Why It's Wrong When Wrongdoers Are Allowed to Admit No Wrongdoing
"The struggle of man against power is the struggle of memory against forgetting."
So wrote Milan Kundera in The Book of Laughter and Forgetting. It is one of my favorite quotes and it popped into my head as I was reading about last week's settlement between JPMorgan and the SEC in which the banking giant agreed to pay a $25 million penalty and cancel $647 million in fees owed by Alabama's Jefferson County as the result of a complicated derivatives deal that blew up in the county's face.
As part of the settlement, JPMorgan neither admitted nor denied wrongdoing -- despite ample evidence that it had engaged in plenty of wrongdoing. Things like paying off local officials with millions to win no-bid contracts worth billions and convincing county officials to switch from fixed-rate bonds to bonds hedged with risky derivatives -- a switch that has driven Jefferson County to the brink of bankruptcy. "We have been victimized by our creditors," said a county official.
JPMorgan released a statement that it was "pleased to have reached a settlement with the SEC," and acted as if it was practically a disinterested party: "The charges relate principally to municipal transactions that occurred six and seven years ago. JPMorgan has since discontinued that business, and the employees in question are no longer employed by the firm."
So no wrongdoing admitted, and time to move on to the next lucrative money-printing scheme. How tidy. This is what passes for justice on Wall Street these days. If you commit a petty crime and hammer out a plea bargain, you'll have to admit wrongdoing as part of the agreement. But put on a suit and commit a billion dollar crime and you won't even have to admit you did anything wrong. It'll be as if it never happened. Which, of course, makes it much more likely that it will happen again.
We saw the same dynamic played out earlier this year in the legal saga surrounding the $3.6 billion in bonuses that was awarded to Merrill Lynch executives just before the failing firm was acquired by Bank of America (with a lot of help from American taxpayers, who bailed out BofA with $45 billion).
It appears that Bank of America executives failed to inform their shareholders that, as part of the acquisition, they were going to give billions to the executives who had been at the helm while Merrill lost $27 billion in 2008. Had the shareholders been told, the news would more than likely have put a crimp in the hastily arranged deal.
Many thought the matter was closed back in August when the SEC reached a settlement with Bank of America in which the banking giant would pay a $33 million fine but -- you guessed it -- admit no wrongdoing.
Of course, lots of wrong was done in that case too -- something that was implicit in the bank's willingness to pay the multimillion-dollar fine. Specific people had made very specific decisions surrounding the Merrill Lynch bonuses -- including not informing their shareholders.
But, instead of going after them, regulators went after the company, gave it a minor ding to its bottom line, and were ready to forget the whole thing.
Last year, the total of amount of fines levied by the SEC was the lowest since the corporate scandals of 2002 led to stricter enforcement regulations. So while the financial system was on a fast track to near-collapse, the SEC was taking its hand off the brake. And the perpetrators of that near-collapse are being allowed to avoid accountability. When crimes are uncovered then resolved with no acknowledgment that a crime was ever committed, that's a recipe for anarchy -- not for a healthy democracy.
It's really not that complicated: if you do the crime, you do the time. But the people who run the show like to make it seem like it is very complicated -- all the better to obscure the simple moral principle of right and wrong. Why should it matter whether you commit your crimes in a fancy boardroom or on the street? If you were reaping the (often enormous) benefits of your crime, why don't you have to admit wrongdoing when you're caught, and pay a commensurate -- not a token -- penalty?
As it happens, there are some heroes out there who have noticed that the ambiguous way our laws are being enforced has diverged from the unambiguous morality the laws are based on.
In the Bank of America case, the hero is U.S. District Court Judge Jed Rakoff. Instead of rubber-stamping the BofA/SEC settlement as everybody expected, Judge Rakoff refused to sign off on the deal, which he called a breach of "justice and morality" that "suggests a rather cynical relationship between the parties."
And Judge Rakoff demanded to know who exactly were the executives who knew about the bonuses and decided not to disclose them. Instead of a faceless company, shouldn't the culpability, Rakoff asked at a hearing, be on "the individuals who were responsible?"
But rather than naming those responsible, Bank of America claimed it was all the fault of its lawyers -- an excuse that, shockingly, the SEC bought, saying the fact that the bank's executives had relied on legal advice would present "substantial obstacles" to prosecution.
Judge Rakoff wasn't buying it -- he saw the slippery slope that thinking would lead to: "It would seem that all a corporate officer who has produced a false proxy statement need offer by way of defense is that he or she relied on counsel," he said.
Rakoff has a history of actually applying the law. Back in 2003, he rejected a settlement with WorldCom because the fine was too low.
