A Big Wet Kiss for White Collar Crime

Here is a bit from an article on fraud by top CEOs by Willam Black. He asks a very good question:

Criminologists have long pointed out that accounting is the “weapon of choice” for financial firms. Moore objects to prosecuting the most destructive property crimes committed by elite white-collar criminals. Accounting control fraud drove the second phase of the S&L debacle. The first phase was interest rate risk and ultimately led to roughly $25 billion in losses. The Enron-era frauds prosecuted by the federal government were accounting control frauds. The current crisis was driven by the accounting control frauds – the largest nonprime lenders, Fannie, and Freddie. The officers that were prosecuted during the S&L debacle and the Enron-era frauds were not members of the “productive class.” No one destroyed more wealth, for purposes of personal greed, than these fraudulent elites. Their crimes and the harm they caused, however, pale in comparison to the accounting control frauds that drove the current crisis. That makes it all the more astonishing that not a single fraudulent senior officer at the major nonprime lenders, Fannie, or Freddie has been convicted. The shills for elite white-collar criminals have swept the field. The administration they constantly deride as socialist has continued the Bush administration’s policy of de facto decriminalization of accounting control fraud. Moore and Baker have, once more, proven Sutherland correct – we treat elite white-collar criminals in a way that bears no relationship to street criminals. We now bail them out after they loot and cause “their” banks to fail and change the accounting rules at their demand to hide their losses. We even invite them repeatedly to the White House to advise us on what policies we should follow. The anti-regulators got their wish – they took the regulatory cops off the beat. The banking regulatory agencies ceased making criminal referrals, the SEC ceased bringing even their wimpy consent actions against the massive accounting control frauds, and the Justice Department ceased prosecuting the accounting control frauds during the run up to the crisis. The results were multiple echo epidemics of fraud, a hyper-inflated bubble, and the Great Recession. If Baker and Moore think these fraudulent CEOs constitute the “productive class” – then capitalism was killed by the producers. The financial frauds, however, were not productive. They were weapons of mass financial destruction. Their fraudulent CEOs were motivated by the most banal of motivations that every major religion warns against – unlimited greed, ego, and a radical lack of empathy for their victims. The most pathetic figures in the crisis, however, are not the CEOs but their shills. Why aren’t the honest bankers leading the charge to prosecute their fraudulent rivals?

It appears to me that the US is like one of those mid-19th century towns in the American west where the bad guys have moved in, killed the sheriff, and are running the town. The fraudulent CEOs have "bought" the politicians and paid think tanks to spread manure in all directions so that everybody now "knows" that free enterprise is best and the free market never makes mistakes and governments are harmful and all regulation must stop (i.e. you shoot the sheriff so the guys in black hats can sit in the saloon and drink and peacefully plot the rape and pillage of the poor citizens of the town).

The great tragedy is that in 2008 Americans voted for "change you can believe in" and have gotten 4 more years of George Bush, a toned down, gentrified version of George Bush. Obama simply buys the Republican line and tries to "moderate" it before he sells it to the American people. The fact that he has continued the Bush deregulation of the banks and decriminalization of fraud is tragic.