You are viewing the_recession

Previous Entry | Next Entry

Are banks too big to jail?

From Salon.com
Wednesday, Jan 23, 2013 10:09 AM PST
PBS Frontline's stunning report shows how the Obama administration undermined the rule of law
By David Sirota

Are banks too big to jail? (Credit: AP/Pablo Martinez Monsivais)

PBS Frontline’s stunning report last night on why the Obama administration has refused to prosecute any Wall Streeter involved in the financial meltdown doesn’t just implicitly indict a political and financial press that utterly abdicated its responsibility to cover such questions. It also — and as importantly — exposes the genuinely radical jurisprudential ideology that Wall Street campaign contributors have baked into America’s “justice” system. Indeed, after watching the piece, you will understand that the word “justice” belongs in quotes thanks to an Obama administration that has made a mockery of the name of a once hallowed executive department.

The Frontline report is titled “The Untouchables,” a tongue-in-cheek salute to how that term once referred to those heroes who fought organized crime and yet now appropriately describes those doing the criminal organizing. Rooted in historical comparison, it contrasts how the Reagan administration prosecuted thousands of bankers after the now-quaint-looking S&L scandal with how the Obama administration betrayed the president’s explicit promise to “hold Wall Street accountable” and refused to prosecute a single banker connected to 2008′s apocalyptic financial meltdown.

The piece by PBS reporter Martin Smith looks at how Obama has driven federal prosecutions of financial crimes down to a two-decade low. It also documents the rampant and calculated mortgage securities fraud perpetrated by the major Wall Street banks, who, not coincidentally, were using some of the profits they made to become among President Obama’s biggest campaign donors.

As we see, that campaign money didn’t just buy massive government bailouts of the banks, a pathetically weak Wall Street “reform” bill or explicit reassurances from Obama’s campaign that the president would refrain from criticizing bankers. Frontline shows it also bought a Too Big to Jail ideology publicly championed by the white-collar defense lawyer turned Obama prosecutor Lanny Breuer.

In the single most damning part of the PBS report, we learn that Breuer, fresh off a lucrative stint defending Moody’s and Halliburton, was appointed by President Obama to head the Justice Department’s criminal enforcement division and was soon sculpting this unprecedented ideology and embedding it into the department’s mission. As Frontline shows, he bragged to his colleagues in the legal profession that as the United States government’s chief criminal prosecutor, he is not primarily worried about lawbreaking in the financial world, but about whether prosecuting financial crime will harm the criminals, their accomplices and their industry.

As this excerpt from Breuer’s 2012 speech to the New York City Bar Association shows, that characterization of Breuer’s declarations is not an overstatement (emphasis added):

To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.

In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct.

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. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.

Save for the intrepid Marcy Wheeler and now Frontline, this speech received almost no news media attention despite being arguably one of the most important statements to come from a top law enforcement official in recent history.

The highlighted parts of that speech are what is so significant. In them, Breuer is saying that enforcing the law should not be — and no longer is, in the Department of Justice — prosecutors’ chief priority. Rather, he says listening to Wall Street’s economic arguments about the alleged cost of stopping and/or punishing lawbreaking should be.

Before you say that Breuer is just being a kind, compassionate guy, remember that the foundational notion of equal justice under the law is not supposed to be kindness or compassion. It is supposed to be blindness — specifically, blindness to a person’s stature and station, regardless of whether that person is a single human or a corporation. Even though that principle has never been applied perfectly (to say the least), the government is supposed to at minimum rhetorically honor its ethos.

Yet, here you have the Obama administration via its chief prosecutor setting the precedent for exactly the opposite: namely, a government that brags that when it comes to Wall Street, justice is not — and should not — be blind. Instead, as Breuer demands, prosecutors should be “kept up at night” worrying primarily about how an enforcement action will affect bankers who break laws and harm millions of Americans.

That’s not nice or compassionate, that’s a corporate defense attorney paying back the banking industry whose campaign contributions installed his boss in the White House and, consequently, him at the top of the Justice Department.

To understand how revolutionary a notion the Obama administration’s Too Big to Jail is, do the mental exercise of switching out the pinstriped Wall Street criminals and replacing them with your mental image of the leaders of drug cartels. They, too, head multinational businesses involving scores of front companies and, thus, thousands of people who may not even know that they are participating in an illegal enterprise. If Breuer applied the very same Too Big to Jail ideology to those cartel leaders, he would be effectively arguing that we shouldn’t prosecute Pablo Escobars because that would result in an unacceptable loss of wages for those kingpins’ secretaries, messengers and secondary workforces.

If such a hideous legal argument about drug cartels was ever even whispered by any official in Washington, you would expect it to be grounds for congressional hearings, if not full-on impeachment proceedings accusing said official of jeopardizing U.S. national security. And in many cases it would be — except, of course, if the drug dealers in question were somehow connected to the financial industry’s profits. After all, it was Breuer who sculpted the Obama administration’s settlement with megabank HSBC after the bank admitted laundering money for drug cartels and terrorist organizations.

