Bloomberg News Service on March 1 published a STORY that said global megabanks have paid $321 billion in fines for such non-banking-like practices as money laundering, market manipulation and even terrorist financing since the market crash of 2008.
And while $321 billion may sound impressive, Bloomberg failed to mention that because of those same banks, President George W. Bush had little choice but to sign the Emergency Economic Stabilization Act of 2008 that pumped more than twice that amount, $700 billion of taxpayer bailout funds, into the failed banks that precipitated the Great Recession of 2008.
Most financial advisers would describe that as a negative return on investment.
Adding insult to injury, $1.6 billion of that $700 billion was used to award multi-million dollar bonuses to CEOs of the very firms that got us into the mess to begin with. http://www.cbsnews.com/news/16b-of-bank-bailout-went-to-execs/
Bloomberg also failed to mention that those fines had little effect on those who perpetuated the crimes but did have a significant impact on stockholders and retirees, those, in other words, who had nothing to do with the massive fraud carried out on such a grand scale.
In fact, in 2010, former Countrywide Financial CEO Angelo Mozilo was fined $22.5 million and ordered to pay another $45 million in restitution as his penalty for reaping a profit of $141.7 million from stock sale, according to Mary Kreiner Ramirez and Steven A. Ramirez, authors of The Case for the Corporate Death Penalty (New York University Press, 2017). So, despite the penalties, he walked away with a net gain $74.2 million, or a 52 percent return, sending a clear signal his peers that “crime does in fact pay,” the authors wrote.
There are also two questions Bloomberg neglected to address:
- What the total cost of the runaway greed and reckless actions of firms like AIG, Lehman Brothers, Merrill Lynch, Goldman Sachs, Citigroup, Countrywide, and J.P. Morgan to stockholders, retirees and American taxpayers in general?
- How many top tier officers at these firms who condoned, encouraged and/or actively participated in the illegal practices went to jail?
The answer to the first question is an eye-popping $15 trillion, according to Ramirez and Ramirez.
The answer to the second question is just as unbelievable: ONE.
In fact, as of Jan. 28, that last date that STATISTICS were updated by the Bureau of Prisons, there were exactly 555 people serving federal jail sentences for banking, insurance, embezzlement and counterfeiting. That comes to .3 percent (three-tenths of one percent) of the total federal prison population.
By contrast, there were 82,109 in federal prison for non-violent drug offenses (46.4 percent of the total), and 14,853 imprisoned on immigration charges (8.4 percent).
At this point it might be fair to ask just who did the most lasting damage to the nation’s economy?
It would also be fair to question why, if only one Wall Street banker went to jail, how is that there are 555 imprisoned for banking- and insurance-related offenses? The answer to that is those offenders, situated on Main Street instead of Wall Street, lacked the political clout in Washington that the leaders of the megabanks enjoyed.
Is that an over-simplification of the circumstances? Probably, but it’s interesting to compare the actions of different White House administrations in handling financial crises.
President Obama’s first Attorney General, Eric Holder, in his “too big to fail” proclamation, said, “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…it (prosecution) will have a negative impact on the economy.”
Obama, for his part, said, “One of the biggest problems about the…financial crisis and the whole subprime lending fiasco is that a lot of that stuff wasn’t necessarily illegal, it was just immoral or inappropriate or reckless.”
Wasn’t necessarily illegal? Both statements stretch credulity to its breaking point and are in themselves, disgraceful because federal laws were clearly broken knowingly and willfully.
It wasn’t always that way. For example, in the wake of the savings and loan crisis of the 1980s and 1990s, more than 1,100 bankers were indicted and 839 were convicted.
Enron, the seventh-largest company in the U.S. at the turn of the century, is another example of how the feds went after those who played fast and loose with the rules. President George H.W. Bush called on Enron CEO Kenneth Lay to run the World Economic Summit in Houston in 1990 and in 1992, Lay co-chaired the reelection campaign of Bush the First.
Enron and its affiliates also contributed more than $888,000 to the Republican National Committee in 2000, the year that George W. Bush was elected President and another $1.3 million to the Republican Party. Lay and his wife personally contributed $238,000 to George W. Bush campaigns and inauguration celebrations and raised another $100,000 from friends. To the younger Bush, Lay was known as “Kenny boy.”
Still, Enron and its top executives were not immune from prosecution by Bush the Second.
Despite the access to the highest levels of government enjoyed by Enron and Lay, he and Jeff Skilling, his successor as Enron CEO, were indicted by the Department of Justice in 2004 and though the two combined to spend some $60 million on their defense, Lay was convicted on all counts and Skilling on 19 of 28 counts of securities fraud.
George W. Bush’s Attorney General John Ashcroft recused himself from the Enron investigation because Enron and Lay both were major financial supporters in Ashcroft’s Missouri unsuccessful Senate re-election campaign. His chief of staff, David Ayers, also took himself out of the investigation of Enron. That was as it should have been.
Enron’s accounting firm, Arthur Andersen, was convicted of shredding Enron documents and both Enron and Arthur Andersen soon ceased to exist.
The same fate befell CenTrust Savings Bank, Drexel Burnham Lambert investment bank, and WorldCom—all because of flagrant violations of federal securities laws and each was prosecuted by the administrations of the two Bushes. WorldCom, in fact, was the largest bankruptcy in history when it went under in 2002.
Evidently, those firms were not considered too big to fail.
By contrast, Obama’s Attorney General Holder and Lanny Breuer, chief of the Department of Justice (DOJ) Criminal Division, did not remove themselves from DOJ’s investigation of the investment banks that brought on the Great Recession of 2008. This despite the fact that both men had worked for the same law firm of Covington & Burling which included among its clients such eminent Wall Street banking firms as Bank of America (Countrywide’s successor), Citigroup, and JP Morgan Chase.
In fact, at the time Holder was tapped as attorney general, he was co-chairing Covington & Burling’s white-collar defense unit. Good training in case you’re ever called on to investigate your former bosses.
Breuer returned to Covington & Burling in 2013 followed by his boss Holder in July 2015, giving Holder at least a reason for his strained, if not borderline unprincipled logic for not pursuing criminal indictments against the megabanks.
Following Holder’s departure, Deputy Attorney General Sally Quillian Yates (Remember her? She’s the one President Trump fired after she refused to enforce his illegal immigration order) issued a DOJ memo (turns out she was pretty good at memos that cut right to the chase) on Sept. 9, 2015, that reversed Holder and Breuer’s DOJ policy toward pursuing individual accountability, both criminally and civilly, for corporate wrongdoing. The memorandum said the policy change was to maximize DOJ’s “ability to deter misconduct and to hold those who engage in it accountable.”
The comparison between the approaches of two Bushes and Obama to bankers’ disdain for securities laws to the detriment of the entire country represents a stark role reversal for the perceived political philosophies of the Republican and Democratic administrations.
And now, President Trump has expressed his determination to roll back the Dodd-Frank bill passed after the 2008 recession for the express purpose of preventing a recurrence of the runaway greed that nearly wrecked the world economy.
In fact, he wants to remove all regulation of Wall Street banks, quite possibly the most dangerous single cartel in American society.