The most effective approach to catching private sector financial criminals is to start by holding Washington officials responsible for their patriotic duty to protect the public interest.
The sordid story of corrupt rich guys on Wall St. and in the mortgage industry is, by now, well known, but the extent to which this corruption was facilitated by bought and paid government lackeys has been fairly well covered up. Elizabeth Warren and Sherrod Brown are making a huge contribution to American democracy by turning the spotlight on the failings of certain powerful regulators–the agents of the people who sold themselves to those they were charged with watching. It is hard to think of any action by a bureaucrat more inexcusable than getting in bed with the entity the bureaucrat is in charge of regulating.
One of the great features of U.S. government is “checks and balances.” Corporate financial crime only succeeded in nearly “destroying the system as we know it” because Federal regulators, Congressmen, presidents, and judges aided and abetted. It is not necessary to have new laws or to turn CEOs into patriots. The US already has a government with the power to make the US a far greater country – simply by doing their jobs.
Fixing the mess should start at the top. Judges who permitted robosigning, regulators who looked the other way at Wall St. fraud, and politicians who are protecting financial criminals from being hauled into court must be held responsible. It is time to return to the rule of law . The “rule of law” means a transparent body of laws that create a level playing field and apply the same rules to all.
The rule of law is not a trivial accomplishment. The general course of American history has, at least until recent decades, been one of hesitant steps mostly in the direction of the rule of law, though such a visionary reality has always been far off. One of the great steps toward the rule of law was the late 19th century establishment of the civil service system. Bureaucracies can be dictatorial, but there are still few characteristics of government more central to the rule of law than a government bureaucracy sufficiently powerful to stand up to bullying by the rich. Over the last few decades, starting with Reagan’s campaign to replace civil servants with private contractors (whom I have heard referring to government contracts as “cash cows”), the private tail has increasingly wagged the public dog. Not only is it in the personal interest of a contractor to make money for his boss, but the revolving door between commerce and government makes protecting the rich rather than the public a matter of personal interest to bureaucrats as well. As recently noted in a New York Times article about conflict of interest:
Further complicating the relationships, consultants like Promontory have forged close ties to the regulators, routinely hiring from government ranks.
Democracy rests on transparency, an independent civil service, and the clear separation of government and commercial career tracks to minimize conflicts of interest. To catch private sector criminals, we must first clean up Washington.