The Gauntlet is Thrown to Obama's Justice Department
By William Neil
May 14, 2011 - 5:30pm ET
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THE GAUNTLET IS THROWN TO OBAMA’S JUSTICE DEPT. & GOLDMAN SACHS
May 14, 2011
Dear Citizens and Elected Officials:
As we were catching up on our yet-to-be-filed newspaper clippings from just about a month ago, we were thinking what a remarkable day Thursday, April 14, 2011 had turned out to be. We ended up with a pile of five financial news stories that are just now coming into clearer focus. The front page lead story in the New York Times was that, finally, the President had come out of the policy shadows and, in the headline’s words - “Taking on G.O.P., Obama Unveils Debt Relief Plan.” That certainly stole the thunder from another front page story, a very long investigative one delivering the Times’ answer to the burning public question posed by so many: why wasn’t Wall Street in jail? The Times reporters answered with their own lower temperature finding: “A Financial Crisis With Little Guilt: After Widespread Reckless Banking, a Dearth of Prosecutions.” This was written by two of their leading financial writers, Gretchen Morgenson and Louise Story, and it confirmed our earlier observations that Ms. Morgenson had previously been too easy on Angelo Mozilo, the Countrywide Financial CEO, as had the Financial Crisis Inquiry Commission itself.
These two stories appearing on the front page had the effect, intended or not, of pushing another major one, the Levin-Coburn Senate Permanent Subcommittee on Investigation’s 650 page report on the financial crisis, back to only the first page of the business section. And that in turn bumped another story, about how poorly the major banks were “servicing” mortgages and foreclosures, to page three of the business section.
The cumulative impact of them all rear-ending each other also had the effect of pushing Jesse Eisinger’s piece about Moody’s rating service to page five of the business section, where readers could find “Vows of Change at Moody’s but Flaws Remain the Same.”
So there it was in print, literally and symbolically, right before our eyes, the demonstration of how the debt and deficit obsession is dominating and obscuring all other aspects of the political economy, including the growing awareness that we now have two separate justice systems, one for white collar crimes and another for the “street” crimes of everyday citizens, the very recent convictions of Raj Rajaratnam of the hedge fund Galleon Group, and Lee Farkas of Taylor Bean, a mortgage originator, notwithstanding. These exceptions demonstrated the rule that the Obama Justice Department & SEC still seem unwilling to take on the real powers in the financial system (and our sincere apologies to Raj and Lee for this necessary slight), the top of the food chain laid out for us so well in Michael Lewis’ The Big Short, and again by Morgenson’s and Story’s article from April 14th, which asserted that the Financial Crisis Inquiry Commission’s Chairman, Phil Angelides, went easy on both Mozilo and his firm (which Angelides denies here at
Let’s step back from these mid April stories a bit, though, and take an alternative look at the news from the real political economy as it has been unfolding since the fall of 2010, eclipsed and obscured first by the election and now by the debt and deficit fixation. Throughout the fall, as we reported in January, 2011 (10,000,000 Foreclosures: No Saving Private Ryan This Time), thousands of people, if not tens of thousands, were losing their homes under highly suspect legal proceedings, allegations of lost mortgage documents, and forged signatures and papers. There were increasing accusations that the desire to obliterate the original sins (and fingerprints) of the mortgage originators, like Mozilo’s Countrywide (and aided by the fumblings of MERS, the electronic registry system) were throwing the entire housing market into a limbo of legal uncertainty. And that’s where we are now, along with still declining housing prices and 28% of the nation’s mortgages underwater, meaning the mortgage owed is larger than the market price. It was so bad that it led economist Joseph Stiglitz to write an op-ed piece entitled Justice for Some which opened with the observation that “the mortgage debacle in the United States has raised deep questions about ‘the rule of law,’” and closed with the declaration that “in today’s America, the proud claim of ‘justice for all’ is being replace by the more modest claim of ‘justice for those who can afford it.’ And the number of people who can afford it is rapidly diminishing.”
Then on February 16, 2011, Matt Taibbi’s blistering piece – Why Isn’t Wall Street in Jail? appeared online, which answered the question with a sickening description of the clubbiness that has evolved between SEC lawyer-regulators, the Justice Department and the Wall Street law firms that will be representing the accused firms – a triangle trade of sorts, and the new “ ‘cooperation initiative,’” a convenience “hotline” of sorts where lawyers can call the SEC to see whether the Justice Department might be indicting their potential clients – “ ‘…so that defense counsel can have as much information a possible in deciding whether or not to choose to sign up their client’” according to Robert Khuzami, the SEC’s director of enforcement.
And at the end of March, while the nation was still deeply considering all the implications of the term “fiscal austerity,” especially in its ramifications for public employees, their union contract rights and their increasing share of the budget burdens at the state and local levels, came the front page New York Times’ jolt that General Electric was turning the “…Tax Man Away Empty-Handed,” a story which set off weeks of follow-ups on how the obligations of national and state revenue have been shifted off corporations and onto middle and working class people, or evaded via offshore accounting havens, the subject of another of Senator Levin’s investigations.
