For years, when corporations paid big fines to escape prosecution for their misdeeds, critics fumed. Why, they asked, shouldn’t big companies be treated like common criminals?
A federal judge turned that question on its head this week as he lamented being asked to approve yet another corporate settlement. Perhaps, he said, common criminals ought to be treated more like big companies.
Judge Emmet G. Sullivan, of the United States District Court for the District of Columbia, took aim at a favorite tool of the Obama administration for addressing corporate wrongdoing: a form of probation known as a deferred prosecution agreement. If companies behave for the length of the agreement, the matter is closed without any criminal record.
The judge said individual defendants should enjoy the same opportunities. While it is not uncommon for judges to criticize outcomes that they see as unjust, it is highly unusual for them to so explicitly advocate — and at such great length — a change in approach.
Judge Sullivan’s 84-page opinion — in what could have been a short, straightforward decision — is the latest influential voice to join a growing chorus of both liberals and conservatives who see the American criminal justice system as fundamentally unfair.
The ruling comes amid a rapidly changing environment: The White House is approving clemency applications at historically high rates; support is coalescing on Capitol Hill to ease sentencing laws; and law enforcement leaders around the country have declared that too many Americans are in prison for too long. Though the federal prison population has declined for the first time in decades, America remains the world’s largest jailer by far; its prison population nearly equals China’s and Russia’s combined.
Justice Department officials agree in principle with Judge Sullivan’s critique and have encouraged Congress to ease tough sentencing laws that were passed at the height of the crack epidemic. Emily Pierce, a department spokeswoman, noted that under an initiative begun in 2013, prosecutors were already ordered to prioritize more serious crimes, while looking for alternatives to prison for low-level offenders. Fewer low-level criminals being charged means fewer people eligible for deferred prosecution. The department has also strongly supported drug courts, which essentially offer the same second chance that companies are given.
At the same time, the Justice Department recently promised to get tough on corporate executives after years of criticism in the aftermath of the financial crisis that bankers, in particular, escaped punishment because their companies agreed to pay big fines. It was that promise, followed days later by a deferred-prosecution agreement with General Motors, that ignited Judge Sullivan’s fury.
Judge Sullivan was appointed to the federal bench by President Bill Clinton. He previously served as a municipal judge and a local appellate judge in Washington, having been appointed by Presidents Ronald Reagan and George Bush.
He called G.M.’s $900 million settlement “a shocking example of potentially culpable individuals not being criminally charged.” G.M. admitted that it misled the public about auto defects, but neither the company nor its executives were prosecuted, “despite the fact that the reprehensible conduct of its employees resulted in the deaths of many people.”
“The court is disappointed that deferred-prosecution agreements or other similar tools are not being used to provide the same opportunity to individual defendants to demonstrate their rehabilitation without triggering the devastating collateral consequences of a criminal conviction,” Judge Sullivan wrote.
Justice Department figures show deferred-prosecution agreements are rare for both individuals and companies. But the number of cases against organizations and companies is so tiny — 150 or so each year, compared with 160,000 or more individual prosecutions — that these deals occur at a much higher rate in corporate cases, which also tend to be higher profile.
Deferred-prosecution deals are attractive because they spare companies the consequence of criminal convictions, such as stock collapse and a loss of contracts. For people, the effects can be even more severe. The American Bar Association has identified tens of thousands of consequences of criminal conviction, which demonstrates how a single arrest can cost people their jobs and homes.
President Obama has indicated that he will make a criminal justice overhaul one of the most important issues of his remaining time in office. He became the first sitting president to visit a federal prison. On Thursday, he defended the Black Lives Matter movement, which has been criticized by police unions in particular as being anti-police. Mr. Obama plans to speak about changing the criminal justice system next week at the annual meeting of the International Association of Chiefs of Police in Chicago.
Much of the public debate has focused on reducing the prison population by cutting sentences for those serving long sentences for nonviolent crimes. Lost in the debate, Judge Sullivan said, has been the importance of keeping people out of jail in the first place. “This oversight is lamentable, to say the least!” he wrote.
He said criminal justice reform should offer people “the chance to demonstrate their true character and avoid the catastrophic consequences of felony convictions.”
