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Has the US Legal System Always Been Such a Joke?

Between the daily drip of stories about paramilitary police forces exerting their will on minorities in places like Ferguson, Missouri, and the regular escape from punishment by rich white bankers, it's easy to be cynical about law and order in America.

by Matt Taylor
Aug 18 2014, 9:00pm

Activists calling for banks to be held accountable for illegal foreclosures at a rally in Washington, DC last year. Photo via Flickr user Stephen Melkisethian

It's easy to feel cynical about law and order in America. Just peruse the tales of paramilitary police forces exerting their will on minorities in places like Ferguson, Missouri while rich bankers routinely escape from punishment for their white-collar crimes. Now the US Sentencing Commission is considering curbing the jail terms dished out for financial crimes like fraud, figuring that since the Feds have finally started to scale back mandatory minimums for drug offenses, we might as well take it even easier on corporate execs.

But are we really too tough on white-collar criminals? And has it always been this way—with the rich getting preferential treatment? Or have public institutions been corrupted in recent years (as Matt Taibbi argued in his recent book The Divide) by the growing stranglehold of the prison-industrial complex and Wall Street money? I called up Noah Feldman, a legal historian at Harvard Law School, for some context on the dire state of criminal justice in America.

VICE: How new is this problem of two criminal justice systems?
Noah Feldman: It's definitely not a new thing. Go back to, say, the Great Depression when the Roosevelt administration came into office saying, 'We're going to get rid of the fat cats.' They initiated a criminal prosecution of Andrew Mellon, who had been secretary of the treasury three times. He was the third-richest man in America. He was like Bill Gates and [former Clinton administration Treasury Secretary] Bob Rubin wrapped into one.

They realized very quickly that they weren't going to be able to get a criminal conviction. They couldn't even get an indictment of him. You know how they say they can indict a ham sandwich? But they tried to indict him in Pittsburgh—where he was God basically—so that was pretty telling. They went far with the civil case against him. And even there, the best they could come up with was not a judgment he had done anything wrong, but that he had to pay some extra taxes.

This is a guy who would literally sign over all his assets to a shell company on the 29th of December and then they'd sign them back to him on January 1st. So we're talking about a very old tradition where the very rich are not like you and me.

How should we be dealing with white-collar crime in America?
There are different minds about the right way to go about prosecuting these big, faceless corporations, right? But going after the corporation—like getting a criminal conviction of the corporation—which happened in the Enron situation and more importantly the Arthur Andersen situation, has a weird result. Which is that it can often bankrupt the company. And that's what happened in the Andersen situation. So there will always be people who will say, if you bankrupt the company, you're sticking it to the shareholders. But it's not the shareholders' fault. And if you look at who are the main shareholders with Bank of America, it's a blue chip stock. So that's like, a bunch of pension funds. There's a kind of credible argument that putting them out of business is a bad idea. And when you add to that that these are major American companies that employ a lot of people and add to that the economy is a little iffy anyway, you can sort of see the rational argument for not going after them criminally. I would describe that as classic Obama administration pragmatism.

But was it the right move?
My gut says the same thing yours does. People should be hanging for this. We should see people swinging in the wind. But this is the problem with the Obama approach, no matter how moralistic you are, when you break down the pragmatic arguments, there's something to them. They can't be completely ignored. But often that ends you up in some terrible place. Like, there's lots of pragmatic reasons not to get involved in Syria: Assad is bad, the opposition is bad, everybody's bad, and then boom here comes ISIS. So there's times when being pragmatic leads directly to your own funeral. Is this an example of that? It's always hard to know. You don't want to mess with the financial system in this delicate moment. If Bank of America had been held criminally liable, who knows what the consequences would have been?

Except most critics of the Obama administration on its approach to financial crime don't want to see the banks put out of business. They just want a few of the guys running the show singled out and prosecuted for wrecking the economy.
It's hard to identify individuals. And once identified, it would be hard to get convictions. And once you've got convictions, they're not going to be higher-ups. The interesting conviction would be some senior-level executive who allowed people to get mortgages in 15 minutes. I know that to be a factor because I got my mortgage for my house in 15 minutes. So it'd be nice, but to show that kind of thing, first you'd have to convict all the little guys who actually did the lying, to show a pattern in their practice. And then once you've done that, then you can come in and go after the senior guy. But that senior guy will probably get off because he'll say I didn't know anything about it. There's some kinds of things that should be criminal that are really hard to prove in practice. It's a quirk of our system designed to protect the innocent rather than to punish the guilty, but it protects a lot of the guilty people along the way and this is a classic example of that. I don't want to say you couldn't get any convictions, but you wouldn't get many and they would not be of high-level people.

Maybe I'm just being nostalgic, but for a while there it seemed like we were really going after white-collar crime. Lately, though, government lawyers have become cautious and shied away from some of the thornier cases.
I think that these things go in cycles, and the Obama administration cycle has been not just cautious, but super cautious. And you ought to go beyond the financial side and look at the torture. The president said, not that long ago, "We tortured some folks." Torture is a crime, it is a criminal violation, and the president of the United States said we tortured. So how does that shit happen and there's no criminal prosecutions? The pragmatic cautious approach: 'We don't want to be vindictive, we want the CIA to do its job, and by the way, it would be bad politics and look partisan.' What this adds up to is really something pretty depressing. Should the CIA guy who actually poured the water over the guy's mouth go to prison? Should it be Dick Cheney? Well it can't be Dick Cheney, so therefore it's going to be nobody.

So you don't see this as a longer term trend toward corruption in the legal system, but instead a cyclical process that just kinda sucks right now?
Go back to the 1870s, when the railroads were being built and the robber barons controlled the courts, a lot of those New York State courts. They were using them to enrich themselves at the expense of the public. And there was a real fear at the time among progressives, the first progressives, that basically law and politics had been completely corrupted by monied interests, and that we were no longer a republic run by the citizens but we were a kleptocracy run by robber barons. And they responded to that by coming up with the invention of regulation. And they invented, among other things, the Interstate Commerce Commission to fight corruption, specifically in the railroads. And they saw it as make or break for democracy. So there are moments in history when it looks like the money is running the show. In those moments, there needs to be a structural response. And I think we're in need of a new set of structural responses.

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