Prosecuting Wall Street

Here is a documentary by PBS's Frontline about the failure of the Department of Justice to prosecute Wall Street executives in the wake of the 2007 financial catastrophe. The best bits are at the end but if you aren't up on the material, watch the whole thing.

The conclusion, stated by the DOJs frontman in this fight, is the DOJ didn't prosecute because of concerns about a "ripple effect" in the banking system. When I first watched it I thought about a prosecutor failing to press charges against a rapist because of concern for the rapist's family. Yes, they probably would feel bad. And there would be a "ripple effect" - their neighbours would be less friendly, etc. Yet rapists occasionally get prosecuted.

Here's what is actually happening. There is a massive concern in Washington, New York, and around the world that if Big Money is prosecuted the result will be a downturn, a deepening of the Great Recession. That big number, the US GNP, keeps spinning in these peoples' minds. It's totally imaginary, it doesn't mean anything but it freaks people out.

There is a reason you here "The economy grew by 0.3% last quarter" or some such nonsense when you turn on your television or your radio. It's an indication of the stability of the consensual fiction we all take part in. We agree to believe these numbers are important, we continue to allow criminal activity by many people to make the number grow based on the belief that so long as it continues growing things will be better for us. It's complete bullshit but it is very complicated bullshit because we all agree to believe it.

Our financial system is an intricate fiction. It only works because we continue to believe in it. Stop believing and it all falls apart. You can see this at the most basic element of our financial fiction - money. Not the statistical money financial reporters are so concerned with but real money, the kind you have in your pocket.

Money is worth something because we agree it is. If we stop believing it has value, if even a small percentage of people start to doubt money will "work" then it will stop working. It's a consensual fiction.

The same is true of the entire financial system. The economy for "fictional vehicles", products you can buy and sell that represent precisely nothing in the real world (the price of wheat in 2015 for example) is ten times the economy of real things that exist in the world. It works because we believe and that's the only reason.

But I call bullshit. If the top executives of all the Wall Street institutions were dragged off in chains tomorrow, you know what would happen? Nothing. They would be replaced. The guy below them on the ladder would be the one holding the doors open for the cops. He would love to slap those chains on himself. If the chairman of Goldman Sachs was put up against a wall and shot, the result would be a collective exhalation of (what, satisfaction? blood lust?) from most of the population and his replacement would be sitting pretty in his office before the corpse was cold.

I'm not advocating shooting the Chairman of Goldman - I think that lets the rest of them off too easy.

There is also an ideological component to this - aside from the ideological belief in our financial system which, being imaginary, requires ideology - and that is the fear investigations and prosecutions might lead to government regulation. The PBS documentary shows how an independent film maker was able to find more evidence of criminal activity on Wall Street in his spare time than the DOJ was able to with the backing and authority of the entire US government. I think this is because the independent film maker wants to be an independent film maker - sure he's like to be richer and more famous but he is doing what he hopes to continue doing. The lawyers at DOJ are in a very serious competition for positions at firms that pay 10 or 15 times what the DOJ does. And those firms work for Wall Street banks.

So, in essence, the rapist's father is the owner of the biggest law firm in the world and that's the "ripple effect" the prosecutor is worried about. As Leonard Cohen tells us, "Everybody knows the fight is fixed. The poor stay poor and the rich stay rich. That's how it goes and everybody knows."