Saturday, August 15, 2015


When I encountered the headline "How Wall Street’s Bankers Stayed Out of Jail," I was hoping for something that seems to rarely come up in discussions of the culpability of persons and/or companies for the financial industry crash of 2008 - some indication of what laws were supposed to have been broken. Granted, it's not the job of a journalist to bring an indictment against someone, but most of us are generally not versed in the law, and especially in financial law.

For me, the answer to "Why isn't anyone in jail?" is simple; the article itself points it out: "Wall Street bankers make it their daily business to figure out ways to abide by the letter of the law while violating its spirit. And to be sure, much of the behavior that led to the crisis involved recklessness and poor judgment, not fraud." And, whether we like it or not, recklessness, poor judgment and violating the spirit of the law are not crimes. And so when I find a piece that purports to tell me why no-one has been convicted of anything, I expect to have it explained to me which laws had their letter violated. Unfortunately for me, that wasn't the case here - rather there was simply another assertion that some crime just had to have been committed, and this opinion was then taken as proof that some perfidy had taken place within the department of justice. So far, so familiar.

Then, a little later on, I read the following:

Any narrative of how we got to this point has to start with the so-called Holder Doctrine, a June 1999 memorandum written by the then–deputy attorney general warning of the dangers of prosecuting big banks—a variant of the “too big to fail” argument that has since become so familiar. Holder’s memo asserted that “collateral consequences” from prosecutions—including corporate instability or collapse—should be taken into account when deciding whether to prosecute a big financial institution. That sentiment was echoed as late as 2012 by Lanny Breuer, then the head of the Justice Department’s criminal division, who said in a speech at the New York City Bar Association that he felt it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges.
And this caught my attention for a simple reason - there was no link to the memorandum in question. And I've learned to be suspicious of news articles that reference documents without pointing to them. About 30 seconds on Google later, I had tracked down "Federal Prosecution of Corporations." And unsurprisingly, it didn't at read like a "warning of the dangers of prosecuting big banks," any more than the manual that comes with a car constitutes a "warning of the dangers of driving."
Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties, and the mere existence of such an effect is not sufficient to preclude prosecution of the corporation. Therefore, in evaluating the severity of collateral consequences, various factors already discussed, such as the pervasiveness of the criminal conduct and the adequacy of the corporation's compliance programs should also be considered in determining the weight to be given to this factor.
Federal Prosecution of Corporations
Now, it may very well be true that the reason that there haven't been prosecutions of "Wall Street types" is that the Federal Government is protecting people in high places due to cronyism and an insufficient commitment to justice for the majority of citizens. Governments have done far worse. But Eric Holder's 1999 memorandum doesn't support that viewpoint in and of itself. And this strikes me as part of the reason why there wasn't a link to an easily-available document.

As much as we talk about "Media Bias," despite the legal fiction of corporate personhood, media organizations are not people, and they lack a consciousness. People, on the other hand, have biases, disagreements and agendas, and they often seek to enlist other people in these, to make them more effective, to show themselves that people are paying attention, or what-have-you. And it's these personal factors that we should be wary of, and alert to the markers for.

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