you kidding?

But the Justice Department wasn’t finished handing out Christmas goodies. A little over a week later, Breuer was back in front of the press, giving a cushy deal to another huge international firm, the Swiss bank UBS, which had just admitted to a key role in perhaps the biggest antitrust/price-fixing case in history, the so-called LIBOR scandal, a massive interest-rate­rigging conspiracy involving hundreds of trillions (“trillions,” with a “t”) of dollars in financial products. While two minor players did face charges, Breuer and the Justice Department worried aloud about global stability as they explained why no criminal charges were being filed against the parent company.

“Our goal here,” Breuer said, “is not to destroy a major financial institution.”

A reporter at the UBS presser pointed out to Breuer that UBS had already been busted in 2009 in a major tax-evasion case, and asked a sensible question. “This is a bank that has broken the law before,” the reporter said. “So why not be tougher?”

“I don’t know what tougher means,” answered the assistant attorney general.

Taibbi added that the Justice Department’s recent $1.9 billion settlement with HSBC was the big bank’s “third strike.”

In late January, PBS aired a Frontline program titled The Untouchables. The following day, David Sirota of Salon wrote about the program. Sirota called it a “stunning report” that exposed how the Obama administration deals with the malfeasance of the bankers on Wall Street.

Quoting Sirota:

PBS Frontline’s stunning report last night on why the Obama administration has refused to prosecute any Wall Streeter involved in the financial meltdown doesn’t just implicitly indict a political and financial press that utterly abdicated its responsibility to cover such questions. It also — and as importantly — exposes the genuinely radical jurisprudential ideology that Wall Street campaign contributors have baked into America’s “justice” system. Indeed, after watching the piece, you will understand that the word “justice” belongs in quotes thanks to an Obama administration that has made a mockery of the name of a once hallowed executive department…

The piece by PBS reporter Martin Smith looks at how Obama has driven federal prosecutions of financial crimes down to a two-decade low. It also documents the rampant and calculated mortgage securities fraud perpetrated by the major Wall Street banks, who, not coincidentally, were using some of the profits they made to become among President Obama’s biggest campaign donors.

As we see, that campaign money didn’t just buy massive government bailouts of the banks, a pathetically weak Wall Street “reform” bill or explicit reassurances from Obama’s campaign that the president would refrain from criticizing bankers. Frontline shows it also bought a Too Big to Jail ideology publicly championed by the white-collar defense lawyer turned Obama prosecutor Lanny Breuer.

I recommend watching Frontline’s The Untouchables. It’s nearly 54-minutes long. Here’s the link:



Gangster Bankers: Too Big to Jail
 How HSBC hooked up with drug traffickers and terrorists. And got away with it (Rolling Stone)

Justice Department’s New Get-Tough Policy Is, Well, Not (Rolling Stone)

Choice of Mary Jo White to Head SEC Puts Fox In Charge of Hen House (Rolling Stone)

Are banks too big to jail?: PBS Frontline’s stunning report shows how the Obama administration undermined the rule of law (Salon)

Why Mary Jo White is the wrong pick for the SEC (CNN Money)

Jack Lew and the Obama Administration’s Finance-Friendly Status Quo (The Daily Beast)

Assistant Attorney General Lanny A. Breuer Speaks at the New York City Bar Association–Thursday, September 13, 2012 (The United States Justice Department)

109 thoughts on “Just Fine: Don’t Bank on the Justice Department to Prosecute Big Banks

  1. Well what I am wondering is if President Obama, Eric Holder, Machen, Jack Lew etc. are actually acting totally cynically just for their personal financial benefit. I thought the idea that Citibank gave Jack Lew a bonus because he got a job with the Federal government was very disturbing.

  2. I thought I was a Democrat and I’m embarrassed to admit that I read Tea Party and libertarian messages but my impression is that all the Democrats in Washington care about is their paychecks. This is after voting Democrat for almost 40 years. I just really don’t trust any of them.

  3. Amazing how THIS can go on without any criminal charges ever being levied yet….. a person who is forced at gunpoint by a group of thugs to make a 60k bank wire transfer using a false identity who then reports this incident to six different law enforcement agencies before having a statement taken, can then be indicted by the federal government for felony bank fraud. Talk about a disgusting backwards system! Keep on going.

  4. rafflaw,

    “If you or I had consorted with terrorists we would be in a supermax prison.”

    As bettykath said–there are different standards for different folks. Rules is rules–except for the “special

  5. It’s already in the cards. House of cards. They’re going to continue massive deficit spending until it collapses.

    The debt is already too huge to ever pay off. It’s a mathematical impossibility. They will deal with the debt either through default or hyperinflation.

    The banksters! What kind of cake do they like? How about their minions?

  6. I absolutely don’t trust Eric Holder. Per Kay Sieverding, I searched USDOJ.gov for the Professional Conduct Review Committee and found nothing indicating that they did anything other than collect paychecks.

  7. The idea that Citibank pays Jack Lew to get a Federal government job and then Lew becomes Treasury Secretary makes me want to vomit.

  8. Well Eric Holder wrote “OPR has jurisdiction to investigate allegations of misconduct involving Department attorneys that relate to the exercise of their authority to investigate, litigate, or provide legal advice.”

    In its 2011 annual report, OPR wrote “OPR has jurisdiction to investigate allegations of professional misconduct made against Department of Justice attorneys when the allegations relate to the exercise of the attorney’s authority to investigate, litigate, or provide legal advice.”

    But OPR attorney William Birney emailed to me “it is the longstanding policy of the Office of Professional Responsibility (OPR) to decline to investigate litigation claims that have been raised, could have been raised, or still may be raised in litigation.”

    So how could all be true?

  9. kay sieverding 1, February 24, 2013 at 9:53 pm

    But OPR attorney William Birney emailed to me “it is the longstanding policy of the Office of Professional Responsibility (OPR) to decline to investigate litigation claims that have been raised, could have been raised, or still may be raised in litigation.”
    Federal government flatulence.

  10. This is really serious! DOJ attorney David Rybicki filed in federal court that the DOJ Prisoner Tracking System doesn’t require a criminal charge. Then twice he filed that the DOJ Joint Automated Booking System doesn’t require a criminal charge. Also he claimed there is no right to a bail hearing if not charged with a crime. Rybicki made these misrepresentations to get my claims dismissed, because I am powerless etc. But it reads as a crime —

    Whoever feloniously steals, takes away, alters, falsifies, or otherwise avoids any record, writ, process, or other proceeding, in any court of the United States, whereby any judgment is reversed, made void, or does not take effect; …. Shall be fined under this title or imprisoned not more than five years, or both.
    18 USC § 1506 – Theft or alteration of record or process; false bail

  11. 9/11 was an inside job. There is plenty of evidence. Don’t count on the judicial system in this country. You’re running in circles.

  12. Thanks for the link, pete.

    Elaine … all we can do is keep on pushing … keep on publishing …the power of drip, drip, drip.

  13. Great Article!

    I think that we-the American People-deserve some of the blame: By allowing this to have transpired, and still tolerate this ongoing nonsense. We were so happy to get that home and auto loan, so happy to go out and vote for this candidate, so ‘thrilled’ to get into student loan and credit card debt, and on and on………

    A couple of months ago, I was reading an online article, from MSNBC, and was shocked to uncover that Adjustable Rate Mortgages (ARMs) and credit card debt (more people are paying with their credit cards at their local Wal-Mart or grocery stores instead of using cash) have been increasing at an alarming rate, student loan debt totals more than $1 trillion, and the unemployment rate remains relatively high. Do I see another economic recession on the horizon or is this the new normal?

    We continue to make poor choices with our finances, and we need to stop trying to go after Wall Street (protected by the federal government: On FoxBuniess News-I think it was on the Gerri Willis Show-a lawyer was stating that the US Government quickly filed lawsuit and settled with the major banks over the mortgage crisis, preventing us-all of America’s homeowners-from filing suit against them for the same crime, meaning that they would have had to ‘shell out more dough;’ Some lawyers believe that we can still file suit?). Instead, we need to do our ‘homework’ before we go into debt, and before we elect certain individuals into office.

  14. I forgot to add that Congress & the Presidency used ‘tax payers dollars to bail the banks out’, and then, the banks used those same bailout funds to pay toward the federal & state lawsuits-settlement purposes-and their lawyers.

  15. RWL.
    Adjustable Rate Mortgages in theory are not part of the problem. When lenders require credit worthy people to pay above market rates on an adjustable rate basis, then they become dangerous to the unknowing who accepted those bad loans. Most ARM’s are a bit of a gamble, but they are usually written to include maximum percentages that the loan rate can be changed on a yearly basis. Many times the first 3-5 years are fixed at a rate below market and at the first change date the rate can only be raised a maximum of 2% points. However, the ARM’s that are a problem are the ones with high rates to begin with and without a year to year limitation. Many of these B paper loans were sold to people who had good enough credit to not require the higher rates, but they were sold a bill of goods.

  16. rafflaw 1, February 25, 2013 at 12:32 am

    Adjustable Rate Mortgages in theory are not part of the problem. When lenders require credit worthy people to pay above market rates on an adjustable rate basis, then they become dangerous to the unknowing who accepted those bad loans.
    Not if they turn in the keys and just walk away.

  17. Putting the top leadership in prison and replacing them with better leadership doesn’t destroy any corporation but unlike fines (merely the cost of doing business) – this medicine is a real deterrent to minimize future crimes. Keep in mind that by and large 9/11 has been exploited to go after legal and peaceful Americans to benefit campaign contributors so why won’t the DOJ go after real suspects that aided the enemy?

