A raw deal, then, for the shareholders, but what of the rest of us? Incomes at Goldman and its peers have soared over the past quarter-century not because they’ve modernized the U.S. economy — Silicon Valley was funded by venture capitalists. As for funding cutting-edge manufacturing, Wall Street is similarly absent. “It’s very hard to raise money for a capital-intensive manufacturing start-up,” Hank Notthaft, who has started and run a number of successful Silicon Valley firms, told me this year.
For most Americans, finances have become an ordeal even as Wall Street made more and more money that was disconnected from endeavors that would boost the economy — and was connected to some, such as offshoring, that shrank it. This was bad for the nation but still, for the most part, legal. Then again, illegality is — or at least begins — in the eye of the prosecutor. And as Catherine Rampell noted in her New York Times blog this week, the number of federal prosecutions for bank fraud have fallen each year since 1999, according to an analysis of Justice Department data by Syracuse University’s Transactional Records Access Clearinghouse. From roughly 3,300 prosecutions then, just 1,365 are expected for fiscal 2011.
Given the number of mortgages that banks had to have misrepresented during our housing bubble, that’s mind-boggling. It strongly suggests a loosening of laws, enforcement and norms of business behavior as banks’ political and cultural power grew.
And still, law enforcement seems inclined to let off banks for their misconduct. Most states’ attorneys general have been trying for months, with the support of the Obama administration, to cut a deal with the five largest U.S. banks, in which the banks would pay roughly $25 billion to homeowners (part of which may come as refinancing assistance) as compensation for their legally dubious robo-signed foreclosure notices, in return for effective immunity for fraud and other misdeeds in the devising and selling of those mortgages. The attorneys general of New York and Delaware — Eric Schneiderman and Beau Biden, respectively — have opposed the accord, saying they want to investigate what the banks may have done with those mortgages (something, astonishingly, that no law enforcement agency had investigated until they came along). With California Attorney General Kamala Harris, theyare holding up the deal until the investigations can be completed and the banks agree either to a bigger settlement or a waiver of immunity.
Total up the systemic failures in law enforcement and public policy that led to the devolution of our once-vibrant middle-class democracy, and is it any wonder that people took to the streets and sparked a movement to remake our country? Occupy Wall Street’s challenge — and, more important, the challenge confronting the much larger number of Americans who embraced OWS’s clear-yet-fuzzy message — is to channel its rage and hopes into strategies that will alter the course of American capitalism. As the great organizer Bayard Rustin put it, from protest to politics.
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