While Judge Sullivan cannot make policy from the bench, the opinion shows the momentum behind efforts to improve the system, said Norman L. Reimer, the executive director of the National Association of Criminal Defense Lawyers.
“It has finally seeped into the public consciousness that there is something wrong,” he said. “All of a sudden, a nation wakes up and realizes we’ve created this unbelievable cadre of second-class citizens.”
By: Matt Apuzzo, The New York Times, October 23, 2015
“Democrats, Republicans And Wall Street Tycoons”: Financiers Resent Any Constraints On Ability To Gamble With Other People’s Money
Hillary Clinton and Bernie Sanders had an argument about financial regulation during Tuesday’s debate — but it wasn’t about whether to crack down on banks. Instead, it was about whose plan was tougher. The contrast with Republicans like Jeb Bush or Marco Rubio, who have pledged to reverse even the moderate financial reforms enacted in 2010, couldn’t be stronger.
For what it’s worth, Mrs. Clinton had the better case. Mr. Sanders has been focused on restoring Glass-Steagall, the rule that separated deposit-taking banks from riskier wheeling and dealing. And repealing Glass-Steagall was indeed a mistake. But it’s not what caused the financial crisis, which arose instead from “shadow banks” like Lehman Brothers, which don’t take deposits but can nonetheless wreak havoc when they fail. Mrs. Clinton has laid out a plan to rein in shadow banks; so far, Mr. Sanders hasn’t.
But is Mrs. Clinton’s promise to take a tough line on the financial industry credible? Or would she, once in the White House, return to the finance-friendly, deregulatory policies of the 1990s?
Well, if Wall Street’s attitude and its political giving are any indication, financiers themselves believe that any Democrat, Mrs. Clinton very much included, would be serious about policing their industry’s excesses. And that’s why they’re doing all they can to elect a Republican.
To understand the politics of financial reform and regulation, we have to start by acknowledging that there was a time when Wall Street and Democrats got on just fine. Robert Rubin of Goldman Sachs became Bill Clinton’s most influential economic official; big banks had plenty of political access; and the industry by and large got what it wanted, including repeal of Glass-Steagall.
This cozy relationship was reflected in campaign contributions, with the securities industry splitting its donations more or less evenly between the parties, and hedge funds actually leaning Democratic.
But then came the financial crisis of 2008, and everything changed.
Many liberals feel that the Obama administration was far too lenient on the financial industry in the aftermath of the crisis. After all, runaway banks brought the economy to its knees, causing millions to lose their jobs, their homes, or both. What’s more, banks themselves were bailed out, at potentially large expense to taxpayers (although in the end the costs weren’t very large). Yet nobody went to jail, and the big banks weren’t broken up.
But the financiers didn’t feel grateful for getting off so lightly. On the contrary, they were and remain consumed with “Obama rage.”
Partly this reflects hurt feelings. By any normal standard, President Obama has been remarkably restrained in his criticisms of Wall Street. But with great wealth comes great pettiness: These are men accustomed to obsequious deference, and they took even mild comments about bad behavior by some of their number as an unforgivable insult.
Furthermore, while the Dodd-Frank financial regulation bill enacted in 2010 was much weaker than many reformers had wanted, it was far from toothless. The Consumer Financial Protection Bureau has proved highly effective, and the “too big to fail” subsidy appears to have mostly gone away. That is, big financial institutions that would probably be bailed out in a future crisis no longer seem to be able to raise funds more cheaply than smaller players, perhaps because “systemically important” institutions are now subject to extra regulations, including the requirement that they set aside more capital.
While this is good news for taxpayers and the economy, financiers bitterly resent any constraints on their ability to gamble with other people’s money, and they are voting with their checkbooks. Financial tycoons loom large among the tiny group of wealthy families that is dominating campaign finance this election cycle — a group that overwhelmingly supports Republicans. Hedge funds used to give the majority of their contributions to Democrats, but since 2010 they have flipped almost totally to the G.O.P.
As I said, this lopsided giving is an indication that Wall Street insiders take Democratic pledges to crack down on bankers’ excesses seriously. And it also means that a victorious Democrat wouldn’t owe much to the financial industry.
