For a free society to function in any capacity there has to be a set of rules that are applied equally to everyone. Our society has chosen not to hold those responsible for the financial meltdown accountable. CBS aired a spectacular interview with Anton Valukas, the investigator appointed by the federal bankruptcy court to determine what caused the Lehman Brothers bankruptcy. Two years ago, he submitted a 2,200 page report stating that there was enough evidence for a prosecutor to bring a case against top Lehman officials and the Ernst & Young accounting firm for misleading investors. So, with this evidence why haven’t there been any prosecutions? It might be prudent to review a few anecdotal observations:
- 2004 election cycle, Lehman Brothers invested $2,338,036 in campaign contributions and in 2008, $2,188,126
- Lobbying investment by Lehman Brothers peaked at $920,000 in the year 2006
- Revolving door of personnel from SEC and Federal Reserve to Lehman Brothers and vice versa. As an example, we can follow the career of Kim Wallace, who worked as a senior analyst on the Senate Budget Committee from 1986 to 1989, an aide to Senate Majority Leader George Mitchell from 1989 to 1994, and then as chief political analyst at Lehman Brothers from 1994 to 2008.
- 2008 election cycle, Ernst & Young invested $2,272,781 in campaign contributions
- Lobbying investments by Ernst & Young consistently between $2 million and $2.5 million a year
- Number of documented revolving door employees at 48
As the story is told, the SEC and the Federal Reserve may have compromised prosecutions against Lehman Brothers and Ernst & Young by their own participation in the cover-up. If the government does not feel it can win a case brought against those at Lehman or Ernst & Young because of government regulators, then by all means pursue prosecution against the regulators who worked in-house at Lehman Brothers and all of their superiors at the SEC and the Federal Reserve. Even if the regulators assigned in-house were in over their heads, they had the responsibility to report their confusion to superiors and their superiors had the responsibility to oversee their subordinates. Otherwise, what is the point of even having taxpayer-funded regulatory agencies?
By no means is the scope of this injustice limited to Lehman Brothers and Ernst & Young. In fact, the horror of this crisis lies in the pervasiveness of the criminal collusion throughout the industry and the government. Across the board we bear witness to the lack of significant prosecutions. This blatant example of selective application of the judicial system forces even the most optimistic citizen to recognize that we now live in a society of the few unaccountable insiders and the many to which justice applies. Of course this didn’t happen overnight, but this state of our union has reached a tipping point now. For example, the Savings and Loan scandal of the 1980s did at least result in an application of the law to put over 800 white collar criminals in prison. Obviously in the 1980s there were also wrongdoers who went unpunished for their crimes.
Justice and equality under the law has never been perfect. However, in just a few decades we can certainly detect a significant increase in the protection of the colluding politically-connected and economically-elite from the justice system. At this point it is difficult to imagine a scenario under which a group of persons within this class would be held accountable by the law.
If nothing else, this financial crisis did shine a spotlight on the degradation of our society to one of the enslaved majority who believe they are free. Although our society has been hijacked by the few, we do still have individual rights and with those we have historically-important responsibilities. Our federal government and its agencies are so dependent upon the corporations they are supposed to be regulating as to render them powerless. The rules in our society have been manipulated and distorted to benefit a few insiders at the expense of the entire system. There are many manifestations of this unfairness in society: the elaborate networks formed between policymakers, lobbyists and associations and their donors to “buy” rules for society, the complex tax code with endless loopholes providing for dodgers, a legal system that does not uniformly apply a set of preexisting rules to everyone equally, and the paradox of useless over-regulation and tragic under-regulation. All of these manifestations develop from the primordial action of getting the right people to represent the best interests of society – our elected officials. If we start with the right people and then motivate them to behave in the best interest of society, then the entire system has a better chance of being fair.
Our political system is structured in such a way as to include money and influence as vital and integral components of the election process. Any elected official on local or national levels is required to accept money to pay for activities that will get him/her elected. The average winner of a U.S. House race in 2008 spent about $1.4 Million. The Senate? About $8 Million. I suspect that an untold number of promises must be made to motivate enough people to separate from that amount of money. Think about it, even when Joey borrows his uncle’s car, he is told that he can as long as he washes it. Human nature is one of exchanging favors. Any run for Congress begins with the approval of the fundraising class. Civil service employment should be based on merit, ability and a dedication to creating a government that promotes the common good, not on how many people with money you can get to give you their money. There is not a shortage of qualified candidates to fulfill these roles, there is a system in place that actively prevents these people from participating. For example, why don’t you run for public office? I, for one, certainly don’t want to sell my soul to campaign contributors – and then continue begging for money throughout my tenure. We have a duty and responsibility to change the structural flaws in our political system and restore justice to our society.