Tuesday, August 13, 2013

The Fierce Ongoing Struggle To Protect and Defend Our Human and Constitutional Rights As American Citizens In a Racist and Surveillance Obsessed Society

Kirsten Luce for The New York Times
Mayor Michael R. Bloomberg after a news conference Monday. He said the city did not get “a fair trial” in the stop-and-frisk case.

August 12, 2013
New York Times

A federal judge ruled on Monday that the stop-and-frisk tactics of the New York Police Department violated the constitutional rights of minorities in the city, repudiating a major element in the Bloomberg administration’s crime-fighting legacy.

Interactive Feature
New Yorkers Speak Out on Stop, Question and Frisk Policy

News Analysis: Two Powerful Signals of a Major Shift on Crime (August 13, 2013)
Op-Ed Contributor: Moving Beyond Stop-and-Frisk (August 13, 2013)
For Police Departments, in City and Elsewhere, Court Oversight Is Not New (August 13, 2013)
Where Stop-and-Frisk Tactic Is Business as Usual, Skepticism Prevails (August 13, 2013)
After Decision, Mayoral Candidates Offer Many Opinions but Few Concrete Plans (August 13, 2013)
Times Topic: Stop and Frisk Policy - New York City Police Department

Ruth Fremson/The New York Times
Plaintiffs, class members and lawyers in the lawsuit answered reporters’ questions on Monday. In the foreground: Leroy Downes; in the back, from left: Vince Warren of the Center for Constitutional Rights, Djibril Toure, Devin Almonar and David Ourlicht.

Richard Drew/Associated Press
Judge Shira A. Scheindlin of United States District Court, who ruled in the stop-and-frisk case, in her chambers in May.

The use of police stops has been widely cited by city officials as a linchpin of New York’s success story in seeing murders and major crimes fall to historic lows. The police say the practice has saved the lives of thousands of young black and Hispanic men by removing thousands of guns from the streets.

But the judge, Shira A. Scheindlin, found that the Police Department resorted to a “policy of indirect racial profiling” as it increased the number of stops in minority communities. That has led to officers’ routinely stopping “blacks and Hispanics who would not have been stopped if they were white.”

The judge called for a federal monitor to oversee broad reforms, including the use of body-worn cameras for some patrol officers, though she was “not ordering an end to the practice of stop-and-frisk.”

In her 195-page decision, Judge Scheindlin concluded that the stops, which soared in number over the last decade as crime continued to decline, demonstrated a widespread disregard for the Fourth Amendment, which protects against unreasonable searches and seizures by the government, as well as the 14th Amendment’s equal protection clause.

Mayor Michael R. Bloomberg angrily accused the judge of deliberately denying the city “a fair trial” and said the city would file an appeal.

Striking a defiant tone, Mr. Bloomberg said, “You’re not going to see any change in tactics overnight.” He said he hoped the appeal process would allow the current stop-and-frisk practices to continue through the end of his administration because “I wouldn’t want to be responsible for a lot of people dying.”

The judge found that for much of the last decade, patrol officers had stopped innocent people without any objective reason to suspect them of wrongdoing. But her criticism went beyond the conduct of police officers.

“I also conclude that the city’s highest officials have turned a blind eye to the evidence that officers are conducting stops in a racially discriminatory manner,” she wrote, citing statements that Mr. Bloomberg and the police commissioner, Raymond W. Kelly, have made in defending the policy.

Judge Scheindlin ordered a number of remedies, including a pilot program in which officers in at least five precincts across the city will wear cameras on their bodies to record street encounters. She also ordered a “joint remedial process” — in essence, a series of community meetings — to solicit public comments on how to reform the department’s tactics.

The judge named Peter L. Zimroth, a partner in Arnold & Porter L.L.P., and a former corporation counsel and prosecutor in the Manhattan district attorney’s office, to monitor the Police Department’s compliance with the United States Constitution. The installation of a monitor will leave the department under a degree of judicial control that is certain to shape the policing strategies under the next mayor.

