The President says he understands the frustration behind the Occupy Wall Street movement. That's nice. But the anger will keep growing as long as the government keeps handing out free passes instead of perp walks to bankers at serial corporate criminals like Citigroup.
The Administration is finally talking the talk, but without criminal investigations it's not walking the walk. Iit's still not too late. While the SEC's latest deal should outrage you, the Administration can makes things right with two decisive actions.
Get-Out-of-Jail Free Card
The SEC announced yesterday that Citigroup agreed to pay $285 million to settle charges that it misled (synonyms for that word include deceived; lied to; tricke and defrauded) investors in a mortgage securities deal, telling them it was a good investment when it knew otherwise and was secretly betting it would fail.
That's not just slimy. As the Financial Crisis Inquiry Commission found in other instances, that kind of behavior is also illegal.
Here are five reasons you should be outraged. Warning: If you have high blood pressure, you should probably stop reading:
1. Once again, nobody had to confess.
Forgiveness is noble, but it only if the offender asks for it. The Truth and Reconciliation Commissions in South Africa granted amnesty for many terrible crimes, for example - but only after the wrongdoers acknowledged their misdeeds and promised not to repeat them.
Yet once again bank criminals were allowed to walk without admitting anything! Common sense tells us nobody would agree to pay more than a quarter of a billion dollars unless did they'd done something very, very wrong. Yet once again the SEC has negotiated a settlement in which the perpetrator "neither admitted nor denied wrongdoing."
"Neither admitted nor denied"? Citigroup has danced this dance before:
When it was forced to buy back $7.3 billion in bonds in 2008 after deceiving investors into thinking these high-risk investments were low-risk, Citigroup "neither admitted nor denied wrongdoing."
When it was forced to pay $1.66 billion in 2008 over its Enron misdeeds Citigroup "neither admitted nor denied wrongdoing."
When Citigroup agreed to pay $2.6 billion over its "improper relationship" with the CEO of WorldCom during the scandals there, it "neither admitted nor denied wrongdoing."
When it was fined $275,000 in 2004 for recommending high-risk securities without fully disclosing that risk, it "neither admitted nor denied wrongdoing."
That's nearly $12 billion that Citi's agreed to fork over without ever admitting wrongdoing! If this bank's not doing very bad things its executives should be fired, because that means they're the worst negotiators in human history.
Citi's not the only one. Take JPMorgan Chase, which just took Citi's crown as "biggest bank in America":
When JPMorgan Chase paid $153 million in 2011 for deceiving investors it "neither admitted nor denied wrongdoing."
When Chase paid $25 million in 2010 over the sale of illegal unregistered securities in Florida, it "neither admitted nor denied wrongdoing."
When Chase agreed to pay $55 million in 2009 after banks "allegedly" misled investors into pouring money into a venture that had already failed, it "neither admitted nor denied wrongdoing."
Even when JPMorgan Chase agreed to a settlement worth nearly three quarters of a billion (that's "billion," with a "b") over some good old-fashioned, down-and-dirty bribery and corruption charges in Alabama it "neither admitted nor denied wrongdoing.
All the big boys have been allowed to walk away without apologizing, confessing, or doing time: Wells Fargo. Morgan Stanley. Credit Suisse. UBS. Goldman Sachs ... and many, many more. A rogue's gallery of bank crooks paid billions in settlements - "without admitting or denying wrongdoing."
Why else should you be outraged?
2. Once again the criminals won't pay for their crimes - you will.
Crimes don't commit themselves.The perpetrators didn't just escape jail time for these crimes. In most cases they got other people to pay for their sins.
It always happens: Bankers commit their misdeeds and are rewarded with fat salaries and even fatter bonuses. If their crimes come to light the settlements are usually paid by the bank itself. In the very rare cases when bank execs are fined for their misdeeds, they only pay a tiny fraction of what they've made from them. In all the other cases - the ones where millions or billions are paid out - the bill goes to everybody who owns shares in the bank.
Who are those shareholders? Some are high-net-worth investors - including many members of Congress, which helps explain a lot of recent history - but others are so-called "institutional investors" that include pension funds for ordinary working people. You may be one of them.
You're not just paying for their misdeeds because you live in the economy they ruined, or because you bailed them out when they screw up. You may also be paying their fines so the bankers who got rich by doing wrong don't have to pay - with their I'll-gotten money, or with their time.
