Widespread Lawlessness in the US

From a post by Barry Ritholtz in his The Big Picture blog:

During George W. Bush’s reign of error, the Justice Department looked the other way at all manner of fraud, but most especially Securities fraud on Wall Street. During his presidency, it plummeted 87%. Other forms of fraud prosecutions also fell. My working assumption was this was specific to W and his unique brand of incompetency.

As it turns out, that was the wrong assessment. After two years in office, President Barrack Obama is no better when it comes to “corporate, securities and bank fraud” than his hapless predecessor:

“Prosecutions of three categories of crime that could be linked to the causes of the crisis — corporate, securities and bank fraud — declined last fiscal year [2010] by 39 percent from 2003, the period after the accounting scandals at Enron Corp. and WorldCom Inc., Justice Department records show.”

Which raises the question: Why has the USAG dropped the ball ?

Some of it involves staffing — after 9/11, many FBI agents were reassigned to anti-terror work. But that should be under a different budget, and if this was a priority, the head of the Justice department should be clamoring for more fraud investigators and those who have forensic skills.

But 9/11 is a lame excuse for a dearth of successful fraud prosecutions a decade later.

I see three big bottlenecks for Fraud prosecutions:

1) Failure to attack the problem as a systemic issue: If it were up to me, I would be using RICO statutes to attack origination fraud and foreclosure fraud.

2) Conflict of interests: Uncle Sam still has huge stakes in banks and insurers. That reduces the incentives to find wrongdoing (thereby hurting your taxpayer funded portfolio)

3) Lobbying/Campaign donations from financials: Congress remains a wholly owned subsidiary of Wall Street. Despite rules prohibiting it, there has been increased pressure on DOJ to not bring actions by Congress-critters.

Thus,we have seen little motion from DOJ against the banksters.

I continue to hold the position that the best hope for obtaining any form of post-crisis Justice will come from the State AGs . . .

I understand why Bush failed to pursue the criminals. The Republicans are the party of corporate greed and corruption. But I don't understand why Obama hasn't gone after the criminals. The only reason I can see is that the biggest donors to Obama's campaign were from Wall Street. But that simply says that Obama is corrupt, the Democrats are corrupt, and that politics in the US is back to what it was in the Gilded Age when the rich bought and sold politicians like everything else they owned during turn of the century US.