Judge Scheindlin’s decision grapples with the legacy of Terry v. Ohio, a 1968 ruling by the Supreme Court, which held that stopping and frisking was constitutionally permissible under certain conditions. But she said that changes to the way the New York Police Department employed the practice were needed to ensure that the street stops were carried out in a manner that “protects the rights and liberties of all New Yorkers, while still providing much needed police protection.”

The judge found that the New York police were too quick to deem suspicious behavior that was perfectly innocent, in effect watering down the legal standard required for a stop.

“Blacks are likely targeted for stops based on a lesser degree of objectively founded suspicion than whites,” she wrote.

She noted that officers routinely stopped people partly on the basis of “furtive movements,” a category that officers have testified might encompass any of the following: being fidgety, changing directions, walking in a certain way, grabbing at a pocket or looking over one’s shoulder.

“If officers believe that the behavior described above constitutes furtive movement that justifies a stop, then it is no surprise that stops so rarely produce evidence of criminal activity,” Judge Scheindlin wrote.

She found that in their zeal to identify concealed weapons, officers sometimes stopped people on the grounds that the officer observed a bulge in the person’s pocket; often it turned out that the bulge was caused not by a gun but by a wallet.

“The outline of a commonly carried object such as a wallet or cellphone does not justify a stop or frisk, nor does feeling such an object during a frisk justify a search,” she ruled.

She emphasized what she called the “human toll of unconstitutional stops,” noting that some of the plaintiffs testified that their encounters with the police left them feeling that they did not belong in certain areas of the city. She characterized each stop as “a demeaning and humiliating experience.”

“No one should live in fear of being stopped whenever he leaves his home to go about the activities of daily life,” she wrote.

One of the plaintiffs in the case, Lalit Clarkson, 31, a union organizer, said after the ruling that “the stop-and-frisk policy criminalizes a whole race and community of people, just for going to work, going to get some food, going on a train to go downtown.”

The decision, he said, represents the legal system’s validation of what the black community has known for a long time: that the stop-and-frisk tactics rely on racial profiling.

“What we know, in our community, to be the truth, has never before gone through a massive legal process” and been “shown, point by point, step by step” to be true, he said.

The judge’s ruling, in Floyd v. City of New York, a 2008 class-action lawsuit that represents the broadest legal challenge to the department’s practices, follows a two-month nonjury trial in Federal District Court in Manhattan earlier this year. Her decision cites testimony of about a dozen black or biracial men and one woman who described being stopped, as well as the conclusions of statistical experts who studied police paperwork describing some 4.43 million stops between 2004 and the middle of 2012.

But the stops were not the end of the problem, Judge Scheindlin found. After officers stopped people, they often conducted frisks for weapons, or searched the subjects’ pockets for contraband, like drugs, without any legal grounds for doing so. Also, she found that during police stops, blacks and Hispanics “were more likely to be subjected to the use of force than whites, despite the fact that whites are more likely to be found with weapons or contraband.”

About 83 percent of the stops between 2004 and 2012 involved blacks and Hispanics, even though those two demographics make up just slightly more than 50 percent of the city’s residents. Mr. Bloomberg and Mr. Kelly have explained that disparity by saying it mirrored the disproportionate percentage of crimes committed by young minority men. But Judge Scheindlin dismissed the Police Department’s rationale.

“This might be a valid comparison if the people stopped were criminals,” she wrote, explaining that there was significant evidence that the people being stopped were not criminals. “To the contrary, nearly 90 percent of the people stopped are released without the officer finding any basis for a summons or arrest.”

Rather, Judge Scheindlin found, the stops overwhelmingly involved minority men because police commanders had come to see them as “the right people” to stop.

“It is impermissible to subject all members of a racially defined group to heightened police enforcement because some members of that group are criminals,” she wrote.