3. Criminals who aren't punished commit more crimes.
No wonder the recidivism rate is so high among corporate offenders! Economists call it "moral hazard." The rest of us call it "injustice," "a raw deal," "a broken system of government," and "a sure-fire way to guarantee that the crimes keep happening." The modern history of our country's too-big-to-fail banks -- and the people who run them -- is a history of moral hazard. Time and time again they've admitted to criminal misdeeds, only to commit even more of them. That's human nature.
Now, I don't know about you, but all this "neither admit nor deny" business leaves me with the distinct impression that they're guilty as hell. If they're really innocent they should have their day in court - criminal court. A walk in an orange jumpsuit would be a small price to pay for vindication, don't you think?
That is, if they cared about vindication. Apparently they don't - and if there's one thing we should have learned from this long string of deals, it's that bankers who aren't punished keep breaking the law.
We need to hear a whole lot less "Let's reassure the financial sector" and a whole lot more "If you can't do the time don't do the crime."
4. Bank CEOs keep getting rich while misdeeds happen on their watch - and are still treated like respectable people.
The CEOs and other senior managers at these banks are either immoral or incompetent. Dear CEOs: If you colluded with the wrongdoers or looked the other way at their actions, you're immoral. If your employees keep committing crimes and you can't stop it, you're incompetent.
It's astonishing when you think about it: CEOs like Jamie Dimon and GE's Jeffrey Immelt run organizations that have broken the law over and over, yet they're still welcome in polite company and treated like wise elders by reporters and politicians.
Our society seems to have forgotten one emotion that serves a vital social function: Shame. Shame inhibits destructive behavior. It's time for shame to make a comeback.
It's time for criminal law to make a comeback, too. In the meantime, don't whine to me about being criticized, Jamie Dimon! That goes for the rest of you, too. Just tell us which it is, boys: Immoral or incompetent?
5. Citigroup was "conceived in sin" by government officials - some of whom got very rich there afterwards.
Citigroup should never have existed. Regulators and government officials smoothed the way for Citibank's merger with an insurance company, Traveler's, by assuring them that what remained of the Glass-Steagall Act would disappear long before they were required to spin off some assets as that law required. Leading the charge was Robert Rubin, who was Bill Clinton's Treasury Secretary at the time.
Rubin aggressively fought bank regulations of all kinds as Treasury Secretary, even as he was smoothing the way for the formation of Citigroup. Then he joined its Board of Directors as soon as he left office, also serving as "Senior Advisor." He eventually earned at least $50 million in cash and stock grants there. Rubin said nobody could've known things were going wrong. A Citigroup employee stated under oath that he "sent an email to Mr. Robert Rubin and three other members of Corporate Management ... (and) specifically warned about the extreme risks that existed within the Consumer Lending Group."
Rubin kept his money. (See "shame," above.)
In addition to its immoral behavior, Citigroup was incompetently managed. Its failure played a central part in the financial meltdown. Recently Peter Orszag, President Obama's Director of the Office of Management and Budget, joined Citigroup. Like Rubin, he made the move immediately upon leaving public service. Orszag's title is Vice Chairman of Global Banking, although he has no previous banking experience.
And people wonder why the 99% feel "frustrated."
That's not to say that Republicans are better, of course. They're much worse. They're even determined to undermine even the relatively mild reforms the Democrats passed last year. They keep making the insane argument that regulation is the cause of our problems, after a financial meltdown caused by de-regulation.
Not coincidentally, 24% of Mitt Romney's campaign funding has come from the banking sector.
But neither the President nor his party will be able to tap the public's outrage with words alone, especially after the events of recent history. Fortunately, they can take two steps - steps that should've been taken a long time ago - to earn the respect and loyalty of the frustrated 99-percenters.
First, investigate its crimes: The SEC deal settled civil charges over these securities. That presumably allows the Administration to open a criminal investigation. It should do so promptly. Justice demands it. And when it comes to "moral hazard," nothing sharpens a person's moral instinct like seeing a peer marched off in handcuffs. Start with Citigroup, then move on down the Street until you've bagged all of the wrongdoers.
Then break it up: It's not too late to protect the nation from a bank that is much too big, much too poorly managed, and much too predisposed to criminality to survive. Even a well-run Citigroup would pose a danger to the world's economy, and this one's a catastrophe that could explode at any moment. It's time to break it up. No ifs, no ands, no buts. Do it now.
Mr. President, Mr. Attorney General: The ball is in your court. The good news is there's a lot you can do - for your country, and for your own prospects in 2012. The 99% eagerly await your next move.
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow