On Thursday the Department of Justice announced it will not prosecute Goldman Sachs or any of its employees in a financial-fraud probe.
The news is likely to raise the ire of the political left and right, both of which have highlighted one of the most inconvenient facts of Attorney General Eric Holder’s Justice Department: despite the Obama administration’s promises to clean up Wall Street in the wake of America’s worst financial crisis, there has not been a single criminal charge filed by the federal government against any top executive of the elite financial institutions.
Why is that? In a word: cronyism.
Take Goldman Sachs, for example. Thursday’s announcement that there will be no prosecutions should hardly come as a surprise. In 2008, Goldman Sachs employees were among Barack Obama’s top campaign contributors, giving a combined $1,013,091. Eric Holder’s former law firm, Covington & Burling, also counts Goldman Sachs as one of its clients. Furthermore, in April 2011, when the Senate Permanent Subcommittee on Investigations issued a scathing report detailing Goldman’s suspicious Abacus deal, several Goldman executives and their families began flooding Obama campaign coffers with donations, some giving the maximum $35,800.
That’s not to say Holder’s Justice Department hasn’t gone after any financial fraudsters. But the individuals the DOJ’s “Financial Fraud Enforcement Task Force” has placed in its prosecutorial crosshairs seem shockingly small compared with the Wall Street titans the Obama administration promised to bring to justice.
Consider the following small-time operators as listed on the Financial Fraud Enforcement Task Force website:
• “Three Connecticut Women Charged with Overseeing ‘Gifting Tables’ Pyramid Scheme.” Three women in their 50s and 60s were indicted for conspiracy, tax, and wire-fraud charges. “These arrests should send a strong message to all who threaten the financial health of our communities,” one federal agent declared.
• In March, 2012, the DOJ sent a property appraiser in Washington, D.C., to the slammer for 65 months for fraudulently inflated prices in a scheme to “flip” properties. The scheme was a small-time $1 million operation, a sharp contrast with the billions on Wall Street.
• The DOJ’s “get tough” on financial crime strategy included sending two health-care software company executives to the clink for 13 and 15 years.
• A Florida resident was charged and sentenced to 14 months in federal prison for falsifying documents, thereby resulting in the obstruction of an SEC investigation.
• Five people in California were charged with bid-rigging foreclosure auctions. The individuals have been charged with violating the Sherman Act and could face up to 10 years in jail.
• Federal officials went after 10 people in Las Vegas because they tried to “fraudulently gain control of condominium homeowners’ associations in the Las Vegas area so that the HAOs would direct business to a certain law firm and construction company.”
• The owner of a Miami company got 46 months in prison for creating fake loan applications.
• Four people in Tacoma, Wash., were indicted for conspiracy that caused a small bank to fail. Their crime: making false statements on loan applications and to HUD.
To be sure, financial fraud of any kind is wrong and should be prosecuted. But locking up “pygmies” is hardly the kind of financial-fraud crackdown Americans expected in the wake of the largest financial crisis in U.S. history. Increasingly, there appear to be two sets of rules: one for the average citizen, and another for the connected cronies who rule the inside game.
That could be changing, as critiques of Eric Holder’s lack of financial prosecutions have now come from the political left and right; indeed, battling cronyism may represent one of the rare points of common ground in today’s fractious political environment. As progressive Richard Eskow of the Huffington Post recently wrote: “More and more Washington insiders are asking a question that was considered off-limits in the nation's capital just a few months ago: Who, exactly, is Attorney General Eric Holder representing? As scandal after scandal erupts on Wall Street, involving everything from global lending manipulation to cocaine and prostitution, more and more people are worrying about Holder's seeming inaction—or worse—in the face of mounting evidence.”
Will bipartisan outrage boost the decibels in D.C. loud enough for Holder to hear and heed? We’ll see. He’s got at least three months to get moving.