In that decision not to criminally prosecute any HSBC executive who had enabled such laundering, Breuer explicitly cited the same radical Too Big to Jail principle aired in the PBS Frontline report. He said: “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.”

For pure adversarial and investigative journalism horsepower, the PBS Frontline piece rivals Bill Moyers’ epic PBS indictment of those charlatans who enabled the Bush administration’s march into the Iraq War. It is a must-watch in the truest sense of the overused term because it so powerfully explains how Obama’s campaign motto of “change” meant something entirely different than what many thought. In the case of financial crime, it meant the embrace of a radical Too Big to Jail ideology, one that creates a moral hazard, encourages exactly the same kind of crimes and therefore makes it more likely that another financial meltdown will happen.

UPDATE: A mere hours after the PBS Frontline piece aired, Lanny Breuer just announced he is resigning his post at the Justice Department. Meanwhile, PBS reporter Martin Smith just reported that in response to his report, the Obama White House has decided to block access to Frontline reporters in their future reporting.

David Sirota David Sirota is a nationally syndicated newspaper columnist, magazine journalist and the best-selling author of the books "Hostile Takeover," "The Uprising" and "Back to Our Future." E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website
This recession related topic is being discussed at RecessionJournal's
The Recession community forum the_recession ~ powered by LiveJournal.




Comments

( 1 comment — Leave a comment )
madman101
Jan. 25th, 2013 04:38 am (UTC)
Both Breuer and Holder worked for the law firm, Covington & Burling, which represented Haliburton, GE, BOA, Morgan Stanley, and most significantly, Goldman-Sachs, (I believe, but I cannot find that via WikiPedia). I don't know the extent of their roles there. Through the fog of my CFS, I cannot remember much more I heard about him today, maybe it was here:

(World Banking, World Fraud - by John Cruz) - http://archives2013.gcnlive.com/Archives2013/jan13/PowerHour/0124133.mp3 - Cruz has been on other shows. Someone else was talking about him lately - maybe Norman Goldman.

David Sirota truly rocks - one of the best. But, it's a sad commentary that people only start paying attention when a serious issue finally gets to Frontline, and by that time it's very late in the game - and thence, often, that is the exposure's only "15 minutes" of fame it ever gets...
( 1 comment — Leave a comment )

Profile

Austerity
the_recession
█▓▒░ The Recession ░▒▓
RecessionJournal.com


economicsblogs.org
economicsblogs.org



Page Hit Counters
Page Hit Counters
Recession Journal Visitors

Welcome to
the_recession!


Welcome visitors, members one and all! I hope you find this community as informative, useful and entertaining as we do!

If you haven't done so already, please take a moment to review the couple of guidelines we have in place by clicking on the community profile. From the main profile page you can also familiarize yourself with the many websites and resources members have recommended since this community started. Some of our personal favorites include Calculated Risk, Economic Cycle Research Institute & Jeffrey Frankel's Blog.

You may also want to participate in our LiveJournal Global Economic Poll - "The Economy Around The World: A Real Live Journal Global Poll" .

As the economies around the world teeter once again, with many already having slipped into "Growth Recession" if not outright technical recession, and with many more looking at the real possibility of outright recession in 2012 and 2013, "the recession" in 2011 was seeming mild by way of comparison to what could be lurking just around the corner.

Will "Recession 2012" look as bad as "The Great Recession" of 2007-2009? Could we skirt by this time without a full-on economic death spiral? Will the economy get better by election day? Or will Obama lose the election for economic reasons? (Presidential elections are usually won or lost for base economic reasons in this country, after all).

Stay tuned. I think it's fair to say that it is going to continue to be a pretty wild ride for the world economy for some time to come. Recession 2013? Recession 2014? Did the Great Recession ever really end in the first place? Many think not!









Give Yourself a Raise!

There are several home business tax tips that could save you money, even if you do not yet have an established home-based business.

Read more...



ECRI Weekly Leading Index

Has a moderate lead over cyclical turns in U.S. economic activity. Data begins in 1967.


Recent Data

Date Level Growth

Jun 29 '12 121.9 -2.9
Jun 22 '12 121.7 -3.2
Jun 15 '12 121.5 -3.2
Jun 08 '12 122.1 -2.8



Job Search - Beyond.com

ECRI Calendar

March 22, 2012
Frankfurt Conference

ECRI will participate in the Bloomberg Sovereign Debt Conference in Frankfurt on March 22, 2012.
.



Crude Oil 1Yr Chart




www.e-forecasing.com







State Coincident Index
3-Month Change



Is your state essentially in expansion or recession?
Lt Green-Dark Green: Growing-Faster.
Gray: No growth.
Pink-Dark Red: Contracting-Faster.


