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How Obama’s Failure To Prosecute Wall Street Set The Stage For Trump’s Win

July 17, 2017

By Alexander C. Kaufman : huffingtonpost – excerpt of book review (video included)

A “chickenshit club” of prosecutors who only pursue easy targets managed to change history, a veteran Wall Street reporter argues in a new book.

In his eight years as president, Barack Obama oversaw a civil rights renaissance, laid the groundwork for combating climate change, and shepherded the nation through its worst financial crisis since the Great Depression.

But his failure to prosecute Wall Street executives for causing the collapse of the housing market ushered in an era of populist rage that cleared the path for a demagogic reality-TV star to take the Oval Office, according to Jesse Eisinger’s new book, The Chickenshit Club, which hit shelves on Tuesday…

The book traces Department of Justice impotence on corporate crime back two decades. In 2000, the dot-com bubble burst, and the sudden deflation of highly valued early internet firms increased scrutiny over companies’ books across industries…

That year, President George W. Bush, eager to steady a quivering economy, signed an executive order establishing the Justice Department’s Corporate Fraud Task Force. The team of prosecutors would ultimately bring down Enron in what became the world’s most infamous accounting-fraud scandal. But before toppling the energy-services company and sending its top executives to prison, DOJ investigators would snag another big fish, catching Arthur Andersen shredding its audits of Enron. In June 2002, the world’s fifth-biggest accounting firm effectively shut down after a conviction for obstructing justice.

The conviction rippled through the corporate world as Arthur Andersen laid off thousands of employees. The shock wave inspired a fierce backlash from corporate lobbyists and defense attorneys. They launched a PR campaign that painted prosecutors as overly aggressive cowboys willing to put people out of work and destabilize markets. Groups like the U.S. Chamber of Commerce funded appeals of the conviction all the way to the Supreme Court, and in 2005, the high court unanimously ruled against the Justice Department…

Changes to the way the Justice Department treated white collar crime came into sharp relief after the 2007 financial crisis. The Corporate Fraud Task Force of 2002 boasted nearly 1,300 fraud convictions by the time Obama replaced it in 2009 with the Financial Fraud Enforcement Task Force. The new entity combined the efforts of the Justice Department, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Treasury Department, in what then-Treasury Secretary Timothy Geithner promised would “act aggressively and proactively in a coordinated effort to combat financial fraud.” But, lacking the focus or prosecutorial muscle of its predecessor, the task force turned out to be what critics called “a clearinghouse of information and resources to facilitate enforcement by other government agencies.” One former Justice Department official derided it to Eisinger as “the turtle.”…

“The great secret to corporate criminal prosecution is that we have privatized and outsourced it to the companies themselves,” Eisinger said. “In doing so, they’re taking cues from the client of the company, and the client of the company is going to be studiously incurious about following investigative threads that might lead to the CEO or board rooms. Instead, they point the finger at a middle manager or someone expendable, and that’s the person who gets indicted by the general government.”.

It’s a revolving-door system. Those same law firms poach Justice Department prosecutors, with offers of far higher salaries than the government can afford. That makes the Justice Department just a middling step in the pipeline between elite law schools and big firms, which is true regardless of politics these days. Firms like WilmerHale and Covington & Burling lean Democratic, while Jones Day leans Republican…
“The Democrats have very few differences from the Republicans now”, Eisinger said. They’re both drawing from the same elite legal culture, they’re all essentially clerking from the same judges or the same courts. … They’re all drawing from the same well with just little gradations in difference on ideology, mainly around social issues.”…(more)

So, the question would ask is ,”Why did Obama replace the Corporate Fraud Task Force with the Financial Fraud Enforcement Task Force?” and “Can the Democratic Party be trusted to fix the problems in the Justice Department?”

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