I do not think the twin epidemics of mortgage loan origination fraud (appraisal and “liar’s” loans) and the various epidemics of post-origination fraud by financial institutions are comparable crimes to the use of chemical weapons. The President’s job, however, is to deter a wide range of criminal conduct. The elite fraud epidemics cost over $11 trillion in losses to households alone and 10 million American jobs. The cost of these fraud epidemics is so vast that deterring future epidemics should be a high priority of every administration. The refusal of the Obama and Bush administrations to prosecute any elite banker whose actions contributed to the crisis has done the opposite of deterring future fraud epidemics – it has encouraged them.
The Obama administration has refused to prosecute elite bank fraudsters even when their crimes threaten our national security. The administration announced the infamous “too big to prosecute” doctrine in refusing to indict HSBC, its officers, or even its former officers for massive felonies that continued for over a decade. If one believes the administration’s findings, HSBC posed a far graver threat to U.S. national security than did the claimed chemical weapon attack in Syria. HSBC helped terrorists evade U.S. financial sanctions, helped Iran evade financial sanctions, and aided one of the most violent drug gangs in the world. The drug gang has killed more people than the presumed chemical attack in Syria.
If Obama believes Obama, then the purpose of HSBC and Standard Chartered aiding Iran to avoid sanctions was to aid one of the most dangerous governments in the world develop nuclear weapons. If Obama believes Obama, the nuclear weapons are to be used against the “Great Satan” (the U.S.) and Israel. HSBC’s officers did all of this for the basest of purposes – to make themselves wealthy.
HSBC is also a systemically dangerous institution (SDI) that threatens to cause a global financial crisis (if Obama believes Obama). It is a serial felon. In addition to evading financial sanctions on funding terrorists and foreign nations (Iran and North Korea) that pose a direct threat to U.S. national security (if Obama believes Obama), HSBC was a member of the largest cartel in the world (fixing Libor), routinely engaged in selling elderly customers completely inappropriate financial products to rip off their retirement savings, and helped some of the world’s richest people evade taxes.
The same economists that prate endlessly about capitalism’s greatest virtue being “creative destruction” and ridicule anyone who complains about American businesses moving overseas suddenly claim that it is a national emergency if a large U.S. bank relocates to the City of London and claim that it is vital that we not prosecute the SDIs lest they be destroyed. HSBC’s frauds had a common characteristic – they increased bank profits by violating the law. The “markets” will not put such a cesspool out of business – they will reward the officers that lead the frauds with enormous wealth. Even if one feared “destroying” HSBC (which would really mean breaking it up into smaller banks), there is never any valid excuse to refuse to prosecute the officers that lead the frauds and profit from the frauds. There are few acts of destruction more creative than busting up a control fraud. When cheaters prosper they create a “Gresham’s” dynamic that turns market forces perverse and causes bad ethics to drive good ethics from the marketplace. That is precisely what has happened at the SDIs. The SDIs pose a grave threat to our economies, our democracies, and (if Obama believes Obama) our national security. Syria does not, though it might were we to attack it.
I write to explain that the logic that President Obama urged on us in his August 31 address to the Nation to explain why he believes we must launch a military attack on Syria is far more compelling in the context of requiring that Obama abandon his continuation of Bush’s policy of refusing to prosecute the elite white-collar criminals who led the accounting control frauds that drove the financial crises. There are no good answers available to the United States even if we are able to establish that the Syrian government deliberately launched a chemical weapon attack on its own civilians. Any military action we take has an excellent chance of making the world a worse place and harming our national interests. Many of the opposition forces to the Syrian government, should they come to power, are capable of being more vicious than the Assad government in attacking Syrian civilians and potentially the United States. Instead of deterring terror, a U.S. attack on Syria could greatly increase terror.
The situation is the opposite when it comes to prosecuting the elite frauds that drove our financial crisis. Such prosecutions would be unambiguously desirable. They would be economically helpful, increase deterrence, and restore lost integrity.
President Obama instructs us that if we fail to hold criminals accountable “then we must acknowledge the costs of doing nothing.” He refuses to acknowledge that cost when it comes to the elite bank fraudsters who drove the crisis.
The President asks us to consider: “What message will we send if a dictator can gas hundreds of children to death in plain sight and pay no price?” What message has it sent – for your entire term – for the elite bank frauds that destroyed $11 trillion in household wealth and 10 million American jobs to “pay no price?” Indeed, they did not simply “pay no price” – they grew obscenely wealthy by defrauding our Nation.
“Make no mistake — this has implications beyond chemical warfare. If we won’t enforce accountability in the face of this heinous act, what does it say about our resolve to stand up to others who flout fundamental international rules?
We cannot raise our children in a world where we will not follow through on the things we say, the accords we sign, the values that define us.”
The President is charged with enforcing federal laws. He has refused to do so against the SDIs and their senior officers whose frauds drove the Great Recession. He has refused to do so even against SDIs and their officers who (if Obama believes Obama) directly endangered the national security of the U.S. and our allies. If Obama is too cowardly to “stand up” to a bank, why would he think that Assad would quake in his boots about Obama? The “values that define us” include the rule of law and the rule of law has died for SDIs and their senior officers under Bush and Obama. Obama has failed to “follow through” on the things he said to get elected about how he would respond to the elite frauds that drove the crisis.
“I’m ready to act in the face of this outrage.” Good, start by firing Attorney General Holder and appointing Sol Wisenberg as the acting Attorney General. To prosecute the banks effectively you need vigorous regulators who make assisting elite prosecutions a top priority. Ask for the resignation of the Director of the Office of the Comptroller of the Currency and make Mike Patriarca your Acting Director. Order the banking regulatory agencies to restore the criminal referral process and detail examiners to aid the prosecutions of elite banksters. Charge the SDIs with violating the settlement agreement on their massive foreclosure frauds and bring criminal charges for those frauds and subsequent violations.
Call personally on Americans with knowledge of the frauds to come forward with information and direct the FBI Director to create a system to coordinate the intelligence gathered from honest loan brokers, loan officers, and due diligence personnel. Have the FBI Director barnstorm the Nation urging whistleblowers to come forward. End your war on whistleblowers.
Support Representative Kaptur’s bill and direct the FBI to hire new agents to replace those transferred to anti-terrorism. Increase the number of FBI agents working fraud cases related to the crisis to 1,000 (the number we used against the S&L debacle fraud epidemic – which was 1/70 the size of this crisis). Break up the SDIs. Rescind HSBC’s and Standard Chartered’s license to operate in the U.S. Reintroduce the Glass-Steagall Act. Repeal the Commodities Futures Modernization Act of 2000.
Recall the days when you were a Senator and sponsored legislation to increase law enforcement staffing? What happened to that guy? What happened to your “outrage” at elite crimes by the banksters?
Note to Oslo: You proved that Norwegians have a brilliant sense of irony when you gave Obama your Peace Prize in 2009. It’s now time to “take back the prize.” Join: @TakeBackThePrize