Ben Bernacke, who was chairman of the Federal Reserve during the financial meltdown in 2008, has acknowledged that more Wall Street executives should have been imprisoned for their role in the crisis.
Why weren’t they?
According to Bernacke, speaking to the media, the reason was that the US Department of Justice was going after the firms themselves – not the executives that made the decisions that nearly brought down the world economy. He doesn’t disagree with the bailout of Wall Street itself. Although the bailouts caused outrage among the taxpayers who became the victims of the crisis, Bernacke defended the action:
We did it because we knew that if the financial system collapsed, the economy would immediately follow…barring stabilization of the financial system, that we could have gone into a 1930s-style depression.
Then, he added: “It would have been my preference to have more investigation of individual action, since obviously everything that went wrong or was illegal was done by some individual, not by an abstract firm.”
In making those statements, Bernacke reaffirms what Progressive journalist Matt Taibbi said to Amy Goodman of Democracy Now in the spring of 2014: “You may not want to criminally charge that company willy-nilly and wreck the company and cause lots of people to lose their jobs… [but] there’s no reason you can’t proceed against individuals in those companies.”
This is what the DoJ failed to do, according to Bernacke. He points out:
The [Federal Reserve] is not a law enforcement agency… the Department of Justice and others are responsible for that, and a lot of their efforts have been to indict or threaten to indict financial firms.
Finally, Bernacke gets to the crux of the matter: “A financial firm is a legal fiction; it’s not a person” [emphasis added].
Are you listening, Justice Roberts? Did you get that, Mitt Romney? Corporations – including financial firms – are not people. And therein lies the problem, as Bernacke again points out: “You can’t put a financial firm in jail.”
It cannot be emphasized enough: corporations cannot “live” apart from the live, flawed, natural human executives and managers who make the decisions.
Wall Street got bailed out – and Main Street got the shaft. It is true that six of the biggest Wall Street banks (Bank of America, Citigroup, Goldman-Sachs, JP Morgan, Morgan-Stanley and Wells Fargo) paid a total of $67 billion for their roles in the 2008 financial crisis. However, even this staggering amount was pocket change to these giant companies, and was simply written off as the cost of doing business. Meanwhile, only one human executive – Bernard Madoff – went to jail. Why Madoff? Simple – he stole from the rich and powerful, not the middle class.
One of the effects of all of this is that it has virtually destroyed any credibility that the capitalist system might have had among the average working people of this country. Arguably, memories of the way the government handled the 2008 crisis and the complete lack of accountability among executives is playing a major role in Bernie Sander’s surging popularity.
It also begs the question of why the DoJ and other agencies failed to prosecute more executives (many of whom today are richer than ever). The federal government certainly had the power. Of course, the five-year statute of limitations that applies to most federal crimes has passed. It’s easy for Bernacke to now wring his hands and talk about how “it hurt” whenever he saw a bumper sticker asking, “Where’s my bailout?”
He should have spoken up years ago.
