Letting ‘Wall Street’ Walk

Legal double standards are the norm in the U.S. – no jail for law-flouting Wall Street bankers but mass incarceration for average citizens, especially minorities, who get caught up in the prison-industrial-complex, as Michael Brenner describes.

By Michael Brenner

Illicit financial behavior has been decriminalized in the United States – for all practical purposes. Despite the revelations of massive misconduct by banks and other financial services businesses, criminal investigations are rare, indictments exceptional and guilty judgments extraordinary.

Most potentially culpable actions are overlooked by authorities, slighted, reduced from criminal to civil status when pursued, individuals evade penalties much less punishment, and the appeals courts take extreme liberties in exonerating culprits when and if the odd conviction reaches them.

Former Attorney General Eric Holder

Former Attorney General Eric Holder

The last mentioned are establishing new frontiers in the formulation of ingeniously sophistic arguments to justify letting financial malefactors off the hook. As some wit suggests, all 32 or so judicial inventions should be assembled in a legal code called the Goldman Variations.

Our elected officials, our regulators, our politicos and the media have come to accept this as the natural order of things. Business Sections of newspapers, like The New York Times, read like the gazette for the world of organized crime in its heyday when the five Mafia families were on top of their game. (substitute Goldman Sachs, Chase Morgan, Bank of America, CITI, Wells Fargo). As for the Wall Street Journal and the legion of business magazines, they blend features of VARIETY and Osservatore Romano.

The reasons for this phenomenon are multiple: the rule of money in our politics; the neutering of regulatory bodies by the appointment of business friendly officers in symbiotic relationships with former or prospective employers; a wider culture in which the cult of wealth pervades all; and the timidity of a political class that defers to the power centers who enjoy rank, status and respect.

Obama’s appointment of Mary Jo White, from the white gloves law firm Debevoise & Plimpton which specialized in advising and representing Wall Street during the financial crisis (where she was head of litigation), to head the Security Exchange Commission is roughly analogous to appointing Dominick “Quiet Dom” Cirillo, consigliore  of the Vito Genovese Mafia family, to run the FBI’s Organized Crime Task Force in Manhattan.

In White’s case, her earlier experience as United States Attorney for the Southern District of New York (the financial district) made her an exceptionally valuable acquisition when she switched sides in 2003 – 2013.  Her record at the SEC since 2013 confirms her adherence to the Holder philosophy of leniency toward financial misdeeds – and confirms where her loyalties lie.

Appointments to senior positions dealing with financial matters have been primarily “parachutists.” Several of them are more egregious than the White case. So too was former Attorney-General Eric Holder. Within days of leaving the Justice Department, he was back at his former corporate law firm – albeit as a “counselor” for the one-year stipulated transition period.

During his years in private practice, Holder represented the Swiss private bank UBS. Because of this, he recused himself from participating in the Department of Justice investigation of UBS’s abetting of tax evasion by U.S. account-holders.

Such is the privileged status of our largest financial institutions that the Obama administration has amended, de facto, the Constitution to accommodate their claim to being above the law.  Former Attorney General Holder is the author of the doctrine that posits the principle of “too-big-to-prosecute.”

Fearing Economic Damage

Holder’s publicly stated view is that he, the Justice Department and the Executive Branch generally have a right to exempt financial institutions from criminal prosecution when they believe that doing so would cause “unacceptable” damage to the national economy. It first took shape during Bill Clinton’s administration.

President Barack Obama as he is sworn in on Jan. 20, 2009, with an oath to defend the Constitution. (Defense Department photo by Master Sgt. Cecilio Ricardo, U.S. Air Force)

President Barack Obama as he is sworn in on Jan. 20, 2009, with an oath to defend the Constitution. (Defense Department photo by Master Sgt. Cecilio Ricardo, U.S. Air Force)

Holder presented the full-blown doctrine in a  startling confession during testimony before the Senate Judiciary Committee on March 5, 2011. “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,” Holder said, according to The Hill newspaper.

Holder’s comments didn’t come as a total surprise. His underlings had already made similar confessions to The New York Times the previous year, after they declined to prosecute HSBC for flagrant, years-long violations of money-laundering laws, out of fear that doing so would hurt the global economy.

