Fraud caused the Great Depression and it has caused the current financial crisis. But fraud is not not being prosecuted, and so it will occur again and again, and prevent a sustainable economic recovery.
Numerous economists have been saying this for years. As I pointed out in March:Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals - and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future. Indeed, William Black notes that we've known of this dynamic for "hundreds of years".Now mainstream journalists are starting to catch on.
And Frank Rich reports in a much-discussed piece in the New Yorker:What haunts the Obama administration is what still haunts the country: the stunning lack of accountability for the greed and misdeeds that brought America to its gravest financial crisis since the Great Depression. There has been no legal, moral, or financial reckoning for the most powerful wrongdoers. Nor have there been meaningful reforms that might prevent a repeat catastrophe. Time may heal most wounds, but not these. Chronic unemployment remains a constant, painful reminder of the havoc inflicted on the bust’s innocent victims. As the ghost of Hamlet’s father might have it, America will be stalked by its foul and unresolved crimes until they “are burnt and purged away.”
After the 1929 crash, and thanks in part to the legendary Ferdinand Pecora’s fierce thirties Senate hearings, America gained a Securities and Exchange Commission, the Public Utility Holding Company Act, and the Glass-Steagall Act to forestall a rerun. After the savings-and-loan debacle of the eighties, some 800 miscreants went to jail. But those who ran the central financial institutions of our fiasco escaped culpability (as did most of the institutions). As the indefatigable Matt Taibbi has tabulated, law enforcement on Obama’s watch rounded up 393,000 illegal immigrants last year and zero bankers. The Justice Department’s ballyhooed Operation Broken Trust has broken still more trust by chasing mainly low-echelon, one-off Madoff wannabes.
Those in executive suites at the top of that chain have long since fled the scene with the proceeds, while bleeding shareholders, investors, homeowners, and cashiered employees were left with the bills. The weak Dodd-Frank financial-reform law that rose from the ruins remains largely inoperative ....
Obama arrives at his reelection campaign not merely with a weak performance on Wall Street crime enforcement and reform but also with a scattershot record (at best) of focusing on the main concern of Main Street: joblessness. One is a consequence of the other. His failure to push back against the financial sector, sparing it any responsibility for the economy it tanked, empowered it to roll over his agenda with its own.
Unless and until there’s a purging of the crimes that brought our president to his unlikely Inauguration Day, much more in America than the second term of his administration will be at stake.
Saturday, July 9, 2011
The Modern Media Wakes Up and Notices the Economy
From a post on the Washington's Blog: