Obama and Geithner: Government, Enron-Style
Strongly recommend this piece at the Huffington Post by Jeff Connaughton, a former aide to Senator Ted Kaufman. Jeff is one of the smartest guys on the Hill and is particularly strong on issues surrounding Wall Street and the regulatory system. In this piece, he takes apart the oft-stated mantra that what Wall Street firms did during and after the crisis was maybe unethical, but not illegal.
He takes particular aim at Barack Obama, who recently tossed that line out on 60 Minutes in what I thought was one of the real low moments of his presidency. Here’s Jeff’s take:
Speaking in Kansas on December 6, [Obama] said, "Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender." Just five days later on 60 Minutes, he said, "Some of the least ethical behavior on Wall Street wasn’t illegal." Which is it? Have there been no prosecutions because Wall Street acted legally (albeit unethically)? Or did Wall Street repeatedly violate major anti-fraud laws (and should thus find itself in the dock)?
The President is confusing "legal" with "difficult to prosecute successfully."
The notion that what Wall Street firms did was merely unethical and not illegal is not just mistaken but preposterous: most everyone who works in the financial services industry understands that fraud right now is not just pervasive but epidemic, with many of the biggest banks committing entire departments to the routine commission of fraud and perjury – every single one of the major banks, for instance, devotes significant manpower to robosigning affidavits for foreclosures and credit card judgments, acts which are openly and inarguably criminal.
Banks and hedge funds routinely withhold derogatory information about the instruments they sell, they routinely trade on insider information or ahead of their own clients’ orders, and corrupt accounting is so rampant now that industry analysts have begun to figure in estimated levels of fraud in their examinations of the public disclosures of major financial companies.
Beyond that, as Jeff points out, Obama is simply not telling the truth about the supposedly insufficient penalties available to regulators. Employing the famous "mistakes were made" use of the passive tense, Obama copped out in his December 6 speech by saying that “penalties are too weak." As Jeff points out, what Obama should have said is that "the penalties my own regulators chose to dish out were too weak".
Moreover, the President is misleading us when he says that Wall Street firms violate anti-fraud law because the penalties are too weak. Repeat financial fraudsters don’t pay relatively paltry — and therefore painless — penalties because of statutory caps on such penalties. Rather, regulatory officials, appointed by Obama, negotiated these comparatively trifling fines. This week, the F.D.I.C. settled a suit against Washington Mutual officials for just $64 million, an amount that will be covered mostly by insurance policies WaMu took out on behalf of executives, who themselves will pay just $400,000. And recently a federal judge rejected the S.E.C.’s latest settlement with Citigroup, an action even the Wall Street Journal called "a rebuke of the cozy relationship between regulators and the regulated that too often leaves justice as an orphan."
What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave.
Keep reading: Obama and Geithner: Government, Enron-Style | | Rolling Stone.