Lanny Breuer, formerly in charge of doling out the Justice Department’s wrist slaps to banks, told  Frontline as much in the documentary “The Untouchables” which aired in January 2011.

Of course, President Obama and Attorney-General Holder had taken oaths to uphold the laws of the land. That pledge does not allow them personal discretion as to whom it applies. Yet, they have acted as if the Justice Department and the Executive Branch generally have a right to exempt financial institutions from criminal prosecution when they believe that doing so would cause “unacceptable” damage to the national economy.

Let us be clear; Holder is not referring to the interpretation and application of any legal standard. He is referring to a purely subjective standard that has nothing to do with the law. In a similar vein, it is reported that the Obama administration has instructed the Department of Justice and the FBI to make mortgage fraud its lowest priority and, indeed, to dismiss hundreds of cases without any investigation whatsoever. (Report of the Inspector General, Department of Justice March 11, 2014).

The administration also improperly has diverted funds appropriated for this specific purpose to other areas. This arbitrary exclusion from investigation of the largest category of financial crime has been made in the face of a well-publicized and solemn undertaking by both President Obama and Attorney General Holder to take bold and expeditious action in this area.

“Equal protection of the laws” is a principle enshrined in the Constitution. There is no allowance for the President or the Attorney General, who serves at the President’s pleasure, to establish special classes of persons who are exempt from the laws’ stipulations – either to make them immune or to deny them due process.  Yet, that is what they explicitly have done.

In a commencement address at NYU in 2014, Holder stated bluntly: “Responsibility remains so diffuse, and top executives so insulated, that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual.”

The Holder-Obama doctrine concentrates heavily on the disruptive effects on the nation’s (and the world’s) financial system were any of the too-big-to-fail banks brought low by a combination of criminal convictions and financial penalties that were greater than the profits made from systematically skirting the law – as currently done.

Addressing the Problem

That is a highly debatable proposition on purely technical grounds. Whatever the appraisal one makes, there are two straightforward solutions to the problem as stated.

Attorney General Eric Holder meets with local residents and community leaders of Ferguson, Missouri at Drake’s Place Restaurant. (by Lonnie Taque, U.S. Department of Justice)

Attorney General Eric Holder meets with local residents and community leaders of Ferguson, Missouri at Drake’s Place Restaurant. (by Lonnie Taque, U.S. Department of Justice)

First, one should break them up so that were they to “fail,” the systemic consequences would be manageable. Second, risk is increased rather than lowered by following a legal cum political strategy that has the effect of encouraging the managers of mega-financial institutions to play fast-and-loose in their financial maneuverings.

To return to the analogy of the five Mafia families, a law enforcement strategy that favored civil action over criminal prosecution, that entailed fines rather than prison time, and that kept those fines at a level where they could be calculated as a cost of doing a very lucrative business would result in a flourishing of criminal organizations – at great cost to society.

Moreover, were there a practice of Mafia bosses and police commissioners/district attorneys parachuting from one sphere to another, the collateral damage inflicted on all law enforcement would be enormous.

The Holder claim for corporate immunity is unsustainable by any reasonable legal standard and reading of the Constitution. Such reasonableness, though, no longer prevails. Witness the widespread passive acceptance of this novel revolutionary doctrine when it was pronounced – and its only slight rhetorical qualification since.

The radical idea that nominally criminal acts should be understood contextually and that judgment as well as punishment should be administered accordingly opens up a wide of questions about the conduct of our judicial system.

There is no reason why it could not be applied generally to the entire range of criminal conduct and proceedings. Following the Holder-Obama logic, this should be done at every stage of jurisprudence: indictment, trial, judgment and punishment. A recent case in New York City illustrates what the implications might be.

In that instance, a woman was arrested at Kennedy airport for possession of 500 grams of cocaine. She was detained, indicted and convicted of a felony.  All that followed the well-trod legal path. It was the sentencing that broke the mold.

