Imagine that you don’t know much about high finance except what you occasionally read in the paper. You would know that we have the greatest finance business in the world, and that the smartest people make the most money. If you have a lot of money, it’s a sign of merit, so you know those Wall Street guys earned it. You know that the SEC is the cop on the beat and they are doing a great job: why, they locked up Martha Stewart to make the trading on Wall Street fair.
From the time you were a kid, you learned that the US stock market was the envy of other nations for its fairness and accessibility. You were taught that the US had come to dominate the finance business because it brought in great brains from physics and math, and the best business minds rapidly move up in the hierarchy by innovation and invention. You wanted to move your money into mutual funds, so you could share in the profits generated through wise investments, and you knew that you could manage your own retirement by careful investments. Those are the fundamental building blocks of your perception of the Way Things Work.
Even in the teeth of the Great Crash, your first thought would not be that the Wall Streeters were responsible. It was those irresponsible people who bought houses they couldn’t afford, or minorities using the government to buy houses they couldn’t afford, or whatever other nonsense you heard from your friends or the TV. It would be easy to distract you from looking at the real causes.
That is why the failure of the Obama administration to prosecute a single bankster is so depressing.Prosecutions would have proved that the Great Crash wasn’t the fault of people who bought houses they couldn’t afford, or the result of government efforts to counter discrimination against minorities trying to buy houses. Prosecutions would have placed the blame squarely on the financial elites, where it belongs. Financiers would not have been able to blame the usual suspects, and use their tools in the press and their politicians to divert attention from their responsibility for plunging the nation into economic disaster.
Prosecutions would have set the stage for real regulation of the finance business. When the banksters sent their lobbyists to Congress, people would have been repulsed, like they were when Lanny Davisshowed up to protect the brutal Ivory Coast usurper Gbagbo. Congress would have been forced to ignore them, no matter how much money went into their campaigns, and there would have been less money because the banksters would have been paying their lawyers millions for self-defense.
Prosecutions would have made it clear that the solution to the crisis wasn’t saving banksters but saving citizens from the crimes of the banksters. We could have set up foreclosure plans that would be oriented to salvaging American families instead of raising the profits of the thieves who created the problems. We could have used fiscal policy to support recovery instead of the weak tools of the Fed which have showered money on the banks at the expense of savers and retirees.
We could have shrunk the finance business back to its proper place in society. We could have pushed the Jamie Dimons and Tim Geithners out of positions of influence in government and replaced them with people whose goal is to improve things for everyone, not just the fabulously rich. Who knows, it might even have opened the eyes of those who deny global warming, and blindly support all our wars, from the killing in Iraq and Afghanistan and Yemen and Pakistan, to the wars on drugs and airplane travelers.
Try (I know it’s hard) to imagine a US Attorney prosecuting financiers for those deals set up to let financial elites short the housing market at the expense of some pension plan. Imagine a perp walk for accounting fraud in the use of Repo 105 or any of the other control frauds that were so common in the run-up to the Great Crash. Imagine any of a number of hedge fund operators in front of criminal juries explaining how they really make money. Imagine the difference in public understanding. It would have been a real life Pecora Commission.
The Obama administration threw away the chance to open the minds of average Americans to the dangers of blind trust in the myth of the market. Obama is a meliorist, only willing to take tiny steps with little chance of changing fundamentals. We need more, much more.