Then, in the April 11th print edition of The Nation, William Greider returned to the themes of Taibbi’s Rolling Stone piece with his deeper, longer horizon vista of How Wall Street Crooks Get Out of Jail Free. Greider reminded us that the current trend verbalized by Khuzami above, goes back at least to a 2003 Justice Department memo which authorized “deferred prosecution agreement(s),” which allow “the company to escape the more severe consequences of criminal conviction – the loss of banking and professional licenses, charters, deposit insurance…including eligibility for federal contracts and healthcare programs. In other words, the punishment prescribed in numerous laws.” In lieu of “‘Old Testament justice, federal prosecutors seek ‘authentic cooperation’ from corporations in trouble.” Greider quoted Russell Mokhiber, “longtime editor of the Corporate Crime Reporter,” for an evolutionary narrative: “‘Over the past twenty-five years…the corporate lobbies have watered down the corporate criminal justice system and starved the prosecutorial agencies. Young prosecutors dare not overstep their bounds for fear of jeopardizing the cash prize at the end of the rainbow – partnership in the big corporate defense law firms after they leave public service.’” The list of “important corporations that have settled without a public trial include Boeing, AIG, AOL, Halliburton, BP, Health South, Daimler Chrysler, Wachovia, Merrill Lynch, Pfizer, UBS and Barclays Bank.” Here’s the full article at
But William Greider could have just as well quoted from his own book from 1992, Who Will Tell The People: The Betrayal of American Democracy, especially the Chapter called “Citizen GE,” where he was sketching out the contrast between the fate of individual citizens who repeatedly violate the law – they lose their jobs, their voting rights and their physical freedom – to that of the repeat corporate offenders who lose “none of their diverse abilities to act in politics. Corporations are ‘citizens’ who regularly offend the law – both in the criminal sense and in the civil terms of flouting regulatory statutes. Yet their formidable influence on political decisions goes forward undiminished, as well as the substantial financial rewards they harvest from government.” And readers who follow the recent Supreme Court decisions in these areas of corporate rights flowing from their alleged “citizenship” know this trend line is continuing, especially for political campaign spending.
And over at Rabbi Michael Lerner’s Network of Spiritual Progressives’ website, citizens can find another logical response to the decline of democracy and the rise in corporate abuses of power, in the form of the Environmental and Social Responsibility Amendment to the U.S. Constitution (it’s called ESRA), here at http://www.spiritualprogressives.org/article.php/20100427162647109 . It’s worth a close reading.
In fact, when you look at the ominous political landscape over the past six months with these features in mind, it’s not hard to spot the numerous planks for a real populist economic program, (and a “nationalist” one, we might add, a word not popular on the left, nor with academic globalizers) begging to be picked up and cobbled together into a progressive platform. Which is why, we guess, that President Obama avoids talking about them time and time again, starting with his State of the Union address. Instead, as the newspaper from April 14th shows, he and the mainstream Democrats are choosing to play out their hand on the political economy from a deck that’s stacked, via the debt and deficit obsession, heavily in favor of the Republican Right, a movement which is reaching new heights of ideological fanaticism.
If you have any doubts that it is indeed ideological fanaticism, or you would like to see the logic of “entrepreneurial romanticism” carried to intellectual absurdity, we invite you to read, as we did, Speaker Boehner’s May 9th address to the Economic Club of New York. The Speaker can see no connection between his elevation of the Entrepreneurs to Supermen and the twisting of justice for them, over time, leading to the now dual legal system. Nor can he conceive that capitalism might go through prolonged periods of depression/deflation, or evolve, even when healthier, to a system which, in the West, doesn’t need or care about 20% of its population, give or take 5% either way. Not working properly? More tax relief, greater regulatory freedom is his cry, doubtless from the heart, and the jobs will flow like milk and honey in the Promised Land; the Speaker can’t understand that in the new economic processes, the evolution of the elongated, super-efficient global corporation, job creation is a very, very secondary consideration, an indirect result, if we’re lucky, and if the table is set just right…so we turn with uplifted eyes to the small businesses of the Nation…and remember, fondly, Joe the Plumber’s views from the fall of 2008…but that’s an essay for another day… (If you are an elected Democrat reading this: ask yourself: how much would you disagree with these thoughts, and his speech?) It is living, breathing proof that what our nation has been through since 2008, and all the suffering its citizens have undergone, and are still going through, have not changed a single nail in the planks of the Republican Right’s ideological platform. We shudder to think of what it will take to alter it; it will, unfortunately, no doubt, take something on the order of 1929-1932, not 2007-2009. Here is the Speaker’s speech at http://www.speaker.gov/News/DocumentSingle.aspx?DocumentID=240370#
All this is the necessary background to our current moment, however, so that you can understand exactly what we mean when we say that several individuals have thrown down the legal (and political) gauntlet, thrown it down to the firm at the very top the financial economic order, Goldman Sachs, and to the governmental protectors of that order, the lawyers at the Justice Department, now to be refereed to as Obama’s Justice Department. (Bill Greider has filled us in on what we got from Bush’s in his Nation article).