Judge Frederick Block placed the woman on probation rather than throwing her into the slammer. His main argument, developed in a closely reasoned 46-page opinion, concentrated on the “collateral consequences” of her conviction. Those consequences were deemed adequate punishment to meet the requirements of the law, society and the felon’s long-term integration into the community. The addition of prison time would have made the punishment disproportionate to the crime. It would have exceeded – not fit – the crime.

What the judge pointed out is that so many legal disabilities attach to anyone convicted of a felony as to deny the person a reasonable chance of pursuing a normal life upon release. Those disabilities include disqualification for all kinds of access to government assistance programs which cover education, housing and employment. The net result would be a high likelihood of recidivism. From society’s perspective, that translates into a higher likelihood of costs associated with welfare, medical care, and possible re-institutionalization. In addition, there are the tangible and intangible costs for possible maintenance of any children she might bear.

The woman in question lives with her mother in New Haven where she was enrolled in college and was working part time as a nail technician. For her, the collateral consequences could be expected to be particularly high. The underlying logic, though, applies generally.

Setting Examples

What about the “systemic consequences?” Isn’t punishment for the commission of a crime supposed to act on a deterrent for others? Yes – in principle. That consideration, however, did not figure in the Holder-Obama doctrine as applied to financial misdeeds whose perpetrators are in a more visible position to set an example.

Occupy Wall Street poster for protest of the G-8 meeting outside Washington.

Occupy Wall Street poster for protest of the G-8 meeting outside Washington.

Indeed, one could argue that the sense of entitlement and expectation of having a right to act with impunity free of worry about accountability is far more pronounced among Wall Street executives than it is among inner city poor. Thereby, the positive value of criminal conviction followed by individual punishment would be commensurately greater in terms of a benefit to society.

The case cited above involves a felonious criminal act whose commission was proven in a court of law. American prisons, today, confine hundreds of thousands whose crimes are of a lesser order. Indeed, a significant percentage may not have committed any crime at all but rather are victims of police campaigns to cleanse the streets of those who allegedly have committed relatively minor misdemeanors.

Draconian enforcement of “zero tolerance” philosophies has led to widespread abuse of the police power in cities like New York. The absurd “three strikes and you’re out” strategy initiated in California and promoted nationwide by President Bill Clinton, has had even more dire results in spiking the incarceration rates, for longer terms – jailing mainly marijuana and other drug users who are a threat only to themselves rather than to society.

Much has been made of the dogmatic claim that a crackdown on misbehavior is the reason for the drastic drop in urban violent crime. This is an urban legend. In New York City, former Mayor Rudi Giuliani and his Police Commissioner Bill Bratton, have been lionized for this supposed achievement. Yet, the story is pure fiction.

The unprecedented sharp decline occurred under David Dinkins, his black predecessor who was widely criticized for being “soft on crime” and stinting in his support for the police. The truth is that violent crime was closely correlated with the crack epidemic and its recession – reinforced by other trends that registered nationwide.

For these categories of criminals and alleged criminals whose misdeeds fall in the category of misdemeanors, Judge Block’s concept of “collateral consequences” is even more compelling. The concept, in fact, should be broadened to pertain to arrest and prosecution as well as sentencing. The consequences to be taken into account properly should aggregate their weight for both the individual and society. Then, there are the intangible costs of mass criminalization and imprisonment.

Unsettling Markets

Yet, while rulings like Judge Block’s may be rare regarding “street crimes,” they have become routine regarding Wall Street crimes, which are not prosecuted in the name of the Holder doctrine concerned about the unsettling effects on investor confidence and markets from casting a dark cloud over “Wall Street.”

The Wall Street bull statue by Arturo Di Modica

The Wall Street bull statue by Arturo Di Modica

Again, this is dubious on technical grounds; and the logical responses obvious. Let us shift ground and think of the unsettling effects produced by legally stigmatizing a considerable slice of inner-city populations. Disruption of families, instilling widespread feelings of persecution, aggravation of relations with the police, more estranged race relations, etc. It may be difficult to place numbers on these costs, but the negative consequences for society are great.

The full extent of the decade-long police “zero tolerance” campaign, and its demoralizing impact on largely minority neighborhoods, is one of the great unreported stories of our times. Corruption was its hallmark: in its misleading justifications, in its methods that systematized entrapment and fabrication of charges (Examples: creating a public nuisance by drinking a beer from a can on the steps of your house; impeding pedestrian movement by stopping to chat while walking your dog at midnight; loitering in the hallway of your own apartment building).