  18. Masters of the Universe
    Our broken government believes banks are too big to fail, curtail, or jail
    By Idrees Kahloon


    Body Politic

    Sherman McCoy, the testy, testosterone-filled 1980’s bond salesman of Tom Wolfe’s Bonfire of the Vanities, frequently calls himself a “Master of the Universe.” The Master of the Universe is a demigod above the law of us plebeians, egotistically immersed in a life of conspicuous consumption and addicted to the adrenaline-fueled machismo of making billion dollar bets.

    Thankfully, McCoy is a frightful fiction—our country’s laws prevent such impertinence. “The United States maintains one of the strongest and most effective anti-money laundering and counter-terrorist financing regimes of the world,” David S. Cohen of the Treasury Department assured the nation.

    So when it was discovered that HSBC knowingly laundered for ruthless drug cartels and Russian mobsters, transacted with blackballed organizations that bankrolled Hezbollah and Al-Qaeda, and helped Iran and North Korea evade sanctions, our robust regulatory agencies sounded the bank’s death knell. Right?

    Given all the corporations-are-people bluster in the air—and that breathing in the same vicinity as Al-Qaeda, let alone moving billions of dollars for it, are possible grounds for placement on President Obama’s kill list and an eventual zapping-from-the-sky—didn’t our Very Tough Officials press severe criminal charges? HSBC will surely lose its banking license, right?


    Not one person behind the decade-long, mind-bogglingly heinous crimes of HSBC will spend a single day in jail. Not one person at HSBC who provided one billion dollars to the terrorist-linked Al-Rajhi bank in Saudi Arabia, or who washed the blood from the hundreds of millions of dollars coming from Mexico’s Sinaloa and Colombia’s Norte del Valle drug cartels, will have to personally pay a single dollar.

    Instead the Department of Justice issued a fine for $1.9 billion—about five weeks’ worth of profit.

    The new normal of banking is a pattern of massive fraud encouraged—er, punished—by these impotent wrist slaps. Profits are privatized among the shareholders, and losses are subsidized by the taxpaying shmucks. Now, congressional Republicans want to do away with the Volcker Rule so that banks can gamble with their clients’ money too.

    There is an epidemic of amnesia when it comes to bank regulation in Washington. Sycophantic lawmakers fawn over CEOs, jockeying for favor and a slice of an almost $500 million lobbying pie. Bending over backwards for the banks, Congress expressed little outrage regarding the HSBC settlement. And less than two weeks after the HSBC settlement came the announcement that UBS was getting away with rate-rigging LIBOR for a measly $1.5 billion.

    Basically, a bunch of bankers from prestigious financial institutions like Barclays and the Royal Bank of Scotland colluded to distort the LIBOR index to misrepresent the strength of their banks and make their trades more lucrative. The problem is that LIBOR is a crucial determinant in the prices of hundreds of trillions of dollars worth of assets—any imaginable financial instrument, from college loans to credit cards to mortgages, was artificially distorted to help traders make a few extra dollars on their deals.

    In an encouraging change of pace, Senator Elizabeth A. Warren exposed the farcical power of the Very Tough Officials by asking a simple question: “Tell me a little bit about the last few times you’ve taken the biggest financial institutions on Wall Street all the way to a trial.”

    The silence was telling. Eventually, Thomas J. Curry, Comptroller of the Currency, mumbled the disheartening, but illuminating, admission that “we do not have to bring people to trial.”

  19. Maybe they need a new agency name? With a few exceptions (Civil Rights Division, etc) this is an Executive Branch agency that protects the Executive Branch’s top leadership. True checks and balances require “checks” by other branches of government. Sounds innocuous but if citizens need protection and think the DOJ will provide justice it can be very harmful or even fatal to trust them – in some cases the DOJ intentionally obstructs justice (a federal crime). Maybe the “Attorney General’s Department” or the “Bureaucracy Protection Department” would be more accurate?

  20. The Department of Justice? Not for Wall Street
    By Brian Young and Brian Kettering

    So, why is criminal court off the table in the financial sector? Well, maybe the harm is not as severe, one might argue. But that’s simply not true. In fact, in some cases the trauma and harm caused by foreclosure can be more devastating and far reaching in a community than any car accident.

    Take Ana and Jose Mendez from Springfield, Mass. After they fell behind in their mortgage payments due to a loss of income, they did what millions of families were told to do — they contacted the bank. Aurora Bank offered them a temporary trial modification, like millions of other families. The Mendez family obliged and paid for six consecutive months. At the end of the trial period, Aurora Bank refused a permanent modification and offered another trial. The family obliged again and paid for six more months at a higher price — hoping that this time they would get a permanent modification. At the end of that period, Aurora again refused a permanent modification and offered one last six-month trial modification. The Mendez family paid those six months. At the end of 18 months of trial payments, Aurora Bank refused to permanently modify the loan and foreclosed.

    Jose Mendez expressed his frustration to a local CBS News Affiliate in Springfield, stating, “I don’t understand the logic that the banks use to evict our communities, all these buildings stay empty without any benefit to our communities.”

    The Mendez family struggle is ongoing. Aurora Bank FSB, which is the legacy of the now defunct Lehman Brothers refused to accept the Mendez family’s offer to pay rent and is now no longer negotiating in good faith. Aurora Bank has chosen to proceed with eviction. The Mendez family is willing to move if Aurora Bank can find a buyer who signs an affidavit to move into the home, but the bank would rather leave the home vacant than work with the family.

    This is just one example of the thousands of families whose lives have been upended without any recourse or justice. If anyone else stole rent for a home from a family, we would haul them into court. Who will stand up for the Mendez family in court?

    That’s why it is so critical that bankers who committed criminal fraud be held to account for their crimes. Any criminal justice expert will tell you that if there is no punishment, there is no deterrent. Bankers need a deterrent to prevent them from cooking up the next crisis that will bankrupt America.

  21. What about the Crime Victims Rights law? You’re supposed to be able to file in court even if there is no prosecution but I don’t know if any of the Federal Courts are actually accepting and processing such complaints.

  22. The New 007 License to Kill: HSBC and Big Banks
    By Mark Karlin

    The Department of Justice has fined banks involved with money laundering token amounts (although they appear large, they are a small percentage of a bank’s profits and the loss is covered by shareholders, not the executives responsible for the money laundering). The violations have ranged from accepting narco money knowingly to taking funds from banks and nations with ties to terrorists to doing banking with countries that the US has sanctions against.

    The Post reminds readers:

    But a string of august names in global banking — Credit Suisse, Lloyds Bank, ABN Amro, ING Bank and now HSBC — have reached settlements in the past couple of years with the U.S. government for billions of dollars in tainted transactions. These investigations have revealed that weaknesses in the financial system lay not with the so-called hawala brokers of Karachi, Pakistan, but the bespoke bankers of London, Amsterdam and Geneva, and their American affiliates. The loss of moral legitimacy in the Department of Justice and the Obama administration in adopting a policy that the bigger the financial crime the less likely to criminally prosecute it is an affront to the rule of law.

    As one reader wrote BuzzFlash in response to our commentary yesterday: “I recall Feds prosecuting folks in Chicago who bought money orders to launder proceeds of drug profits for a couple thousand dollars each to be sent out of the country. Yet banks which admitted money laundering hundreds of millions (perhaps billions) in drug profits get off with paying a fine?”

    For big banks and Wall Street financial firms, there are a different set of rules; there are basically few violations of banking laws — very few — that will lead to criminal prosecution. Yes, an individual bank executive might be indicted for embezzling from a bank, but bank executives won’t be prosecuted for facilitating the fortunes made by drug traffickers or financially working with banks and nations that, according to the US government, seek to attack or undermine the interests of America.

    Given the death toll in Mexico, Central America, Colombia and elsewhere due to the show-war on drugs, banks like HSBC (and the other banks that have and likely continue to engage in illicit drug money laundering in Mexico and South America) aren’t just violating laws when they willingly accept the deposits of narco; they are acting as accessories to murder.

    Without the ability to launder hundreds of millions of dollars, perhaps billions, through American banks, the drug cartels and their partners in the Mexican government (including many politicians, federal police, members of the military – including generals – and often the local police), no doubt fewer citizens would have been killed in Mexico up to this point.

  23. They won’t prosecute because it would lead to economic collapse…. or, rather, the discovery process in any prosecution would.

    The apple is rotten to the core, the only thing that keeps it running is the shiny wax on the skin, makes it look OK on the shelf.

    Back during Enron, when everybody was saying “a few bad apples” things looked dire. Enron, Arthur Anderson, Worldcom…. and then the real fireworks started.

    The main problem is that during the 2008 crash, the banks were insolvent. Many may still be. Drug money was the only liquid asset many banks had.

    It wasn’t just HSBC, Wachovia was all over it too. It’s connected to Oliver North’s drug running network. Investigating these banks would bring it to light that the Iran-Contra investigations were a total whitewash. The CIA runs drugs and uses the mafia to launder money. There’s a clear, direct line you can trace from N897SA to Zambada Niebla, with the banks right in the middle.

    If any of this were litigated, the US media would have to start talking about LIBOR. The LIBOR price fixing scheme may be a couple decades old.

  24. It gets far worse! At http://www.ACLU.org on the second page (December 2012) there is an updated article titled “Spying on First Amendment Activity State by State”. We have real terrorism cases with some banks but the police, FBI, etc. are targeting African-American college students, environmentalists, animal rights activists and even peaceful protesters at the Republican National Convention! All legal and constitutional activities but real terrorism cases they have no interest in.

