Suskind’s book vividly illustrates, has proved consistently reluctant to take on this powerful vested interest. President Obama’s campaigns have taken a great deal of money from Wall Street and, as Mr. And here the classic American feedback mechanism appears to be damaged. The lesson of these books is throughout American history, the ultimate constraint is not so much the courtroom but rather the polling place. Or, if you prefer something more modern, try Richard Reeves’s ultimately sad President Nixon: Alone in the White House. I suggest the bizarre tale in the new book American Emperor: Aaron Burr’s Challenge to Jefferson’s America or the classic account of the confrontation between President Andrew Jackson and the Second Bank of the United States, in The Age of Jackson by Arthur Schlesinger or Teddy Roosevelt’s confrontation with the railroad trusts in Edmund Morris’s Theodore Rex. And this is exactly why the megabanks threaten to undermine democracy.įor your holiday reading, pick an example of power and accomplishment gone awry in American history. Whenever someone or a group of people is above the law, equality before the law is ended. So it would have been entirely logical for him to fear disclosures that would damage their business models and legal viability. Geithner sees megabanks as essential to the functioning of the economy – and gambled on bailing them out as a way to restart the economy. Despite a lack of any supporting evidence, Mr.
Connaughton in his piece), but worry about system stability is part of the treasury secretary’s job. Geithner may dispute details in Confidence Men (which was also quoted by Mr. For his part, President Obama, the few times he’s been asked, explains that past unethical Wall Street actions are “not illegal.” Geithner’s influence likely played a role. We may never know exactly why the administration failed to organize effectively along these lines, but Mr.
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agents, and federal prosecutors for each of the potential primary defendants and ignored past lessons about how to crack financial fraud.” “As the New York Times and New Yorker have reported, the Department’s leadership never organized or supported strike-force teams of bank regulators, F.B.I. In an important article in the Huffington Post this week, Jeff Connaughton (former chief of staff to Senator Ted Kaufman) argues that the Department of Justice failed to concentrate the resources that might have built successful cases: This inertia – a government at rest tends to stay at rest – has led to public protest and deeply shaken trust in the financial system. But the Obama administration continues to dither – arguing behind the scenes that the financial system is still too weak. New York Attorney General Eric Schneiderman is mobilizing the resources for a long-overdue investigation of Wall Street practices and hopefully gathering momentum. Thankfully, this lawlessness – and it is that – nettles some regulators and prosecutors. Now three years later, the megabanks are even bigger, as is the risk they concentrate (see my recent testimony to the Financial Institutions subcommittee of the Senate Banking Committee for details.) Curiously, their precariousness, as much as their power, is shielding these behemoths from the enforcement of financial fraud laws. One poor earnings report, a disclosure of a fraud, or a loss of faith in the dealings between one large bank and another-a withdrawal of funds or refusal to clear trades-and it could result in a run, just like Lehman.” (from Ron Suskind’s Confidence Men, p.202) “The confidence in the system is so fragile still. In early 2009, Treasury Secretary Timothy Geithner reportedly said to President Obama and senior members of the new administration, with regard to the financial system: A version of the same process is happening again today but what has become concentrated is not a vital energy source or the nation’s transport arteries but rather something much more abstract: financial sector risk. The most obvious example is the oil and railroad trusts at the end of the nineteenth century. Our political system has many advantages, but it also provides motive and opportunity for resourceful people to become so strong they can elude the legal constraints that bind others. The American ideal of “equal and impartial justice under law” has repeatedly been undermined by attempts to concentrate power.
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