Monday, November 24, 2014

The Reverse New Deal: A "Golden Era of White Collar Crime"

Above: William Douglas, left, was Chairman of the Securities & Exchange Commission from 1937-1939. Like other New Dealers, Douglas wasn't afraid of (or bought by) the Wall Street big wigs. He knew that the pervasive fraud on Wall Street had to be cleaned up. When a powerful Wall Street attorney realized that Douglas meant business, he said "When you take over the Exchange, I hope you'll remember we've been in business one hundred and fifty years. There may be some things you will like to ask us." Douglas responded: "There is one thing I'd like to ask...Where do you keep the paper and pencils." After his stint as SEC Chairman, Douglas went on to become the longest serving Supreme Court Justice in U.S. history. Photo courtesy of the Library of Congress Prints and Photographs Division. Quote from "The New Deal: A Modern History," by Michael Hiltzik, New York: Free Press, 2011.

During the New Deal, policymakers took a dim view of white collar crime. They created, for example, the Securities & Exchange Commission to police fraud, and the Glass-Steagall Act to curb reckless financial gambling by the big banks. Heck, even the president of the New York Stock Exchange, Richard Whitney, ended up in Sing Sing Prison.

Today, the story is quite different. Both political parties take obscene amounts of money from corporations and the super-wealthy. Hence, they're not overly interested (or interested at all) in prosecuting the hand that feeds them. And this acceptance of white collar crime by our political "leaders" trickles downward and affects the entire criminal justice system. Today, many white collar criminals, especially those in big organizations, are immune from criminal prosecution. They simply pay fines--fines that are much less than the profits derived from the criminal activity--and then move on to the next fraud.

To make matters worse, a Federal Reserve official recently told U.S. Senator Elizabeth Warren, "We were not willing to find those firms guilty before, because we were worried that if we found them guilty, that could somehow potentially destabilize the financial system" ("The Fed Just Acknowledged Its Too Big To Jail Policy"). In other words, because they were members of large and powerful organizations, wealthy executives were not (and I would argue, are still not) answerable to the criminal justice system.

Above: In this June 22, 2012 Bill Moyers show, journalist and author Matt Taibbi describes, at 14:11, bid-rigging by American's big financial institutions: "...the story I just wrote about, which was about the systematic rigging of municipal bond auctions, which affected every community in every state in the country and all of the major banks were involved, including Chase. They were rigging the auctions...And this is not like something that the mafia does. This is what the mafia does. The mafia has historically, it's one of their staple businesses, bid rigging for construction or garbage or, you know, street cleaning services, whatever it is. They're doing exactly the same thing. The only thing that's different is there's no violence involved. But what their method of control is that they're ubiquitous. They have this incredible political power that the mafia never had."

Many Americans, duped by right-wing politicians, pundits, radio show hosts, and think-tank "researchers," blame public school teachers, unemployed workers, and unions for our nation's economic problems, instead of the white collar crooks running the frauds. This blame switcharoo is surely one of the most astounding developments of the 21st century. It seems that no amount of insider trading, money laundering, price fixing, interest rate rigging, mortgage & securities fraud, accounting fraud, illegal foreclosures on soldiers, bribery, pollution, tax evasion, and so on, will dissuade millions of people from blaming public school teachers and the homeless for our nation's economic woes, and also screaming at low-income Americans to "practice personal responsibility!"

Sam Antar, a man who ran a large financial fraud in the 1980s, recently said "We are in the golden era of white-collar crime. My biggest regret is I should've been a criminal today rather than 20 years ago" ("Crazy Eddie CFO: 'We are in the golden-era of white collar crime,'" CNN, November 17, 2014).

Mr. Antar is correct. This is arguably the best time in American history to be a white collar criminal.


1. Too Big To Jail: In addition to the Federal Reserve official's observation of "too-big-to-jail," that I noted above, Eric Holder, head of the Department of Justice, also implied that big financial institutions are immune from criminal prosecution because such prosecution could have a negative effect on the economy ("Eric Holder Admits Some Banks Are Just Too Big To Prosecute," Huffington Post, March 6, 2013).

2. A Scared SEC: When a prominent and well-respected attorney at the Securities & Exchange Commission recently retired, he asserted that "his bosses were too 'tentative and fearful' to bring many Wall Street leaders to heel after the 2008 credit crisis..." ("SEC Goldman Lawyer Says Agency Too Timid on Wall Street Misdeeds," Bloomberg, April 8, 2014).  William Douglas's they are not. 

