A Bank of America branch in New Haven, Connecticut. Photo via Flickr user Mike Mozart
It's becoming a sort of ritual for the US government to cut a deal with the Wall Street bankers who caused the 2008 financial crisis. Last October, we saw JP Morgan get slapped with a $13 billion settlement for hawking shady mortgages to investors. Citigroup was charged $7 billion in a similar agreement reached this July. Usually, the settlements consist of large sums of money that can be trumpeted in splashy newspaper headlines and tough, self-congratulatory statements from Attorney General Eric Holder, who fancies himself a hero. But set against the backdrop of an ongoing War on Drugs that essentially criminalizes African American and Hispanic youth in many American cities, the federal government's stubborn refusal to criminally prosecute the white guys who sent the economy into a tailspin is a testament to just how heinous our legal system has become.
The latest settlement is with Charlotte, North Carolina-based Bank of America, which has apparently caved to Holder's demand that they pay between $16 and 17 billion—the "largest single federal settlement in the history of corporate America," as the New York Times reports. Tack on the $45.87 billion the bank had already shelled out in various other suits since the crash, and it almost starts to seem like all is right with the world, or at least some small measure of justice is being done.
But don't let the flashy numbers fool you. For one thing, BofA is paying for the crimes of some of its subsidiary banks like Merrill Lynch and Countrywide that were absorbed during the panic. And as ThinkProgress has already pointed out, the numbers are misleading because only a chunk of the total settlement has to be paid in actual cash; the rest can come in the form of breaks to consumers that will ultimately benefit the bankers. And the huge fees that do get paid to the Feds are tax-deductible, ensuring there isn't so much as a taste of actual pain for the bad guys.
Letting bankers do their thing without the threat of punishment is now almost as engrained in our culture as going easy on renegade cops. We learned this week that prosecutors probing the systematic beatings of mentally ill patients at NYC's Rikers Island, the second largest jail in the country, are declining to pursue a case against the prison guards responsible. Apparently the Bronx district attorney had such a heavy caseload over the past couple of years that it was impossible to make the sadists pay. What kinds of cases was he working on instead? Surely some of them were the kinds of low-level marijuana and other "Broken Windows" (or quality-of-life) offenses that the authorities insist represent an existential threat to the national fabric. In reality, they speak to two different criminal justice systems—one for the rich, and one for everyone else.
On Thursday, the New York Daily News reported that the death of Eric Garner, whose videotaped death via police chokehold has sparked an uproar in recent weeks, was the direct result of a crackdown on illegal cigarette sales ordered by NYPD brass. So selling a few untaxed cigarettes is now officially worse than causing the economy to run off a cliff—and screwing over countless homeowners along the way.
“The DOJ [Department of Justice] can be counted on to brag that the settlement dollar amount with Bank of America sets yet another record and claim, again, that this shows DOJ is tough on Wall Street," Dennis Kelleher, the President and CEO of Better Markets, a financial reform advocacy group, said in a statement. "But, unlike other recent settlements, will DOJ provide the public with the key information on investor losses, Bank of America profits, the names of involved executives, specific laws broken and the actual systemic illegal schemes and activities? In short, is DOJ willing to actually inform the American people about such important and grave matters?"
For a while, at least, the White House could cite the specter of weak financial markets as an excuse for not aggresively going after Wall Street banks. But the US economy is growing pretty rapidly at the moment, and the banks are doing great. Is there really any danger at this point in setting the precedent that some financial "innovation" is beyond the pale?
The corruption at play is also pretty blatant when you glance at the Wall Street Journal's nifty breakdown of which banks have paid how much for their naughty behavior since the crash. Goldman Sachs—the company that fell in love with Barack Obama harder than any other back in 2008—is at the bottom of the list. In their case, the settlements haven't even reached $1 billion, though that's partially a function of the bank not having its own consumer mortgage shop. But even if the bankers paid exactly as much as they destroyed/ruined (not to mention the trillions in bailout money and loans they were gifted from the Feds), it still wouldn't be justice, per se. These men should be doing time for breaking the law and screwing people over. As long as they can just write a check—and the profits from breaking the law exceed the fines—why not keep the party going?
"Given the enormity of what went on in the mortgage market, and the thorough involvement of Merrill Lynch, Countrywide, and Bank of America itself, it's not as big as it sounds," former North Carolina Congressman Brad Miller, who worked extensively on financial regulation in Washington and has since joined a law firm involved in litigation against those very banks, told me of the settlement. "We will be paying the price for not having held them accountable for a very long time. Having been treated as delicately as fine China has only made them feel entitled to do anything they want."
He bemoaned the fact that as recently as the 1990s, being "tough on crime" (both street crime and white-collar crime like the Enron mess) was mainstream.
"Now being tough on crime when the crime in question is securities fraud is seen as left-wing," Miller said.
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