Obama and the financial criminals of the 2007-8 collapse

Peter Boyer and Peter Schweizer ask Why Can't Obama Bring Wall Street to Justice? Newsweek 05/06/2012. This is one set of information that was news to me:

Obama delivered heated rhetoric, but his actions signaled different priorities. Had Obama wanted to strike real fear in the hearts of bankers, he might have appointed former special prosecutor Patrick Fitzgerald or some other fire-breather as his attorney general. Instead, he chose Eric Holder, a former Clinton Justice official who, after a career in government, joined the Washington office of Covington & Burling, a top-tier law firm with an elite white-collar defense unit. The move to Covington, and back to Justice, is an example of Washington's revolving-door ritual, which, for Holder, has been lucrative--he pulled in $2.1 million as a Covington partner in 2008, and $2.5 million (including deferred compensation) when he left the firm in 2009.

Putting a Covington partner--he spent nearly a decade at the firm--in charge of Justice may have sent a signal to the financial community, whose marquee names are Covington clients. Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and Deutsche Bank are among the institutions that pay for Covington's legal advice, some of it relating to matters before the Department of Justice. But Holder's was not the only face at Justice familiar to Covington clients. Lanny Breuer, who had co-chaired the white-collar defense unit at Covington with Holder, was chosen to head the criminal division at Obama's Justice. Two other Covington lawyers followed Holder into top positions, and Holder's principal deputy, James Cole, was recruited from Bryan Cave LLP, another white-shoe firm with A-list finance clients. ...

(Two members of Holder's team have already returned to Covington.) [my emphasis]

This may be legal, and I presume it is. But it's real corruption. It begs for a bad joke about lawyers and ethics, but I'll refrain.

It's always possible for someone who can expect to gain a lot of money for going easy on criminals in such positions. But when you know you can get $2.0-2.5 million a year after you leave office by going easy on them, it's a big temptation.

And his boss didn't seem to be interested in putting a lot of pressure on Holder to go after financial criminals:

Two months into his presidency, Obama summoned the titans of finance to the White House, where he told them, "My administration is the only thing between you and the pitchforks."

The bankers may have found the president's tone unsettling. Candidate Obama had been their guy, accepting vast amounts of Wall Street campaign money for his victories over Hillary Clinton and John McCain (Goldman Sachs executives ponied up $1 million, more than any other private source of funding in 2008). Obama far outraised his Republican rival, John McCain, on Wall Street--around $16 million to $9 million. As it turned out, Obama apparently actually meant what he said at that White House meeting--his administration effectively would stand between Big Finance and anything like a severe accounting. To the dismay of many of Obama's supporters, nearly four years after the disaster, there has not been a single criminal charge filed by the federal government against any top executive of the elite financial institutions. [my emphasis]

The financial industry de facto owns the national Democratic Party right now. And they are using it as well as the Republican Party to prevent the enactment of the kinds of regulations needed to prevent a recurrence of the kind of crash we had in 2007-8. And also to block prosecutions of people who should be prosecuted:

Strikingly, federal prosecutions overall have risen sharply under Obama, increasing dramatically in such areas as civil rights and health-care fraud. But according to the Transactional Records Access Clearinghouse, a data-gathering organization at Syracuse University, financial-fraud prosecutions by the Department of Justice are at 20-year lows. They're down 39 percent since 2003, when fraud at Enron and WorldCom led to a series of prosecutions, and are just one third of what they were during the Clinton administration. (The Justice Department says the numbers would be higher if new categories of crime were counted.)

And they contrast this with the record of prosecutions in the wake of the S&L collapse, one of the great accomplishments of St. Reagan's Administration. The collapse, that is, not the prosecutions. Those were mainly done under Old Man Bush's Presidency:

"There hasn't been any serious investigation of any of the large financial entities by the Justice Department, which includes the FBI," says William Black, an associate professor of economics and law at the University of Missouri, Kansas City, who, as a government regulator in the 1980s, helped clean up the S&L mess. Black, who is a Democrat, notes that the feds dealt with the S&L crisis with harsh justice, bringing more than a thousand prosecutions, and securing a 90 percent conviction rate. The difference between the government's response to the two crises, Black says, is a matter of will, and priorities. "You need heads on the pike," he says. "The first President Bush's orders were to get the most prominent, nastiest frauds, and put their heads on pikes as a demonstration that there's a new sheriff in town."

The following really looks bad. But after Obama's first three years, now getting closer to 3 1/2, it's not surprising:

Meanwhile, Obama's political operation continued to ask Wall Street for campaign money. A curious pattern developed. A Newsweek examination of campaign finance records shows that, in the weeks before and after last year's scathing Senate report, several Goldman executives and their families made large donations to Obama's Victory Fund and related entities, some of them maxing out at the highest individual donation allowed, $35,800, even though 2011 was an electoral off-year. Some of these executives were giving to Obama for the first time. ...

It would be a leap to infer these Goldman contributions were made--or received--as quid pro quo for dropping a criminal investigation. Still, the situation constitutes what one Justice veteran acknowledged is a "bad set of facts."

