What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims. As the ghost of Hamlet’s father might have it, America will be stalked by its foul and unresolved crimes until they are burnt and purged away.”
After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora’s fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama’s watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department’s ballyhooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes. You almost have to feel sorry for the era’s designated Goldman scapegoat, 32-year-old flunky “Fabulous Fab” Fabrice Tourre, who may yet take the fall for everyone else. It’s as if the Watergate investigation were halted after the cops nabbed the nudniks who did the break-in.
Even now, on the heels of Bank of America’s reluctant $8.5 billion settlement with investors who held its mortgage-backed securities, the Obama administration may be handing it and its peers new get-out-of-jail-free cards. With the Department of Justice’s blessing, the Iowa attorney general, Tom Miller, is pushing the 49 other states to sign on to a national financial settlement ending their investigations of the biggest mortgage lenders. What some call a settlement others may find a cover-up. Time reported in April that the lawyer negotiating with Miller for Moynihan’s Bank of America just happened to be a contributor to his 2010 Iowa reelection campaign. If the deal is struck, any truly aggressive state attorneys general, like Eric Schneiderman of New York, will be shut down before they can dig into the full and still mostly uninvestigated daisy chain of get-rich-quick rackets practiced by banks as they repackaged junk mortgages into junk securities.
Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative, since the actual rule-writing was delegated to understaffed agencies now under siege by banking lobbyists and their well-greased congressional overlords. The administration’s much-hyped Consumer Financial Protection Bureau is being sabotaged by Washington Republicans intent on blocking any White House nominee, whether Elizabeth Warren or some malleable hack, to lead it. “We can’t let special interests win this fight,” said Obama when he proposed the agency in October 2009. Well, he missed his moment to fight for both it and Warren, and the special interests won without breaking a sweat.
Rather than purge the crash’s crimes, Wall Street’s leaders are sticking to their alibi: Everyone was guilty of fomenting this “perfect storm,” and so no one is. Too-big-to-fail banks are bigger than ever, and Masters of the Universe swagger is back. Even Jamie Dimon of JPMorgan Chase, about the only bank chief not to be caught with a suspect balance sheet or a $1,400 office trash can, has taken to channeling Schwarzman. In June, he publicly challenged Ben Bernanke about the intolerable burdens of potential regulation—this despite a 67 percent surge in JPMorgan’s first-quarter profits and a 1,500 percent raise in his own compensation from 2009 to 2010. As good times roar back for corporate America, it’s bad enough that CEOs are collectively sitting on some $1.9 trillion in cash—much of it parked out of the IRS’s reach overseas—instead of hiring. (How many jobs can you buy for $1.9 trillion? America’s total expenditure on the Iraq and Afghanistan wars over a decade has been $1.3 trillion.) But what’s most galling is how many of these executives are sore winners, crying all the way to Palm Beach while raking in record profits and paying some of the lowest tax rates over the past 50 years.
The fallout has left Obama in the worst imaginable political bind. No good deed he’s done for Wall Street has gone unpunished. He is vilified as an anti-capitalist zealot not just by Republican foes but even by some former backers. What has he done to deserve it? All anyone can point to is his December 2009 60 Minutes swipe at “fat-cat bankers on Wall Street”—an inept and anomalous Ed Schultz seizure that he retracted just weeks later by praising Dimon and Lloyd Blankfein as “very savvy businessmen.”