Gretchen Morgenson calls the lie to all the nonsense we’ve heard from the Obama administration this last five years about how hard they were working on financial crime that led to the global economic crisis of 2008, A Loan Fraud War That’s Short on Combat. “If there had been cases to make,” people from the administration would say, “We would have made them!” Well, it turns out—Contain your shock!—this is not true. Last week, the inspector general of the Justice Department issued a report, Audit of the Department of Justice’s Efforts to Address Mortgage Fraud (pdf). Morgenson sums up the report’s conclusion, “Complex financial crimes were the lowest priority for the criminal investigative division.”
This is not a surprise. I’m very cynical when it comes to this kind of stuff. It is very simple: the power elite do not go after the power elite. The law is meant to keep the little guy in line. The logic is that simple. But that doesn’t mean that we should accept things the way they are. But things will continue to be this way as long as we continue to elect people like Barack Obama whose call for “hope and change” was really about hoping that nothing changes. And no one should have been surprised. He never claimed to be anything but an establishment kind of guy. He was the candidate of the Wall Street bankers and so no one should have been surprised that he’s the president of the Wall Street bankers.
Dean Baker followed up Morgenson’s reporting with an analysis of his own, Locking Up the Banksters: It’s Not Hard. In it, he goes through the basics of building a case against systemic fraud: from the bottom up. That’s because at every level except the top, there was someone telling a subordinate to misbehave. And if the government were handing out prison terms, there would have been a whole lot of people who were not willing to fall on their swords for the sake of their bosses.
I have a personal example that is related, although I’m unsure where exactly it fits in the pantheon of financial crime. My wife and I owned a condo and owed about $80,000 on it. We were interested in refinancing and so we worked with someone who I think was representing Ameriquest, but I could be wrong. They printed out the loan offer and sent it to us. I went over it and noticed a problem. The fees were so high on the loan that despite the lower interest rate, we would end up paying more in interest over the term of the loan. I told this to the loan officer and I got almost no push back from her. She was well aware that she was offering me a terrible loan. She acted the way any con artist would when discovered: she made a hasty exit.
I tell this story to point out that the bankers knew exactly what they were doing. Of course, when it comes to the packaging of subprime mortgages, the con is baked right in. It was like a game of hot potato: get the bad loan and pass it off on someone else as fast as possible. Of course, the report itself didn’t even deal with securities fraud. So as bad as it shows the system to be, it is far worse.
Morgenson finishes her article by quoting former Delaware Senator Edward Kaufman, “The report fits a pattern that is scary for a democracy, that there really are two levels of justice in this country, one for the people with power and money and one for everyone else. And that eats at the heart of what I think makes this country great.” This is the basis of all our country’s problems. The powerful cannot be punished. The rich cannot lose money. The United States is well on its way to complete destruction. Sadly, our enormous military will prop it up for a while longer, during which we will do untold damage to our own people and people throughout the world.