3. Hush Money: Author and journalist Matt Taibbi, who has followed corporate crime like a hawk for many years now, recently wrote, "Holder's Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called 'statements of facts,' which were conveniently devoid of anything like actual facts. And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption" ("The $9 Billion Witness: Meet JP Morgan Chase's Worst Nightmare," Rolling Stone, November 6, 2014). 

Above: U.S. Senator Elizabeth Warren--the woman who should be the next Democratic nominee for president (instead of Hillary Clinton)--asks various government officials if any big bank executives have been referred to the Justice Department for prosecution. At 4:12, Warren says, "Without criminal prosecution, the message to every Wall Street banker is loud and clear. If you break the law, you are not going to jail, but you might end up with a much bigger paycheck." Near the end of the clip, U.S. Senator Richard Shelby, a Republican from Alabama, says that people should not be able to buy their way out of the criminal justice system and that he agrees with Senator Warren. A rare display of bipartisanship in our Congress.
4. A Devil-May-Care Attitude: In November of 2013, William Dudley, head of the Federal Reserve Bank of New York, said that the big financial institutions in America had an "apparent lack of respect for law, regulation and the public trust" ("New York Fed Chief Levels Explosive Charge Against Big Banks," Huffington Post, November 7, 2013). 

5. Illicit Cash Becomes Campaign Cash: In discussing a PBS Frontline report, on the Obama Administration's failure to prosecute financial crimes, journalist David Sirota writes, "(The report) documents the rampant and calculated mortgage securities fraud perpetrated by the major Wall Street banks, who, not coincidentally, were using some of the profits they made to become among President Obama’s biggest campaign donors" ("Are banks too big to jail? PBS Frontline's stunning report shows how the Obama administration undermined the rule of law," Salon, January 23, 2013). 

6. Wall Street's Embrace of Crime: A 2012 survey indicated that "A quarter of Wall Street executives see wrongdoing as a key to success" ("Many Wall Street executives says wrongdoing is necessary: survey," Reuters, July 10, 2012). 

7. A Congress That Encourages Crime: When Republican politicians recently fought to protect wealthy tax evaders, Heather Lowe, of the organization Global Financial Integrity, said "It is mind-boggling that a major political party would even consider endorsing a resolution to facilitate tax evasion" ("Republicans bash U.S. law targeting offshore tax dodgers," Reuters, January 24, 2014).

Above: In this fascinating July 18, 2012, NPR segment of "On Point with Tom Ashbrook," the host asks, at 15:54, "When you look at this, is it a fair question now to ask, somehow, this sounds absurd, but has somehow the banking system become practically a criminal cartel?" One of his guests, Pulitzer-Prizing-winning reporter Jesse Eisinger, responds, "...I think it's beyond a doubt the banking system is completely out of control, that there's an ethical crisis."

Unfortunately, until more Americans become informed, and stop blaming the less fortunate for America's economic ills, the Golden Era of White Collar Crime will likely continue--and perhaps become even worse. Certainly, there is little sign of abatement (see, e.g., "Wall Street Banks Manipulated Commodity Prices At Consumers' Expense, Senate Report Finds," Associated Press, November 19, 2014).

Where's a William Douglas when you need one? Where's a New Deal when you need one?


  1. Excellent article! In addition, the work that Ferdinand Pecora did in interrogating the top Wall Street criminals, he describes in his 1939 book about the Senate investigations titled "Wall Street Under Oath: The Story of Our Modern Money Changers". The Senate webpage on the issue is

    Phil Angelides and his Financial Crisis Inquiry Commission report uncovered quite a bit of the criminality, although its a shame that he stuck within the limits set by just investigating the facts. He quickly buckled under afterwards when the Wall Street press whores went after him, which also reflected his utterly milquetoast campaign against banker boy Arnold Schwartzeneger.

    This is the correct theme though. Good luck taking on the deep seated delusion about Wall Street, since over the years, the brainwashing has made everyone equate the economy in general with Wall Street, when it in fact has almost nothing to do with it anymore beyond how much of the real economy they can suck dry for the speculative casino. As an example, a clerk at the local water utility got that deer in the headlights look when I said that my impoverished condition won't be solved until Wall Street is shut down, which he exclaimed "would never happen!". In retort, I said that their survival will come at the death of everyone else, which caused him to shut up and shove my receipt at me, not wanting to say anything else.

    1. Thank you for your comment. There is definitely a large and growing disconnect between the stock market and the prosperity of the non-wealthy. Certainly, the decline of unions is a large part of that. Many workers have little or no bargaining power. Add white collar crime into the equation, and a low labor force participation rate too, and things get even worse.