Other elements of the corruption included its degeneration into a crass quota system, its abuse of the criminal justice system that jailed hundreds of thousands of innocents who couldn’t meet bail or hire a lawyer, forcing them to admit to misdemeanors that leave a permanent stain on their records in order to be released, and its exploitation by cynical politicians.

The one first-hand account that tells the tale is Matt Taibbi’s deeply disturbing DIVIDE (Spiegel & Grau 2014). It deals with New York City, but the same phenomenon is visible across urban America.

Collateral consequences can be a valuable concept – one that has multiple meanings. But it should be applied where it serves justice not iniquity.

Michael Brenner is a professor of international affairs at the University of Pittsburgh. [email protected]

11 comments for “Letting ‘Wall Street’ Walk

  1. J Dubyah
    June 6, 2016 at 15:41

    It is what it is and cannot, and will not, not be changed.

    The net of Fascism is already closed and the fate of we the fish is already sealed.

    The Judge is the son of the one committing financial murder – he will not put his father on trial, or allow even an indictment. “Move along, nothing to see here.”

    For us, why scream and fight against a hurricane? Can we defeat a hurricane?

    The outcome of even starting to fight a losing battle is predictable – we will lose, no question. Instead, pick the winnable battles, follow the sharks as they kill and consume, and then profit from the leftovers. I cannot, we cannot, us little sardines, win against the shark/s.

    Heroism and martyrdom does not pay very well, and often leads to a shortening of one’s journey on the planet. JFK had the gall to question orders and Gary Webb pestered too well the herdmasters and their lions regarding their secrets. Webb’s two shots to the face ruled “suicide” is a message to us all. We cannot change the path of America’s Fascism, and if we could, we would be introduced to the opportunity to enjoy not paying taxes anymore.

    For those in the majority of the populace who are lost in the drug induced state of happy ignorance from the “blue pill” (The Matrix), they are unwakeable from their programmed slumber. Let them sleep in their blissful peace.

    Mass media programmed death comes earlier and earlier for those afflicted by the diseases of inactivity and the “benefits” of affluence. Their trajectory in life is predictable: Go to work. Go home to turn on the programming machine while eating and sitting. Go to sleep. Wake. Go back to work. Their “blue pill” programmed psyche is a parasite to their host, and will soon contribute to those that profit from healthcare – “till death do us part”.

    So, light up another one, drink another one, eat some more, sit on the couch some more, enjoy your drugs, and above all else pay the cable bill in order to receive more “enrichment of understanding”.

    I will be waiting for you.

    Let them enjoy the fruits of their programming, and let those that work in the healthcare industry earn profits and enjoy jobs for themselves and their families. I am a medical mercenary; as I look around I see that the victims typically shot themselves with the guns of their own behaviors. I observe few are the victims of unfortunate chance, rather most are by natural selection. As the herd is led by the herd-masters of mass media to the slaughterhouse I must realize I cannot save the ones that walk directly into the pathway of the bullets anyway. I duck, survive, and am paid to provide medic services. As a result of their programming, they will, and do, go on their own, and eagerly, to their own demise. All is well. But, I digress.

    Back to the article’s topic. Let us perhaps pause to view it in a different way since, “… a republic, if you can keep it.” has been lost to the main American religion of materialism, as is preached to us continually by mass media, and is owned by those who are our herd masters. For the populace, the careful programming drug of mass media causes the populace to feel that the latest antics of a celebrity is much more important what what is going on in our nation. So be it.

    Since we cannot change these things, should we waste efforts on such, or, just look for ways to “surf the wave” of those that commit the financial murder. It is only a waste of time to complain regarding what I cannot change.

    So, I sit on the hill in camouflage, quietly and carefully observe, and from my vantage point think, “I cannot change the parasitical destructive choices of the mass of the populace, nor the financial slaughter before me, so, realistically, how do I profit from it?”. So, to seek to understand the strategic itinerary and roadmap of the herd-masters’s plan is the wise plan, and allows this little sardine to feast well on the leftovers.