When he first became a judge, prosecution used to focus more on individuals instead of companies. "The feeling then," he said, "was if a crime had been committed, it was important to discover who the persons were who made the wrongful decisions."
Judge Rakoff's display of spine appears to have rubbed off on the SEC, which now says it will aggressively pursue its case, taking Bank of America to trial. And there have been other ripple effects: after initially stonewalling a congressional committee looking into the Merrill acquisition, the bank agreed in September to hand over some, but not all, of the documents the committee had requested. And in October, it agreed to turn over to the SEC and the New York Attorney General's office documents revealing the legal advice it received regarding the Merrill deal -- an unusual waiving of attorney-client privilege. What's more, Brian Moynihan, the bank's onetime general counsel and a contender to succeed departing CEO Ken Lewis, will testify before the House Oversight Committee next week about his role in the Merrill takeover.
Of course, it's not just our "too big to fail" banks that have been allowed to do wrong without having to admit to any wrongdoing. The pharmaceutical industry and health insurance companies have been doing the "pay the fine but admit nothing" dance for years -- chalking up the millions (and sometimes billions) they have been fined as the cost of doing business.
But with the banking, drug, and insurance industries all finding themselves at a crossroads, now is a very good time to revoke the Get Out of Jail Free card those at the helm of these companies have been given for far too long.
We all know that there was a great deal of wrongdoing that led to the near-collapse of our financial system and to our badly broken health care system. The first step to reforming each of them is to acknowledge that wrongdoing -- and to seek the real punishment of the wrongdoers.
Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff
Difficult times need wise men to tell difficult truths. And, for many years, Buffett has done just that. So it was deeply distressing to listen to him last week joining in the economic victory lap the Obama administration is taking.
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I alway thought that creating crimes so large that the long arm of the law couldn't get it's long arm around it was a Karl Rove political strategy. It seems to have rubbed off on the bankers.
I'm gratified that you're trying to hole members of the plutocracy accountable. It sounds like antique revolutionary talk, but the only way to de-enthrone these financial barons is to hold them accountable in a criminal court.
Brought To You By
The Party Of No.
No Oversight
No Accountability
No Responsibility
These Bankers and their policies are criminal. These are classic flim flam tactics. You know there were plenty of kings and other potentates the enjoyed pedophilia because they were kings and no one was allowed to find fault with their behavior or discuss the suffering they caused. We have the same kind of toddler-ish Elite breaking and smashing without penalty.
The Catholic Church tortured and executed more than 50,000,000, men and women . These people were slaughtered for the crime of heresy charged against them by Papal Rome during the 605 years of the Inquisition. The gene for independence and ability to stand up to authority has been "cleansed" right out of the population by sociopaths such as these since the dawn of history. These bankers are exercising an age old tradition, total domination and obliteration by a weakened and threatened people.
Can we stop it or just be forced to listen to oppressive contempt from those that have no trouble destroying anyone and anything for what they want in this world??
When those with power are allowed to commit wrongdoing, and do not have to admit it, then it promotes a culture of corruption.
And there is a glaring contradiction from Wall Street when they say they deserve such huge payouts.
They hold themselves to highest standards of income, but at the same time they insist upon justifying the lowest standards of professional competence and ethics upon themselves.
It is hard to believe that there weren't "winks and nods" when highly trained, astronomically paid professionals rated mortgage-backed bonds as "low-risk" and then sold them to investors during the real estate bubble. A complete neophyte-lay person may not have forseen what would inevitably happen when faced with a graph showing the insane rate of rising real estate prices, knowing that middle class incomes were not rising at the same rate, and that the interest rates of many of these mortgage backed bonds where rigged to rise years later. However, Wall Street professionals neck deep in the details, who say that they deserve their astronomical incomes, cannot claim the excuse that it was a surprise. We hold doctors, who are paid much less, to much higher standards.
Face it, there is a culture of corruption & deception on Wall Street. Preceding the crisis and perhaps during the bailout, financial press failed to aggressively hold the "superstars" under skeptical scrutiny. The market turned into a black box, where the statements of salesmen & hucksters, were regarded as truth.
Power corrupts, absolute power corrupts absolutely" . Breaking up near monopolies has been done in this country, look at Ma Bell. The same can be done with any institution that has gotten so large it poses a threat to the security of the nation. Splitting monolithic organizations up creates more competition, which is good for the consumer and for the nation, it eliminates the to large to fail scenario.
