Forgery. Perjury. Investor fraud. Bribery. Money laundering. The body of evidence against individuals at the nation's biggest banks is overwhelming. Nothing speaks louder about the banks' guilt than this evidence -- nothing, that is, except the billions they've paid to settle the charges.
The Administration reacted indignantly this week to suggestions it's still slow-walking its investigation. And then, despite all this evidence, the Treasury Secretary of the United States proclaimed that no laws had been broken. And the White House wonders why its word is no longer enough?
A source in the office of a key figure in the investigation has denied a new story that they've ruled out criminal prosecutions. But the burden of proof has shifted. Nothing will convince the public now except action.
Whether it's JPMorgan Chase settling bribery charges in Alabama, Wells Fargo settling charges of laundering drug-cartel money in Mexico, or the nation's five largest banks buying their way out of widespread foreclosure fraud and tax evasion, never in history has so much evidence led to so little action. Investigators pinpointed the fraudulent activity of individual accountants in GE Capital's settlement with the SEC, only to be dumbfounded to discover that no criminal indictments were handed down.
So it was nothing short of astonishing to hear the Secretary of the Treasury assert yesterday that no crimes were committed by America's banks, saying that "most financial crises are caused by a mix of stupidity and greed and recklessness and risk-taking and hope" and adding "you can't legislate away stupidity and risk-taking and greed and recklessness."
That's a straw-man argument, since nobody has suggested outlawing character traits. The Administration's critics are pointing to a mound of evidence implicating bankers in criminal activity and asking the simple question: Where are the prosecutions?
Geithner was doubling down on an assertion his boss made last December, when President Obama told 60 Minutes that "Some of the most damaging behavior on Wall Street -- in some cases some of the least ethical behavior on Wall Street -- wasn't illegal."
Deliberately or not, that sent a message to bankers that they could stop worrying about indictments -- that is, if they ever had worried. Why would they? There's been no investigation, no grilling, no subpoenaing of bank executives' emails or phone records. And as far back as 2010, Eric Holder and his Justice Department were trying to pass off long-standing investigations as part of a major assault against financial fraud called "Operation Blind Trust."
The DoJ's claims were quickly debunked and "Blind Trust" was shown to be nothing more than a deception which a Bloomberg columnist said used "trumped-up numbers." The Columbia Journalism Review summed up their recap of "Blind Trust" coverage with the headline, "Obama Administration's Financial Fraud Task Force Stunt Misfires."
Burden of Proof
But we were told those days are over. Now the President's really cracking down on Wall Street, we were told. In the face of widespread criticism for his proposed foreclosure fraud settlement with five top banks, the President eventually accompanied that deal with a promise of tougher enforcement. He appointed New York State Attorney General Eric Schneiderman, who had been pursuing banks and resisting previous deals, to his previously-lethargic mortgage fraud group.
"The mortgage fraud task force I announced in my State of the Union address retains its full authority to aggressively investigate the packaging and selling of risky mortgages that led to this crisis," the President said on February 9. "Working closely with state attorneys general, we're going to keep at it until we hold those who broke the law fully accountable."
But then there were stories that the task force's proposed staff, whose proposed numbers were already absurdly low when compared to those used to pursue criminal behavior under Reagan after the much smaller savings and loan scandal of the 1980s, hadn't even been hired.
The Administration responded swiftly. Unnamed Justice Department employees joined Schneiderman's press secretary in telling The Nation's George Zornick that the task force's five co-chairs are in "constant communication" and "meet regularly." Fifty attorneys and other employees were already working on the project, Zornick was told. (It was not made clear whether they were assigned to the task force full-time.)
Yesterday Zornick published a piece quoting former Democratic Rep. Brad Miller, an outspoken advocate for bank investigations, as saying he was strung along by the task force after being led to believe he was a leading candidate by Schneiderman's office. What's more, he made the explosive suggestion that, in Zornick's words, "the working group was afraid of Wall Street."
Miller told Zornick that he knew "Republicans were watching the work of the task force very closely and very critically, and that they would oppose my playing that role." Most explosively, he said he had been told that "People being indicted and looking at the possibility of prison sentences -- they were saying they did not expect any of that. They expect civil litigation or civil enforcement but not criminal prosecution."
If the task force had abandoned any thoughts of criminal prosecution with Schneiderman's assent, it would be a political and legal bombshell. But a source in Schneiderman's office who said he was Miller's point of contact denies that suggestion -- "vehemently," he added.
The source said Miller was a candidate for the job, but that some felt he lacked prosecutorial experience. In addition, I was told, concerns were expressed about appointing someone with a political background. "That would give Republicans another avenue of attack against the whole task force," the source said. (The Republicans have already been harrassing the group at every opportunity.) Schneiderman's office recognizes that statutes of limitation present a real problem.
"But abandon prosecutions altogether," the source added, "and let the word get out that everybody's off the hook? How silly would that be?"
The real problem isn't that they haven't appointed the right Executive Director for the task force,although that's extremely important. The real problem is that the Administration didn't take more aggressive action in 2009 or 2010 to investigate criminal behavior on Wall Street. Now the wrongdoers -- and their political sympathizers -- are trying to run out the clock.
The real problem is that the senior officials in the same Administration are making public proclamations about the innocence of people who should, by all rights, be suspects in a criminal investigation.
The real problem isn't that somebody's lust for vengeance isn't being fulfilled. It's not even the fact that senior officials find it understandably difficult to contemplate criminal investigations of people they've known for years as colleagues, friends... and yes, as donors.
The real problem is this: As long as bankers know they won't be prosecuted for committing crimes they'll commit them again. Officials in the Justice Department and elsewhere privately express fears that it will be difficult to obtain convictions after so much time has passed, or in cases where intent is difficult to prove.
But they don't even look like they're trying. Comments like Mr. Geithner's only add to the perception that bankers have a free pass to commit crimes without fear of prosecution. That's not just an injustice. It's also a threat to our economic security.
This perception can only be changed if the Administration moves aggressively to hire and staff this Task Force with the best people and best managers possible. The public needs to see action, and it needs to see it now.