    Call me a bottom-feeder if you will. The cockroaches will survive.

    No one wants to hear us: the prophets, except us.. we are the consumers of the commentary of our own observations.

    Occasionally, one wanders into the churches like this one and hears a message from our religion – and is awakened to learn and understand more. Then they too, have taken the “red pill”. Sober people look at things differently.

    Thank you for reading,

    La cucaracha aka “the hungry survivor sardine”.

  2. delia ruhe
    June 5, 2016 at 14:02

    So what was the excuse for letting off those who authorized and gave the orders for torture? Why is it that a handful of kids with over-active cameras the only people who went to jail for torturing inmates at abu Ghraib? And, oh yes, that the guy who blew the whistle on waterboarding did time as well?

  3. Bart
    June 3, 2016 at 18:12

    One of Obama’s early unforced errors was keeping the large financial institutions intact. Then it was “look forward, not backward”. Now talk is of merely decreasing the leverage of these banks. After doing this we can count on the gambling to increase as regulations are eased.

    The appointment of MJ White was another unforced error.

    • Dosamuno
      June 4, 2016 at 18:10

      Why do you label these actions “errors”?
      Obama did appoint Timothy Geithner as Secretary of the Treasury.

  4. J'hon Doe II
    June 3, 2016 at 16:30
    • Bob Van Noy
      June 4, 2016 at 07:33

      Thank you Mr Doe, I always follow your links and often find insight there. Woe that we little people must work so hard to do the background that sleepy professionals get payed to ignore…

  5. Bill Bodden
    June 3, 2016 at 15:52

    Legal double standards are the norm in the U.S. – no jail for law-flouting Wall Street bankers but mass incarceration for average citizens, especially minorities, who get caught up in the prison-industrial-complex,

    How is that possible? President Obama has stated on many occasions that “no one is above the law.” He, president of the United States, wouldn’t be lying to the American people – would he?

  6. J'hon Doe II
    June 3, 2016 at 15:42

    “I believe there are more instances of the abridgement of freedom of the people
    by gradual and silent encroachments by those in power
    than by violent and sudden usurpations.” — James Madison
    Madison – back then, foresaw/foretold the destructive force of a ‘citizens united’ fascist gov’t


