We’ve all been exposed to the phrase “too big to fail” when it comes to the financial crisis of 2008. But how about adding “and too risky to prosecute” to the end of that phrase? This seems to be one of the reasons stated as to why there are no Wall Street CEOs being held accountable for defrauding the country into economic catastrophe.
Frontline released another informative piece on the financial crisis in their series documenting the most important aspects of how it occurred. It’s appropriately titled “The Untouchables” as the people who came out the richest through their swindling somehow came out the cleanest, legally. There are various reasons documented as to why there have been no successful prosecutions but the last one given by Lanny Breuer, the man formerly at the Justice Department in charge of bringing these cases, is absolutely stunning. Here is the exchange from the transcript:
MARTIN SMITH: You gave a speech before the New York Bar Association. And in that speech, you made a reference to losing sleep at night, worrying about what a lawsuit might result in at a large financial institution.
LANNY BREUER: Right.
MARTIN SMITH: Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?
LANNY BREUER: Well, I think I am pursuing justice. And I think the entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.
Did you catch that? Read it closely again. And again. And again. If steam isn’t coming out of your ears like a Looney Tunes character after eating a barrel full of jalapenos topped with another barrel of hot sauce, read it again because you missed what he said.
In short, we can’t bring the prosecutions against the CEOs because there might be (remember, a completely unproven statement) “some huge economic effect”. This strangely plays into the conservative idea of these people not being rich but being “job creators”. And, of course, we can only psychologically accept that title if we erase the fact they destroyed 6.8 million jobs from September 2008 to December 2009. I guess they are job creators, it’s just that sometimes the amount of jobs they create is a negative number.
So to recap, huge financial institutions instituted bad policies then made massive amounts of money by betting against those decisions knowing full well they would fail at some point. Then, as expected, they failed and took the entire economy with them. Now, we can’t even attempt to hold them accountable for what they have done because…there might be another economic crash…for prosecuting the wrongdoers who crashed the economy. In other words, a crime is committed, an effect occurs, people are caught red-handed, then those people can’t be prosecuted because another effect might happen.
Imagine applying this logic to any other crime. You could basically get out of jail time for virtually any horrendous crime. Hypothetical example: man with children cheats on wife; wife finds out; argument ensues; man kills wife; man does not even get arrested because of the potential financial effect on the kids in his household; man marries mistress; repeat. Or: great math teacher sexually abuses student; teacher gets caught on school security cameras abusing student; teacher doesn’t get arrested because of the potential for falling math scores in the school; repeat. See how insane this sounds? Yet, it is exactly what is happening.
Which brings us to the most important question: if the guys who committed the crimes that crashed the economy got rich and didn’t pay for what they did, what’s going to stop them from doing the exact same thing again? Wait, I remember the answer. We just deregulate the economy completely because the people at the top of these companies will be led by the “invisible hand” into doing only great things for us in the long run. Just like in 2008…