Jail the Bankers

By Bill Moyers and Matt Taibbi, Moyers & Company

02 February 13

ILL MOYERS: This week on Moyers & Company ...

MATT TAIBBI: The rule of law isn't really the rule of law if it doesn't apply equally to everybody. I mean, if you're going to put somebody in jail for having a joint is his pocket. You can't let higher ranking HSBC officials off for laundering eight hundred million dollars for the worst drug dealers in the entire world.

BILL MOYERS: And ...

VINCENT WARREN: There is not a country in the world that believes that the U.S. drone attacks that we are doing on countries that we are not at war with is the right and sustainable solution for us.

VICKI DIVOLL: All we have is the president interpreting his own powers and the limits on his own powers. And that is not the way it's supposed to work. We need more oversight.

BILL MOYERS: Welcome. This week, two United States senators insisted that the Justice Department come clean. Why are Wall Street's big banks not only too big to fail but too big to jail? Senators Sherrod Brown of Ohio, a Democrat, and Chuck Grassley of Iowa, a Republican, are outraged that the giant banks violate the law with impunity -- laundering money, cheating homeowners, falsifying information -- every trick in the ledger book. They sent a letter to Attorney General Eric Holder demanding to know why the banks get away with fines instead of jail time.

Maybe they had their anger roiled by "Frontline," Public Television's premier investigative series. The other night, "Frontline" broadcast a report called "The Untouchables," on how the Department of Justice allegedly has looked the other way for fear that prosecuting the banks would do even more damage to the American economy.

ELIOT SPITZER in Frontline: The Untouchables: It was a definite sense that justice backed off.

NARRATOR in Frontline: The Untouchables:Did the government fail?

MARTIN SMITH in Frontline: The Untouchables: A number of people told us that you didn't make this a top priority.

LANNY BREUER in Frontline: The Untouchables: Well I'm sorry that they think that because I made it an incredibly top priority:

BILL MOYERS: That's Lanny Breuer, the assistant attorney general in charge of the criminal division at the Justice Department. A week after the Frontline report, he stepped down and is now expected to return to private corporate practice -- one more government appointee spinning through the lucrative revolving door between Washington and Wall Street.

That door could be a big reason why government treats the banks with kid gloves. A man who once worked for Citigroup, Jack Lew, the president's chief of staff, has been picked to be the new Treasury Secretary. And Mary Jo White, the newly named head of the Securities and Exchange Commission, is a chief litigator at a top law firm representing big investment banks like Morgan Stanley.

With all this happening, it's time to talk with journalist Matt Taibbi. You've seen him on our broadcast before. A contributing editor at "Rolling Stone," he's been tracking the high crimes and misdemeanors of Wall Street and Washington for years.

Welcome back to the show.

MATT TAIBBI: Thanks for having me.

BILL MOYERS: You're working on a story right now that'll come out in a couple of weeks on the HSBC settlement. That's the, tell me about that, why it interests you.

MATT TAIBBI: Well, the HSBC settlement was a really shocking kind of new low in the history of the too big to fail issue. HSBC was a serial offender on the money laundering score. They had been twice given formal cease and desist orders by the government. One dating back as far as 2003, another one in 2010 for inadequately policing the accounts in their system. They laundered over $800 million for cartels in Colombia.

BILL MOYERS: Drug cartels?

MATT TAIBBI: Drug cartels in Colombia and Mexico. They laundered money for terrorist connected banks in the Middle East. Russian gangsters. Literally, you know, I talked to one prosecutor who's, like, "They broke basically every law in the book and they did business with every kind of criminal you can possibly imagine. And they got a complete and total walk." I mean, they had to pay a fine.

BILL MOYERS: $1.9 billion, a lot of money.

MATT TAIBBI: It's a lot of money. But it's five weeks of revenue for the bank, to put that in perspective. And no individual had to suffer any consequences at all. There were no criminal charges no individual fines, which was incredible. Incredible.

BILL MOYERS: Lenny Breuer also forced the Swiss bank UBS, as you know, to pay a big fine in the LIBOR, the price fixing conspiracy. And that outraged you as well, didn't it?

MATT TAIBBI: This is the, I think the biggest financial scandal of all time. It was a price fixing scandal where, essentially, some of the world's biggest banks got together and they conspired illegally to artificially rig the global interest rates which are based upon this London inner bank offered rate, which is a rate that measures how much it costs for banks to lend money to each other.

This LIBOR rate affects the prices of hundreds of trillions of dollars of financial products. And it goes from everything from credit cards to mortgages to municipal bonds. Basically everything in the world the price is, you know, is somehow connected to LIBOR. And these guys were monkeying around with this for individual profit. And they got, again, a complete and total walk on this. There were no criminal charges, which is just unbelievable.

