"A court martial, under orders, has just dared to acquit a certain Esterhazy, a supreme insult to all truth and justice. And now the image of France is sullied by this filth, and history shall record that it was under your presidency that this crime against society was committed."
Émile François Zola
How far above the law can Banks and their management go before they will be brought to account, besides a fine that is considered a cost of doing business?
It's a good question asked in the most straight faced, almost naively innocent, manner by Senator Elizabeth Warren.
Apparently amongst the Washington bureaucrats, with regard to any indictments and prosecution of financial matter 'the buck stops' with Eric Holder and his Justice Department. Without that tool, the regulators can only levy civil fines, although often those fines are only wristslaps.
And the other day Mr. Attorney General Holder said that considerations other than criminality, including instances of brazen and repeated offenses, inhibit the Justice Department from doing their jobs in prosecuting financial crimes.
Those considerations are the importance of that institution to the economy and the systemic threat that a loss of confidence might provoke. In other words, size and power, and the fear of the consequences of enforcing the existing laws, much less reform, are at the heart of the Administration's policy towards prosecuting significant financial crimes at the highest levels. And that policy sets the tone for the economy, and the market's attitudes towards regulation and reform.
But since Eric Holder is Obama's personal representative, almost certainly acting in consultation on financial matters with the Treasury Secretary, the offensive corruption in the financial sector is the result of the President's policies. That is also known as moral hazard. And at this point he has no one else to blame.
And so Senator Warren might as well ask: "Mr. President, to what level of criminality must a Bank, and its management, rise before you would be willing to allow your Justice Department to indict and prosecute it? And as an aside, why are you so zealous in prosecuting whistleblowers and reformers, but so tolerant of even extreme examples of white collar financial crime that abets unrelated, non-financial felonies?"
It is doubtful that the mainstream Republicans and Democrats will ever bring anyone to account, because they are as, or even more, complicit in this web of corruption, having been given enormous amounts of money by the Banks in speaking fees and campaign contributions, with the promise of greater amounts for consulting after their terms in office.
And there it is: the credibility trap. Justice for some. However one wishes to rationalize it, but always in order to preserve it.
Senator Warren may as well have asked, like the childlike innocent, "Why is the Emperor naked?"
C'est la mode du temps, cherie, c'est la mode.
"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.
The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.
And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.
The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious, organized hypocrisy.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery."
Treasury and Fed Officials Prevaricate Before Elizabeth Warren - Yves Smith
Failure to Prosecute Is Killing the Economy - Washington's Blog
Drug Possession Warrants Jail Time, But Laundering Billions of Drug Money Doesn't? - Raw Story