Jack Lew had served in the Clinton administration. He worked in the OMB (Office of Management of the Budget) and he was one of the key players in helping pass the repeal of Glass-Steagall, which more than anything else led to extraordinary big-bank profits and the financial catastrophe to which that led, in turn.
Glass-Steagall was repealed specifically to legalize the merger of CitiGroup. "Coincidentally," Robert Rubin, who was the Treasury secretary, and Jack Lew, then end up working at CitiGroup five or ten years later, at very fat salaries indeed. Surprise, surprise. And then they go back to government! Once again, this is the sort of incestuous merry-go-round that everybody in Washington knows about but prefers to not think too deeply about. It's just the way things work. But again: At what cost to investors, ordinary citizens, and the economy as a whole?
How do we explain President Obama's change in position on this?
When he was running for president, he expressly promised to "close the revolving door" that we've been talking about. And he seemed genuinely shocked at the collapse of the financial system and the banks' role in it. But he also was raking in massive campaign contributions from these very people who should be indicted. So, did those contributions by the banks to his campaign simply turn out to be "good investments" for the banks, or is Obama just overwhelmed by the corruption in the system that's controlled by these guys? Or both?
It's likely that Obama and his administration genuinely accept the explanation that they should hear from all these people who run these Wall Street companies -- people like Bob Rubin and Larry Summers, who are close confidants of the Obama administration and are probably telling them, "Look, if we start prosecuting all kinds of people for X, Y and Z, there's going to be major instability in the markets. Investors are going to flee America. They're going to withdraw capital from the American financial system. It'll be a disaster. Millions of jobs will be lost."
But this is just not acceptable as an explanation. Why not? Because the rule of law isn't really the rule of law if it doesn't apply equally to everybody. If you're going to put somebody in jail for having a joint in his pocket, you can't then let high-ranking HSBC officials off, for laundering $800 million for the worst drug dealers in the world! These high-level drug dealers, for whom the big banks were/are performing an essential service, not only deal drugs, they are guilty of thousands of murders.
Eventually a dichotomy like this eats away at the very fabric of society . . as some people guilty of selling small amounts of drugs go to jail, and other people, guilty of so very much more (i.e. the things that very much facilitate and encourage those sales) don't go to jail.