The chief accountant's job at the SEC is actually an investigatory position. They look for possible disclosure violations. When companies issue their SEC quarterly reports, they have to make sure that everything they say in those reports is accurate. That's the chief accountant's job, to make sure the disclosures are accurate. And Turner told me that in his experience on that job, he saw case after case in which they had good evidence against companies that were involved in very shady dealings, and these cases were either slowed down or not pursued at all.
He gave me an example, the Rite Aid case, in which a company was hiding billions of dollars in losses. It was similar to the Lehman Brothers situation. Rite Aid was trying to make their bottom line look better for shareholders, so they created these little cookie jar companies in which to hide their losses. This is very similar to what Enron and WorldCom were doing. The SEC had plenty of evidence of this in the Rite Aid case, but the case went nowhere for eight years. And this is the typical M.O. at the SEC. When kickbacks and payoffs are sufficient, they just do not act fast enough to get anything done.
You mention that before the corruption starts, the state is at a disadvantage because policing Wall Street requires serious intellectual firepower, and the banks seize a huge advantage from the start by hiring away the top talent.
Yes. One lawyer I talked to put it to me this way. He said everybody knows that the top 80% of all the graduating classes of all the best law schools go to Wall Street. They go to these corporate defense firms where they get the big money-making jobs. The bottom 20% go to the SEC. That's just the way it works. And, you know, the way he described it, "It's just such a mismatch it's not even funny." And even that bottom 20%, of course, eventually get roped into the revolving door situation, so if any real talent rises from that pool into positions of responsibility and decision making, they can then easily get co-opted and lured away by the million-dollar partnerships.
So what you're left with is -- not to insult the people who work at the SEC, but clearly, the very best and brightest lawyers are working for the banks that the SEC tries to monitor -- banks at which they continually come up with these very fiendish and brilliant defenses for the schemes that their companies devise. They always find a way to plausibly claim that what their company did was legal, and they also come up with these elaborate justifications. And many of the SEC lawyers are then overwhelmed by these justifications, and they end up not having the gumption or firepower to prosecute or move forward with cases against these elite firms.
We have two-and-a-half million people in jail this country, more than a million of whom are in jail for nonviolent crimes. And yet we couldn't find a single person on Wall Street to do even one day in jail -- for losing 40% of the world's wealth in a criminal fraud scheme? And that tells you that this goes well beyond the clich???? that rich people have better lawyers and therefore they have an advantage. This is a step beyond that. This is a situation where the system is completely corrupted. It's called "regulatory capture." This means that the SEC and the Justice Department are essentially subsidiaries of Wall Street!
You mentioned Obama's chief of staff, Bill Daley, newly appointed. What about the $20 million he made last year, mainly from Chase Bank?
Most of the reporters who do political journalism in this country don't know a whole lot about economics, and so they believe this sort of general notion that the guys on Wall Street are the experts and that if you want to have somebody running your economy, you have to go to the experts. So from this perspective it makes perfect sense that President Obama would want to surround himself with executives from Citigroup and Goldman Sachs and JPMorgan Chase. And I think that the thinking of most political journalists doesn't really get any more sophisticated than that. And so it is that a lot of these Wall Streeters get a pass. The journalists don't really look deeply or carefully at what these companies have been up to, and what kind of influence they might have over the President's decision making. In other words there isn't very much coverage that's adequate. There isn't enough debate about what these appointments mean.
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