Tags: barack obama, eric holder, obama administration, us economy, wall street prosecutions

The Eric Holder nomination for Attorney General

I suppose it shouldn't surprise me that the Republicans seem to be focusing in on Eric Holder, Obama's nominee for Attorney General, as the Cabinet nominee they are most eager to discredit. The Republicans' hopes to take authoritarian Party rule to the proverbial "next level" with the next Republican President are largely dependent on there being no general legal accountability for criminal acts committed by senior officials in the current administration. So of course they're going to trash the incoming Attorney General.

Holder's critics are using Bill Clinton's much-criticized pardon of fugitive financier Marc Rich in his last days as President to be Exhibit A in their case against Holder. (See the major story on Holder and the Rich pardon, Pardon Is Back in Focus for the Justice Nominee by Eric Lichtblau and David Johnston New York Times 12/02/08). That pardon was widely criticized, including a memorable condemnation for former President Jimmy Carter.

But it wasn't Cheney-style corruption, either. Joe Conason hasn't forgotten what he wrote about nearly eight years ago now in Pardon for peace? Salon 02/13/01. During the last months of the his administration, Clinton was pressing hard for a Palestinian-Israeli settlement. And Israel specifically asked Clinton for the Marc Rich pardon - a fact that Carter noted in his own criticism, saying (as Conason does) that he didn't think that was a valid grounds on which to issue that pardon to Rich. But that context is important, and it's virtually never discussed in connection with Rich's pardon. Conason wrote in 2001:

Helping Rich became a priority for Israeli officials -- particularly those in the hierarchy of the Labor Party -- because of his services to the Jewish state. Not only did the Swiss-based businessman give enormous amounts of money to charities and institutions there, but he has also used his connections in other nations to perform services for the Israeli government. According to press reports, he has assisted in the rescue of Jewish families from hostile countries, and he's believed to have gathered information for Israeli intelligence agencies as well.

If Clinton was influenced by Israeli pleas on behalf of the undeserving Rich, that wouldn't excuse his decision, which has been justly criticized as improper in both substance and appearance. Nor is Clinton exempt from criticism because his predecessor awarded pardons that were even worse. But a pardon given for reasons of state, in pursuit of peace, ought to be regarded as wholly different from a pardon awarded for political and charitable contributions.

Evidence that has emerged so far strongly suggests that the context of the peace negotiations was important and perhaps even decisive. It was no secret that Clinton, as he faced the final months of his presidency, seemed consumed with reviving and even completing the Oslo peace process before he left office. To his critics, this was proof of an unseemly obsession with his own legacy, while his supporters saw it as a noble attempt to salvage a once-promising initiative. Whatever his motivations, there is little doubt that the impasse between Barak and Palestinian leader Yasser Arafat was Clinton's most urgent priority.

At a time when Clinton was urging Barak to make critical concessions to the Palestinians, the then-prime minister and various important figures in Israel were asking him for two heavy favors: a pardon for Jonathan Pollard, convicted of espionage against the United States for Israel; and a pardon for Rich, their generous benefactor and intelligence asset.

The situation Clinton faced was ably summarized by an unlikely ally on NBC's "Meet the Press" last Sunday. Former U.S. Attorney Joseph diGenova, an ardent Republican and frequently a harsh critic of the Clinton administration, explained the situation in detail to host Tim Russert as follows: "When the prime minister of Israel, one of our closest allies, communicates with the president of the United States about a pardon, I would say to you that the president has a pretty good idea of how important the case is.The prime minister of Israel [Labor leader Ehud Barak] became deeply involved in this case, and he recommended a pardon." [my emphasis]

Bill Clinton did not issue a pardon for Jonathan Pollard.

Conason returns to the theme in The Holder Nomination: Rich Story, Poor Coverage New York Observer 12/03/08:

The Rich pardon was a top priority for Israeli officials because he had long been a financial and intelligence asset of the Jewish state, carrying out missions in many countries where he did business – notably including Iran. ...

The final round of peace talks began in Taba, Egypt on January 21, 2001, the day after Clinton signed the Rich pardon. Those negotiations came closer to achieving a durable settlement than any before or since.

As I’ve written before, Clinton’s decision remains vulnerable to harsh criticism in both substance and appearance. But the pardon power exists precisely because presidents must be free to make such choices for reasons of state. As a lame duck, Clinton had very few means to induce his Israeli partner to take any risk for peace, especially at that political juncture. All of this was ignored or discounted, quite wrongly, in the aftermath of the Clinton presidency. The sudden revival of the Rich pardon furor has seen no improvement in the coverage so far. [my emphasis]

Tags: eric holder

Cabinet picks

Glenn Greenwald and human rights attorney Scott Horton both have a high opinion of Eric Holder as a nominee for Attorney General. They think it's likely that he will enforce the rule of law and has sufficient integrity to avoid becoming a simple partisan in the job.

Surprisingly to me, Joe Conason makes The Case for Robert Gates New York Observer as Obama's first Secretary of Defense (New York Observer 11/18/08). I think it would be a bad, possibly disastrous pick. But Conason has a more benign view. Much of his favorable view has to do with Gates' participation with the Iraq Study Group (ISG). But the ISG recommended something different that what The Surge turned out to be. And Gates signed on with Bush to implement The Surge.

For less favorable views of the current Defense Secretary, see these pieces at CorsortiumNews.com: Robert Gates: As Bad as Rumsfeld? by Ray McGovern 11/19/08; The Danger of Keeping Robert Gates by Robert Parry 11/13/08; and a whole slew of others.

Tags: eric holder, robert gates