Wednesday, December 25, 2013

The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?

In a just published article in the New York Review Of Books, The Financial Crisis: Why Have No High-Level Executives Been ProsecutedJed S. Rakoff, United States District Judge for the Southern District of New York, explains the following:

1. It is clear that grounds for prosecuting exist.
2. The government says it doesn't prosecute the corporations because serious disruptions will follow.
3. The government doesn't prosecute individuals because it is more difficult than other kinds of prosecution currently in progress.

The judge goes on to say that the reasons given for not prosecuting are obviously unacceptable, because similar prosecutions have been done in the recent past with no resulting disruption, and because there is no reason prosecutors can't do what is difficult when faced with very serious crimes committed and their very serious consequences.

But the judge says further he doesn't believe the explanation of the lack of prosecution is the "revolving door" system, where the same people who direct the companies that commit financial crimes are appointed to government positions responsible for regulating and prosecuting those very crimes. He doesn't believe prosecutors don't prosecute because they are the direct beneficiaries of the people they are expected to prosecute or expect to be in the future their direct beneficiaries.

He leaves it at that.

The implication is that there is no prosecution of financial crimes, the individuals or corporations responsible, because the government isn't accustomed to, isn't in the habit of doing that kind of thing. Prosecutors would like to make their careers, the Judge writes, taking on the big guys, but that just isn't what's done these days.

"Isn't what's done." Social class, unquestioning imitation of one's peers, speaks in that phrase.

Punishing corporations and jailing their directors would be a disruption, but only for the social class that pays to elect the government.

The President doesn't want anyone to be prosecuted. The Congress doesn't want anyone to be prosecuted. There is a united front of all the most powerful government officials against prosecution. A prosecutor won't make his career by doing what's not done. 

Why have no high-level executives been prosecuted? A class of society defined by wealth and an ideal of compromise, determined not to look too closely at anything or do anything disturbing.*

P.S. From The New Yorker Magazine: 'In 2008, (U.S. Senator) Warren joined a five-person congressional-oversight panel whose creation was mandated by the seven-hundred-billion-dollar bailout. She found that thrilling and maddening, too. In the spring of 2009, after the panel issued its third report, critical of the bailout, Larry Summers (former President of Harvard University and hedge fund director, at this time director of the National Economic Council) took Warren out to dinner in Washington and, she recalls, told her that she had a choice to make. She could be an insider or an outsider, but if she was going to be an insider she needed to understand one unbreakable rule about insiders: “They don’t criticize other insiders.”'