This is the way the Department of Justice's (DOJ) greatest strategic prosecutorial failure ends, not with a bang but a whimper that it is too hard to prosecute "rocket science" frauds. The context is the ritual Bloomberg exit interview with the senior DOJ official going off to make his new fortune. The lucky fellow this week is Deputy Attorney General James Cole. This genre of interview is designed to allow the man in the revolving door to announce his great accomplishments as a prosecutor, or in this case, non-prosecutor. Cole gamely claims that zero prosecutions constitutes a brilliant success because DOJ's civil cases "have resulted in banks paying huge fines and altering their behavior."
"Holder today praised Cole as his 'indispensable partner' since taking the deputy's job in January 2011. 'Jim's leadership and ingenuity have been critical in attaining historic results on behalf of the American people,' Holder said in a statement."
Holder is correct, DOJ produced "historic results" under the Holder/Breuer/Case team's leadership. Never in modern history has DOJ suffered such an abject defeat. They didn't simply fail to prosecute the elite bankers -- they never even indicted them and rarely investigated them.
The exit interview ground rules call for softball questions only, but Cole does get asked why zero prosecutions represents a "historic" triumph. His answer, is the final whimper.
"Proving individual bankers broke the law was extremely difficult because it was hard to show criminal intent and because they may not have violated laws in effect at the time. 'We are dealing with financial rocket science,' he said."
There are two essential responses to Cole's whimper. Both responses are so important that I have to divide my comments into two columns. In this column I assume solely for purposes of analysis that Cole is correct that DOJ could not "show criminal intent" because "we are dealing with financial rocket science." (My second column will eviscerate that claim and any claim that there were not laws "in effect at the time.")
Cole's claim screams out for a follow-up sentence by him -- and failing that -- for a follow-up question from the Bloomberg reporter. Let's review the bidding: hundreds of financial executives led the three most destructive epidemics of financial fraud in history, aided and abetted by thousands of professionals. The epidemics of accounting control fraud hyper-inflated the real estate bubbles and drove the Great Recession. The Great Recession caused an estimated $21 trillion in lost U.S. GDP and over 10 million American jobs -- and both numbers are far larger in Europe. Leading those frauds made the elite bankers and the professionals wealthy. DOJ does not simply refuse to prosecute these "financial rocket scientists" -- it refuses to bring civil suits against them to recover the fraud proceeds. It has brought one -- yes, one -- successful civil suit to trial against a senior Bank of America officer (and she was not remotely in the C-Suites). Cole's claim, which we assume to be true for purposes of analysis, is that DOJ was unable to find a single case in which it could prosecute the "financial rocket scientists" who led the fraud epidemics that caused the global crisis and that DOJ was able to find only one "financial rocket scientist" that it could sue successfully in a civil case.
The series of facts (remember, we're assuming here that Cole's claims about DOJ's total helplessness against the "financial rocket scientists") contained in the paragraph immediately above is among the most important and frightening conceivable. Any Deputy Attorney General that believed those facts to be true would have dedicated his career to changing those facts before they caused the next, vastly worse crisis. Under Cole's "facts," the elite fraudsters (aka "financial rocket scientists) were left in power at the world's largest banks by DOJ and now know that they can loot with absolute impunity. The ability to become wealthy through the "sure thing" of accounting control fraud with absolute impunity makes the banking environment among the most criminogenic in existence.
Cole must have been sending dozens of memoranda to Attorney General Holder and President Obama alerting them to the impending catastrophe and providing them with his recommendations on specific changes that needed to be made immediately to avert the next, even more catastrophic epidemics of fraud and resultant crises. Cole must also be warning the public repeatedly of the coming catastrophe and asking them to support the emergency measures he has recommended to end the ability of the financial rocket scientists to loot with impunity.
Even if Cole, inexplicably, failed to use his exit interview with Bloomberg to reiterate this public warning that he is famous for making repeatedly about the banksters' ability to loot with impunity and failed to explain to the public, and ask for their support, the emergency measures urgently needed to end this ability to loot with impunity, surely the Bloomberg reporter would ask him a follow-up question!
Just kidding, of course. Cole is famous for never warning the public that DOJ had decided that the fraudulent "financial rocket scientists" were so far above their IQ grade that they could never be prosecuted and virtually never even sued by DOJ for their hundreds of thousands of felonies that looted "their" banks and caused the global financial crisis and the Great Recession. Cole is famous for never formulating a means to end the financial rocket scientists' ability to loot with impunity.
Cole (and Lanny Breuer and Holder, and Obama -- all lawyers) never even thought in these terms. They all knew that they were not going to prosecute or even sue the financial rocket scientists that led the frauds that caused the catastrophe. They all knew that the financial rocket scientists grew wealthy by looting with impunity. They all knew that this primed the powder for the next great global catastrophe and made wealthy and politically dominant the Nation's worst financial sociopaths. They all knew that it was essential, under the oaths of office they took, for them to bend every effort on an emergency basis to end the ability of the financial rocket scientists to loot with impunity. They all knew that there is nothing in the Dodd-Frank Act -- and nothing that the administration proposed for that Act that was killed by Congress -- that ends the ability of the financial rocket scientists to loot with impunity. They all failed to even try to do their duty.
Bloomberg's failure to even see the vital question scream the loudest. One cannot ask the right questions if one's analytical powers are on the same plane as DOJ's leadership.