    Madison’s Attitude Towards Corporations

    There are a number of passages in Madison’s writings that help us understand his attitudes towards corporations and the role they might play in politics, and three of them are particularly useful. The first comes in the course of argu- ment in Congress on February 8, 1791, in which he mustered his reasons for opposing Alexander Hamilton’s proposal to charter a Bank of the United States. Madison began by stressing that corporations, unlike natural persons, had only the exact measure of rights that was conferred upon them by the state in ex- press terms7–in other words, they did not have “inalienable rights” which arose under natural law, like the “people of the United States” invoked at the outset of the Constitution. Moreover, Madison soon made clear that he thought corporations were “powerful machines” that might well do a great deal of mis- chief if left unguarded. He is plainly suspicious of Hamilton’s motives and talks repeatedly about “monopolies,” the risk to the economy on the whole of a run on the bank, and the risk of a nation which is credit-dependent upon this bank (here he cites the East India and South Seas Companies).
    In his recent book Mendacity of Hope, my friend Roger Hodge looks closely at what stands behind this almost feverish opposition to Hamilton’s bank scheme. Hamilton has founded the Bank of New York, rumors were spreading that it would be merged into the national bank, helping to anchor Hamilton’s control over the institution and providing a powerful vehicle that would further the po- litical aspirations of the Federalists. In the background stands Hamilton’s alter ego, William Duer, one of the great rogues of early American history, a man widely expected to take control of the bank, who within a year would be ex- posed as the force behind a bond scheme that almost brought down the Bank of New York. Duer was condemned to spend the rest of his life in debtor’s prison. Hodge turns to a second source, an article Madison wrote for the National Ga- zette in 1792, for clarification:
    “Madison saw, in Hamilton’s financial program, a plan to give pref- erential treatment to a particular mercantile and moneyed interest, in order to bind it tightly to the executive’s energetic agenda. His rhetoric is withering, and his weapon of choice is devastating irony. He summarizes his opponents’ views in the following manner: ‘In all political societies, different interests and parties arise out of the na- ture of things, and the great art of politicians lies in making them checks and balances to each other. Let us then increase these natu- ral distinctions by favoring an inequality of property… We shall then have the more checks to oppose each other; we shall have the more scales and the more weights to protect and maintain the equilib- rium.’
    “The language here is very close to his own, yet the distinctions make all the difference. He shows how a slight shift, using the vo- cabulary of American republicanism, in this case the doctrine of checks and balances, can be made to pervert republican ends. ‘From the expediency, in politics, of making natural parties, mutual checks on each other, to infer the propriety of creating artificial parties, in order to form them into mutual checks, is not less absurd than it would be in ethics, to say, that new vices ought to be pro- moted, where they would counteract each other, because this use may be made of existing vices.’”8
    This shows us that Justice Kennedy’s understanding of Madison is off the mark: the “artificial parties” to which Madison is referring are business enti- ties, and he’s saying that their voice in the political process is inherently cor- rupting–that the political process must be driven by natural and not artificial persons. There’s no denying that Madison’s fears are at least to a degree tacti- cal. The Jeffersonian party was then anchored in the agricultural south, with some support in the small towns of the Middle Atlantic interior and among immigrants, “mechanics” (as skilled or semi-skilled laborers were then called) and the servant class in the major cities of the Northeast. The Federalists were based solidly in the merchant class of New England and the Middle Atlantic. Proposals like the one put forward by Hamilton threatened to allow them to
    ???leverage their position as bankers and merchants through use of federal pre- rogatives.9 The Virginia of Madison and Jefferson was large and powerful, but still an essentially agrarian state not positioned to draw advantage from Ham- ilton’s mercantile initiatives. But it must be stressed that the prime worry that guided Madison was the leveraging of a corporate charter for domestic po- litical purposes. This he clearly feels would potentially corrupt the finely tuned political system of the U.S. Constitution, giving the Federalists unfair advan- tage over the Republicans, and opening the door to foreign pro-Federalist influ- ence.10


  7. Jonny James
    June 3, 2016 at 15:05

    Article makes great points. I would highly recommend consulting with prof. W.K. Black – arguably the leading financial crime expert in the country. (his articles are found on New Economic Perspectives website). Black has stated that no one has been indicted, let alone prosecuted, for “the largest financial crimes in the history of the world”.

    The situation is even much worse than this article implies. Prof. Michael Hudson’s new Book (Killing the Host) goes into the larger context and outlines the financial and intellectual propaganda pushed not only by the Bank Cartel, the Media Cartel, the Captured Puppet Government, but also (very important and often left out of serious conversations) academic economics.

    Even Ed Bernays, if he were alive today, would be shocked at the efficacy of intellectual propaganda, er Public Relations.

  8. Bob Van Noy
    June 3, 2016 at 13:47

    Many thanks again to Robert Parry and Professor Michael Brenner. Years ago I became interested in the concept of justice thinking about it like I thought about most learned documents; that they contained the Truth. On justice: I read until I finally came to John Rawls, “On Justice,” where I learned many important things: John Rawls is a true successor to the enlightenment, and his concept of “Justice as Fairness” is here: http://plato.stanford.edu/entries/rawls/ If you visit the site you will be impressed as I was by the intellect of John Rawls.

    I read recently that what we so lack right now is not theoretical, (The hard work is mostly recorded) what we lack is integrity. As I type this, Bill Clinton’s statement “Depends on what the meaning of is, is” keeps repeating in my mind…

    Much appreciation for this wonderful site.

  9. Tom Welsh
    June 3, 2016 at 12:49

    “Holder’s publicly stated view is that he, the Justice Department and the Executive Branch generally have a right to exempt financial institutions from criminal prosecution when they believe that doing so would cause “unacceptable” damage to the national economy”.

    The EU has a similar doctrine. Essentially, in “ordinary people” languqage, these doctrines boil down to “we can do whatever we want”.

    In olden times, this doctrine was known as “The Divine Right of Kings”.

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