  25. http://www.cato.org/publications/commentary/financial-crisis-bank-deregulation-myth

    The financial crisis was primarily caused by government policy. We do not live in a free market. We live in a mixed economy. The technology industry is largely unregulated and as a result has performed well through various economic cycles. Financial services is the most regulated industry in the world, and since it is, it’s not surprising that the industry has been so troubled.

    The real cause of the financial crisis was a combination of mistakes by the Federal Reserve, along with government housing policy, which was implemented by Freddie Mac and Fannie Mae. Neither would have ever existed in a free market.

  26. Re: Post by “Tired” (Crimes Victims Rights Law).

    To the best of my knowledge a citizen crime victim without an attorney (or Plaintiff Pro Se) can only file a civil case without a government prosecutor or U.S. Attorney (DOJ federal prosecutor) and they have limited resources so not all crimes are investigated. But there is one exception that I heard about: a private citizen can petition the court to “convene a Grand Jury to appoint a Special Prosecutor” – essentially independent from the Department of Justice. That would be a powerful tool for a citizen with legal standing.

  27. @bron

    The technology industry is not a free market. Industrial scale corporations are largely defined by their organizational prowess. They don’t compete, they buy their competitors. They succeed to the extent they are able to plan effectively.

    Manufacturers need parts to arrive reliably. Farmers need to be able to purchase fertilizer when their crops need it. WalMart needs its stock to arrive on time.

    A market, by contrast, is defined by unpredictability: if a competition is fair, the outcome is uncertain. Uncertainty is bad for industry, it leads to supply chain problems and price volatility where the business environment requires standardization and predictable returns on investment.

    This uncertainty is the source of innovation: innovation is not possible where everything is planned. Mergers and acquisitions take the role of innovation in industry.

    Industrial scale corporations don’t operate on the same principles as an entrepreneurship. The “lemonade stand” model of capitalism has about as much to say about industry as a piggy bank has to say about the fractional reserve system.

    Industrial scale corporations don’t need to respond to demand, they can create demand. Take Apple’s iPod, for example. Apple is famously secretive about their product announcements, but arranged for the manufacture of millions of iPods before anybody knew anything about it. Demand follows supply.

    Industrial scale corporations tend towards oligopoly. Oligopoly is the default market arrangement in industry. ADM processes 50% of US corn ethanol. Intel makes 85% of CPU’s. Microsoft makes 90% of computer operating systems. Most cities have exactly one choice of cable TV provider, and maybe two broadband providers. These aren’t cherry-picked examples.

    Industry has nothing to do with free markets. The whole point of an economic competition is to put your competitor out of business, and industry operates along those lines very aggressively. Industry is successful because of planning.

  28. “They won’t prosecute because it would lead to economic collapse…. or, rather, the discovery process in any prosecution would.

    The apple is rotten to the core, the only thing that keeps it running is the shiny wax on the skin, makes it look OK on the shelf.”


    This is the bottom line truth of the matter, no matter who is in charge. We have allowed these banks and their allies to take over the World’s financial system. They have made themselves “too big to fail”, while their criminal history would make even an Al Capone think himself a piker in comparison. Evil sociopaths who feel the etitlement to power.

  29. Mike,
    While in agreement with most of your points, there are also thousands of “worker bee” employers in those banks that are honest, law abiding and merely trying to raise a family. If top management is removed, prosecuted and replaced by legitimate leadership then the company is allowed a long term compliance deadline the crooks get punished while minimizing job loss for the innocent employees. 60 Minutes did a similar show a while back where the bank regulators take over banks in a similar fashion, they basically come in at the end of day on a Friday afternoon and stabilize the bank before Monday morning – so as not to alarm the customers or investors. My point is most employees in these banks aren’t as culpable as the management and great care should be taken.

  30. Our former Sec of Treas was a tax evader, our soon to be Sec of Treas had money in offshore bank accounts. Our Pres and At Gen seem to be not interested in prosecuting those that brought on the largest financial disaster in modern times. And yet Prez O is a “man O the people”. Amazing.

  31. Too Big to Jail: Our Banking System’s Latest Disgrace

    You can be forgiven if you watched the Department of Justice’s announcement yesterday of a $1.92 billion settlement with HSBC with a sense of disappointment–and déjà vu. The event checked all the boxes in a theatrical routine that has become all too familiar.

    Descriptions of breathtaking misconduct involving the facilitation of massive drug trafficking and transactions with rogue terror-sponsoring nations? Check.

    Broad boasts about the “historic” nature of the settlement that will certainly end the type of criminal misconduct alleged? Check.

    Mea culpas from the offending institution with promises that it has really learned its lesson this time and will never ever engage in dastardly conduct again? Yep, that too.

    Nothing, however, was quite as it appeared. Sure, HSBC paid a record fine, but there was something vitally important missing from yesterday’s press conference: actual criminal charges for obvious criminal conduct.

    Some perspective: HSBC sent more than $800 million in bulk cash from Mexico to the United States, a good chunk of which apparently represented proceeds from some of the most notorious Colombian drug cartels. As someone who tried the first narcotics money laundering case involving extradition from Colombia, let me assure you that this is a lot of money, the discovery of which usually generates vigorous prosecutions and lengthy prison sentences. And it wasn’t HSBC’s only dirty business: There were also hundreds of millions of more dollars of illegally disguised transactions with rogue nations such as Iran and Sudan.

    Why no criminal charges? Why instead only some remedial measures and a “historical” fine that can be measured in weeks — not years — of earnings? It certainly wasn’t for lack of evidence. No, instead the government determined that HSBC is not only too big to fail, but also too big to jail. As the New York Times first reported, even though there were strong voices within DOJ pushing for criminal charges, the big banks’ best friends within the government (the Treasury Department, of course, and other unnamed regulators) were too fearful that an indictment could destabilize the global financial system. Yes, it’s 2008 all over again. In the name of systemic stability, a megabank again escapes accountability for its actions, rescued by compliant officials.

    In some aspects, DOJ’s surrender is understandable. Notwithstanding regulatory reform efforts in the U.S. and the UK, the largest banks are in many ways even more systemically dangerous today than when we bailed them out in 2008. This indirect acknowledgment that we have failed to fix the too-big-to-fail problem has potentially dire consequences.

    One of the reasons why we have a criminal justice system, of course, is to deter criminal behavior. If you know that you will be punished for putting your hand in the cash register at your local supermarket (or illegally stripping out information from a monetary transaction that identifies the source nation as Iran), you are less likely to do so. But if the government offered a blanket waiver from criminal accountability for a certain group — let’s say all left-handed people over six feet tall or a handful of banks deemed so large and so significant that their indictment could destroy the global financial system — we would expect that those exempted would no longer be deterred from committing criminal acts. And although lefty giants may otherwise lack a predisposition for boosting cash, in recent years the largest banks have demonstrated an unbridled zeal for pushing the boundaries of the law as part of their relentless pursuit of profits. DOJ’s actions with regards to HSBC are beyond unfair: They are downright terrifying for weakening the general deterrence for megabanks, both foreign and domestic, which could rationally interpret yesterday’s actions as a license to steal.

    The enduring presumption of bailouts in our banking system already drives the largest banks to take on too much risk with too little disclosure and too much leverage, a toxic cocktail that will inevitably lead to another financial crisis. Yesterday’s action now spikes the punch with a new toxin, confirmation that criminal penalties are off the table, leaving a worst-case scenario of a fine totaling far less than even a single quarter’s earnings. Given the potential profits of criminal behavior and the unlikelihood of personal consequences for the executives directing it, the message is clear: Crime pays. This will inevitably lead to more reckless risk-taking that will further undermine systemic stability and lead to an even greater financial meltdown down the road.

    There is, of course, a solution for our emerging two-tier system of justice. The largest banks need to be broken up, the only realistic way to truly end both too big to fail and too big to jail. But since our government has demonstrated a reluctance to do so, perhaps the next time a megabank presents HSBC’s argument that it should not be criminally charged because it would destabilize the financial system, instead of capitulating to this threat, DOJ should require at a bare minimum that in return for allowing the bank to survive, it must break itself up, ensuring that it could never hold the justice system hostage again. Otherwise, we can look forward to many more press conferences that are long on drama but short on impact.

    Neil Barofsky was the Special United States Treasury Department Inspector General to oversee the Troubled Assets Relief Program from 2009 until his resignation in February 2011. He is currently a senior fellow at the NYU School of Law and is the author of Bailout (Free Press, 2012).

  32. “While in agreement with most of your points, there are also thousands of “worker bee” employers in those banks that are honest, law abiding and merely trying to raise a family. If top management is removed, prosecuted and replaced by legitimate leadership then the company is allowed a long term compliance deadline the crooks get punished while minimizing job loss for the innocent employees.”


    I totally agree that that is a fact that these policies come from those on top of the hierarchy. I think your solution, similar to the takeover of failed banks done by the FDIC is a good one

  33. The New Untouchables Are Wall Street Executives, Despite Evidence Many Likely Criminally Violated Sarbanes-Oxley Act

    On January 22, Frontline airs a program asking why the executives on Wall Street who oversaw the economic meltdown in 2007 have remain unprosecuted.