Mr. Bloomberg pledged that lawyers for the city, in appealing to the United States Court of Appeals for the Second Circuit, would argue that the judge was biased against the police. As evidence, he cited the fact that the judge, who has overseen numerous stop-and-frisk cases over the last decade, had encouraged the plaintiffs to steer the Floyd case into her courtroom by marking it as related to an earlier case she had overseen.

The mayor said the judge did “not understand how policing works” and had misinterpreted what the Constitution allowed.

America cares for you – until you start asking questions

Manning, Snowden and Trayvon Martin: a series of legal cases is making US citizens re-evaluate what the state is really for

by Gary Younge
The Guardian, 
Sunday 11 August 2013

A protest in New York against government surveillance programmes and the NYPD's stop and search. ‘Put bluntly, Americans have been told that they are being spied on and misinformed for their own good.’ Photograph: Edward Leavy Jr/Demotix/Corbis

When Ray Kelly, the man Barack Obama is currently considering to lead homeland security, was the New York City police commissioner, he allegedly had a policy of terrorising black and Latino neighbourhoods.

A hearing into the city's stop-and-frisk policies in spring heard how Kelly told state senator Eric Adams that "he targeted and focused on [black and Latino youth] because he wanted to instil fear in them every time they left their homes that they could be targeted by the police". The hearing also heard a secret recording of South Bronx deputy inspector Christopher McCormack telling a subordinate to stop "the right people at the right time, the right location", and focus stop-and-frisks on "male blacks" between 14 and 21.

A decision on the constitutionality of the city's stop-and-frisk practices is expected any time now, marking the latest in a summer of legal showdowns that have exposed both the power and partiality of the American state. Many who previously understood the legal system and its enforcers to be dispassionate arbiters of justice working in the interests of society as a whole have been forced to re-evaluate their assumptions.

First came the trial of Bradley Manning, charged in a military court with "aiding the enemy" for passing diplomatic cables and other classified military information to WikiLeaks. Then came the manhunt for Edward Snowden, the former National Security Agency contractor, who leaked evidence of mass snooping. More recently there was the trial of George Zimmerman, the neighbourhood watchman in Florida who pursued Trayvon Martin, a young, black, unarmed teen, and shot him dead after Martin confronted him. Soon will come the verdict on stop-and-frisk.

Each, clearly, is its own case, with its own dynamics, outcomes and facts on the ground. There are many who will favour prosecution in one case but not in another. The point here is not that the cases raise identical issues.

And yet for all their glaring differences they share at some crucial traits: each, in its own way, raises fundamental questions about the function and purpose of the American state, the moral underpinnings of the legal system in which it is grounded, and the degree to which the law is designed to work for or against the people in whose name it operates. In each case, in different ways, the following questions become acute: to whom is the state responsible? Who is it supposed to protect? And who is it supposed to protect them from? Manning was sentenced to 90 years (down from 136) after the "aiding the enemy" count was dropped; Zimmerman was acquitted; Snowden was granted asylum in Russia after his US passport was revoked, leaving him holed up in the Moscow airport for weeks trying to avoid extradition.

Snowden's case is the most blatant. The government insists the mass collection of phone data and surveillance of internet communications – much of which is overseen by a court that few knew existed and which operates in secret – is essential to keep people safe. When questioned about the existence of this type of surveillance, those in charge of it lied "for reasons of security". If people knew they would worry, went the argument, they are safer in their ignorance. Trust us and move on; nothing to see here. Put bluntly, Americans have been told that they are being spied on and misinformed for their own good, leaving them simultaneously infantilised and criminalised.

Zimmerman's acquittal is the most challenging because this ostensibly was the judicial system working as it should, complete with televised trial by jury. The acquittal on grounds of self-defence essentially means an unarmed boy has no legal protection against an armed man who, ignoring the advice of the police, decides to follow and shoot him. In such a situation the insistence that the jury faithfully upheld the law is not comforting but deeply troubling. For it confirms the suspicion that the law is deeply selective in terms of whom it seeks to protect and to pursue.

