Last night I watched the Frontline documentary The Untouchables that I wrote about yesterday that explored the question of why, more than four years after the financial debacle involving widespread mortgage fraud, not a single high-level Wall Street executive has faced criminal prosecution. All that has happened is a bunch of very low-level people being charged and a series of civil prosecutions resulting in plea bargains in which some banks have paid fines that seem large but are puny compared to the scale of the fraud, and which the bank executives can simply write off as the cost of doing business while they continue to enrich themselves with high salaries and bonuses. The program covers some of the same ground as that excellent 2010 documentary Inside Job that I reviewed here
The film shows how people down in the trenches actually reading the mortgage applications knew that the whole structure was rotten to the core and warned those above them that huge numbers of mortgages were being issued based on wildly implausible information. The people at the top of the Wall Street banks knew it but sold this junk to their clients anyway, while reaping the profits. It was the collapse of this house of cards that precipitated the latest recession.
So why is it that no one at the top is even facing the threat of going to jail? Two people shown in the program illustrate the problem.
One of them is Robert Rubin. He symbolizes everything that is corrupt about the system. He has a high-level Democratic connections, having served from 1995 to 1999 as Bill Clinton’s Treasury Secretary where, among other Wall Street-friendly measures, he was instrumental in getting rid of the Glass-Steagall Act that placed a wall between retail and investment banks. That removal was what resulted in banks acting like casinos using other people’s money and contributed mightily to the crisis. Before that government stint he was head of Goldman Sachs and after that he went to Citigroup, two institutions at the heart of the scandal. He epitomizes the cozy relationship between the government and Wall Street and the revolving door through which they use their government positions and connections to benefit banks and themselves.
The other person is Lanny Breuer, the head of the criminal division of the Justice department in the Obama administration, second to attorney General Eric Holder, whose job it was to prosecute fraud but whose main talent seemed to be finding reasons why he could not prosecute high-level Wall Street executives. The day after the Frontline program was broadcast, it was announced that he was resigning.
But don’t cry for him. As Buzzflash observes, he too is a heavy user of the government-Wall Street revolving door. Before coming to the justice department he and Holder worked in the high-powered law firm of Covington & Burling which has several big investment banks as clients. You can be sure that he (and Holder) will return to that or another similar firm and reap the gratitude of those Wall Street firms and executives that he found reasons not to prosecute. They look after their own.
Rubin and Breuer are just two of the many people who use government to benefit themselves and their private sector employers. They are the poster children of the government-Wall Street complex.