Is Senator Elizabeth Warren fighting an impossible and pointless battle against a criminal financial elite completely out of control and totally in control of the U.S.? I think not: progress can come on many levels.
What is Warren trying to do, and what would constitute a valuable degree of success? It may be generally understood that Warren’s point is not just to put “banks” on trial but to put “bankers” on trial. Nevertheless, it is important to be clear about that critical distinction. The single most valuable protection financial super-criminals have in the U.S. is the new (in the last 20 years) unwritten rule that even if Washington punishes an institution, it will allow the actual individual criminals to go free (as long as they are CEO’s or board members or other high-level managers). Washington has repeatedly made financial settlements with banks, imposing fines that sound impressive to most of us but which are absolutely meaningless to the banks – because they are a tiny percentage of the banks’ fraudulent earnings and because they are tax deductible! These settlements do help some citizens and so are to be encouraged in principle, but in practice, they simply constitute official approval of corruption. Banks are not people; they do not get embarrassed or slapped by their wives when they are convicted. But big-shot bankers who know they may face public trial and humiliation, even if not actual conviction and jail time, will think twice. That is the importance of what Warren is trying to do.
After all her experience being manipulated by Washington insiders and run out of town, I doubt she is very naive any more. She is trying to change the culture. The US used to have a culture in which bankers were trusted because they stood behind their business moves (e.g., a bank that gave out a mortgage would keep it for the whole 30 year term). In the last generation that culture has shifted to one of pure gambling and government approval of such gambling and public acceptance of such gambling.
If Warren can shift the culture to public and official Washington condemnation of bank fraud, half the battle will have been won. If a handful of the top financial criminals can be brought to trial and forced to justify their behavior, even if they get away without conviction due to lack of evidence, it will send a message that the rules have changed back toward a culture of honesty. It is unfortunate that the U.S. lacks a significant political force advocating the fundamental restructuring of our financial system, involving the establishment of a public bank, the break-up of the top banks that are too big to manage, and perhaps the socialization of the whole banking system. Whether or not capitalism needs to cede ground to socialism, having the question under the microscope of serious public debate would reveal how modest and conservative Warren’s reform moves really are. All she really has attempted to do is get the drunken driver out from behind the wheel of our financial sports car before it hits a tree. Why is the rest of Washington covering for the drunk?