    According to a Frontline release, “In ‘The Untouchables,’ premiering Jan. 22, 2013, at 10 P.M. on PBS (check local listings), FRONTLINE producer and correspondent Martin Smith investigates why the U.S. Department of Justice (DOJ) has failed to act on credible evidence that Wall Street knowingly packaged and sold toxic mortgage loans to investors, loans that brought the U.S. and world economies to the brink of collapse.”

    Frontline asks “asks Lanny Breuer, assistant attorney general for the DOJ’s Criminal Division, about his failure to criminally indict Wall Street executives. ‘I think there was a level of greed, a level of excessive risk taking in this situation that I find abominable and very upsetting,’ says Breuer. ‘But that is not what makes a criminal case.'”

    Yet, the Sarbanes-Oxley Act was designed to prosecute key elements of the kind of activity that Wall Street engaged in prior to the economic breakdown – and of which there is the possibility that they are still engaging in. All the DOJ has done is fine banks (which is merely a cost of their doing business) along with the Securities and Exchange Commission (SEC).

    The lamentable damage to justice is nothing new regarding Wall Street inviolability from a criminal perspective (in regards to financial accountability). In fact, “60 Minutes” aired a compelling, lengthy evidence-filled investigative story on December 4, 2011, in which reporter Steve Kroft begins the segment with this statement:

    It’s been three years since the financial crisis crippled the American economy, and much to the consternation of the general publie and the demonstators on Wall Street, there has not been a single prosecution of a high ranking Wall Street executive or major financial firm, even though fraud and financial misrepresentations played a significant role in the meltdown.

    After interviewing Countrywide Financial’s [which is now part of Bank of America] executive vice president, Eileen Foster, in charge of fraud investigations — and Richard Bowen holding a similar post at CitiGroup — “60 Minutes” showed how — based on their testimony and other evidence — the essence of accountability to shareholders and the government as mandated by Sarbanes-Oxley had been violated. Countrywide, in particular, was a key player in the fraudulent subprime mortgage schemes that played a pivotal role in the economic collapse that occurred at the end of the Bush administration.

    “All of this raises several questions,” Kroft said in the 2011 “60 Minutes” report. “Why has the Justice Department failed to go after mortgage fraud inside Countrywide? There has not been a single prosecution. Even more puzzling is the Justice Department’s reluctance to employ one of its most powerful legal weapons against Countrywide’s top executives. It’s called the Sarbanes-Oxley Act of 2002.”

  34. Consigliere Lanny Breuer, Head of the DOJ Criminal Division, Leaves Without Prosecuting One Made Man on Wall Street

    “Lanny Breuer, Justice Department criminal division chief, is stepping down,” a Wednesday Washington Post headline announced.

    We’d like to think that it was a Tuesday BuzzFlash at Truthout commentary that did the trick: “The New Untouchables Are Wall Street Executives, Despite Evidence Many Likely Criminally Violated Sarbanes-Oxley Act.” In that piece, BuzzFlash observed that Breuer is ultimately responsible for not prosecuting any key Wall Street executives, many of which – on the evidence available – oversaw a tsunami of criminal violations of the 2002 Sarbanes-Oxley Act.

    Many Americans are not aware of Sarbanes-Oxley, which has many legal requirements in it. A key regulation it places on corporations, under penalty of law, is full disclosure of financial transactions and any discovered fraudulent activity. The latter breaking of the law was key to how the subprime mortgage breakdown was the gateway to the collapse of the economy in 2008.

    Yet, Breuer, who was – and likely will be again – an insider DC megabucks lawyer representing banks too big to fail and global corporations, settled on fines (or let the Securities and Exchange Commission do a slap on the wrist to corporate and financial masters of the universe). As the Washington Post confirms, “Prior to his appointment at the Justice Department, Breuer worked at the Washington office of the Covington & Burling law firm, alongside [Eric] Holder.”

    In short, Breuer and Holder are responsible to the American people for prosecuting the same masters of the universe clientele who they represented for lavish salaries at Covington & Burling. We can’t read the minds of Breuer and Holder, but given DC precedent, it is quite likely that they will return to mega-bucks salary partnerships at a DC law firm again representing the kind of people who they are supposed to be prosecuting. If they criminally indict Wall Street executives, their financial value as attorneys decreases. That’s the bottom line.

    Besides, these guys are of the same elite managerial class that the Wall Street “made men” are.

    So Breuer did not prosecute one Wall Street executive during his term as head of the criminal division, not one. Instead the likes of the Washington Post praise him for occasionally imposing fines that were merely the cost of doing business (think of drug cartels paying off Mexican and US government officials 5 or 10% for letting shipments go through, while pocketing 90 or 95% in profits – basically analogous to a DOJ or SEC fine, even if seemingly large.) What this means is that Wall Street financial firms and corporations just factor the fines into a smaller profit, but a large profit they still make on illegal activity – and a handsome one to boot.

  35. I wonder…

    If income earners above the Social Security tax cap were denied benefits, might voters ask that the cap be raised?

    So, right now, incomes above $110,000 are not taxed towards Social Security.

    If anybody earning above $110,000 were left “on their own” at retirement age, perhaps the moderate wealthy would lobby to increase that cap, providing needed funds.

  36. Jack Lew’s Citigroup Contract Included Incentive To Go Into Government

    By: DSWright Monday February 25, 2013 6:00 am


    There may not be anyone left in America that doesn’t know Wall Street sets the agenda in Washington, that the revolving door between finance capital and the so-called regulators of finance capital spins so fast the IAEA should demand inspections. And so we learn that President Obama’s Treasury Secretary nominee not only worked for the Citigroup hedge fund that shorted the housing market, invested in off-shore tax havens, and took a nice bonus from TARP money – he had a provision written into his employment contract that encouraged him to return to government service.

    Lew’s employment agreement with Citigroup said his “guaranteed incentive and retention award” wouldn’t be paid if he quit his job, with limited exceptions. One was if he left Citigroup “as a result of your acceptance of a full-time high level position with the United States government or regulatory body.” This applied if he left “prior to the payment of any incentive and retention award for performance year 2008 or thereafter.” Such an award wasn’t guaranteed but would be consistent with the company’s practice, the document said…

    When I asked Citigroup what its rationale was for including the government-service exception, a spokeswoman, Danielle Romero-Apsilos, said: “Citi routinely accommodates individuals who wish to leave the firm to pursue a position in government or nonprofit sector.” I pointed out that the contract terms I was asking about didn’t mention anything about a nonprofit, but she declined to elaborate on her statement.

    The agreement makes no such mention of “non-profit” work. Is anyone surprised? How would Citigroup capitalize on that? No, Citigroup wants friends in high places, it wants puppets in power to give the bank further subsidies and favoritism. The Too Big To Fail bank seems to have secured itself another term of handouts with the Lew appointment, playing the old bribery game.

    Citi has been an especially nice landing spot for big-shot Democrats. Former White House budget director Peter Orszag is now a Citigroup vice chairman and somehow finds time to write a column for Bloomberg News. And there was former Treasury Secretary Robert Rubin, who was paid more than $115 million while encouraging the risk-taking that would have destroyed Citi if not for a taxpayer rescue.

    Mr. Rubin was Mr. Lew’s patron at the bank. Mr. Lew’s contract suggests that Citi knew from the start that Mr. Lew was headed back to a powerful job in Washington, and that it wanted him to remember the bank fondly when he left.

    Paying someone a few million dollars is a good way to ensure you are thought of fondly. And making sure if they go back into government service – as they may have hinted they will do – that they receive all the bonuses you have just conjured up is so pleasant. It’s not bribery because…

    In any case Citigroup will continue its long streak of having undue influence at Treasury, Geithner has already done his part, now it’s Lew’s turn.

  37. ap,
    that is an amazing story about the Citigroup contract term. Would that be one part of a paper trail evidencing corporations intent on stacking the governmental agencies with friendlies?

  38. Matt Taibbi & William Black on Bailout Secrets & How New Foreclosure Deal Spares Banks From Justice
    Democracy Now

    Four years after the massive bailout that rescued Wall Street, we look at the state of the financial sector with Rolling Stone’s Matt Taibbi and former financial regulator William Black. In a new article for Rolling Stone, Taibbi argues the government did not just bail out Wall Street, but also lied on the financial sector’s behalf, calling unhealthy banks healthy and helping banks cover up how much aid they were getting. The government’s approach to the banks came under new scrutiny this week after it reached an $8.5 billion settlement for improprieties in the wrongful foreclosures on millions of American homeowners, including flawed paperwork, robo-signing and wrongly modified loans. The settlement will end an independent review of all foreclosures, meaning the banks could be avoiding billions of dollars in further penalties, in addition to criminal prosecution.

  39. The Federal Reserve “Bernanke” is continuing to bail out the banks by “printing” and buying $85 billion per month of mortgage-backed securities
    still – an unbelievable outrage. We MUST close down the Fed. It is truly the head of the banking system – a cartel. It enables the banks to commit the financial crimes by manipulating the currency; as well as tits government cronies’ collusion committed against the American people. The tentacles of the Federal Reserve reach far and wide as does their terrible consequences: unending wars unpaid for, invasions, drones by which the US destroys the peoples of many countries as well as the quality of life of the middle class of the US (the true “producers” and drivers of the American economy and wealth). These are unspeakable crimes that will result in complete collapse, wholly avoided by the perpetrators in their Lear Jets leaviing it behind as the bewitching hour has come and gone. Govern accordingly.

  40. Raff,

    Look at how much chase bank admitted to laundering…. If you launder money…. They seize it…. And criminally prosecute you…. if the banks do it… They pay a civil fine….