BILL MOYERS: Did you see the Frontline documentary "The Untouchables?"

MATT TAIBBI: I did.

BILL MOYERS: Then you're familiar with Lanny Breuer's testimony.

MARTIN SMITH in Frontline: The Untouchables: You made a reference to losing sleep at night worrying about what a lawsuit might result in at a large financial institution. Is that really the job of a prosecutor to worry about anything other than simply pursuing justice?

LENNY BREUER in Frontline: The Untouchables: I think I am pursuing justice and I think the entire responsibility of the department is to pursue justice, but in any given case, I think I am prosecutors around the country being responsible should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case there's some huge economic effect. If it creates a ripple effect so that suddenly counter-parties and other financial institutions or other companies that had nothing to do with this are affected badly, it's a factor we need to know and understand.

MATT TAIBBI: Think about what he's saying. He's essentially saying that some individuals are so systemically important, that they can't be arrested and put in jail. Now, it's only a few steps forward to the corollary to that, which is if some people are too systemically important to arrest, other people may safely be arrested. So we're creating a class of people who are arrestable and another class of people who are not arrestable, which is crazy. It's a crazy thing for the assistant attorney general to say, to admit out loud that he's dividing Americans up into these two classes. There's no reason they couldn't have taken a number of individuals from some of these companies and put them on trial.

Historically, we've always done this. Even under the Bush administration, if you go back just ten years, you know, WorldCom, Enron, you know, Adelphia. We took the leading individuals of these companies and we put them on trial to make an example out of them. And this is exactly what we're not doing in this case. Those companies were systemically important then. I don't see why they can't do the same thing now.

BILL MOYERS: You were shocked when you heard that President Obama had named Mary Jo White to lead the Securities and Exchange Commission. And you wrote that she was a partner in a law firm that represented a lot of these big banks. You know, Bank of America, Goldman Sachs, Chase, AIG, Morgan Stanley.

You said, "She dropped out and made the move a lot of regulators make, leaving government to make bucket loads of money, working for the people she used to police." And I gather your great concern is that you don't want to see the country's top financial cop being indebted to the people who created the bank role?

MATT TAIBBI: Right. Yeah, absolutely. I mean, it's just simple common sense. I mean, you're sitting on $10 million, $15 million, however much money she made working there at Debevoise and Plimpton when she was a partner and you owe that money to this specific group of clients and now you're in charge of policing them, just psychologically think of that. It doesn't really work, you know? It doesn't really work in terms of how aggressive a prosecutor should be, what his attitude towards the people he's supposed to be policing should be. It's just, the circumstances just aren't quite right. You'd much rather see a career civil servant in that in that situation.

BILL MOYERS: She was once a tough prosecutor. What's your beef?

MATT TAIBBI: Well, you know, I have people who are telling me that I'm wrong about this, that Mary Jo White was an excellent prosecutor and she's a good choice. But, you know I've done stories in the past about an episode, you had an SEC investigator named Gary Aguirre who was pursing an insider trading case against the future CEO of Morgan Stanley. He asked for permission to interview that future CEO. His name was John Mack. It was denied. And it was because there was communication between Morgan Stanley's lawyer, who at the time was Mary Jo White and the higher ups at the SEC who included the director of enforcement, Linda Thomsen. Aguirre was later fired for complaining about having this investigation squelched.

BILL MOYERS: Blowing the whistle.

MATT TAIBBI: For blowing the whistle. But the SEC was later forced to pay a $750,000 wrongful termination suit to Aguirre in that case. But what's so interesting is that Aguirre's boss, the guy who killed that case went to work for Mary Jo White's firm nine months after the case died. And he got, you know, a multi-million dollar position. It's a classic example of how the revolving door works in Washington. You know, you have these regulators at the SEC. And they know that there's that job out there waiting for them. So how hard are they really going to regulate these companies when they know they can get that money?

But in Washington, you know, people kind of shake their heads at it because it's so common you know, that these people, they move from government back to, you know, these high priced legal defense firms that represent the banks. And then they go back to government again. And it's this sort of, this coterie of, you know, 100, 200 lawyers who really run this entire thing. And it's all the same people on both sides.

BILL MOYERS: Lanny Breuer was one of them. He was in a very prestigious Washington law firm. Jack Lew, the new incoming secretary of the Treasury if he gets approved, served three years at Citigroup. His record there, according to "The Wall Street Journal" was not very lustrous for a man who's about to take over the Treasury Department. But "The Wall Street Journal" suggests that he got his job, not because he had the experience, but because he was a crony of Robert Rubin.

