Elizabeth Warren: What Level of Criminality Will It Take to Shut Down a Bank, (Mr. President)?

"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."

Related:

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

Gold Daily and Silver Weekly Charts - A Jekyll & Hyde Market - SP/Gold Ratio

They said on financial TV today that "Bernanke is in control of this market."  Europe does not matter, and the dollar will provide its faithful servants with permanent prosperity.

Stress test results for the Big Banks will be coming.

This is a Jekyll/Hyde market, with Hyde exhibiting complacency, greed, and a brutal arrogance.   But occasionally the market reverts to a timid Jekyll driven primarily by self-loathing and a wanton fear.

Let's see what pops out of the box tomorrow.

The SP/Gold ratio is updated in the last chart.

SP 500 and NDX Futures Daily Charts - Better Than Blue Skies

The Street is looking for a 'better than expected' Jobs Report tomorrow and a tick down in unemployment.

The Middle Class: Death By a Thousand Cuts - Is Nothing Sacred?

"The corporate right and the political right declared class warfare on working people a quarter of a century ago and they've won... Take the paradox of Rush Limbaugh, ensconced in a Palm Beach mansion massaging the resentments across the country of white-knuckled wage earners, who are barely making ends meet in no small part because of the corporate and ideological forces for whom Rush has been a hero."

Bill Moyers


"The escalation of the class war against the poor and the working class is intense. More and more working people are beaten down. They are world-weary. They are into self-medication. They are turning on each other. They are scapegoating the most vulnerable rather than confronting the most powerful. It is a profoundly human response to panic and catastrophe. I thought Barack Obama could have provided some way out. But he lacks backbone.

Can you imagine if Barack Obama had taken office and deliberately educated and taught the American people about the nature of the financial catastrophe and what greed was really taking place? If he had told us what kind of mechanisms of accountability needed to be in place, if he had focused on homeowners rather than investment banks for bailouts and engaged in massive job creation he could have nipped in the bud the right-wing populism of the tea party folk. The tea party folk are right when they say the government is corrupt. It is corrupt. Big business and banks have taken over government and corrupted it in deep ways.

We have got to attempt to tell the truth, and that truth is painful. It is a truth that is against the thick lies of the mainstream. In telling that truth we become so maladjusted to the prevailing injustice that the Democratic Party, more and more, is not just milquetoast and spineless, as it was before, but thoroughly complicitous with some of the worst things in the American empire."

Cornel West


"Politicians are the public face of corporate power. They are corporate employees. Their personal narratives, their promises, their rhetoric and their idiosyncrasies are meaningless. And that, perhaps, is why the cost of the two presidential campaigns is estimated to reach an obscene $2.5 billion. The corporate state does not produce a product that is different. It produces brands that are different. And brands cost a lot of money to sell...

Unfettered capitalism is a revolutionary force which turns everything into a commodity. Human beings become commodities, the natural world becomes a commodity, that you exploit until exhaustion or collapse...

You can dismiss those of us who will in protest vote for a third-party candidate and invest our time and energy in acts of civil disobedience. You can pride yourself on being practical. You can swallow the false argument of the lesser of two evils.

But ask yourself, once this nightmare starts kicking in, who the real sucker is."

Chris Hedges


"The most sacred of the duties of government is to do equal and impartial justice to all its citizens.”

Thomas Jefferson

Nihilne sanctum est?

Politicians from both sides of the aisle will swear pious oaths to protect and foster the well being of the middle class.  They will say that their policies and proposals are all designed for its betterment.  And yet the state of the middle class continues to dwindle into despair and disrepair. Why is this?

It is not because of the predominance of a right or left ideology, of taxation and deficits and austerity. It is not because of the re-emergence of a perversion of the gospel, in the predestination of prosperity. We have seen all this before. It is not because in our comfort we have lost the sense of the imperative of common cause.

It is because of the overwhelming corruption of power, and of the cynical amorality of thoroughly modern political managers who worship power and personal wealth as ends unto themselves.   They distract the people with artificially divisive social issues and crises, while robbing them blind.

It is driven by the allure of the cartels, monopolies, and  monied interests, and their corrupt political bargains.  It is a child of the subornation of perjury on a massive scale. It is the unscrupulous servility to power of those who have sworn to uphold and protect the law.   What is truth?  Whatever suits us, whatever we say it is, by whoever has the power and the craft to define 'we.'  It is not the triumph of evil so much as the absence of any sense of the good, of honor, honesty, and of simple common decency.

And it is marked by the daily subverting of the law as a matter of convenience and comfort to the insatiable few, and the cravenness of their enablers, driven by personal ambition, ignorance, and fear.  It is the will to power, the elevation of the ascendant self and the system that supports it, above all else.  Greed is good.  Whatever works.  And the enemy is all that is not the self, which is the other.

And where there is nothing sacred, the people perish.