Following the imprisonment of four Icelandic bankers this week who were indicted on fraud charges associated with the 2008 financial meltdown, it seems like as good a time as any to reflect again on why charges still have not been brought against a single business executive for their roles in the financial collapse in the U.S. – Too big to jail strikes again.
On Thursday it was reported that the former chief executive, the chairman of the board, one of the majority owners and the chief executive of the Luxembourg branch of the Kaupthing Bank had all been sentenced to prison by an Icelandic court for hiding the fact that a Qatari investor bought shares in the firm with money he borrowed from the firm itself. The Kaupthing Bank was one of the many banks to collapse in 2008 due to massive debt.
So the big question lingers that if Iceland is taking the lead in bringing the hammer down on these bankers, why, then, has the US Department of Justice not taken the appropriate measures to bring those responsible for the financial collapse to justice? Well they tried. Sort of.
In May of 2009 President Obama signed The Fraud Enforcement and Recovery Act (FERA) into law. Its aim was to ‘provide substantial funding and resources to the Justice Department’ and to ‘establish a Financial Crisis Inquiry Commission to examine the domestic, as well as global, causes of the current economic crisis.’ The law was the first step in paving the way for the DOJ to seek criminal charges against bankers and financial fraudsters and to give the DOJ the added powers needed to make that happen.
The second major development came in November of 2009 when Obama signed an executive order creating the Interagency Financial Fraud Enforcement Force. This order replaced the Corporate Fraud Task Force established in 2002 and gave even more power to the DOJ.
“This task force’s mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening,” Attorney General Eric Holder said. “We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives.”
The attorney general then set up a meeting with representatives of the National Association of Attorney Generals, the National District Attorneys Association and a number of other enforcement groups with the apparent goal of bringing these crooks to justice. After the meeting Treasury Secretary Tim Geithner said:
“Through the Financial Fraud Task Force, we are making clear that the Obama Administration is going to act aggressively and proactively in a coordinated effort to combat financial fraud,”
But one can only imagine the complexities that come with trying to mount criminal cases against some of the most powerful people in the world and SEC Chairman Mary Schapiro said of the process: “Many financial frauds are complicated puzzles that require painstaking efforts to piece together. By formally coordinating our efforts, we will be better able to identify the pieces, assemble the puzzle and put an end to the fraud,”
It was not long after that the Senate Permanent Subcommittee of investigations released its final report and Senator Carl Levin (D-MI), chairman of the subcommittee had this to say:
“The report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses, and markets. High risk lending, regulatory failures, inflated credit ratings, and Wall Street engaging in massive conflicts of interest, contaminated the U.S. financial system with toxic mortgages and undermined public trust in U.S. markets.”
The committee sent their report to the Justice Department and everyone waited for indictments to be handed down.
In place of the expected indictments came the biggest copout and potentially damaging blow to the entire process; it seemed the DOJ believed that, like the firms and banks that had been labeled ‘too big to fail’, that these CEOs and financial titans were also ‘too big to jail’. So why the change of perspective from the DOJ?
Enter former DOJ Criminal Division Chief Lanny Breuer who claimed that despite the DOJ having brought successful cases against the executives at Enron as well as scores of other white collar criminals, that the major financial institutions themselves were again at risk of collapse should their CEOs be indicted for their crimes. It was a bullshit excuse. Breuer said of his decision:
“I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake.”
During his tenure with the DOJ Lanny was building his clout with the same executives who had all but toppled the U.S. economy and the guy responsible for making the final call on whether these business moguls would be prosecuted, has since left his post and is now raking in a whopping $4 million annual salary with Covington & Burling, a prominent law firm. The New York Times reported in March of 2013 that “Mr. Breuer will be its vice chairman. The firm created the role especially for Mr. Breuer, a Washington insider” and that “Breuer, will now shift to defending large corporations.” Imagine that.
Though the criminal actions of these CEOs have resulted in millions of Americans losing their homes and jobs, they have learned nothing at all from this debacle. If anything it has strengthened their resolve in knowing that the DOJ will turn a blind eye to their blatant fraud. To quote Massachusetts Senator Elizabeth Warren:
“Today, the four biggest banks are 30 percent larger than they were five years ago. And the five largest banks now hold more than half of the total banking assets in the country,” Warren said at a conference on financial reform “Who would have thought five years ago, after we witnessed firsthand the dangers of an overly concentrated financial system, that the ‘too big to fail’ problem would only have gotten worse?”