If a Democrat does win, does it matter much which one it is? Probably not. Any Democrat is likely to retain the financial reforms of 2010, and seek to stiffen them where possible. But major new reforms will be blocked until and unless Democrats regain control of both houses of Congress, which isn’t likely to happen for a long time.
In other words, while there are some differences in financial policy between Mrs. Clinton and Mr. Sanders, as a practical matter they’re trivial compared with the yawning gulf with Republicans.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 16, 2015
“Kasich And Bush: The Lehman Brothers”: Mixing Investment Banking With Politics In A Robber Baron Era
Most of the stuff being written about soon-to-be official GOP presidential candidate John Kasich involves his struggle to qualify for the August 6 Fox News debate, though some observers really seem to think he’s a serious dark horse candidate if he can get his act together and deal with conservative anger at his decision to accept a Medicare expansion as governor of Ohio.
But an old problem for him is beginning to reemerge: his seven years as a managing director at Lehman Brothers, the firm whose meltdown in 2008 touched off the global financial crisis that in turn led to the Great Recession. Bloomberg Politics‘ Mark Niquette has the story:
Kasich’s Lehman career, which included deals for companies from Google Inc. to Cleveland-based manufacturer ParkOhio, will test the presidential campaign that the two-term Ohio governor plans to start this month.
While his opponents have depicted his stint at the doomed bank as a period during which he cashed in as millions suffered, Kasich makes the case that he gained finance experience that made him a better public official.
“If people want to attack me, I’ll tell them what I did, and I think it’s been great,” Kasich said in an interview Wednesday during a visit to South Carolina.
This is why Niquette describes Kasich’s Lehman tenure as representing a “Rorschach Test” for how one view’s Kasich’s career: did it taint him or enhance his long resume? The same could be asked of his service as one of Newt Gingrich’s lieutenants in the Republican Revolution of the 1990s.
As it happens, Kasich is not the only Republican candidate who worked extensively for Lehman Brothers. So did Jeb Bush, who was an “advisor” to the firm and then to its successor, another bank with a less than ideal reputation, Barclay’s. In a Daily Beast column last week, Charles Gasparino suggests that Bush’s refusal to answer questions about what he did for both banks could significantly undermine the claim of total transparency he made when releasing old tax returns.
Not much is known about what Bush actually did for Lehman—the firm that went belly-up in 2008 and sparked the wider financial crisis, and Barclays, the bank that purchased Lehman out of bankruptcy and continues to work out of its midtown Manhattan headquarters. He began working for the former after his term as Florida governor ended in 2007, and continued working for the latter until the end of 2014, when he decided to run for president.
The two banks were his biggest sources of income in recent years: Bush earned more than $14 million working for Lehman and then Barclays, which based on my understanding of simple math accounted for nearly half of the $29 million he made after he left government. Yet in Tuesday’s disclosure, and even in many of his public comments, Bush has downplayed his work for the two banks.
“I also was hired as a senior advisor to Barclays where I advised their clients on a wide range of global economic issues with a mind towards navigating government policies,” he writes in an essay that accompanied the tax returns. It is the only sentence that refers to his time at Barclays. And he doesn’t mention Lehman at all.
Bush has denied any responsibility for one bit of toxic Lehman Brothers fallout: the huge bath taken by Florida state agencies and local governments who invested their assets in a state fund managed by the bank when it folded. Despite the denials, suspicions remain thanks to this big coincidence noted by the Tampa Bay Times:
The storied bank hired former Gov. Jeb Bush as a consultant in June 2007, five months after he left office. As governor, Bush also served as a trustee for the State Board of Administration, which invests public money.
Lehman was the dominant Wall Street broker that sold the SBA $1.4 billion of risky, mortgage-related securities that started tanking in August 2007.
Bush has said he had nothing to do with those sales.
So there’s some smoke but no fire so far, but I doubt the association of two presidential candidates with a bank whose name is a byword for failed promises will entirely go away. Indeed, if Kasich’s campaign survives its early tests I wouldn’t be surprised if one of their many rivals starts referring to them together as the “Lehman Brothers.” No specific allegation will be necessary to make the line damaging. Them’s the breaks when you mix investment banking with politics in a Robber Baron era.
