The Obama Justice Department’s decision to prosecute and fine the nation’s biggest bank, JPMorgan Chase $13 billion for its role in causing the Great Recession is a good start. And so is the Attorney General Eric Holder’s ironclad insistence that bank executives could be held criminally liable for the crash, too.
But it’s only a start. There’s a long way to go. And, unfortunately, the politicians and political appointee “regulators” who enabled the corporate criminals on Wall Street, in hedge funds, and elsewhere to get away with murdering the economy appear to be beyond the law’s reach – even though they’re as guilty as the financiers, if not more so.
Holder may have taken awhile for his prosecution, but research by several business school professors shows nobody went to jail for financial fraud in the Great Depression, either. Utility magnate Samuel Insull was the most prominent defendant.
But Insull beat all the charges when his lawyers pointed out that at the time of his machinations – pre-New Deal – the moves weren’t illegal.
“The government also went after Charles ‘Sunshine Charley’ Mitchell, president of National City Bank, now Citibank,” their article adds. “Mitchell divided National City into a banking arm and an investment arm, with the latter selling up to $2 billion annually in speculative securities and shaky bonds.
Before the Pecora Commission, Mitchell acknowledged he knew his salesmen were pushing bad investments on unsophisticated customers, many of whom borrowed money from his banking arm to finance their investments.” Does this sound familiar? It’s called bundling subprime mortgages.
“While National City’s behavior shocked the nation, the company’s salesmen hadn’t broken any laws. In a déja vu moment, a Goldman Sachs employee admitted to Congress in April, 2010 that he sold investments that he thought were a ‘s—-y deal.’ Mitchell himself resigned his post and was charged with tax evasion for selling company stock to his wife at a loss, but he got off with a fine,” their study adds.
The CEO of the New York Stock Exchange later went to jail, nine years after the Depression began and for stealing millions from NYSE’s pension fund, not for the speculation and financial finagling his exchange’s members perpetrated upon the country before the crash, which began 84 years ago this week, on Oct. 25, 1929.
The prosecutions, or lack of them, in the Great Depression, helped FDR push through the laws, such as the Glass-Steagall Act and the Securities and Exchange Act, designed to help prevent a rerun. So why did we suffer the Great Recession, also known as the Bush Crash? Answer: Because laws were repealed and politicians appointed non-regulators who let the financiers run amok, with our money, again.
And that brings us to the second group of responsible parties for the Great Recession: The politicians and non-regulators.
The 1999 repeal of Glass-Steagall was a joint effort by congressional Democrats and Republicans, led by Sen. Phil Gramm, R-Texas. Democratic President Bill Clinton signed it. Republican President George W. Bush named heads of the Securities and Exchange Commission with a clear mandate not to regulate the financial finagling.
And Federal Reserve Chairman Alan Greenspan looked the other way, at best, or aided and abetted the financiers with his policies, at worst. In recent interviews and his latest book, Greenspan still doesn’t realize his role or that he did anything wrong.
The problem with prosecuting Greenspan, Gramm et al is that they all acted “under the color of law,” and under laws they enacted or enforced, or didn’t enforce. That sounds just like Insull’s successful defense.
That’s why we say that prosecuting JPMorgan Chase – and, hopefully, other banks and bankers to follow – is a start, but only a start.
The more financial perpetrators who go to jail for all the suffering their machinations caused, the better.
The more of their fines dedicated to making the rest of us who suffered from their corporate criminality at least partially whole, and $4 billion of the Chase fine is earmarked for that, the better.
But prosecuting the enablers who let the financial elite run amok and trash our economy, our jobs, our pensions, our houses and our lives is apparently impossible.
There is one other solution, though, to punish those perpetrators. Find out which of them are still in office or positions of power and eject them, by ballot or by removal. They put us out of jobs, homes, health insurance and pensions. Let’s put them out of their jobs, too.
Photo: “I am so damn proud of this company,” said JPMorgan Chase CEO Jamie Dimon after hearing about the $13 billion fine levied against it for crippling the U.S. economy. AP