Here's an interesting aside: National City Bank is now "Citigroup." Citigroup recently "agreed to pay $7 billion to resolve claims it misled investors about shoddy mortgage-backed securities in the run-up to the financial crisis" ("Citigroup to pay $7 billion to settle U.S. mortgage probe," Reuters, July 14, 2014).
Things, of course, have changed a lot since 1981. Ever since Reagan and his Republican colleagues ushered in distrust of government, de-regulation, and gargantuan tax breaks for the wealthy, banking has veered towards its pre-New Deal way of doing things. For example, during the years 1981 through 2014 there were 2,906 bank failures, or about 85 per year - a 600% increase from the 1934 through 1980 period.
Attitudes have changed as well. During the Pecora hearings the public became incensed at the misdeeds of Corporate America. But today?...outside of a few concerned citizens, groups, and politicians? Neh, not so much. As Jeffrey Sachs, director of Columbia University's Earth Institute observes: "Our society increasingly values people and their behavior according to their wealth, not to their integrity. Many of our leading CEOs preside over companies that have committed massive financial crimes -- fraud, price rigging, insider trading, and more -- and have paid tens of billions of dollars in fines; yet these CEOs are still revered because they are rich, and they remain frequent guests at the White House for the same reason."
Why is the public so complacent? Well, there are an awful lot of reality shows to keep up with, e.g., "Keeping Up with the Kardashians." So that takes up a lot of time. Also, the political right tells us that public school teachers and the unemployed are the real culprits behind our economic woes. Never mind that the middle class has shrunk in every state, and never mind that the Forbes 400 keeps adding billions to their private fortunes. No, the real economic catastrophe is that a public school teacher makes $60,000 and has her summers off. And food stamp recipients, my God, sometimes buy potato chips! The horror...the Horror!
Bartlett Naylor, former Chief of Investigations for the U.S. Senate Banking Committee, recently commented on a settlement between U.S. regulators and big banks in the LIBOR interest rate-rigging scandal:
"[Law enforcement] discovered pervasive fraudulent practices where traders gave false information about rates at which they borrowed or loaned money with other banks. That established false benchmarks on which other rates were based. That harms average Americans when they agree to mortgages. Law enforcers also found that Deutsche Bank withheld and even destroyed information about the investigation. Yet, surprisingly, despite the severity of these offenses, the government concluded that these crimes should be punished only through a financial penalty...This settlement, which involves no jail time for any traders, seems out of sync with the problems identified. To make matters worse, many of the traders responsible for the frauds remain employed at Deutsche Bank. The DOJ claims that it may still prosecute individuals, and we hope it will pursue such work. To date, some traders at other firms such as Rabobank have been convicted, but no senior officers of any of the banks involved in the LIBOR case have faced charges."
Naylor has been sounding the alarm bell on financial wrongdoing for many years. In 2012, he noted of the LIBOR scandal: "I think what this scandal shows is that Wall Street is making this money, it's overtaking our economy, any way it can...and that includes cheating." Unfortunately, Naylor's logical analysis of the problem doesn't trump Fox News. And if Fox News says our nation's economic problems stem from a surfer on food stamps, then tens of millions will believe it. Indeed, the suits in the corner offices must be thanking God every day for the diversionary tactics of Fox News and other right-wing media.
U.S. Senator Elizabeth Warren has observed, "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." And Warren should know. When she warned Jaime Dimon, CEO of JP Morgan Chase, about possible lawbreaking he smiled and said, "So hit me with a fine. We can afford it." Dimon knows full well that, at least within the realm of financial activities, he's immune from criminal prosecution and that no civil penalty will ever make a dent in his company's profits.
At the end of the day, we're kind of stuck with white collar crime and fraud, aren't we? Because whenever we try to reign in Wall Street with common sense regulations, Republican and Tea Party politicians cry "socialism!," and tell us "You can't hinder the work of the Job Creators!" And whenever we ask the executive branch to prosecute white collar crime more harshly, it nods in charming but empty agreement, thereby letting us know that they consider some criminals to be too big to jail.
Thanks to weak leadership, timid regulators, campaign cash from super-wealthy donors, and mass media misinformation & blame-shifting, we are truly living in the "Golden Era of White Collar Crime." I mean, let's be honest here, we've essentially come to the conclusion that, "Hey, if you've made billions of dollars through corporate wrongdoing, it's okay as long as you pay us a certain percentage of that profit, some of the time, through fines." But what kind of cultural message is it, when we essentially say, "Certain kinds of crime are, well, sorta okay."
It's been amazing to witness the rich & powerful treated with kid gloves, after so much criminal and civil wrongdoing while, at the same time, those who lost their jobs because of such wrongdoing have been scolded as lazy good-for-nothings and have faced a relentless attack on their social safety net programs (unemployment benefits, food stamps, expansion of Medicaid, etc.).
This upside-down ethical system we've embraced inspires me to ask, in desperation, "Ferdinand Pecora, where are you?"