On Wednesday, Attorney General Eric Holder made a huge admission that goes a long way towards explaining why executives of the big banks that caused the financial crisis have gone scot-free from prosecution.
Here’s what he said in a Congressional hearing, according to Mark Gongloff of the Huffington Post:
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…
So, there you have it, in so many words. Even if bankers at, say, Citibank or UBS committed crimes that would be prosecutable had they been Joe Smallfry of the Podunk Building & Loan, the U.S. Justice Department would simply look the other way.
This shouldn’t be a total surprise. Holder is one of the worst attorneys general of modern times, but systematic incompetence from his top deputies and career prosecutors never struck me as a good explanation of why day after day, year after year, bankers were never held criminally accountable for their behavior.
I mean surely there must have been fraud somewhere in all this—even at the big mortgage banks (which many of the giant banking institutions now own).
Nor was I persuaded that the federal government’s embarrassing defeat in the trial of Bear Stearns executives had rendered DOJ permanently gun shy.
No, in this case, the conspiracy theory was the most logical one, and Holder has now confirmed it. The principal culprit was probably former Treasury Secretary Tim Geithner, who did a very good job of saving the financial system from collapse, but at the price perhaps of rule of law.
He likely persuaded President Obama, who had raked in millions of dollars in campaign contributions from big bank employees in 2008, to tread carefully in this area. The president went along, or perhaps he was content with just prosecuting bankers rhetorically.
In any event, Holder and some top deputies at DOJ were white-collar defense attorneys who had spent their careers defending bankers and Wall Street types. As soon as they were hired, it was clear the fix was in.
Holder’s remarkable revelation has given new impetus to efforts by liberal Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.) and conservative David Vitter (R-La.) to break up the big banks. I wish them luck, but remember: the big banks were able to stave off tough enforcement and water down the Dodd-Frank bill even when the foul stench of their pre-crisis actions was still in the air.
So now, 225 years after the U.S. Constitution was signed, one group of institutions gets not equal but preferential treatment under the law because they’re ”too big to jail.” The bankers seem to have as much sway over the world’s greatest democracy as the original Mafia did over the bought-and-paid-for Sicilian government.
“He OWNS the police!” cried Faye Dunaway to Jack Nicholson at the end of the classic 1974 movie “Chinatown.”
And in another great film of the same year, The Godfather, Part II, Diane Keaton said to Al Pacino as Michael Corleone: “I suppose I always knew you were too smart to let any of them ever beat you.”
Especially if they didn’t want to.