This brings me to government run healthcare. Absolute power corrupts absolutely. This truism couldn't be any more apt in application to what our government is trying to do. Pundits get so caught up in their belief system that they don't reflect on repercussions. Wanting the government to get larger, more powerful, only invites the corruption and inefficiencies that necessarily culminates from the power granted to it. It is completely irresponsible to ignore that medicare is over 10x the cost that was proposed, and many times even based on inflation. The current house bill has per capita cost at 7300, more than we're currently paying. Odd when the premise was to reduce our healthcare costs, this is a travesty. The corruption is only beginning. So much focus on bad insurance companies, and zero focus on bad grand sized government.
Gee its wrong to not be accountable for one's wrong deeds. Unless one is progressive, which is proved time and time again on this website. Yet the progressive complains and ignores that, the emperor wears no clothes.
To admit wrongdoing one must be able to differentiate between right and wrong. The executerrorists in question cannot do this. Corporations have no soul and are totally amoral. Consequently those who lead these corporations are sociopathic to the point of being able to fire thousands of workers and still be able to sleep well at night. Right and wrong doesn't seem to enter into their thought process. After all if they had to concern themselves with right and wrong, they wouldn't be as effective at feeding their greed. This is why we need government regulation. This is why the courts should mete out the corporate death penalty. This is why the too big to fail companies must be broken up. This is why the people who lead these companies should be exiled to a penal colony in Greenland and forbidden to engage in any business activity for the rest of their lives.
Ant this same argument could be said for the govenment instead of corporations. You have faith in government? And that is proven, where? Or when? So where is the "soul" in government or it's regulation?
What about the wrongdoers in the house, senate and white house ?
What about Phil Gramm, Jim Leach and Thomas Bliley who helped repealed Glass-Steagall ? Have they admitted wrongdoing ? What about President Clinton ? Has he apologized for signing the Gramm-Leach-Bliley bill?
What about Alan Greenspan ? Has he apologized for being the architect of the credit bubble ? What about President Bush and Hank Paulson for letting the credit bubble grow and for having bailed out their failed buddies in the banking industry ? What about Ben Bernanke for having printed over a trillion dollars and exposed us to the risk of hyperinflation ?
What about Barney Frank and Chris Dodd who kept covering up the failures of Fannie and Freddie ? Have they admitted to any wrongdoing ?
While this might be a worthwhile topic for a different article, it has no relevance to the discussion at hand.
The subject is wrong done and not accounted for, and what part of that did sensasord miss?
Great article!
There's a big difference between a " Free Market" and an outright Free For All
How amusing that you can plunder your way to the top at the expense of everyone below
and cause catastrophic failure with no accountability.
The financial world seems to operate on a no fault mind set
avoiding legal jeopardy by simply claiming incompetence.
If you or I are behind the wheel of a car and we make a mistake
and someone is harmed by this momentary accidental incompetence, you are still
at fault and liable for the damages.
These executives should be charged with criminal negligence
and have every last bit of their assets seized.
Kinda like how toddlers can get away with pretty much anything without penalty. They are above the law.
The reason these Big Corp/Banks, get away with this is because they can. No one has really challenged them on what they do. Power honey, that's the name of this game, don't ask and we won't tell. Even, after the President/Congress called out, the banks on their big bonus giving to their CEO's, they thought after about four months everyone had amnesia, and began the practice all over again, once again they do this because they can, and they have been practicing this way so long they think it's right to do, if you continue doing wrong you will start thinking it's right to do, especially if you continue to get away with it. Clearly, these (MEN) are no different than a crook they just operate, with legal contracts. Today, the name of the game is, I can do whatever I want and you better not say anything about it, and that is what we've done said nothing, while we deposit our monies in their banks and then in return they say, NO! to a small loan, that you have requested, now there is something seriously wrong with that picture. These are some times that deceit is running rapid amongst us, & it's a disgrace to the human race, that Americans don't know where their gonna live, can't find a job, robbing peter to pay paul & banks have been given billions to help people & they ain't helping nobody but themselves, and their CEO's.
It seems to me that ultimately the wrongdoers reside in Congress and the Judicial system.
It is Congress that failed to enact responsible regulatory statutes and repealed some that
were needed and quite sound.
Thus far the courts haven't come up with much that was "illegal." Immoral, yes. But we have
to direct our desire for accountability to those who made it possible for such behavior to
be legal, and that means our lawmakers are the ones deserving of our wrath, not bankers
or insurance companies or stock brokers. But the ones who enabled this kind of behavior
by abdicating their responsibility to legislate responsibly.
So what else is new in the corporatetocracy that is known as the U.S. of A.?
As always ... great read !
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