By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, July 9, 2015
Too bad George W. Bush is persona non grata among congressional Republicans. If he were less unpopular, they might find in the waning years of his presidency an example of what to do about a vexing issue facing them in 2016, an issue Senate Majority Leader Mitch McConnell called that “gosh darn” minimum wage.
In their bid to take over the Congress in 2006, the Democrats vowed to raise a federal minimum wage that had remained unchanged since the second term of the Clinton administration. After sweeping midterm victories in both chambers, congressional Democrats put the issue on their agenda, calling for an incremental increase from $5.15 an hour to $7.25 by 2009.
That wasn’t enough for Barack Obama, who vowed to raise the minimum wage to $9.50 by 2011 if elected president. His promise, however, came before the Great Recession cast a pall over many of his campaign promises. The minimum wage has remained $7.25 since he took office. (It is now higher in some cities and states; New York State recently raised it to $15 an hour in the New York City metropolitan area and $12.50 upstate.)
So the push to raise the minimum wage isn’t new. That’s a bit counterintuitive given the attention being paid to economic inequality, an issue that arose in the aftermath of the 2007 financial collapse. Even Republican contenders for the White House are obliged at least to pay lip service to the issue. And to be sure, a stagnant minimum wage is the bedrock of economic inequality. But the thread of the debate began during the second Bush administration, which was hostile or indifferent to the law, and allowed the purchasing power of the base wage to erode while the cost of living continued to climb or, indeed, soar. (To briefly illustrate, using 2013 dollars: if the minimum wage were $7.25 in New York City, the actual value would be about $4 an hour.)
What did President Bush do that could serve as a model for today’s congressional Republicans? First, two observations. One, Bush’s presidency was nearing historic levels of unpopularity by 2007. Two, voters tend to punish the party in power in hard times. The 2008 election was going to be rough for any GOP candidate.
But also keep in mind the nature of the business wing of the GOP. It is against wage mandates, because wages cut into profits. But the faction is also politically canny. It was willing to concede to demands for a higher minimum wage, if conceding weakened Democrats in 2008. Put another way: if Republicans had continued to resist raising the wage, then the wage issue may have become more potent for Barack Obama. So the business wing of the Republican Party — including 82 members of the House, all but three senators, and the president — held its nose and supported a wage hike.
The conservative wing of the GOP, on the other hand, is the opposite of canny. It does not see the wisdom of conceding on the minimum wage, even as the minimum wage has taken on more significance than it had a decade ago. Conservatives believe losing now means losing forever, and losing is inconceivable given the righteousness of their cause. Therefore, the more they resist raising the minimum wage, the more potent it will be for the Democratic Party’s nominee. As Harry Reid told The Hill yesterday: “If Republicans don’t do something about it, it’s a major issue.”
Reid was commenting on the most recent effort to exploit conservative intransigence. In the past, the Democrats called for $10.10 an hour. Yesterday, Senator Patty Murray introduced a bill raising the wage to $12 by 2020. The Raise the Wage Act, she said, would affect 38 million workers. Moreover, she was clearly relishing the moment. “I want to hear what the Republican presidential candidates have to say about this,” she said.
And they responded in predictable fashion.
Ted Cruz said the bill would be a “job-killing” disaster. Marco Rubio warned that workers would be replaced by robots. Scott Walker questioned the validity of wage mandates in general. Rand Paul said a base wage is good for young people but nobody else. And Jeb Bush, who most represents the interests of the business wing of the Republican Party, punted to the “private sector.”
You’ve got to wonder whom they think they are speaking for. According to a February poll by the Associated Press, 6 in 10 favor raising the minimum wage, including 40 percent of Republicans. In 2013, Gallup found more than 71 percent in favor, including half of Republicans. Last year, a Washington Post/ABC News survey found that 50 percent of respondents are more likely to vote for candidates who favor raising the minimum wage.
Clearly, the Republican presidential field isn’t speaking for the majority, or even for members of their party who see the good in increasing the wage. Jeb Bush is speaking for a business faction that fears higher wages eating into profits, while the rest is speaking for conservatives who believe compromise equals surrender.
