Archive | Blind Justice

The Power of the Law

I wasn’t surprised by anything that happened on Wall Street because I know that, given control of vast amounts of money and power, some greedy people will lie, cheat and steal.

I used to argue with people that if I ever came into a large sum of money (and I still might), I would never, ever, EVER invest it in the market. “It’s rigged,” I’d say.

“No, all you have to do is make prudent choices and have a balanced portfolio,” they’d earnestly respond.

Hah. Looks like I was more right than they were.

Some people tend to accept labels. Courtroom = justice, school = education, hospital = cure, investment = prudence. But all our systems are riddled with fraud and abuse, and expecting that to come to a good end was just plain silly.

In a written statement to members of the Senate Judiciary Committee this May, Jamie Galbraith explains:

Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: “liars’ loans,” “ninja loans,” “neutron loans,” and “toxic waste,” tells you that people knew. I have also heard the expression, “IBG,YBG;” the meaning of that bit of code was: “I’ll be gone, you’ll be gone.”

If doubt remains, investigation into the internal communications of the firms and agencies in question can clear it up. Emails are revealing. The government already possesses critical documentary trails — those of AIG, Fannie Mae and Freddie Mac, the Treasury Department and the Federal Reserve. Those documents should be investigated, in full, by competent authority and also released, as appropriate, to the public. For instance, did AIG knowingly issue CDS against instruments that Goldman had designed on behalf of Mr. John Paulson to fail? If so, why? Or again: Did Fannie Mae and Freddie Mac appreciate the poor quality of the RMBS they were acquiring? Did they do so under pressure from Mr. Henry Paulson? If so, did Secretary Paulson know? And if he did, why did he act as he did? In a recent paper, Thomas Ferguson and Robert Johnson argue that the “Paulson Put” was intended to delay an inevitable crisis past the election. Does the internal record support this view?

Let us suppose that the investigation that you are about to begin confirms the existence of pervasive fraud, involving millions of mortgages, thousands of appraisers, underwriters, analysts, and the executives of the companies in which they worked, as well as public officials who assisted by turning a Nelson’s Eye. What is the appropriate response?

Some appear to believe that “confidence in the banks” can be rebuilt by a new round of good economic news, by rising stock prices, by the reassurances of high officials – and by not looking too closely at the underlying evidence of fraud, abuse, deception and deceit. As you pursue your investigations, you will undermine, and I believe you may destroy, that illusion.

But you have to act. The true alternative is a failure extending over time from the economic to the political system. Just as too few predicted the financial crisis, it may be that too few are today speaking frankly about where a failure to deal with the aftermath may lead.

In this situation, let me suggest, the country faces an existential threat. Either the legal system must do its work. Or the market system cannot be restored. There must be a thorough, transparent, effective, radical cleaning of the financial sector and also of those public officials who failed the public trust. The financiers must be made to feel, in their bones, the power of the law. And the public, which lives by the law, must see very clearly and unambiguously that this is the case. Thank you.

Good

Too bad all we can do is send them to prison:

WASHINGTON — Federal investigators are likely to file criminal charges against at least one of the companies involved in the Gulf of Mexico spill, raising the prospects of significantly higher penalties than a current $75 million cap on civil liability, legal experts say.

The inquiry by the Homeland Security and Interior Departments into how the spill occurred is still in its early stages and authorities have not confirmed whether a criminal investigation has been launched.

But environmental law experts say it’s just a matter of time until the Justice Department steps in – if it hasn’t already – to initiate a criminal inquiry and take punitive action.

“There is no question there’ll be an enforcement action,” said David M. Uhlmann, who headed the Justice Department’s environmental crimes section for seven years during the Clinton and Bush administrations. “And, it’s very likely that there will be at least some criminal charges brought.”

Payback

I do not believe in the death penalty, with one notable exception. I think anyone found guilty of massive environmental crimes should be executed, because that person doesn’t kill one person. They kill the land and water, and they kill generations of people who come into contact with the poison they’ve left behind.

So it wouldn’t bother me to see someone executed for all this.

Maybe Because There’s No Real Difference?

So what else is new?

WASHINGTON – The selection of Solicitor General Elena Kagan to be the nation’s 112th justice extends a quarter-century pattern in which Republican presidents generally install strong conservatives on the Supreme Court while Democratic presidents pick candidates who often disappoint their liberal base.

Ms. Kagan is certainly too liberal for conservatives, who quickly criticized her nomination on Monday as a radical threat. But much like every other Democratic nominee since the 1960s, she does not fit the profile sought by the left, which hungers for a full-throated counterweight to the court’s conservative leader, Justice Antonin Scalia.

In many ways, this reflects how much the nation’s long war over the judiciary has evolved since Ms. Kagan was a child. While the American left back then used the Supreme Court to promote social change in areas like religion, race and abortion, today it looks at it more as a backstop to defend those rulings. The right, on the other hand, remains aggrieved and has waged an energetic campaign to make the court an agent of change reversing some of those holdings.

Along the way, conservatives have largely succeeded in framing the debate, putting liberals on the defensive. Sonia Sotomayor echoed conservatives in her Supreme Court confirmation hearings last year by rejecting the idea of a “living” Constitution that evolves, and even President Obama recently said the court had gone too far in the past. While conservatives have played a powerful role in influencing Republican nominations, liberals have not been as potent in Democratic selections.

In that vein, then, no Democratic nominee since Thurgood Marshall in 1967 has been the sort of outspoken liberal champion that the left craves, while Justice Scalia has been joined by three other solid conservatives in Chief Justice John G. Roberts Jr. and Justices Clarence Thomas and Samuel A. Alito Jr. By all accounts, Mr. Obama did not even consider the candidates favored most by the left, like Harold Hongju Koh, his State Department legal adviser, or Pamela S. Karlan, a Stanford Law School professor.

“Why do the conservatives always get the conservatives, but we don’t get to get the liberals?” Senator Tom Harkin, Democrat of Iowa, asked the Web site Politico recently, voicing the frustration of the left when Ms. Kagan was considered a front-runner but was not yet Mr. Obama’s selection. “What the hell is that all about?”

A 2009 study provided some fodder for Mr. Harkin’s argument that today’s conservative justices lean more to the right than the liberals lean to the left.

Richard A. Posner, a conservative appeals court judge in Chicago, and William M. Landes, his colleague from the University of Chicago law school, ranked all 43 justices from 1937 to 2006 by ideology and found that four of the five most conservative ones are on the current court. Even the moderate swing vote, Justice Kennedy, was the 10th most conservative over that period. By contrast, none of the current justices ranks among the five most liberal members, and only Justice Ginsburg is in the top 10.

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