The stop-and-frisk case combines the paternalistic logic of the NSA with the crude "policing" strategy of Zimmerman. The NYPD's defence has been that it is in the best interests of the people who live in certain neighbourhoods to have their sons, lovers and fathers systemically profiled and systematically harassed. In the hearings McCormack was also recorded saying: "99% of the people in this community are great, hardworking people, who deserve to walk to the train, walk to their car, walk to the store, without becoming crime victims." Kelly's defenders say he was referring to policing in high-crime areas in general. This is their defence: we must terrorise this village in order to save it.

Those who defend this version of the all-powerful, all-caring state have little choice but to demonise those who oppose it. They assume their powers on the basis that they are best qualified to know what's best for the public, even when the public thinks differently. Those who challenge such hubris are dealt with severely. The enemy in the NSA scandal is not those who are spying on you and lying about it, but the one who tells you about it. The criminal, in the Manning case, is not the soldiers who murder innocent civilians and laugh about it or the politicians who sent them to war but the young man who exposes their crimes.

The state is right to be worried. For while it has aggregated power, it has failed to garner the influence to sustain or justify it. Manning said he hoped by releasing the cables he would spark "worldwide discussion, debates, and reforms". The leaks informed the Arab spring, revealing the venality of the leaders and the complicity of the US. When Snowden came out as a whistleblower, he said his greatest fear was "that nothing will change". As Obama moves to modestly reform the NSA, the public he claims to be protecting shows growing support for Snowden. Neither the government nor the judiciary has been able to point to a single credible example of how its secrecy, neglect, deception or persecution in these cases has protected anybody or anything. When they insist such measures are crucial for security, they evidently mean security of the state – not the people who live in it.

Following Zimmerman's acquittal, Obama was keen to point out that "America is a nation of laws". Nobody doubts that. What is less clear is whether it is a nation of justice.

Twitter: @garyyounge

Bradley Manning, the Nuremberg Charter and Refusing to Collaborate With War Crimes
Friday, 09 August 2013
By Paul Jay, The Real News Network 
Video Report

In this segment of Reality Asserts Itself, Paul Jay and Vijay Prashad discuss the Bradley Manning case in light of the 68th anniversary of signing the Nuremberg Charter which states it is illegal to follow orders to commit a war crime.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I'm Paul Jay in Baltimore. And welcome back to Reality Asserts Itself on The Real News. Our guest is Vijay Prashad.

In our first segments with Vijay, we talked about identity, and we got to there, to Marx, to socialism, to the Soviet Union, fairly free-ranging discussion. And I encourage you to watch the earlier parts. But we're going to change gears now. We're going to talk about the conviction of Private First Class Bradley Manning, and we're going to talk about something that I think connects with that.

Sixty-eight years ago on August 8 was the signing of the Nuremberg Charter, which established the crime of wars against humanity and the whole concept of war crimes. It was signed by all the major Western countries and the Soviet Union. It was signed by the United States. And let me read you a couple of clauses from that charter. Principle IV of the Nuremberg Charter: "The fact that a person acted pursuant to order of his Government or of a superior does not relieve him from responsibility under international law, provided a moral choice was in fact possible to him." Or Principle VII: "Complicity in the commission of a crime against peace, a war crime, or a crime against humanity as set forth in Principles VI is a crime under international law."

Now joining us to talk about Manning, Nuremberg, and what's become of international law is Vijay Prashad. He's the Edward Said Chair at the American University at Beirut this year. He's written many books, including The Poorer Nations: A Possible History of the Global South. And he writes for The Hindu, he writes for Frontline and CounterPunch.

Thanks for joining us.


