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Home > Blogs > Anthony Harrington > US Senate report on the crash, part 2—“Criminalization” of America’s financial system?

US Senate report on the crash, part 2—“Criminalization” of America’s financial system?

Financial crisis causes | US Senate report into the crash - Part 2: 'Criminalization' of America's financial system? Anthony Harrington

This is the second of four blog posts on the US Senate report on the crash. See also: The US Senate report on the crash (part 1), The demise of Washington Mutual (part 3), and Recommendations—Will regulation work this time? (part 4).

Part 1 considered the enormity of the scale of the Investigations Committee’s task in sifting the evidence for this report. Now we turn to the broad outlines of the sketch it has produced. As part 1 made clear, the mountains of paper and electronic based documentation generated through the crash is enough to fog anyone’s brain, but the Committee did a fine job of holding to the main flow of the river, as it were, and did not get swept up into cul de sacs or lost in the minutia of it all, tens of millions of pages of evidence notwithstanding...

As a result there has been no shortage of bloggers rushing to judgement on the back of the Committee’s hard work. My favourite summary so far comes from World Socialist, whose headline screamed: “Special Report on Wall Street: The criminalisation of America’s ruling classes”. What? All of them? Everyone was involved? And how many ruling classes are there anyway? I thought it was singular rather than plural, but what the hell, why nitpick?

What Senator Levin and his team have done, according to World Socialist, is to demonstrate that:

“..the overall picture is one of criminality on the part of the entire financial establishment that, with all levels of government serving as its co-conspirator, systematically looted the economy in order to further enrich itself. The result is a social tragedy for tens of millions of people in the US and many millions more around the world. And yet, the result of this historic crime is that the bankers and speculators are richer and more powerful than ever. Not a single senior executive at a major US bank, hedge fund, mortgage firm or insurance company has gone to jail. Not one has even been prosecuted. There is every indication that none will be criminally indicted in the future...”

That’s it then, the entire financial class is headed for the wall when the revolution comes. Actually, despite World Socialist’s gloomy conclusions, there is not quite that level of certainty that no prosecutions will flow. Certainly the clock on the three year statute of limitations for commercial cases has now run down, but there is no such clock for criminal prosecutions. And besides, there are probably a number of test filings already in the system that will find the US Senate report an absolute treasure trove to bolster whatever cases and charges they are contemplating. It will be interesting to read the next sets of Goldman Sachs and Deutsche Bank accounts to see what level of funding they have set aside as contingency reserves against future claims.

Actually, there is not that much distinction between the tone of the World Socialist piece and the tone that Senator Levin has taken in press conferences following the report. The two are so much in harmony, in fact, that Socialist World has felt comfortable publishing large extracts from Senator Levin’s interviews, particularly his interviews with The New York Times. While it is likely the good senator would not, in his calmer moments, want to cast aspersions on the entire financial system (all those tellers in retail banks serving customers all day, what? They were at it too?) it is clear that he saw enough downright criminality and viciousness in that pile of evidence to get pretty stirred up about things.

As the New York Times, the Senator has been particularly exercised by Goldman Sachs betting against clients who bought CDOs from it. Not unreasonably, the supposition is that Goldman was not being entirely upfront about all pertinent matters with those clients. However, Steven Davidoff argues in his piece in the NYT that “the criticism of Goldman is overwrought”. More attention should be paid to the incredible web of complicity and connections that the report sketches out, he says. In his words, “Wall Street went wild in the years leading up to the financial crisis and in the aftermath, the penalties have been few.”

On that point he and Barry Grey, the author of the World Socialist piece, are shoulder to shoulder, but thereafter they part company. Grey would like to see the executive heads of “the vampire squid”, as Rolling Stone Magazine famously dubbed Goldman Sachs, hung, drawn and quartered for blighting the lives of tens of millions. Davidoff would like us to move on and do sensible things to prevent future mayhem, and offers Dodd-Frank as one of the “good results” to have come out of all the verbal Wall Street bashing. It at least prepared the ground for bi-partisan agreement on curbing Wall Street, he argues. I’m not convinced that those “tens of millions” of American and other victims of the downturn would be that forgiving if they had any say in the matter.

Further reading on the causes of the financial crisis:

Tags: 2008 crash , criminal charges , Deutsche Bank , Goldman Sachs , Senator Carl Levin , US Senate Report
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