After the crash in 2008, with interest rates slashed to basically nothing, banksters could go to the Fed, get money for free (almost like parking a moving van next to the back door of the bank at 3 a.m. and filling it up with pallets of packaged hundred-dollar bills, so that they can lend it out to us at five, six, or seven percent interest on our home loans, and oh by the way, how much interest do you pay on your credit cards? Many folks end up paying more than 20%. It's almost impossible not to make money in banking if your cost of capital is zero. You can even afford to gamble a good share of it at the local casino, i.e. the stock market and the derivatives market.
Therefore, what the Fed has done is essentially this: It has helped set up a massive subsidy system -- some call it a kind of automatic and automated robbery operation -- in which the banksters on Wall Street cleverly and safely steal from the rest of us. As was the case throughout most of Mexico for awhile, the thieves own the police and the government, so what's there to fear?
You say in your article that the justice system has actually evolved into a highly effective mechanism for protecting financial criminals -- not prosecuting them, but protecting them.
One of the things I found out when I was interviewing former SEC officials and whistleblowers (people who had been involved in some of these cases), is that when you look at the revolving door situation with all these folks -- the Mary Jo Whites and the Gary Lynches and the Linda Thompsons, i.e. these former high-ranking financial cops who leave government service and then go to work in these millionaire partnerships on Wall Street, it creates this collegial atmosphere where it's just a small group of lawyers who all know each other, and they're in this constant merry-go-round: from government, back to private service, back to government again, and if you wanted to be polite, you might just say it's far too collegial. In reality, it's the means by which the banksters maintain the operations that transfer vast amounts of wealth from everyone else to themselves.
There's a scene in Matt's article where the current head of the SEC enforcement, Robert Khuzami, is giving a speech to all these lawyers, and he's saying, you know, "We have a new policy now where if you're a defendant or if you're a company that's being investigated, you can come to the SEC and we will get you answers as to whether or not the Department of Justice has a criminal interest in your case." So, essentially the SEC is now acting as a middleman for these companies, so that they can find out whether they're going to be criminally prosecuted. Then, once they get that information, they can make a decision about whether or not to settle financially with the SEC. And so they often just pay a settlement fee. Nobody gets criminally prosecuted. No individuals ever get fined. Their companies pay these relatively small fines, and they almost always have a little section in the agreement that says that they do not admit wrongdoing. So, they don't even have to say they're sorry, essentially. No individuals have to suffer at all. And it's all done in a very collegial way. But at huge public expense.
You suggest in your article that Bernie Madoff went to jail because it was rich people who were the victims.
Absolutely. Every single former investigator or current investigator I talked to said the same thing: Madoff went to jail because the wrong people suffered, including famous actors and the glitterati in New York. If these had been teachers and firemen and other pensioners, or any of the million people in foreclosure in this country right now (with many of them there because of predatory lending and because of this fraud scheme), there would have been no criminal prosecution against Madoff. No Wall Streeter will ever be criminally targeted unless their victims are powerful people themselves.
Talk about Lynn Turner, the former chief accountant for the SEC.
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