THE BURNED OVER DISTRICT

For all the crimes of Wall St. in all their awful magnitude, no one will be going to jail. They will just settle up with the Feds and write a check on an agreed upon sum. Matt Taibbi explains how this has come about.

The deferred-prosecution deal is a hair short of a guilty plea. The bank has to acknowledge the facts of the government's case and pay penalties, but as has become common in the Too-Big-To-Fail arena, we once again have a situation in which all sides will agree that a serious crime has taken place, but no individual has to pay for that crime.

As University of Michigan law professor David Uhlmann noted in a Times editorial at the end of last week, the use of these deferred prosecution agreements has exploded since the infamous Arthur Andersen case. In that affair, the company collapsed and 28,000 jobs were lost after Arthur Andersen was convicted on a criminal charge related to its role in the Enron scandal. As Uhlmann wrote:

From 2004 through 2012, the Justice Department entered into 242 deferred prosecution and nonprosecution agreements with corporations; there had been just 26 in the preceding 12 years.

Since the AA mess, the state has been beyond hesitant to bring criminal charges against major employers for any reason. (The history of all of this is detailed in The Divide, a book I have coming out early next year.) The operating rationale here is concern for the "collateral consequences" of criminal prosecutions, i.e. the lost jobs that might result from bringing charges against a big company. This was apparently the thinking in the Madoff case as well. As the Times put it in its coverage of the rumored $2 billion settlement:

The government has been reluctant to bring criminal charges against large corporations, fearing that such an action could imperil a company and throw innocent employees out of work. Those fears trace to the indictment of Enron's accounting firm, Arthur Andersen . . .

There's only one thing to say about this "reluctance" to prosecute (and the "fear" and "concern" for lost jobs that allegedly drives it): It's a joke...

But most importantly, Madoff and Stanford were simple scam artists who could have come from any generation. There was nothing systemic about their crimes. It was possible to throw them in jail without exposing widespread corruption in our financial system.

That's what's so disturbing about this latest Justice Department cave. It underscores the increasingly obvious fact that the federal government is not interested in getting to the bottom of our financial corruption problem. They seem more to be treating bank malfeasance as a PR issue for the American financial markets that has to be managed away, instead of a corruption problem to be thoroughly investigated and fixed.

In a way, the administration seems to have the same motivation as Chase itself – as CEO Jamie Dimon put it last week, "We have to get some of these things behind us so we can do our job."

It seems that the boys on Wall St. have learned well from Willie Sutton who, when asked why he robbed banks, said that's where the money is. The difference between Willie and Jaime is that Jaime is smoother and steals bigger. Big enough to convince the Feds to let him go.