  41. E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad
    By: Jessica Silver-Greenberg

    When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix.

    Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews,according to documents filed early Tuesday in federal court in Manhattan. As a result, the mortgages, which JPMorgan bundled into complex securities, appeared healthier, making the deals more appealing to investors.

    The trove of internal e-mails and employee interviews, filed as part of a lawsuit by one of the investors in the securities, offers a fresh glimpse into Wall Street’s mortgage machine, which churned out billions of dollars of securities that later imploded. The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit.

    The lawsuit, which was filed by Dexia, a Belgian-French bank, is being closely watched on Wall Street. After suffering significant losses, Dexia sued JPMorgan and its affiliates in 2012, claiming it had been duped into buying $1.6 billion of troubled mortgage-backed securities. The latest documents could provide a window into a $200 billion case that looms over the entire industry.In that lawsuit, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, has accused 17 banks of selling dubious mortgage securities to the two housing giants. At least 20 of the securities are also highlighted in the Dexia case, according to an analysis of court records.

    In court filings, JPMorgan has strongly denied wrongdoing and is contesting both cases in federal court. The bank declined to comment.

    Dexia’s lawsuit is part of a broad assault on Wall Street for its role in the 2008 financial crisis, as prosecutors, regulators and private investors take aim at mortgage-related securities. New York’s attorney general, Eric T. Schneiderman, sued JPMorgan last year over investments created by Bear Stearns between 2005 and 2007.

  42. The People vs. Goldman Sachs
    A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges
    MAY 11, 2011

    They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

    Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.

    The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — “a million fraud cases a year” is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin’s small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street’s aristocratic impunity and prosecutorial immunity produced since the crash of 2008.

    To date, there has been only one successful prosecution of a financial big fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was just convicted on a smorgasbord of fraud charges and now faces life in prison. But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff, his comically excessive crime spree (which involved such lunacies as kiting checks to his own bank and selling loans that didn’t exist) was almost completely unconnected to the systematic corruption that led to the crisis. What’s more, many of the earlier criminals in the chain of corruption — from subprime lenders like Countrywide, who herded old ladies and ghetto families into bad loans, to rapacious banks like Washington Mutual, who pawned off fraudulent mortgages on investors — wound up going belly up, sunk by their own greed.

    But Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences. Thus, while much of the Levin report describes past history, the Goldman section describes an ongoing? crime — a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.

  43. Addressing “The Empathy Deficit”: What Lloyd Blankfein could Learn at the DMV

    Did you know, for instance, that the Goldman Sachs Board Member who oversees the Goldman compensation committee is James “Jim” Johnson, who was the CEO of Fannie Mae?

    In their best-selling book, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Created the Worst Financial Crisis of Our Time, Gretchen Morgenson, a Pulitzer Prize-winning business reporter at The New York Times, and Joshua Rosner, an expert on housing finance, describe how under Johnson’s leadership as CEO of Fannie Mae, the company used the mortgage agency backing provided by the government (which essentially functioned as a subsidy) to enrich himself personally to the tune of $100 million, as well as lining the pockets of other executives, including his successor Franklin Raines. The authors cite a 1996 Congressional Budget Office study that discovered that Fannie took about a third of the benefits of the government subsidy when they were meant to pass it onto homeowners like Uncle Joe, or you and me.

    This seems to be the epitome of negligent leadership. That Jim Johnson kept those monies while maintaining his grips on power, seemingly without any accountability reflects what Thomas Friedman has rightly called “a corrupt plutocracy”. Not only has no one amongst these executives gone to jail for leading corrupted company cultures and helping to create both a significant debt burden on citizens like Uncle Joe and those of GenEntrepreneur, but also contributed to a general culture of crony capitalism.

    That culture of crony capitalism is a far cry from the Emersonian brand of American entrepreneurial capitalism that made this country great.

  44. U.S. AG Eric Holder, DoJ Head Lanny Breuer Linked To Banks Accused Of Foreclosure Fraud
    By Scot J. Paltrow

    Jan 19 (Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

    The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

    Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

    Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

    The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

    In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.

    While Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co – as well as at least one other bank that is among the 10 largest mortgage servicers.

  45. US high court limits SEC authority to seek penalties
    10:14 AM ET, 02/27/2013 – Reuters

    WASHINGTON, Feb 27 (Reuters) – The U.S. Supreme Court on Wednesday limited the authority of the federal government’s top securities regulator to seek civil penalties over conduct that occurred more than five years before investigators took action.

    The court held on a unanimous vote that the five-year clock for the government to act on fraud begins to tick when the fraud occurs, not when it is discovered.

    The case is a win for mutual fund manager Marc Gabelli and colleague Bruce Alpert, whom the U.S. Securities and Exchange Commission claimed allowed a firm now known as Headstart Advisers Ltd to conduct hundreds of “market-timing” trades, which involve rapid trading to exploit market or price inefficiencies.

  46. Department of Justice Attacks Frontline As Lanny Breuer Resigns
    By: DSWright
    January 24, 2013

    Well that didn’t take long. Less than 24 hours after PBS aired Frontline’s The Untouchables, a program focused on the failures of the Department of Justice to make cases against Wall Street bankers despite ample evidence of fraud, the head of DOJ’s criminal division resigns. It’s hard to dismiss as a coincidence given that Lanny Breuer was rather clearly identified in the program – which he participated in – as the person unwilling to go forward with Wall Street prosecutions out of both a fear of losing the cases and some strange fixation on the possibility the firms engaging in criminal fraud might go out of business. I am not sure anyone regrets Enron and Arthur Andersen going out of business. But more to the point, that concern is totally outside a prosecutor’s purview. Breuer was supposed to enforce the law not play systemic risk analyst – a job he is in no way qualified for.

    While establishment media like the Washington Post want to focus on Breuer’s role in the “Fast and Furious” gun running fiasco as a possible reason for his departure it seems those in the know had a different understanding. The Department Of Justice spent the day attacking Frontline claiming their program was a “hit piece” and threatening to “never co-operate” with news stories in the future. It’s so good to see someone will pay for Wall Street’s crimes – not the bankers or the politicians who committed the crimes and profited from them but journalists asking questions about what happened. Sweet justice.

    It is also worth noting that Lanny Breuer was interviewed extensively for the program. He had his say repeatedly as did others whom he worked with, a good deal of the program involved him offering the best arguments he could muster to defend his actions/inactions. For DOJ to now punish the journalists for a program that provided their officials with a forum is truly ridiculous.

    It’s time to face the facts, DOJ failed on one of the most important legal issues of our time. They have no one to blame for their bad reputation but themselves.

  47. Breuer Identifies Real Clients on Frontline then Quits
    January 23, 2013

    Lanny Breuer is out as head of the Criminal Division of the Department of Justice, according to the Washington Post. After his ratlike performance on Frontline (transcript here) it won’t be long before we find him at some creepy New York or DC law firm defending his best friends, the banks and their sleazy employees. His legacy is simple: too big to fail banks can’t possibly commit crimes, so minor civil fines and false promises of reform are punishment enough. Jamie Dimon couldn’t have put it better.
    Breuer tried his best to dodge questions about why he violated his promise to Senator Kaufman that he was actually conducting an investigation of Wall Street fraud. Martin Smith, the interviewer, asks:

    “We spoke to a couple of sources from within the fraud section of the Criminal Division, and through mid-2010 they reported that when it came to Wall Street, there were no investigations going on; there were no subpoenas, no document reviews, no wiretaps.”

    Breuer responds: “we looked very hard at the types of matters that you’re talking about.” He doesn’t deny that there were no investigations; no subpoenas, no document reviews, no wiretaps. Instead, he tries to shift the subject to his pointless insider trading cases, his Ponzi cases, the Lee Farkas case (the mortgage firm Taylor, Whitaker and Bean), and a few hapless mortgage originator cases, and even a policeman defrauded by some fraud or other. Smith won’t let that pass. Eventually we get to the heart of the problem to Breuer:

    “But in those cases where we can’t bring a criminal case — and federal criminal cases are hard to bring — I have to prove that you had the specific intent to defraud. I have to prove that the counterparty, the other side of the transaction, relied on your misrepresentation. If we cannot establish that, then we can’t bring a criminal case.

    “But in reality, in a criminal case, we have to prove beyond a reasonable doubt — not a preponderance, not 51 percent — beyond any reasonable doubt that a crime was committed. And I have to prove not only that you made a false statement but that you intended to commit a crime, and also that the other side of the transaction relied on what you were saying. And frankly, in many of the securitizations and the kinds of transactions we’re talking about, in reality you had very sophisticated counterparties on both sides.”

    Smith says “You do have plaintiffs who will come forward and say that they relied on the reps and warranties, and they relied on the due diligence claims that were made by the bank.”

    Breuer keeps talking, but he can’t worm out of this one. Smith then says:

    “We’ve spoken to people inside the Residential Mortgage-Backed Securities Working Group who said that when they began their work in January, February, March of 2012 that they found nothing at the Justice Department in the pipeline, no ongoing cases looking at securitization.”