The smart thing would be to give in now to prevent the minimum wage from haunting the Republican candidate later. But don’t hold your breath. On the occasion last summer when Mitch McConnell complained about the Democrats proposing to raise that “gosh darn” minimum wage (once again!), he added one more comment suggesting there’s no returning to the political pragmatism the George W. Bush administration exhibited in 2007.
“These people believe in all the wrong things,” he said.
By: John Stoehr, Managing Editor of The Washington Spectator; The National Memo, May 8, 2015
“Most Glaring Drawback Is He’s A Bush”: Jeb Bush Cannot Escape His Brother’s Undeniably Disastrous Presidency
Earlier this year, Mitt Romney had a Galadriel moment. He appeared to be briefly seized by a vision of himself as an all-powerful, world-striding President Romney, before turning away from temptation and settling for the plain old Mitt Romney he has always been. It was political theater at its most bizarre, a flack-driven frenzy that doubled as a flashback to the self-delusion that blinded the Romney 2012 campaign in its final days.
With Romney now out of the way, Jeb Bush has consolidated the support of the GOP’s moneyed class with surprising alacrity. As Politico noted last week, the contest for the Republican nomination was previously seen as a “free-for-all among a half-dozen or so viable candidates” but has since shifted to a game of catch-up, with a clear leader way out front who has a “bull’s-eye on his back.” He may soon be out of sight: The Washington Post reported that Bush is amassing so much money so quickly that his potential rivals “do not even claim they can compete at his level.”
The Republican primary process is a fearsome thing for any establishment candidate, but history shows that he (and it is always a he) will win in the end. None of this is good news for Bush’s would-be competitors, whether they be on the fringe (Rand Paul, Ted Cruz), slow starting out of the gates (Chris Christie), or Pawlenty-esque (Scott Walker, Bobby Jindal).
The problem for the GOP is that a Bush running in 2016 is almost as eye-rubbingly bizarre as another Romney campaign.
I’m not talking about Jeb Bush’s policies or his abilities as a campaigner (though for the most part he has been deft in avoiding the usual pitfalls and has handled the media well). I’m talking about his most glaring drawback: the fact that he’s a Bush. It seems too obvious to mention, but as Republican elites rally around his flag, it appears they need a reminder. Just a few years ago, the idea of another Bush running for president would have been laughable. Today, the party is so desperate for a winner that it is willing to entirely overlook eight disastrous years in the White House.
In early February, Jeb Bush said his brother was a “great president.” Maybe that’s just what a younger brother has to say to avoid seeming like a heartless backstabber. Then again: Really?
George W. Bush’s Iraq War was a horrible blunder — the worst foreign policy disaster since Vietnam. There was a brief moment at the dawn of the Arab Spring when conservatives were crediting Bush’s pro-democracy agenda for a wave of anti-authoritarian protests across the region, but you don’t hear them saying that anymore. Iraq was a really, really bad idea, and nothing has changed that.
Then there’s the economy. There are not many modern presidents who enjoy the dubious honor of overseeing a recession so bad that it compares only to the Great Depression. In fact, there is only one: George W. Bush. While it would be unfair to lay the entire economic collapse at his feet, it’s clear that the financial crisis stemmed from a stew of GOP policies, from deregulation to crony capitalism to overly prizing homeownership. Again, not great. Not even good.
Next up: the budget. Bush entered office with a budget surplus, then gave a huge chunk of it away to the rich. That’s not good. That’s very, very bad.
Then there’s all the rest of it: Katrina, Scooter Libby, torture, wiretapping, Dick Cheney, and on and on and on.
George W. Bush’s approval rating has improved since its 2008 nadir, but it doesn’t take a genius to figure out that it will plummet once the Bush years are relitigated in the context of a hypercompetitive presidential race in which another Bush is on the ballot.
To win a general election, Jeb Bush would have to come up with a way to disown his brother’s legacy — and so far he has only embraced it. That means that, should Hillary Clinton be the Democratic nominee, the 2016 election could very well come down to a contest between the 1990s and the 2000s.
Americans have fond memories of the 1990s. The 2000s? Not so much.
By: Ryu Spaeth, The Week, February 17, 2015