MATT TAIBBI: Jack Lew served in the Clinton administration. I think he worked in the OMB in the, you know, Office of Management of the Budget. And he was one of the key players in helping pass the repeal of Glass-Steagall. And, you know, this is kind of the way it works. It's not a one to one, you know, obvious connection. But, you know, Glass-Steagall was repealed specifically to legalize the merger of Citi Group. And, you know, coincidentally Bob Rubin, who was the Treasury secretary and Jack Lew end up working at Citi Group five, ten years later. And they make enormous amounts of money. And then they go back to government. And again, this is just sort of this merry-go-round that everybody in Washington knows about. And that's the way it works.

BILL MOYERS: How do you explain President Obama's attitude in this? When he was running for president, he promised the close the revolving door. And he seemed genuinely shocked at the collapse of the financial system and the banks' role in it. But he also was raking in massive campaign contributions from these very people. Did those investments, did those contributions turn out to be good investments, or do you think he's just overwhelmed by the system that's controlled by these guys?

MATT TAIBBI: I think that they genuinely accept the explanation that they're probably hearing from all these people who run these Wall Street companies. You know, people like Bob Rubin and Larry Summers who are close confidants of the Obama administration are probably telling them, "Look, if we start prosecuting all kinds of people for you know, X, Y and Z, there's going to be major instability in the markets. People are going to flee America. They're going to withdraw capital from the American financial system. It'll be a disaster. Jobs will be lost." But it's just not an acceptable it's explanation. I think they're--

BILL MOYERS: Why?

MATT TAIBBI: Well, just because the rule of law isn't really the rule of law if it doesn't apply equally to everybody. I mean, if you're going to put somebody in jail for having a joint in his pocket, you can't let higher ranking HSBC officials off for laundering $800 million for the worst drug dealers in the entire world. People who are suspected, not only of dealing drugs, but of thousands of murders. I mean, this is an incredible dichotomy. And eventually, you know, it eats away at the very fabric of society when some people go to jail and some people don't go to jail.

BILL MOYERS: But do you ever have the sense that those guys are, you know, are and their lawyers are up there laughing at all of us on their way to the bank, no pun intended? I mean, the fact of the matter is they are immune. There was a story in "The Washington Post" the other day by Howard Schneider and Danielle Douglas. With the lead, "Five years after the collapse of Lehman Brothers, a global push to tighten financial regulation around the world has slowed in the face of attempted recovery, which the banks helped bring on. "And a tough industry lobby effort. Big banks, insurers and other financial giants remain intact and arguably too big to fail." I mean, nothing really has changed.

MATT TAIBBI: No, no, definitely not. And in fact, if you want to look at it objectively, since 2008, you know, the companies that we're talking about have become bigger and more dangerous and more immune to prosecution than they were back then. And you might even say by a lot. I mean, you know, the first factor was that you had a series of mergers in 2008, which you know, made companies like Wells Fargo and JP Morgan Chase, you know, double in size.

Or they were much bigger than they were before. So therefore they're more dangerous. And so you have these companies, like Barclays, like Royal Bank of Scotland, like UBS, like HSBC, which are, you know, they can't be regulated. We can't get an accurate accounting of what's going on in their books. And apparently now we can't even criminally prosecute them for laundering money like HSBC does. I mean we just keep setting the bar lower and lower and lower. And it's getting scary I think.

BILL MOYERS: There's a new analysis out just the other day from the Economic Policy Institute that shows the super-rich have done well in the economic recovery, while almost everyone else has done badly. And the economist Robert Reich says, "We're back to the widening inequality we had before the big crash." Are the financial and political worlds just too intertwined and powerful for anything to change?

MATT TAIBBI: I mean, it's a concern, I would worry about. But it doesn't mean you can't, you know, try to stop the problem. I definitely think though that there is this connection now between political power and financial power that's just becoming more and more overt. I mean, what Lanny Breuer is saying in that video is these people who have an enormous amount of power, destructive financial power we can't prosecute them.

On the flip side what they're essentially saying is that people who don't have any money at all, it's politically safe to put them in jail. And so, you know, we're creating this kind of dual class. And it's a very upsetting and disturbing situation.

BILL MOYERS: Matt Taibbi, we'll be looking forward to your next expose in a couple of weeks. Thank you very much for being with us.

MATT TAIBBI: Thanks for having me on.