Call Now: 888-925-6525


What is the
definition of recession?


According to the laypress, and even many economists, a recession is defined as two consecutive quarters of negative GDP (Gross Domestic Product). While this very simple definition is usually the case during recessions, it is not always so.

Most experts now acknowledge that GDP alone is an insufficient determinant of recession.

For one, GDP is often revised several quarters - even years - later, as more complete information becomes available that changes the components of the earlier, initial GDP estimates in what can be very substantial ways.

For another, not all serious downturns exact as serious a toll on GDP. Often, the decline is much more pronounced in GDI (Gross Domestic Income) and/or employment. If the income or employment of a nation is undergoing a pronounced, pervasive and prolonged decline even if for whatever various reasons its GDP may be holding up, is it not foolish to deny that a recession is underway?

For these reasons and others, the NBER (National Bureau of Economic Research), the official arbiter of recessions and expansions in the United States, determines whether or not the US has fallen into recession using a much more holistic approach.

As the NBER explains it:
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER's recession dating procedure?

A:
Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.

Q: Why doesn't the committee accept the two-quarter definition?

A:
The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

Q: How does the committee weight employment in determining the dates of peaks and troughs?

A.
In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date. The peak date at the end of 2007 coincided with the peak in employment. We designated June 2009 as the trough, six months before the trough in employment, which is consistent with earlier trough dates in the NBER business-cycle chronology. In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output. Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures. In that cycle, as well, the dating of the trough relied primarily on output measures.

Q: Isn't a recession a period of diminished economic activity?

A:
It's more accurate to say that a recession–the way we use the word–is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion. As of September 2010, when we decided that a trough had occurred in June 2009, the economy was still weak, with lingering high unemployment, but had expanded considerably from its trough 15 months earlier.









What is a
"Double Dip Recession"?


In the most general sense a Double Dip Recession occurs when an economy falls back into contraction for at least a couple of months (usually at least six) after a relatively brief expansion.

By this definition, the recession of 1981-82 which followed a year-long expansion after the very short, two quarter's long 1980 recession, seems to qualify. Also by this broad definition, the 1937 recession that occurred four years after the end of the 1929-1933 recession also qualifies. While each of those were technically "new" recessions, they happened so soon after their predecessors that many people tend to think of the separate 1980 & 1981-82 recessions as one nasty, long recession. Similarly, most people think of the 1929-1933 & 1937 recessions as encompassing "The Great Depression."

Another definition of a "Double Dip Recession" would be that of a recession which technically has not ended, and was only punctuated by a quarter or twos worth of head-fake rise in GDP. Many recessions throughout history have had such false hopes, only to swoon back down into contraction, until they finally came to an end.


Call Now: 877-883-4494


List of Recessions:
Post-1900 US Recessions

Mo/Yr Started Duration
Sep 1902 - 23 Months
May 1907 - 13 Months
Jan 1910 - 24 Months
Jan 1913 - 23 Months
Aug 1918 - 7 Months
Jan 1920 - 18 Months
May 1923 - 14 Months
Oct 1926 - 13 Months
Aug 1929 - 43 Months
May 1937 - 13 Months
Feb 1945 - 8 Months
Nov 1948 - 11 Months
Jul 1953 - 10 Months
Aug 1957 - 8 Months
Apr 1960 - 10 Months
Dec 1969 - 11 Months
Nov 1973 - 16 Months
Jan 1980 - 6 Months
Jul 1981 - 16 Months
Jul 1990 - 8 Months
Mar 2001 - 8 Months
Dec 2007 - 18 Months


Call Now: 888-651-6542

What is
Gross National Happiness (GNH)?


An alternate measure of a nation's wealth was conceptualized several decades ago as a means of cutting through the overemphasis on materialism of traditional wealth measures, and seeing the bigger picture.

According to GNHUSA.Org

  Gross National Happiness (GNH) is an indicator developed in Bhutan in the Himalayas, based on the concept elaborated in 1972 by the then King Jigme Singye Wangchuck. Since then, the kingdom of Bhutan, with the support of UNDP (UN Development Program), began to put this concept into practice, and has attracted the attention of the rest of the world with its new formula to measure the progress of a community or nation.

GNH is based on the premise that the calculation of "wealth" should consider other aspects besides economic development: the preservation of the environment and the quality of life of the people. The goal of a society should be the integration of material development with psychological, cultural, and spiritual aspects - all in harmony with the Earth.

The Four Pillars of GNH

  • the promotion of equitable and sustainable socio-economic development
  • the preservation and promotion of cultural values
  • the conservation of the natural environment, and
  • the establishment of good governance.



Page Summary

Tags

Latest Month

August 2014
S M T W T F S
     12
3456789
10111213141516
17181920212223
24252627282930
31      
Powered by LiveJournal.com
Sponsored by Cisco