The Obama administration is hearing footsteps on its left and needs to placate a base disappointed by the Great Peacemaker’s evolution into the Big Brother that Dick Cheney never even dreamed of. Since the Left is motivated mainly by hatred and envy, the answer to Barack Obama’s midterm problems is show trials for Wall Street.
Eric Holder, the reliably dishonest man who inexplicably serves as attorney general of these United States, has done that great Washingtonian thing: announcing an announcement. The announcement he announced is that the Justice Department plans to bring charges against a number of financial firms in relation to the 2008–09 financial crisis. When exactly that is going to happen was not enunciated in Mr. Holder’s announcement announcement, and neither were the targets of those charges — but the likely suspects include JPMorgan, corporate home of former Obama chief of staff William Daley, and Bank of America, financier of Barack Obama’s 2012 campaign and corporate patron of Michelle Obama’s former chief of staff Stephanie Cutter. Barack Obama has consistently filled high positions in his administration with Wall Street players, much to the dismay of that faction of the Democratic party associated with Senator Elizabeth Warren, who has no doubt been shaking the walls of her $1.7 million Cambridge mansion with howls of proletarian outrage.
How badly this administration wants some Wall Street scalps to nail over the Oval Office door is best demonstrated by the fact that the attorney general felt obliged to lie about the scope and impact of its mortgage-fraud investigation — just a month before the 2012 election. The attorney general’s office originally said that some 530 defendants were charged with defrauding 73,000 homeowners in a case involving $1 billion worth of fraud. Two Bloomberg reporters took a look at those numbers and quickly deduced that Justice had a sock in its prosecutorial pants, inflating its numbers with cases that had originated before President Obama ever came into office. The $1 billion in fraud was soon reduced to less than a tenth of that figure.
If past is prologue, expect the announced announcements just before the 2014 election.
But what kind of cases will they be? If there is evidence of criminal wrongdoing by Wall Street players — and there very well may be — the time to prosecute was 2009 or 2010, back when the administration was filling its ranks with investment bankers and still trying to wash the stain of Goldman Sachs’s filthy lucre off of its hands like some kind of deranged Beltway Lady Macbeth. Much of whatever wrongdoing can be documented will be immune to prosecution because of the five-year statute of limitations that covers many crimes of that sort.
Why so long to prosecute? One theory is that it would have been unseemly for the Obama administration to do so after being propelled to the White House on a gusher of Wall Street money. Another theory is that Eric Holder and the gang are not very good at this, and it has therefore taken them a long time to put together the cases. That is, incidentally, Eric Holder’s story: “These are complex cases that require enormous amounts of effort to put together, but we are at a point — as you’ve seen, I think, recently — where the results of that difficult work is starting to bear fruit,” he told the Wall Street Journal.
For a point of comparison, take a look down the street from the Justice Department at the other end of policing Wall Street: the Securities and Exchange Commission. The SEC, long considered the best job option for finance types not quite smart enough to work on Wall Street, can’t keep its people. It has had three directors in less than a year. As the Wall Street Journal notes, four of its five division chiefs have left in the past year — “including the top SEC officials for trading and markets, corporation finance and enforcement” — along with four of the eleven regional directors, while four of the five heads of its specialized enforcement units have left since 2010. Three of the five SEC commissioners have departed since December.
“Longtime employees at the SEC say they can’t remember another time when so many high-ranking officials have come and gone,” the Journal says. “But the exits seem to be having little or no noticeable impact on the agency’s work, according to insiders.” Little or no noticeable impact — I would not be surprised if that were true, but there are two ways to read that statement.
People think of financial regulation as being like a fence: If we define the rules thus, then financial activity and innovation will stay inside the borders. But it is really more like a game of tag, albeit a game of tag played by the Jamaican Olympic relay team against People of Walmart. The regulators cannot keep up with innovation and often make things worse, while the prosecutors are held hostage by the political necessities of the White House.
What that means is this: We’ll probably see some charges filed against a few financial firms, and maybe even a little old-school frog-walking down Wall Street, which Occupy types, having returned to their fireplaces and billiards tables, will find satisfying. There will be some settlements, though I’ll be surprised if anybody hears a heavy steel door close behind him. It should be quite a show.
What it will not be is a solution to the problem of “too big to fail,” which was not solved by Dodd-Frank or by promises of no more bailouts and will not be solved by election-season show trials.