As he has regularly done in the past with other media outlets, President Obama artfully dodged a straightforward question about lack of criminal prosecutions from Steve Kroft on 60 Minutes last night. The question was about how one of the things bothering people was the fact that no one on Wall Street has been criminally prosecuted for the financial catastrophe that has caused so much damage to our country. What he was really asking — what everyone in the country is asking — is why has there been no accountability of those on Wall Street who got rich before, during and after the meltdown they caused while the rest of the country got stuck with the bill, including historically high unemployment, foreclosures, deficits, etc.
Rather than even attempting to answer that question, the president started by saying he can’t get into specific cases, which he wasn’t asked about. He then gave his standard line, “I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, some of the least ethical behavior on Wall Street, wasn’t illegal. That’s exactly why we had to change the laws.”
Okay, even if that highly questionable assertion is true, he is nonetheless conceding that at least some of that behavior was illegal and therefore the question remains why he and his team refuse to prosecute Wall Street. (Evidence of those crimes was the subject of a 60 Minutes piece the prior week.)
The easy answer of some is because that’s where they are doing a lot of fundraising (a bipartisan activity, I should note). While that no doubt plays a role, the more complete answer is also more complex, but no less satisfying.
The president and his team decided early on that recapitalizing the financial industry in general and Wall Street in particular was the highest priority for the country. Their view was that, if they didn’t’ do that, a Second Great Depression was highly likely. They all truly believed that as went Wall Street, so goes Main Street. (This view was helped along by all the former Wall Streeters occupying the highest levels of the administration and on whom the president relied most heavily for advice on this matter.)
This view is, of course, right to some extent. If the financial industry was allowed to collapse in the fall of 2008, then Main Street would suffer gravely: everything from paychecks to credit cards to the simplest of loans for everyone from individuals to small business to the big companies at the heart of our economy could have ground to a halt. Moreover, they were blindly obsessed with people’s confidence in the banking system (as Ron Suskind spelled out so well in his book, Confidence Men). They worried that anything that was done other than helping the banks would erode confidence in the banks, which would cause the crisis to deepen and potentially cause a downward spiral.
Unfortunately, this view resulted in an administration policy of protecting the banks from even the slightest criticism, never mind actual action. So, there was no financial crimes task force formed to investigate potential crimes and there was no serious consideration given to taking other actions against the biggest banks and the titans of Wall Street. Indeed, this view even stymied efforts to seriously investigate the financial crisis so that informed reforms could be implemented. (Remember, that the Financial Crisis Inquiry Commission was created very late, was given limited powers, and was structured to report only after the reform law passed.)
Indefensibly, this policy of “see no evil, hear no evil, and speak no evil” of Wall Street was followed even when the administration basically handed Wall Street the keys to the treasury and US taxpayers’ pockets. In fairness, this wasn’t just an Obama administration policy. It was certainly also the policy of the Bush administration, but many thought that the November 2008 election would usher in new policies that would hold people accountable.
This approach of uncritically coddling Wall Street and ignoring its role in the financial crisis was the subject of an unprecedented meeting in the White House in the spring of 2009. A number of Democratic senators demanded a meeting with the president personally to tell him directly and clearly that he was getting bad advice from his Wall Street-biased group of senior advisors and that he must take strong action against Wall Street wrong-doing. It appears that the President responded with more artful dodges along the lines of “What would you have me do? Let the banks fail? That would be devastating for the economy and the country.”
Well, of course, no one was advocating — then or now — letting the banks fail and ushering in another Depression. However, there was a very strong view — then and now — that the financial industry could be saved and wrongdoing could still be punished. This view is nicely captured by the phrase that “you can save the banks, but you don’t have to save every banker.” Unfortunately, as the president revealed again last night on 60 Minutes, those bankers have nothing to fear from this administration (except the occasional criticism not backed up by any action). The policy of “hold no bank or banker accountable” appears to be firmly in place.
That is bad news not only for the country, but also for the president. It’s one of the key reasons the American people are so mad and justifiably so: this foolish policy means that the rules that apply to everyone else, don’t apply to the rich, powerful and politically well-connected banks and bankers on Wall Street. And, even worse, it means that those very same banks that only exist today because the US government with taxpayer money saved them in the fall on 2008 are now using their massive profits to fight regulatory reform that is desperately needed if we are to avoid another financial collapse.