JAY: So it seems rather clear. International law says, one, illegal war--in fact, I think it's in that charter, I believe, is the language which more or less says wars of aggression are the highest war crime, highest crime against humanity. The war in Iraq was illegal, according to most legal scholars I've heard, including Kofi Annan, who, unfortunately, didn't really come out and say it until after he left United Nations, but he said it. An illegal war, invading a country is a war crime. If Bradley Manning sees atrocities committed in the course of a war crime, it's not just some choice he made. It's not just a moral obligation. Under international law, he actually had a legal obligation, and certainly a defense, for doing what he did. So talk a bit about, you know, the significance of Nuremberg, a bit about Manning, and then we're going to get into, you know, where is international law anyway.

PRASHAD: Well, look, the first thing to say is that it is true that on August 8, 1945, this Nuremberg Charter appears. It is signed by the major powers. It has the weight of international authority. And it suggests that if you observe something that is a war crime, you are under a legal obligation to report it. That is, you know, unassailable. It is a fact.

JAY: Let me add just one quick thing of context, 'cause I have to keep reminding myself that we have a lot of younger viewers, and partly 'cause our school system stinks, they hardly know, I bet you, what we're talking about. So just quickly, after the end of World War II, the defeat of Germany, the three, four major Allied partners--Russia, England, and United States--got together and they started to prosecute the leaders of the Third Reich. Hitler was dead as far as we know, but other leaders of the German regime were put on trial. And the basis for having this trial was this Nuremberg Charter, because before that, there really wasn't anything in international law to say you could try these guys for committing war crimes. Other than that, previously they had just lost a war. And, in fact, often if you just lost a war, in European tradition the king and the leaders would do quite well after the war.

PRASHAD: Correct, I mean, although there were the Geneva Conventions about how wars could be prosecuted, so there were some established conventions preceding Nuremberg.

But the real issue is that what Nuremberg established legally, as a point of international law, is also deeply rooted in, if I may say this, a human common sense. You know, it is a very commonsensical assertion. You know, one tells one's children this, that if somebody in authority, if a teacher, for instance, tells you to do something, but you think that this thing that you're being told to do is not right, you might want to assert the fact that you're not sure you should follow orders. It is a deeply commonsensical idea, which then is established as the rule of nations, because the nations decide to sit down in London and sign this Nuremberg Charter, which sets up the basis for the tribunal not only of Nazi leaders, but also of people who had been complicit in the atrocity of the genocide. You know, it could have been accountants, people who logistically helped send, you know, Jews, communists, Gypsies, homosexuals, etc., to the gas chamber. So it was even bureaucrats, technicians of the Holocaust were culpable, because they didn't refuse to do, they didn't sound the alarm against a war crime. And this, I think, is a very important international, you know, horizon for us, that, you know, a state's responsibility is one thing. But those who are technicians of the state, those who act on behalf of a government, of a military, you know, of any bureaucracy have a conscience, and that conscience is legally binding. You know, it's not just that they must follow God or their moral compass or things, but there's a legal requirement that if the conscience suggests that something is wrong, they have to act.

JAY: Yeah, just to read it again, just to quote the Nuremberg Charter, the fact that a person acted pursuant to order of his government or of a superior does not relieve him from responsibility under international law.

PRASHAD: Yeah. And so what I would say is that the reason I'm insisting on bringing common sense into this or, you know, what we might understand is a modern human understanding of how we act in the world, the reason I'm bringing this up is that it is the case that despite the fact that people [incompr.] bureaucracies and are tasked to do all kinds of things, people may not be schooled in the niceties of international law, which is a problem, you know, that when you enter a bureaucracy, the military, for instance, you're not necessarily informed that these are international regulations. You know, what people who enter the U.S. military are often taught is the code of conduct of the U.S. military, which is framed around the parameters of international law. But you're not necessarily taught the niceties. Common sense suggests that if you see something that's wrong, you know--.

JAY: But it's not just wrong, 'cause it's more than just wrong.

PRASHAD: It's illegal.

JAY: Yes,--

PRASHAD: It's illegal.