    And lest we forget, Lanny reminds us that these cases have ramifications for the rest of the bank. I don’t know who told Breuer that indicting the investment banking arm of a megabank would destroy the bank, but that’s a piece of idiocy that he claims to believe…

  48. Is Jack Lew A Friend to Wall Street?
    Like Tim Geithner, the new Treasury nominee may owe his views to Robert Rubin. So don’t expect him to pursue much in the way of bank reform.
    By Michael Hirsh

    It was a little noted event when last fall, during the height of the presidential election campaign, the Treasury Department released Timothy Geithner’s phone records. To the extent anyone paid attention at all—and let’s face it, almost no one did—financial reporters were struck that the Treasury secretary’s most frequent contact was Larry Fink of BlackRock, the world’s largest money manager and Geithner’s principal conduit to his many friends on Wall Street. But the even more telling name of Geithner’s regular confidants, as the Financial Times noted, was the second one on the frequent-contact list: Robert Rubin.

    That might seem odd; after all, it’s been nearly a decade and a half since Geithner worked for Rubin, who is long retired from public life. But Bob Rubin was no ordinary employer. The former Treasury secretary under Bill Clinton all but created Timothy Geithner as we know him today, raising him from a junior Tokyo Embassy staffer to undersecretary of the Treasury in the mid-to-late-’90s, and later sponsoring the still-boyish bureaucrat as president of the New York Fed in 2003 (against resistance from the head of the search committee, Paul Volcker, who according to The Wall Street Journal barked: “Who’s Geithner?”). As he almost always has, Rubin prevailed, and for nearly four years his former protégé has lorded over America’s financial system.

    Rubinomics: It’s the cult that never quits. Now the nation is faced with a potential new acolyte. Is Jacob Lew, who is expected to be named Thursday as the replacement for Geithner, yet another Rubinite who will largely follow the policies of his predecessor? Calm, brilliant, competent at everything he’s tried—from the Office of Management and Budget to deputy secretary of State to chief of staff—Lew has smoothly run the White House in the year since William Daley left. He has a reputation for unimpeachable integrity and total honesty, as well as a mastery of the budget that will be critical over the next four years of fiscal fights. But many critics fear that the picture is different when it comes to Wall Street. On financial reform, Lew is a virtual cipher who, in his few public pronouncements, has appeared to toe the Rubin-Geithner line of minimal interference with America’s giant banks.

    And Lew is taking over as Treasury secretary at a critical time. Two and a half years after enactment, the Dodd-Frank financial law is still not fully implemented. Even as the winds of financial turbulence threaten from Europe, financial-industry officials admit the Federal Deposit Insurance Corp. has not developed the capacity to liquidate banks in the event of a crisis. Although it never became a 2012 campaign issue, financial regulation has lagged well behind schedule (no one even seemed to care, for example, when Mitt Romney failed to propose an alternative to Dodd-Frank, even though he had promised to do so). Wall Street’s lobbyists have managed to delay the “Volcker Rule” —the closest thing we have today to a Glass-Steagall law separating federally insured commercial banking from risky investment banking—by six months. The banks are also engaged in a behind-the-scenes effort to escape U.S. oversight of their derivatives activities overseas.

    Into this den of super-sophisticated—and savage—lions of finance will walk the gentle-mannered figure of Jack Lew, who is expected to be easily confirmed. Hopes for change—any real progress in containing the power and systemic size of the banks—are not high. “By going with Jack Lew, Obama is making the decision: ‘I don’t want a fight over Treasury secretary. I want someone who’s going to maintain the status quo.’ That’s what Jack Lew represents,” says Jeff Connaughton, who as a senior Senate staffer fought for financial reform and later, in despair, wrote a book titled Wall Street Always Wins.

  49. GMason,

    I apologize. I was wrong. After reading all of Elaine’s articles and other bloggers’ views, I have come to the conclusion that “A Revolution without violence” is a great idea! Let me explain how it can be done:

    I was watching CNBC’s ‘Squawk on the Street’ and an economist had made 2 interesting points:

    1. He stated: “70% of our economy is dependent upon consumer spending: the more consumers (Main Street) go into their wallets or pursues, the more profits and bonuses Wall Street receives, and the more our economy continues to prosper”
    2. He stated: “Wall Street (Financial Institutions, in particular) make their ‘longest green” (most of their funds or money) off of interest: Interest from Main Street’s loans (home, auto, personal or private, student, payday, etc.) and credit cards.” In other words, Main Streets’ indebtedness provides for Wall Street richness.

    By we-the-people calling for Wall Street executives and board members (along with the Feds) to be punished, and then, we continue to maintain our indebtness to Wall Street, it is like the drug user blaming the drug dealer for selling the drugs to him. Just say NO!

    When I was a probation & parole officer, I used to tell drug users to stop blaming the drug dealer, and just say no (Before I tell them this, I would ask the drug user a series of questions: Did the drug dealer put a gun or use any type of force toward you, your family, or your friends to make you purchase these drugs? Drug User response: No; Did the drug dealer promise you a $1million if you purchase these drugs: Drug User response: No-some even laughed at this question, but you get the point. Finally, I would ask them: if you told the drug dealer no, what did he do. Drug User response: He would leave, and some would never come back). This scenario is same type of relationship, involving loans and credit cards, with Drug Dealer Wall Street (with the help of the Feds) and Drug User Main Street.

    If the we-the-people would ‘just say no’ to loans and credit cards, then we can change this country overnight. If we can make a 5-7 year plan to be debt free (and to stay debt free), and pass this message down to our children, and grandchildren, etc., then Wall Street and the Feds would have to change. What would happen to the housing market if no one wanted a home loan? What would happen to the automobile industry if no one wanted an auto loan? Colleges and Universities (and certain vocational schools) have huge endowments thanks, in part, to student indebtness. If students said no to student loans, colleges and universities would have to change their way of doing business (Free Higher Education, like a few European Countries?). You can use the same scenario for personal and payday loans and credit cards.

    If the we-the-people would stop trying to “Keep up with the Joneses” (some people are using loans to do so), ‘live within our means’, or however-you-like-to-say-it, and just say NO! to passenger, Drug Dealer Wall Street and his buddy (Feds), driving the stolen vehicle, as we are walking to get on the Metro Bus and/or Metro Link or starting up our $5k car (used our tax refund to buy it or money we saved up) while we are pulling off our driveway from our home (that we purchased for $5k at a housing auction).

  50. Sherrod Brown Teams Up With David Vitter To Break Up Big Banks
    By Amanda Terkel

    WASHINGTON — Multi-trillion dollar financial institutions continue to get richer, exerting more and more control over both America’s economy and its political system. The top 20 largest banks’ assets are nearly equal to the nation’s gross domestic product.

    Now, Sen. Sherrod Brown (D-Ohio), along with unlikely ally Sen. David Vitter (R-La.), is launching an effort to break up the taxpayer-funded party on Wall Street.

    “The best example is that 18 years ago, the largest six banks’ combined assets were 16 percent of GDP. Today they’re 64-65 percent of GDP,” Brown said. “So the large banks are getting bigger and bigger, partly because of the financial crisis, partly because of the advantages they have.”

    The progressive Ohio senator sat down with The Huffington Post in advance of his Thursday speech on the Senate floor to discuss the need to address the “too big to fail” problem and the bipartisan support his work is attracting.

    “The system is such that the big banks have far too many advantages, bestowed in part by the marketplace, because investors understand and the market understands that government might in fact bail them out, so there is lower risk for investors, and that means that they can borrow money at a lower cost than anybody else can,” Brown said, explaining why small- and mid-sized banks are at a disadvantage.

    Brown and Vitter announced on Thursday that they were working together on bipartisan legislation to address this problem.

  51. Senate Could Question HSBC ‘Too Big To Jail’ Case
    Feb. 28, 2013

    Months after Europe’s largest bank dodged a potentially crippling criminal prosecution for alleged money laundering, members of the U.S. Senate will have a chance to ask banking regulators whether some financial institutions really are too big to jail.

    Congressional sources told ABC News they expect treasury and banking regulators will be among those called to testify before the Senate Banking Committee next week for a hearing that could get at questions that have been swirling since December, when the Justice Department announced it would not prosecute London-based HSBC for allegedly helping Mexican drug gangs launder money.

    The decision not to prosecute HSBC came despite what attorneys there said was compelling evidence that the bank for years helped Mexican drug cartels move cash, concealed transactions involving rogue states such as Iran, and catered to clients alleged to have been involved in financing terrorist operations even after they had been warned to stop…

    Sen. Jeff Merkley, an Oregon Democrat, wrote to Attorney General Eric Holder to express his dismay at the decision, saying it “deeply offends the public’s sense of justice.”

    “I am deeply concerned that four years after the financial crisis, the department appears to have set the precedent that no bank, bank employee, or bank executive can be prosecuted even for serious criminal actions if that bank is a large, systemically-important financial institution,” Merkley wrote in the pointed, three-page letter.

    While the Banking Committee’s agenda for the hearing has not been released, advocates for banking reform said they are hoping the senators can begin to piece together how the Department of Justice reached the conclusion that the consequences of prosecuting the bank would damage the economy. One key question, they said, was whether officials from the Treasury Department put pressure on the Justice Department to settle the HSBC case.

    “I hope they demand all the memos, all the meeting minutes, open up the process,” said Jack Blum, a Washington banking expert. “The case is over now. There is nothing to be gained by keeping it secret. Let’s see what happened. The public has the right to now.”

  52. Inequality, Capitalism and a Nation of Men
    Bruce Judson (Author, “It Could Happen Here”; Former Senior Faculty Fellow, Yale School of Management)


    John Adams famously sought to create “a government of laws and not of men.” Sadly, I suspect John Adams would be disappointed in the nation today. Increasingly, the application of the law reflects what Adams feared: It depends on who the men or women are rather than what they have, or have not, done.

