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More thoughts on crime

by Robert Teitelman | Published December 10, 2010 at 11:44 AM

There has been considerable blogospheric chatter here, here and here over the failure of the government to produce criminal prosecutions in the financial crisis. It's rare to see such unanimity out there, particularly among journalists. They're outraged, believing that the administration either lacks the guts or is simply in the bag -- just another failing of the Obama gang. We should be suspicious of such a consensus, particularly when everyone is tossing forward the same memes, often in the same language. The reaction is visceral. We demand accountability. No one offers any legal expertise that may cast some light on this, or offers a legitimate legal argument about how such cases may be constructed and, importantly, won. Lists of potential targets mostly involve the long-gone -- Stanley O'Neal, Dick Fuld, Chuck Prince, Jimmy Cayne -- which would obviate the popular demand for wiretapping. And the analogies fly thick and fast. Is the financial crisis really the same as Enron and WorldCom, or the S&L crisis? Is there a legal nostrum that the size of the crisis must spawn a proportional criminal roundup? As long as we're talking financial crisis, who went to jail for the Crash of '29? If you answer Richard Whitney, you'd be wrong: The president of the New York Stock Exchange (and brother of House of Morgan partner George Whitney) went to Sing Sing for embezzlement years after the crash.

That's not to say (as I wrote yesterday: just covering my rear here) that someone like Fuld may not end up in court -- or that other examples of fraud might surface. And it's not to say that the government, under pressure to show its guts, couldn't conjure up a case and take it to court. Prosecutors have a lot of power when they want to wield it. But that does not insure in any way that they could win, particularly given the legal talent they're almost certainly going to face. The government's record in these cases is already lousy (remember Frank Quattrone, who the media turned into Mike Milken before a jury let him go). And more significant losses could set back white-collar prosecutions even further.

Yesterday, I also chewed over the sight of journalists essentially begging the government to do a job that they, at least in part and to considerable chest thumping, consider theirs: investigation. There's more to say on this topic. The reality that financial complexity and firm size makes journalistic investigation into wrongdoing difficult (not to say resource-intensive, a big problem) forces reporters into an odd, if intimate, relationship with the government, if they want to play that game. I don't want to overstate this. Getting wind of investigations is a high calling, particularly if you can then bring context and depth to the story; historically, The Wall Street Journal has done a fine job at this. But it does create a situation, seen again and again, when many of the folks who would normally be professionally suspicious of concentrated "power" (as in the famous "speaking truth to power") in, say, the Pentagon or the CIA, suddenly and mindlessly embrace it when it's used by prosecutors. (There's also an inconsistency by political persuasion: Prosecution of Bill Clinton was a scandal; prosecution of unnamed Wall Street CEOs is A-OK.) Public power trumps private. Normally skeptical journalists are suddenly urging the government to seek redress by whatever means. They call for accountability. They cheer the cases. They justify leaks and demand wiretaps.

This irony is even more acute in this particular crisis, not because Wall Street was innocent of wrongdoing and error (hardly), but because it is clear how deeply complicit Washington was in these affairs, including the regulators. This is a crisis that involves the toxic interpenetration of public and private. If both public and private power were clearly in error, why would anyone be convinced of the virtues of public prosecutorial power - at least until they see a case? But in fact journalists tend to view prosecutors not only as allies - certainly as excellent generators of headlines and as figures ripe for mythologizing - but as brothers beneath the skin. All of which makes it very easy to demand a roundup of miscreants for a crisis that, in its complexity and reach, still eludes full understanding. - Robert Teitelman

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