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Holding the Powerful Accountable for Bad Behavior

David Callahan

President Obama made a strong stab at outlining a progressive narrative last night that envisions a nation where "everybody plays by the same rules." It's a pretty simple idea, tapping the powerful American ideal of egalitarianism -- that all of us should get a "fair shot" and that nobody is too high and mighty not to be held responsible for their actions. 

Of course, the obstacles to realizing this vision are enormous, particularly when it comes to ensuring equal accountability before the law. The rich are able to get away with misdeeds because their wealth enables them to block or water down rules aimed at curbing such behavior and can also be used to hire armies of lawyers and lobbyists when the authorities do come after them.

The U.S. is not nearly as bad as, say, Russia in this regard, but we are far, far away from a society where everyone is held equally responsible for their actions. And, ironically, we have moved further from that ideal over the past two decades during the same period when many politicians have trumpeted "personal responsibility" at every turn. That concept, it turns out, has been mainly applied to poor people and especially African-Americans -- not to rich people who actually have fewer excuses for being irresponsible. Indeed, many of the same conservative politicians who have been most obsessed with "personal responsibility" have helped to make it easier for the rich and corporations to do whatever they please without fear of sanctions. Witness the rollback of rules governing Wall Street or the weakening of labor laws that protect workers from abusive employers or the hollowing out of the IRS's enforcement capacity.

So it was nice, last night, to hear President Obama call for steps to ensure accountability for all. Specifically, Obama pledged anew to see that justice is done in regard to the biggest white collar crime spree in U.S. history -- namely all the abuses that led up to the 2008 financial crisis:

We will also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments. Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.

Now, in case you don't follow this stuff closely, The New York Times today explained why the repeat offender reference was in the speech:

New York Times analysis of S.E.C. enforcement actions over the last 15 years, published in November, found at least 51 cases in which the S.E.C. concluded that Wall Street firms had broken antifraud laws that, as part of settlements of earlier fraud cases, they had pledged never to breach. The 51 cases spanned 19 firms, including nearly all of the biggest financial companies — Goldman Sachs, Morgan Stanley, JPMorgan Chase & Company and Bank of America among them. 

The Times notes:

Mary Schapiro, the chairwoman of the S.E.C., similarly called on Congress in November to raise the maximum penalties the commission could assess for securities laws violations, and to allow it to assess greater fines for repeat violations of antifraud statutes.

Nobody expects such legislation to pass any time soon. The banks have too many powerful friends in Congress, and especially in the GOP -- the party that purports to care most about personal responsibility. 

And, as the Times noted, there already is a Financial Fraud Enforcement Task Force, a cross-agency group that Obama set up in November but which has shown few results -- at least in nailing any of the major players involved in the subprime debacle. The SEC has been so weak in its approach that it fell to a federal judge last year to demand tougher treatment of Citigroup after the SEC gave that bank a slap on the wrist for financial abuses. Matt Taibbi, among others, has noted that a criminal case against Goldman Sachs is easily made -- but so far the U.S. hasn't acted. It's been left up to New York State Attorney General Eric Schneiderman to go after the big game on Wall Street. That's not the way things should be.

It's hard to say what will come from Obama's remarks last night. But let's hope that, here as elsewhere, he's woken up to the fact that Americans are ever more anxious to see their egalitarian values put into practice.