    A central principle that is necessary for the rule of law, as well as a successful capitalist economy, is embodied in the statues that stand outside many courthouses. They portray Lady Justice with a blindfold. Justice is blind, and every person–rich or poor, mighty or not– stands before the court on an equal basis.

    Within this framework, the court applies the law without regard to the status of the defendant. The ideal of blind justice is a prerequisite for both a fair society and a vibrant capitalist economy. With all treated equally, buyers and sellers can rely on the courts to enforce their agreements: small businesses know that their agreements with large corporations and institutions of any size will ultimately be protected by the legal system. Contracts, declared immutable in the early days of the Republic under the Dartmouth College case, will be enforced. As a consequence, trade and production occur, while markets and commerce have the opportunity to flourish…

    Let’s not kid ourselves: the portrait painted above is, in many ways, a charitable portrait of the nation today. We now live in a society where the rule of law, confidence in the judicial system, a fair capitalist economy, and an essential public respect for the law is rapidly disappearing. Indeed, our largest financial institutions seem to break the criminal laws with impunity, and a two tiered system of justice has evolved. I believe John Adams would say he fought a revolution to prevent the type of society that is now evolving.

    Here are two examples. Unfortunately, my files contain dozens more:

    In the HSBC case, as Matt Taibbi recently wrote,

    “the U.S. Justice Department granted a total walk to executives of the British-based bank HSBC for the largest drug-and-terrorism money-laundering case ever. Yes, they issued a fine – $1.9 billion, or about five weeks’ profit.”
    Taibbi further notes:

    “For at least half a decade, the storied British colonial banking power helped to wash hundreds of millions of dollars for drug mobs, including Mexico’s Sinaloa drug cartel, suspected in tens of thousands of murders just in the past 10 years …The bank also moved money for organizations linked to Al Qaeda and Hezbollah, and for Russian gangsters; helped countries like Iran, the Sudan and North Korea evade sanctions; and, in between helping murderers and terrorists and rogue states, aided countless common tax cheats in hiding their cash.

    “They violated every goddamn law in the book,” says Jack Blum, an attorney and former Senate investigator who headed a major bribery investigation against Lockheed in the 1970s that led to the passage of the Foreign Corrupt Practices Act. “They took every imaginable form of illegal and illicit business.”

    That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist slap for HSBC might undermine the world economy. “Had the U.S. authorities decided to press criminal charges,” said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”

    There seems to be little question that the executives involved knew they were breaking the law. These executives assisted in the system that distributes massive quantities of prohibited drugs, which is also inevitably accompanied by violence and murders. The harm to our society was inestimable.

    Yet, no criminal prosecutions arose. No accountability (which is fundamental to a fair society and a capitalist system) was demanded. Instead, prosecutors used their discretion to settle for a fine.
    For our largest financial institutions, a new tier of justice has arisen: They break the law and pay a fine–which is typically a small cost of doing business as compared to the profits their otherwise prohibited activities generate.

    In contrast, how many people are now languishing in jail for drug related crimes that caused far less harm to our society? How much money could you or I launder without facing criminal prosecution?

  53. Fallout from ‘Untouchables’ Documentary: Another Wall Street Whistleblower Gets Reamed

    by Matt Taibbi

    March 4, 2:31 PM ET


    A great many people around the county were rightfully shocked and horrified by the recent excellent and hard-hitting PBS documentary, The Untouchables, which looked at the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis. The PBS piece certainly rattled some cages, particularly in Washington, in a way that few media efforts succeed in doing. (Scroll to the end of this post to watch the full documentary.)

    Now, two very interesting and upsetting footnotes to that groundbreaking documentary have emerged in the last weeks.

    The first involves one of the people interviewed for the story, a former high-ranking executive from Countrywide financial who turned whistleblower named Michael Winston. You can see Michael’s segment of The Untouchables at around the 4:20 mark of the piece. The story Winston told during the documentary is essentially an eyewitness account of the beginning of the financial crisis.

    When I spoke to him last week, Winston was still as amazed and repulsed by what he saw at Angelo Mozilo’s crooked subprime mortgage company as he was when he worked there. Winston, who had worked for years at high-level positions at companies like Motorola and Lockheed before joining Countrywide in the 2000s, described a moment in his first months at the company, when he rolled into the parking lot at the company headquarters.

    “There was a guy there, a well-dressed guy, standing next to a car that had a vanity plate,” he said. “And the plate read, ‘FUND’EM.'”

    Winston, curious, asked the guy what the plate meant. The man laughed and said, “That’s Angelo Mozilo’s growth strategy for 2006.” Here’s how Winston described the rest of the story to PBS – i.e. what happened when he asked the man to elaborate:

    “What if the person doesn’t have a job?”

    “Fund ’em,” the – the guy said.

    And I said, “What if he has no income?”

    “Fund ’em.”

    “What if he has no assets?” And he said, “Fund ’em.”

    Later on, Winston would hear that the company’s unofficial policy was that if a loan applicant could “fog a mirror,” he would be given a loan.

    This kind of information is absolutely crucial to understanding what caused the subprime crisis. There are people out there still willing to argue that the government somehow “forced the banks to lend” to unworthy applicants. In reality, it was unscrupulous companies like Countrywide that were cranking out loans en masse, knowing that these loans would be unloaded down the line, first to banks and then to sucker investors like pension funds and foreign trade unions, almost as soon as they were created.

    Winston was a witness to all of this. Eventually, he would be asked by the firm to present false information to the Moody’s ratings agency, which was about to give Countrywide a negative rating because of some trouble the company was having in working a smooth succession from one set of company leaders to another.

    When Winston refused, he was essentially stripped of his normal responsibilities and had his corporate budget slashed. When Bank of America took over the company, Winston’s job was terminated. He sued, and in one of the few positive outcomes for any white-collar whistleblower anywhere in the post-financial-crisis universe, won a $3.8 million wrongful termination suit against Bank of America last February.

    Well, just weeks after the PBS documentary aired, the Court of Appeals in the state of California suddenly took an interest in Winston’s case. Normally, a court of appeals can only overturn a jury verdict in a case like this if there is a legal error. It’s not supposed to relitigate the factual evidence.

    Yet this is exactly what happened: The court decided that the evidence that Winston was wrongfully terminated was insufficient, and then from there determined that the “legal error” in the original Winston suit against Bank of America and Countrywide was that the judge in the case failed to throw out the jury’s verdict:

    In short, having scoured the record for evidence supporting the jury’s verdict on the issue of causation, we have found none. It follows that the trial court erred in denying defendants’ motion for judgment notwithstanding the verdict.

    “I was flabbergasted,” Winston says now. “Think of all the hard work the jury did, and [the court] overturns it just like that.”

    While it’s impossible to say just exactly what a fair financial award should be for a person who reports bad corporate activity to the public, it’s certainly true that when these whistleblower suits end in failure, it has a chilling effect on other people thinking about coming forward. Not many people are willing to risk their jobs if they think it will cost them every last dime in the end. This is just one more example of how hard it is for whistleblowers to come out even, even if they win jury trials.

    That decision came down on February 19th, and is the first of the two interesting post-Untouchables footnotes.

    The other involves some of the comments made by the head of the Justice Department’s Criminal Division, Lanny Breuer, who said (as he has on other occasions, including after the recent non-prosecutions of HSBC and UBS for major scandals) that his Justice Department has to weigh the financial consequences of bringing prosecutions. Quoting from the PBS show, Breuer explained:

    But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.

    When Breuer said that, it raised a serious red flag on the Hill. A number of people in positions of power wanted to know just what “experts” people like Breuer had consulted with before deciding not to press charges in certain cases. Iowa Republican Senator Chuck Grassley and Ohio Democrat Sherrod Brown, specifically, sent Attorney General Eric Holder a letter asking a number of questions.

    Among other things, the two Senators wanted to know if certain companies had been designated “Too Big to Jail.” Then they had a series of very obvious and reasonable questions about those “experts”:

    4. Please provide the names of all outside experts consulted by the Justice Department in making prosecutorial decisions regarding financial institutions with over $1 billion in assets.

    5. Please provide any compensation contracts for these individuals.

    6. How did DOJ ensure that these experts provided unconflicted and unbiased advice to DOJ?

    Well, at the end of last week, on February 27th, the Department of Justice sent Brown and Grassley a letter in return. The letter is, to describe it very generously, not terribly informative.

    Most of the letter is just a long list of the many wondrous accomplishments the DOJ has secured under Eric Holder’s watch, including felony manslaughter convictions against BP, or “fraud convictions for a board member of Goldman, Sachs,” or the ongoing LIBOR investigation, or the prosecution in the Stanford Ponzi case. But the rest of the letter totally ignores the Brown/Grassley questions, particularly on the matter of which experts were and are being consulted.

    On those questions, the DOJ would say only that “it is entirely appropriate for prosecutors to hear from subject matter experts at relevant regulatory authorities” and that . . .

    When the Department consults with relevant regulatory authorities, or hears from companies who are targets of the Department’s investigations and their counsel regarding potential collateral consequences of enforcement actions, neither those agencies nor the target companies receive any compensation from the Department.

    That is one hell of a slippery piece of language. It’s great that the Department of Justice is not paying, say, HSBC to consult with them on the question of whether or not HSBC should be prosecuted. What a relief! But that doesn’t mean they’re not paying someone else for that kind of advice.

    The DOJ similarly blew off naming any individual experts and they refused absolutely to turn over information about any compensation they may have paid out to whomever it is who is whispering in their prosecutorial ears.

