Government Collusion With Big Finance

Does the appearance of government collusion with Wall St. crime come from government incompetence or…from government collusion with Wall St. crime? Intentional or not, when the government lets financial criminals off the hook, the result is to undermine U.S. national economic security.

For the latest evidence of government collusion with Big Finance, read the piece in Bloomberg Businessweek [11/4/11] accounting an alleged SEC habit of slapping Citibank on the wrist for repeated fraud while allowing Citibank to grin all the way to the…well, you get the idea. Here’s the deal, judging from the article:

  1. Government, desiring popular respect, sternly exposes Wall St. fraud;
  2. Wall St. criminal enterprise sincerely apologizes;
  3. Government demands that Wall St. criminal enterprise promise never to do it again;
  4. Wall St. criminal enterprise agrees, departs, and does it again.
  5. Return to Step 1. 

But the SEC settlement has to be reviewed by a judge, in this case Judge Jed S. Rakoff of the Federal District Court in Manhattan, and he is showing signs of independent thinking.This raises some serious questions:

  • Is he sincere?
  • Can he resist the pressure that will surely come his way to “play ball?”
  • What does the SEC really intend to do about Wall St. fraud?
  • Is there actually hope that someone in government will support the 99% and Occupy protesters to bring big financial criminals to justice?

As the reports of violence appearing during Occupy protests become increasingly frequent, it is important to keep our eyes clearly focused on the main issue: the degree to which the financial criminals and exploiters sneaky enough to defraud in ways that are not technically illegal under our highly biased system of “justice for the rich” are held to account for their attack on national economic security.

_________________________

Historical and Moral Background:
There is of course nothing new about corruption, self-serving behavior, or even collusion between rich financiers and rich politicians at the expense of the citizenry. A huge distinction needs nevertheless to be made between elite corruption in a context of a “rising tide lifting all boats” and elite corruption slaughtering the goose that lays the golden egg. Even a society founded on a bias in favor of the rich must make that distinction in theory and, through the workings of the system of justice, in practical law. Whatever the pro-elite, pro-business bias of American capitalism, the government does occasionally strike back against the extremes of Big Finance’s “abuse of privilege.” The dismissal of an early 1950s government suit against Wall St. by U.S. Circuit Court judge Harold R. Medina on September 22, 1953 was, despite its immediate defeat of government efforts to rein in Wall St. corruption, a long-term landmark in making the behavior of Big Finance more transparent and in establishing in law a clear distinction between the narrow legalities of the situation and the broader concept of morally appropriate behavior in a democracy.
In his history of Goldman Sachs, Money and Power [Doubleday, NY, 2011: 95], William D. Cohan summarizes the significance of Medina’s penetrating ruling:
It demonstrated in vivid detail how investment banks garner business. Medina ruled that the investment banking firms did not violate the law. But his lengthy analysis raised the question of whether Wall Street’s practices at that time furthered its ostensible mission–to help companies raise capital for growth–or whether much of the banks’ activity was designed to increase the bank accounts of their senior partners. An activity may be legal, but is it just?

As the American system of government evolves and–citizens must hope–matures (not at all an inevitable evolutionary trajectory), it maneuvers through an environment rich in alternative strands of governance DNA. “It” picks from among these strands with two frequently contradictory motivations in mind–short-term benefits being sought by individual actors or groups for self-aggrandizement and long-term benefits being sought by actors or groups that choose to act for the benefit of the whole society. These strands of “governance DNA” include bits and pieces of fascism [e.g., brute force joint dictatorship of industry and government over the people with massive welfare for corporations], raw capitalism [e.g., child labor], and socialism [e.g., welfare for average individuals], not to mention less fertile alternatives such as communism, religious fundamentalism, and feudalism. Evolutionary trends may push the system in any direction; if democracy is to mature, however, the system must surely evolve generally in the direction of, albeit not necessarily all the way toward, socialism, i.e., governing for society. A landmark step toward such maturation of governance would be the transformation of Judge Medina’s concept of just behavior on the part of a rich financial elite into law that would prohibit behavior by Big Finance that failed to contribute to the general welfare.

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