Holding the Scorpions on the Street Accountable

Or, the Vampire Squids, as Matt Taibbi calls them



I know that the following quotes will seem a bit out of character for the nature of this blog, but muckraking journalist Matt Taibbi makes a blunt and important point in his Rolling Stone article Why Isn't Wall Street in Jail? Right off the bat he quotes congressional officials on how useless it has been for the SEC to try to police Wall Street, even in the wake of the 2008 economic meltdown:

"Everything's f____ed up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

I put down my notebook. "Just that?"

"That's right," he said, signaling to the waitress for the check. "Everything's f____ed up, and nobody goes to jail. You can end the piece right there..."

"You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

In her book Pivotal Decade: How the United States Traded Factories for Finance in the Seventies, Judith Stein describes the shift that began in the late 1970s when America started shedding its manufacturing jobs and shifted to an economy based on finance and consumption. It was deemed at the time to be more important to fight inflation than unemployment, but in her view it was a failed strategy that has increased income inequality, weakened the nation, and left us in a more precarious position than before.

As the controversy in Wisconsin drags on, much of the anti-union sentiment coming from the right reminds me of what I was hearing back in the 1970s. In the comments posted on the American Thinker article Why I Changed My Mind About Unions I found a litany of the kind of stories I was well familiar with hearing in those days. In fact, I'd venture to guess that most of the union horror stories in those comments were from the 1970s. They'd almost have to be, considering that less than 7% of the private sector workforce is unionized today.

I have to admit, I saw some of this myself. When I was in college during the 1970s, I worked a landscaping job on campus during the summers. The guys on the full-time landscaping crew could be interesting characters, to say the least. One guy, almost perpetually high, used to tell me about his union days working in the shipbuilding yards down South. The union-management relationship he described to me sounded contentious, if not outright vicious. What struck me was that he saw no apparent irony or contradiction between his stories about finding a secret place to sleep off hangovers on the ships they were building, and his stories about the petty-minded bosses "who wanted to take food out of the mouths of my kids." I wasn't shocked that the shipbuilding industry collpased in the USA as a result, and I told him so.

At any rate, 30-35 years ago? That's a long time. Did American union workers get fat and lazy by the time the 1970s came along? I suppose some did, but that is a far cry from saying that the unions, that people bled and died to form, by the way, were unnecessary then and are unnecessary now. Anyone who agrees that:

- Greed is associated with our fallen human nature and can affect any of us, whatever our state in life happens to be, and...
- Any human endeavor is best served by a healthy system of checks and balances ...

...should be able to see this. In any case, it's a mystery to me how so many people can be resentful over the size of a unionized teacher's pension, but are non-plussed over what gets raked in by a Lloyd Blankfein, or the rest of that den of thieves on Wall Street. I'm reminded of a quote by the late columnist Molly Ivins

The trouble with blaming powerless people is that although it's not nearly as scary as blaming the powerful, it does miss the point.

Not only does it miss the point, it's increasingly absurd. Through the paucity of their numbers combined with the pressures of globalization, unions have long ago been rendered largely powerless and toothless. Nevertheless, the right still uses them as their favorite whipping boys. They will tell you that the GM bailout was done at the behest of unions. They will even tell you that the SEIU was the main beneficiary of the Supreme Court's Citizen's United decision.

Rick Santelli and the guys on the trading floor at the Chicago Board of Trade want to talk about moral hazard... Sure. We can put some blame on people who got into houses over their heads and didn't read the fine print on their mortgage agreements. Shame on them. But let's put bigger blame on people who should have known better, people with MBAs who knew that these loans were crap but gave them AAA ratings and collateralized them and sold them as bogus assets anyway.

As far as union money goes, they can blame the people who work cleaning the bathrooms at night in our office buildings for all of this if they want to. After all, the Tea Party is a revolt of the "haves" against the "have nots." They can try to make the case that the unions have the same kind of lobbying clout as the Business Roundtable and the Chamber of Commerce in our political process, but I don't think rational people will think it's very convincing.

Then again, what does rationality have to do with it? Clearly, not much. It's hard to let go of some of our most cherished myths about America and the Horatio Alger stories we adore.

If we feel a need to assign blame, we can see that it has been next to impossible to assign blame where it properly belongs. Matt Taibbi, author of the recent book Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, tries gamely to rectify this as he describes in Why Isn't Wall Street in Jail? the chummy, revolving door relationship between the Wall Street investment banks and the agencies that are supposed to be overseeing them.

The system is skewed by the irrepressible pull of riches and power. If talent rises in the SEC or the Justice Department, it sooner or later jumps ship for those fat NBA contracts. Or, conversely, graduates of the big corporate firms take sabbaticals from their rich lifestyles to slum it in government service for a year or two. Many of those appointments are inevitably hand-picked by lifelong stooges for Wall Street like Chuck Schumer, who has accepted $14.6 million in campaign contributions from Goldman Sachs, Morgan Stanley and other major players in the finance industry, along with their corporate lawyers.

As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff. "The betrayal that this represents by Obama to everybody is just — we're not ready to believe it," says Budde, a classmate of the president from their Columbia days. "He's really f____ing us over like that? Really? That's really a JP Morgan guy, really?"

Which is not to say that the Obama era has meant an end to law enforcement. On the contrary: In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers — of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. Since 2007, felony immigration prosecutions along the Mexican border have surged 77 percent; nonfelony prosecutions by 259 percent. In Ohio last month, a single mother was caught lying about where she lived to put her kids into a better school district; the judge in the case tried to sentence her to 10 days in jail for fraud, declaring that letting her go free would "demean the seriousness" of the offenses.

So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime. Prison is too harsh. Get them to say they're sorry, and move on. Oh, wait — let's not even make them say they're sorry. That's too mean; let's just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don't make them pay it out of their own pockets, and don't ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What's next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?

The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.