    The two Senators late last week issued a blistering answer to the DOJ letter, saying, “the Justice Department’s response is aggressively evasive,” and that “the Department’s only clear response was that it speaks to regulators and the banks themselves.”

    The Department of Justice is now saying that it misunderstood the two Senators, that it didn’t know that they were asking for the actual names of those experts. Moreover, the Department claims it is working on answers to those queries.

    In the meantime, Eric Holder is appearing before the Judiciary Committee this Wednesday, and it will be interesting to see how he handles questioning from Senator Grassley. It may get ugly before the answers actually come out, but it seems that someone is finally determined to get some real information.

  54. Swarthmore mom,

    Yep, and that’s one of the problems, IMO. The comfortable are not sufficiently afflicted (using the words of another).

  55. ap, Not everyone with a 401k is comfortable. Some only have a couple thousand dollars in it. Won’t go too far in retirement…..

  56. ap, Not everyone with a 401k is comfortable. -Swarthmore mom

    True, I wasn’t clear,…, but those with 401(k) accounts are often in better shape than those without.

    I still contend, quoting Mother Mary Jones, that the comfortable need to be afflicted. Maybe then, we’ll have a fighting chance…

    Many people are much too comfortable.

  57. “And even if the Dow were a better index — if it were more like the S&P 500, say — the stock market generally has been disconnected from the broader economy for quite a while.

    Nothing illustrates this quite as well as the yawning gap between the job market’s recovery and the stock market’s recovery. The Dow has recovered all of its recession losses, gaining 119 percent from its low in March 2009. That makes this the third-strongest bull market for the Dow since World War II. In contrast, the job market is still in a deep hole, recovering only 5.5 million of the 8.7 million jobs lost during the recession.

    In other words, the third-best stock-market rebound since World War II has been accompanied by the worst labor-market recovery since World War II.

    With the job market weak, worker wages have stagnated. Inflation-adjusted average income is 8 percent lower than in 2007, when the Dow was at its previous high, notes Quartz’s Matt Phillips. Nothing illustrates the disconnect between regular people and the stock market than the chart above, showing how profits and stocks have skyrocketed together, leaving hourly earnings in the dust.

    Higher stock prices do benefit the wealthy and wage-earners who own stock in their retirement plans. That could bolster the mood of consumers, which could benefit the economy. But after two stock-market crashes in the past 13 years and technological glitches like the Flash Crash of 2010 and the botched Facebook IPO, investors could be skeptical that the good times will last. That makes them less likely to run out and spend a bunch of money at the first sign of a stock-market high. If they have any extra money to spend, that is.” Huffington Post

  58. Swarthmore mom
    1, March 5, 2013 at 11:11 am
    But it sure helps the 401k.
    Not when the stock and bond markets both crash. Or there’s hyperinflation and the purchasing power of your retirement plans is only about 10% of what you expect it to be worth.

  59. A lot of opportunities have been lost waiting for hyper-inflation to occur. Inflation is running under 2.5% a year. I would rather ride the wave up with stocks and bonds and switch to interest bearing accounts if inflation does occur at a later date.

  60. SWM,

    Inflation at under 2.5% a year? Do you know what is meant by a black swan event? You will get to keep your stocks and bonds.

    Do you know that banks are legally allowed to use money in your checking and savings accounts to cover their losses? The FDIC? How much money do they have?

  61. I will sell just like I did in 2008 before the crash. Actually have been selling some lately that I bought in 2009. Buy low sell high. lol

  62. Tuesday, Mar 5, 2013 03:57 PM EST

    The Dow’s meaningless rebound

    On Tuesday, it rose above 14,000. Meanwhile, the median wage is down and unemployment remains sky-high

    By Robert Reich



    “Today the Dow Jones industrial average rose above 14,270 – completely erasing its 54 percent loss between 2007 and 2009.

    The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then.

    Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains sky-high.

    Why is the stock market doing so well, while most Americans are doing so poorly? Four reasons:

    First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.

    Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers – allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment – a new WPA or CCC to hire the long-term unemployed, major investments in the nation’s crumbling infrastructure – have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.

    Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest – even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.

    Finally, the Fed’s easy-money policies. They’ve pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9 percent.

    All of this spells widening inequality in America, because the people who invest the most in the stock market have high incomes. Those who rely most on wages have lower incomes.

    Corporate profits are claiming a larger share of national income than at any time in 60 years, while the portion of total income going to employees is near its lowest since 1966.

    As my colleague Immanuel Saez recently found, all the economic gains between 2009 and 2011 (the last year for which data were available) went to the richest 1 percent of Americans. The bottom 99 percent has continued to lose ground.

    The sequestration is likely to make all this worse, since it will slow the U.S. economy and keep unemployment higher than otherwise.

    It will also hurt the most vulnerable. Some $1.9 billion in low-income rental subsidies are being eliminated, affecting 125,000 people. Cuts to the Department of Agriculture will eliminate rental assistance for another 10,000 low-income rural people. Meanwhile, 100,000 formerly homeless people are likely to be removed from their current emergency shelters.

    More than 3.8 million Americans receiving long-term unemployment benefits will have their monthly payments reduced by as much as 9.4 percent, and lose an average of $400 in benefits over their period of joblessness.

    The Department of Education’s Title I program, which helps schools serving more than a million disadvantaged students, will be cut $715 million, and $400 million will be cut from Head Start, the preschool program for poor children. And major cuts will be made in the Special Supplemental Nutrition Program for Women, Infants, and Children, which provides nutrition assistance and education.

    Rarely before in American history have public policies so radically helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.

    Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. “

  63. AP,

    With Financials (Big Banks) leading the rally, and the retail sector a close 2nd. Thanks in part to we-the-people, bailing the big banks out via staying in debt, and then, we-the-consumers-continue to spend…..spend….spend by increasing our indebtness. This rally won’t last long or maybe this is the new norm. You have to feel a little sad for those college seniors and grad students graduating this May,and unable to find a good job.

  64. Eric Holder Admits Some Banks Are Just Too Big To Prosecute
    By Mark Gongloff
    Posted: 03/06/2013

    When the Attorney General of the United States admits some banks are simply too big to prosecute, it might be time to admit we have a problem — and that goes for both the financial and justice systems.

    Eric Holder made this rather startling confession in testimony before the Senate Judiciary Committee on Wednesday, The Hill reports. It could be a key moment in the debate over whether to do something about the size and complexity of our biggest banks, which have only gotten bigger and more systemically important since the financial crisis.

    “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us 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,” Holder said, according to The Hill. “And I think that is a function of the fact that some of these institutions have become too large.”

    Holder’s comments don’t come as a total surprise. His underlings had already made similar confessions to The New York Times last year, after they declined to prosecute HSBC for flagrant, years-long violations of money-laundering laws, out of fear that doing so would hurt the global economy. Lanny Breuer, formerly in charge of doling out the Justice Department’s wrist slaps to banks, told Frontline as much in the documentary “The Untouchables,” which aired in January.

  65. Elizabeth Warren Takes On Eric Holder’s ‘Too Big To Jail’ Statement
    The Huffington Post
    By Mollie Reilly

    Sen. Elizabeth Warren (D-Mass.) took on Attorney General Eric Holder’s admission that some banks are too big for the Justice Department to prosecute, asserting that Holder’s statement illustrates why the financial institutions should be held accountable.

    “It has been almost five years since the financial crisis, but the big banks are still too big fail,” Warren said in a Wednesday statement. “That means they are subsidized by about $83 billion a year by American taxpayers and are still not being held fully accountable for breaking the law. Attorney General Holder’s testimony that the biggest banks are too-big-to-jail shows once again that it is past time to end too-big-to-fail.”

  66. Elizabeth Warren Slams Federal Regulators Over Bank Money Laundering
    —By Erika Eichelberger
    Thu Mar. 7, 2013

    On Thursday, the Senate held a hearing to ask federal regulators why they are not stopping banks from allowing money laundering. Sen. Elizabeth Warren (D-Mass.) was the highlight of the show, slamming a Treasury official who refused to weigh in on whether the banks should face more severe penalties.

    In December, the giant international bank HSBC was fined $1.9 billion for illegally allowing millions in Mexican drug trafficking money to be laundered through its accounts. But it’s not just HSBC—this is a systemic problem. Ten banks have been penalized in recent years for failure to comply with anti-money laundering rules. The Senate banking committee held the hearing in order to interrogate regulators at the Federal Reserve, Treasury Department, and the Office of the Comptroller of the Currency about why they are not doing more to stop these kinds of shenanigans.

    All of the regulators said they were working on improving regulations and enforcement and protested that it was up to the Department of Justice—not them—to decide whether prosecution was appropriate. (The Justice Department did not have a witness at the hearing.) They were reluctant to weigh in on whether they thought HSBC should have faced trial, even though they consult closely with the DOJ on bank activities. That infuriated Warren:

    The US government takes money laundering very seriously for a good reason. And it puts strong penalties in place… It’s possible to shut down a bank… Individuals can be banned from ever participating in financial services again. And people can be sent to prison. in December, HSBC admitted to… laundering $881 million that we know of… They didn’t do it just one time… They did it over and over and over again… They were caught doing it, warned not to do it, and kept right on doing it. And evidently made profits doing it. Now, HSBC paid a fine, but no individual went to trial. No individual was banned from banking and there was no hearing to consider shutting down HSBC’s actives in the US…. You’re the experts on money laundering. I’d like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many sanctions do you have to violate before someone will consider shutting down a financial institution like this?

Comments are closed.