Why none of the crimes of the financial services industry will ever be punished.
If you want to commit a crime and get away with it, one way to do it is to make it an EPIC crime, surround yourself with lots of fall guys, and remain utterly unrepentant. Nixon understood this in the Watergate scandal; his abuse of office was remarkable, and he had no qualms about letting his underlings dangle. Reagan & Bush understood this in the Iran Contra affair; mixing billion dollar drug and weapons deals to negotiate the extended enemy-state-sponsored kidnapping of American citizens to win an election was a stunning exercise in criminality that went largely unpunished. In fact one of their fall guys is now a high-paid “journalist” with Fox News. And in a recent bizarre example, the US government dropped charges against a fugitive doctor wanted in a multimillion dollar international racket selling prescription drugs online, simply because the evidence against him was using too much space on federal servers.
Another way to achieve your goal is to create a legitimate business that so insinuates itself into people’s lives that they feel they can’t live without it, and then charge them enough to buy deregulation for yourself, so you can basically get away with murder, price-fixing, repossession of property, and slave-like labor practices. This would be the health and insurance, telecom, mortgage, and mobile device industries, respectively. The health and insurance industries get a special Goodfellas bonus for somehow maintaining their reputations as wonderful, life-saving services, in spite of the fact that the latter drives you to bankruptcy by weaseling out of paying when you most need them, and the former is often everything BUT healthy. As Walter Cronkite observed decades ago, “America’s health care system is neither healthy, caring, nor a system.”
But if you REALLY want to carve out your name in history as a master criminal – and never spend a single day in jail – you need to do BOTH of the above, by going into banking or economics. Banking is the field for you if you like shopping for $87,000 rugs while your company is going under, or if you enjoy contriving elaborate schemes to strip the average working stiff of his self-esteem and home while telling him he can’t live without what you have, even though it was never yours to begin with. Economics, on the other hand, is a great field if you admire the basic methodology of the TV weatherperson, palm reader, or astrologer, but prefer hanging out with politicians and bankers.
The scary thing about all this apparent hyperbole is that it really isn’t hyperbole at all. Since 2008, we’ve witnessed the most massive financial crimes in history, seen very little in the way of punishment, and in fact seen the very perpetrators of the crimes elevated to the highest levels of government. Often in the very agency that is intended to regulate the industry in question. Even scarier is that these people are either blithering idiots who have no idea whatsoever how markets work, or they made this all happen on purpose.
If you’re a student of economics, there’s no hope of persuading you to think differently than you already do, because you’re almost certainly already indoctrinated into one of the two main schools. If you’re a Keynesian, you’re probably smugly saying “I told you so” and selling lots of books. If you’re a neo-classicist, maybe you’re still running around gazing at the world with 20/20 hindsight, constructing logical fallacies to explain the catastrophes after the fact. Or maybe there’s another secret frat house within the neo-classical school. Maybe this whole global economic shift is intentional. Maybe it’s just a variation of the kind of scorched earth policy suggested by the Starve the Beast strategy. We will never know, since so many things are either veiled in secrecy, or buried in the mind-numbing avalanche of data.
At the end of the day, there’s not much middle ground. Those responsible for guiding the markets over the past few decades were either dead wrong about their theories (operating sort of like a Shaman doing a raindance while it’s raining), or they were intentionally engineering a world-changing shift in how governments work in relation to banking and finance. How could it be anywhere in between? Take the arrogant, floppy eared, squinty-eyed Ayn Rand sycophant Alan Greenspan. Wrong at almost every turn in his career, but rooms would fall silent when he spoke, eagerly awaiting his pronouncement about the new prime lending rate. Or his banal twaddle about irrational exuberance or whatever. At least he finally admitted to 30% of his ignorance. And more recently, two of the people who – if they really knew what they were doing – were best positioned to see catastrophe coming and failed to do so. And to fix the problems they failed to see coming, resorted to the exact opposite of what their own theories would recommend. They used the Invisible Hand as a big bitch slap to the world in general, basically telling us that if the government didn’t pay for the mess, the world would end. And then these guys not only kept their jobs, they either got bonuses or government appointments to boot.
The question of criminality is not a matter of opinion; in the aftermath of the financial crises of the last several years, the SEC has filed hundreds of actions. Over 700 in fiscal year 2011 alone. The scale of misdeeds by the financial services industry is literally mind-boggling. Even trying to list the most egregious here would be absurd; information in quantities like this literally requires databasing.
The most disturbing thing of all though is that little is likely to ever be done; no significant players have gone to jail, and when cases ARE successfully prosecuted, the banks pay fines in the millions against offenses in the billions. It becomes merely the “cost of doing business”. And you and I don’t seem to care, we still stick our hard-earned money in the same bank that we bailed out while we argue about Mitt Romney’s dog transport methods and Barack Obama’s birth certificate.
And any seemingly organized civil reaction has turned out to be a joke. While the Tea Party is far from the band of PBR-swilling yahoos that most smartypants liberals like to frame them as, they have largely either (quite successfully and intelligently) folded themselves into the conventional political process, or on the fringes, are obsessed with looney ideas about sovereign citizenship and other misinterpretations of constitutional law. And the Occupy Movement? NICE JOB. Call yourselves “Occupy Wall Street”, get the world’s attention, and then spend the next six months arguing about everything BUT Wall Street. Christ, even HIPPIES were more effective in fomenting social change.
So while we will probably continue to see these quiet wrist slaps by the SEC, most bankers can sleep well tonight in their five hundred dollar jammies, because the Department of Justice isn’t going to actually put anyone in jail. Why? It’s too hard, they say. These cats are just Too Big to Jail.