No Financial Crisis Prosecutions

The New York Times’ Gretchen Morgenson and Louise Story have a long, detailed account of how no major figures who caused the financial collapse of 2007-2008 have been criminally prosecuted for their roles in wrecking the economy. Morgenson and Story frame their piece, “why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?” One of the overarching themes they find is a choice by prosecutors like Andrew Cuomo, then New York’s Attorney General, and regulators like Timothy Geithner, then at the New York Fed, to not risk market instability by holding people accountable or conducting detailed investigations. Morgenson & Story have plenty of regulators saying they “have done the best they could under difficult circumstances,” but nonetheless, “no senior executives have been charged or imprisoned, and a collective government effort has not emerged.” This is in contrast to the S&L scandals of the 1980s, when “special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail.”

One of the articles most powerful quotes comes from Bill Black:

“This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity,” said William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government’s director of litigation during the savings and loan crisis. “But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.

Glenn Greenwald describes this as evidence of our two-tiered system of justice in the United States:

The evidence of rampant criminality that led to the 2008 financial crisis is overwhelming, but perhaps the clearest and most compelling such evidence comes from long-time Wall-Street-servant Alan Greenspan; even he was forced to acknowledge that much of the precipitating conduct was “certainly illegal and clearly criminaland thata lot of that stuff was just plain fraud.”

Despite that clarity and abundance of the evidence proving pervasive criminality, it’s entirely unsurprising that there have been no real criminal investigations or prosecutions. That’s because the overarching “principle” of our justice system is that criminal prosecutions are only for ordinary rabble, not for those who are most politically and financially empowered. We have thus created precisely the two-tiered justice system against which the Founders most stridently warned and which contemporary legal scholars all agree is the hallmark of a lawless political culture.

Not surprisingly, Greenwald has a comprehensive look at other stories where law-breaking elites are given a complete pass when it comes to accountability, from warrantless wiretapping to torture as compared to vicious prosecution of minor drug offenders overflowing our prisons and whistleblowers whose leaks shed needed light on illegal or immoral behavior by our government.

Matt Taibbi has been writing about the choice to not pursue criminal charges for the financial collapse for a while. The Morgenson piece really just validates a lot of his work and shows, in painful clarity, the extent to which the scales of Justice are no longer balanced and her blindfold has been removed in the United States of America.

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