Chuck Hagel Mauled in Bizarro World of US Senate

By Juan Cole, Informed Comment

01 February 13

he confirmation hearing in the Senate for Chuck Hagel, President Obama's nominee for Secretary of Defense, was painful to watch because it displayed the tomfoolery, pretense, self-righteous know-nothingism, and embarrassing lack of contact with reality that dominate the landscape of America's broken democracy. It was like watching a Nebraska ordinary Joe set upon by circus freaks– a phalanx of moral midgets, stalking cat-men, vicious lobster boys and ethical werewolves.

Those who regretted that Hagel seldom stood his ground, often just deflected persnickety questions, and sometimes was made to recite the catechisms of Neoconservative orthodoxy, should remember that what is important in Washington is willingness to conform orally, regardless of what one actually believes or how one acts. Hagel might agree to look like he is being pushed around by his former colleagues, for the sake of their face and his. He won't agree actually to be pushed around once he is in office.

Ted Cruz, a Texas tea partier who probably won't be there after Texas turns blue in a few years, tried to carry out a Fox News-style ambush of Hagel. He played a 2009 Aljazeera interview of Hagel on the issue of nuclear disarmament.

At one point a caller called in from London with a rambling statement, who made an argument that there is a double standard, with the US and its allies free from international law on things like possessing and using nuclear weapons, whereas other countries are held to stricter standard. He said that this unequal application of the law was clear in that Omar al-Bashir, the president of Sudan, had been convicted of war crimes in Darfur by the International Criminal Court, but Israeli leaders, who had committed war crimes against the Palestinians, had been held harmless. He went on rambling, complaining about alleged war crimes the Sri Lankan government committed against the Tamil Tigers, then the host asked him for a question and to finish up. When Hagel responded, he began by saying he agreed with the caller's point. It is obvious to me that he was agreeing that there had been a double standard, and he later said it should be overcome with regard to nuclear disarmament by the US and Russia taking the lead to reduce stockpiles. The caller had a thick accent and it wasn't even clear that Hagel understood everything he said in his rant, much less meant to agree with it. Is Cruz saying that Hagel was agreeing about Sri Lanka, too?

The relevant bit begins at 6:26 minutes in:

http://www.youtube.com/watch?v=AkFDvGo-iIg

Cruz insisted that Hagel should have disagreed with the caller about Israel having committed war crimes, given that Jews were victims of war crimes. Cruz is a truly bright and energetic man, with a Princeton education, who clerked for Rehnquist. He knows very well that he is lying about Hagel. And he knows that Israel is guilty of plenty of war crimes. He managed to make Hagel deny this obvious fact, however. Cruz's performance underlines the importance of Christian Zionism in reinforcing the crackpot conviction in the US senate that it is impossible ever to say anything slightly negative about Israeli policy (the only country in the world so exempted).

Ironically, Cruz's implausible grandstanding occurred on the same day when, as the New York Times headline put it, "U.N. Panel Says Israeli Settlement Policy Violates Law "

Or how about "UN mission finds evidence of war crimes by both sides in Gaza conflict."

In fact, a British court issued an arrest warrant for Tzipi Livni for her role in launching the attack on Gaza in 2008-9, and it is not clear that she can travel to the UK without fear of arrest. The charge, Senator Cruz? War crimes.

Ah, and then there is Lindsey Graham, the Red Queen of the Senate (who is the essence of the pedantic governess and asks through-the-looking-glass questions like: "Divide a loaf by a knife: what's the answer to that?").

Graham wanted to know why Hagel voted against the 2007 senate resolution declaring the Iranian Revolutionary Guards Corps a terrorist organization.

The reason that was a dumb resolution is that terrorism is defined in the US civil code as the deployment of violence by a non-state actor against civilians for political purposes. Since the Revolutionary Guards are a kind of Iranian national guard, they are not a non-state actor. They are therefore not a terrorist organization. They may deploy terror, but it is state terror. (The senate also said they were terrorists because they were guilty of killing US troops in Iraq. First of all, there is no evidence that is true. Second of all, killing troops is not terrorism, it is an act of war). Graham's position is illogical and makes a hash of any reasonable definition of terrorism.

Graham wants to pile on illogical charges against Iran and its institutions in order to force the US into a war on that country, which is 3 times more populous and much more geographically vast than Iraq. Because, like, Iraq went so well, I guess.

Then the Red Queen went after Hagel for having said that the "Jewish lobby" intimidates people. He demanded, "Name one person here who's been intimidated by the Jewish lobby . . . Name one dumb thing we've been goaded into doing due to pressure by the Israeli or Jewish lobby."

Hagel said he didn't have anyone in mind.

