Last night during the State of the Union, President Obama, while calling for tough financial reform said, he "was not interested in punishing the banks." Besides being an awful sound bite, it misses the point that there are literally thousands of crimes the banks have committed that that have gone unpunished.
The FBI warned of 12,000 cases of mortgage fraud being committed in 2004 alone, with banks initiating 80% of the fraud. The FBI repeatedly warned throughout the mid 2000's of the most massive wave of financial crimes being committed since the Savings and Loans Scandals during the 1980's.
Yet, the Savings and Loans scandal saw over a thousand industry insiders go to jail, while the current crisis has only seen a few crooks like Bernie Madoff go to jail. None of the big fish, who were the CEOs at the major banks who encouraged such "epidemic fraud," as the FBI labeled it, have been put in jail.
What the president should have done tonight, in addition to calling for tough financial reform, was to call for a special task force armed with thousands of investigators to look into crimes committed by the big banks.
A step like this would have really scared Wall Street into changing its ways. The tough financial reform that President Obama has proposed will protect the American people, but eventually Wall Street will find loopholes or buy enough influence to create them. The financial lobby already is spending $344 million in the first nine months of 2009 on lobbying .
We have to make the punishment for financial fraud greater than the rewards the multimillion bonus culture of Wall Street has to offer. We need to throw some guys into jail in order to scare these Wall Street guys in to behaving in the interests of the American people.
Not only is this a smart step in terms of protecting our economy, it's a smart politics. Everybody hates the banks, and yet both parties are doing more about Wall Street than Main Street. If President Obama had called for a massive investigation of Wall Street employing thousands of investigations, there wouldn't be a single teabagger in the country that wouldn't agree with him.
When President Obama gets up and says he doesn't want to punish the banks, he makes Americans raging against the banks think he isn't as angry with the banks as they are. As a result of such weak sounding rhetoric, they ignore the fact that his calls for financial reform are the toughest offered since the Great Depression.
Most Americans lack the financial literacy to know how bold the Consumer Financial Protection Agency, reinstating portions of Glass-Steagall, or reforming derivatives trading really is. Most Americans, though, understand accountability and punishing the banksters that they perceived as robbing them out of their savings, their jobs, and quite often their homes.
President Obama shouldn't allow rhetoric towards the banks meant to convey bipartisanship to undercut the boldness of his call for bold financial reform. President Obama needs to demonstrate how bold he truly is by holding Wall Street accountable for its crimes.