So that brings us to Thursday, May 12, 2011. We were “relaxing” online by browsing the day’s stories on Bloomberg, at a time when real economic storm clouds are gathering in many different locations. One storyline, not in any way highlighted, caught our attention, however, perhaps because it was so unexpected: “Goldman Drops as Bove Says Sell.” So we clicked to take a closer look at the story by Christine Harper, and here’s what we found, a name so familiar to us, and by now, we hope, to our readers: ‘‘‘The new Matt Taibbi article in Rolling Stone magazine is another all-out attack on the company,’ Bove wrote in today’s note. ‘However, this time the attack is backed by a 650-page report signed by both a Democrat and a Republican.’” (Richard Bove is an analyst at Rochdale Securities, LLC.) Here’s the link at http://www.bloomberg.com/news/2011-05-12/goldman-sachs-drops-as-rochdale...
This was the first we had heard of Taibbi’s article, which we immediately read, and printed out, all nine pages of it, just one day behind its May 11th appearance. It’s entitled The People vs. Goldman Sachs, and it’s a dynamite piece which opens with the following sentence: “They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.”
And those “lies” were the ones told in the testimony given on April 27th 2010, in front of Senator Carl Levin’s (Democrat of Michigan) Investigation Subcommittee. Like the issues involved with the SEC’s April 2010 lawsuit against Goldman Sachs, later settled for $550 million, the allegations of lying to Congress concern mortgage derivative investment offerings where the clients buying them are told they are excellent, while the internal memos circulating behind the scenes at Goldman are saying they are most decidedly lousy investments. Indeed, the broader issue is that they are being sold as long (favorable) positions on mortgage bonds in 2007, while the firm has decided, in December of 2006, that it is now going to short (bet against) mortgage backed securities in a very big way. Even the firm comes to refer to it as the “The Big Short,” a shift of positions that Taibbi says, based on the Committee’s work, went from $6 billion long to $10 billion short – “a shift of $16 billion,” which even for a firm of the size of Goldman’s is one of remarkable scope. Doubtless, Taibbi says, the Goldman defense will be, just as it was in April of 2010, that they had complex hedges against the housing market to protect themselves. But Taibbi believes, and he’s convinced us, that based on the evidence the Senate investigators have uncovered, that defense is not going to work this time.
This has quite a familiar ring to it for us, since we covered Goldman’s “hedging” defense at some length back in April of 2010, in our introduction to the essay Debt, Deficits & Balanced Budget Bull, which you can still find online here at …
Then we went back and looked at our separate Introduction to Part II, Austerity, Courtesy of the Best Men, which we issued just six days later, on April 29, 2010. Here’s the way we began: “On Tuesday, April 27th, we were watching CNBC, awaiting the start of Senator Levin’s Committee hearing on Goldman Sachs, and on part of the screen the network was simultaneously airing President Obama’s press conference heralding the first meeting of his ‘Debt Commission.’” (Here’s the essay at
We did a double take when we read that, having forgotten the context last April. So now we ask you, readers, what kind of pure chance event is it that on the occasion of the two big public days for Senator Levin’s investigation into Wall Street - the hearing for Goldman Sachs officers on April 27, 2010, and the release of its 650 pages of findings on Wednesday, April 13, 2011 - President Obama just happens to be conducting debt and deficit “newsmakers” himself? Were they skillfully timed “diversions” or purely coincidental, simultaneous events? We’ll leave it to others to argue it out; we’re satisfied simply to have noticed the very interesting timing. (Here’s the link to the full Senate committee report at http://levin.senate.gov/newsroom/release.cfm?id=332491 .)
But back to Taibbi’s article. He says that “this month, after releasing his report, Levin sent all of this material to the Justice Department. His conclusion was simple. ‘In my judgement,’ he declared, Goldman clearly misled their clients, and they misled the Congress.’”
Taibbi wraps up his article, and his appeal to us, with this closing paragraph:
This isn’t just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case – if Goldman skates without so much as a trial – it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.
(Here’s the article at http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20... )
So that’s where Bill Greider was way back in 1992; Taibbi arrives there in 2011, and Ralph Nader too, with his Waiting for the Spark commentary, (here at
http://www.commondreams.org/view/2011/04/19-4 ) and now we going to see how long it takes President Obama to arrive there too. Thanks to Senators Levin and Coburn, and the relentless focus of Matt Taibbi, the decision is now in the Justice Department’s hands.
Until our next posting, all the best to our readers,
PS. If you visit our April 2010 essays at Ourfuture.org, please be sure to register your protest with President Obama there too, over the failure to provide Progressives and the People’s Budget a seat at the debt and deficit negotiating “table,” here at http://www.ourfuture.org/blog-entry/2011051912/give-people-and-peoples-b... The missing chairs must be due to some temporary oversight, or lost invitation, right?
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