The irony, of course, is that Graham is himself part of the Israel lobby, and there he was intimidating Hagel for complaining about having been intimidated!

All the congressmen and senators know that the Israel lobby intimidates them or tries to, on a daily basis. Ernst Hollings complained, "you can't have an Israeli policy other than what AIPAC gives you around here." AIPAC is the American Israel Public Affairs Committee, the de facto foreign agent of the Israeli government in the United States, which gets away with not having to register as such because it has bought off or intimidated Congress. 22-year Illinois veteran of congress Paul Findley has also complained about this. And, just read former AIPAC lobbyis M.J. Rosenberg regularly to get the inside scoop on how AIPAC pressures Congress, including against the president. As Graham knows, there is a whole book by John Mearsheimer and Stephen Walt about the Israel lobbies, which will soon be supplemented by further publications documenting all the … intimidation. The Israel lobbies work by threatening to give money to a rival in the next primary or election. Since races in many districts are close, and since there is no wealthy, organized lobby for the Palestinians or Arabs, it is crazy for a US politician to risk AIPAC's ire. AIPAC doesn't always win, and recognizing its effectiveness as a lobby is not to buy into the bigotted notion of Jews secretly controlling Gentiles. In fact, denying that the Israel lobby exists is not only willful blindness, it is itself a form of anti-Semitism, since such a denial depicts Jews as inherently unlike Cubans, Armenians, Indians, Latinos and all the other ethnic groups that lobby Congress.

The long arm of these lobbies is something about which I have a little personal experience.

Senator John McCain then attacked Hagel for having predicted that the surge or troop escalation ordered by George W. Bush would be a huge mistake. The Iraq War was fought under false pretenses (that the Saddam Hussein regime was two years from having a nuclear weapon and had big stores of biological and chemical weapons, and that it was behind the 9/11 attacks and trained al-Qaeda in the use of chemical weapons– all of these pretexts for war being wretched, bald-faced lies). The Neocons promised McCain's committee a short inexpensive war of $60 billion, over within 6 months. Instead it turned into a quagmire that cost thousands of American lives and some 33,000 badly injured veterans who lead diminished lives. McCain was a cheerleader for the war, then a skeptic, then a cheerleader, and now he has decided that the troop escalation was a success.

If the ‘surge' was a success, it was a minor one in a vast and pockmarked terrain of abject failure. But there are plenty of reasons to question the David Petraeus narrative of a successful surge. In Baghdad, the horrible civil war that killed tens of thousands in 2006 gradually subsided through 2007 mainly because the Shiites ethnically cleansed Sunnis from mixed neighborhoods. The US troop escalation was complicit here because it disarmed the Sunni neighborhood militias first, exposing them to night-time attacks by the still-armed Mahdi Army and Badr Corps. I have talked to Iraq vets who were on the ground and saw this process unfold with their own eyes; they say everyone knew that was what was happening. The turning of Baghdad into a largely Shiite city, while it tamped down violence, could hardly be called a big success (it had been about 50/50 Sunni and Shiite in 2002 before the Americans came).

The other element of the surge was the creation in al-Anbar Province and elsewhere of "Awakening Councils" or "Sons of Iraq," essentially clan-based Sunni Arab militias willing to fight the Sunni-Muslim radicals who had asserted themselves in the Sunni Arab center-west of the country. Shiite prime minister Nouri al-Maliki opposed this program, which resulted in 80,000 armed Sunni militiamen, as a threat to the future public order in Iraq. After the violence began subsiding somewhat, he declined to bring more than about 9,000 of the Sons of Iraq into government security forces. The others were either cut off altogether or given small stipends. Some were hunted down and killed by the Muslim radicals, once they no longer had the protection of being in an organized unit. Some of the Sons of Iraq had been terrorists in 2005-2006, and al-Maliki refused to amnesty them, having them arrested and tried.

The big news from Iraq these days is precisely the continued discontent of Sunni Arab Iraqis, some of them (like the Abu Rishas) from families that had joined the Awakening Councils. They are demanding increased stipends for their service under Petraeus, demanding that hundreds of Sunni Arab youth arrested arbitrarily be released, demanding that the stigmatization of Sunni Arabs and the barring of them from public service be ended, and demanding that the pro-Iran, pro-Syrian, Shiite Prime Minister, Nouri al-Maliki, step down.

http://www.youtube.com/watch?v=-YOr9wEuCX0

So the "surge" didn't account for the decline of violence in Baghdad, and its Awakening Councils created as many problems as they solved, and created expectations that continue to roil Iraqi politics and perhaps threaten a break-up of the country.

I'd say Chuck Hagel got it about right.