As has been the case before, I find myself simultaneously pleased and displeased with the actions of the Obama administration. I applaud the president's executive action on immigration policy. I find it just and sensible in a situation where it is seemingly impossible to pass any legislation on the matter. On the other hand I am depressed by the public confirmation that it has been administration policy not to prosecute bankers for the legal violations that were an integral aspect of the financial crisis of 2008.
In the case of immigration Obama has taken a very public position in formally issuing and an executive order and making public presentations explaining his reasons and purposes for doing so. There are about 11M undocumented immigrants in the US. If the administration followed the letter of the law all of them should be apprehended and deported. Taking such action would cause various forms of disruption. Some of those would be economic in nature. The cost of such an operation would be huge and the impact on the labor supply would be significant. Obama is not the first president to find it necessary to take executive action to reduce the pressure of immigration problems. While it is generally granted he has the constitutional authority for some action on the matter, the media is full of discussions about the legal limits of that authority.
Last week William Dudley, chariman of the New York Federal Reserve Bank, appeared before the Senate Banking Committee and confirmed that it has been administration policy to avoid prosecutions of the corporations and executives of major financial institutions in the interest of maintaining the stability of the financial system.
“We were not willing to find those firms guilty before, because we were worried that if we found them guilty, that could somehow potentially destabilize the financial system,” Dudley said.
The way that I interpret this is that the bank regulators and the Dept of Justice made a broad policy decision not to apply the enforcement of existing law in the interest of what they claim was a broader social purpose. While I am not convinced that a much more aggressive approach to cleaning up and restructuring the financial system would have resulted in a more serious crisis, they would have no trouble lining up a chorus of economist from prestigious academic and financial institutions to support the prophesies of doom. That is the neoliberal financial consensus that has been firmly in place for 40 years.
It is certainly galling for many people to see individuals with wealth and power to be given a pass on violations of established laws. One question that we must ask is whether it is just the personal position that gets them off. Would a bank executive who gets a pass for financial crime also get a pass if he were accused of poisoning his wife? Part of the problem for the administration was that the financial system had become such as mess that much of existing law had been ignored for a long time. The entire trend for deregulation began in the Carter administration, accelerated during the Reagan administration and was endorsed by the Clinton administration. This didn't all just happen during the administration of Bush II.
If there had been an unofficial amnesty for bankers while a process of serious restructuring of the financial system was underway, I would be more inclined to view it as a necessary but unpalatable form of administrative discretion. However, in my view the Dodd–Frank Wall Street Reform and Consumer Protection Act is not much more than window dressing. It is not serious financial structural reform. It likely was about as much as could get passed in the present political climate.
Prior to the crash of 2008 the last major financial scandal had been the savings and loan crisis that spanned a decade from the mid 80s to the mid 90s. In terms of cost to the tax payers and disruption to the financial system it was small potatoes in comparison. It resulted from sloppy deregulation and inadequate enforcement of the regulations that still existed. It was an early dose of the consequences for the neoliberal regime. There was considerable outrage at the time, but the underlying policy trend continued merrily along. One difference between the S&L crisis and the great crash was that it was deemed politically desirable to have a few token prosecutions to slake the public anger for the former. Charled Keating turned out to be a particularly qualified poster boy for the face of financial corruption.
In contrast the approach to the 2008 debacle was to blame the system and exempt all individuals from prosecution. The "system" is certainly seriously flawed and it remains essentially unrepaired. The system was created in the name of financial innovation and opportunity. Its results have been serious economic damage to ordinary people and increasing economic inequality. It is very difficult for people to understand the vast complexities of an impersonal financial system. It is much easier to focus on individuals who are enjoying immense wealth and power when they really do deserve to be in jail.
They aren't going to jail. In many cases the statute of limitations has probably already run out. Immigration is an issue in which there really are significant differences between the Democrats and Republicans. The president has taken some action that pushes the envelope. When it comes to financial regulation I can't see a lot of difference.