JAY: --'cause when Manning sees the video of the helicopter gunning down essentially unarmed people and then shooting this van that comes up afterward to help these people, that's a war crime. More than that, it's a war crime within a war where the whole war itself is a war crime because it's illegal. And he has a legal obligation to do what he can to go against that. And I wish that had been his defense, and it wasn't, but I wish they'd used Nuremberg as his defense, because then it would have put the war on trial.

PRASHAD: Let's talk about that helicopter attack, because that took place in New Baghdad, where Apache helicopters saw something on the ground, people walking around, and they saw somebody, thinking he had a gun. They shot the crowd, killed, it turned out to be, a photojournalist with a international, you know, agency. He was killed in cold blood there. Nobody engaged the helicopters. A car came to help them, to rescue them. They said, give me the signal, I want to shoot, I want to engage, fired in. There were children in the car, etc.

Now, a ground platoon arrived at the scene, and American troops got out and saw what had happened. Many people saw that this was a great--let's just call it mistake that had taken place. When questions were asked at the time about that attack in New Baghdad, the United States government denied that anything was wrong, and the United States government also said there is no video. In other words, the government was lying and covering up what took people on the ground, even troops--there was one particular troop, a man named Ethan McCord, later would come out and speak about what he saw, but he was suppressed. Bradley Manning saw that video and felt obliged to release it because not only was this an illegal war, not only was this apparently a war crime, but also the government was covering up the war crime. So he released the video via WikiLeaks. When he released the video, Ethan McCord, who was on the ground and saw the little children inside that car, one of them blinded because glass went into her eyes, this shattered Ethan McCord's approach to what he was doing. But because Manning, this young, young man, took a courageous decision to release this video, it freed up other people in the military to come out and say, yes, we were party to a war crime.

And the great tragedy is that Bradley Manning was then put on trial for espionage, as well as other quite ridiculous charges like computer fraud. He was put on trial. But that war crime was not investigated further.

JAY: And I think that's--the point is, yes, governments have a right to secrets, yes, in today's world, governments have a right to military secrets, yes, a soldier should be prosecuted if they simply are releasing secrets and they've agreed and signed a contract--I'm going to be a soldier and I won't release secrets and such and such--but not if the government's committing war crimes. And that should be the discussion about Manning. It's not just for transparency's sake; it's that it's a war crime, and war crime has--under international law, you have an obligation to do what you can against your government's wishes, because these wishes are illegal.

PRASHAD: And you--let's--this is exactly the issue. I mean, it's a war crime, it's a war crime that the government was covering up. It's a war crime that was giving nightmares to the troops themselves, not just people on the ground, not just those young children who now continue to suffer from, you know, the death of their father, the fact that they are disabled by that attack, etc. It's certainly that, but it's something other than that as well. This is a very young man who's put into action who has a understanding about the world, but it's not fully developed. A lot of dangerous things come before him, and he has to find a way to bring this up somewhere.

Now, in the United States, whistleblower protection is anemic, is virtually nonexistent. In the military, there is generally, to my understanding, people I have spoken to in the--there is an understanding that the chain of command may not take you seriously if you say that there was a war crime. I mean, after all, the military is not going to be happy to have released for public--.

JAY: Well, in this case we know they covered it up.

PRASHAD: They covered it up. I mean, in other words, what choice did this young person have but to go public?

JAY: So for ordinary Americans watching this interview, this issue of the Nuremberg trial, the issue of international law, the issue of, you know, the Iraq War being a war crime, Manning, even though he didn't make it his defense, it seems to me he would have a defense under international law for what he did. Why is that important?

PRASHAD: What Bradley Manning did was an honest and, I think, decent thing. You know, he saw something that was wrong, he acted upon it, and he's paid a terrible price. I think what's equally sad, you know, equal to the way in which he is being persecuted, what's equally sad is a very large number of liberal intellectuals who have become judges, who have said from the sidelines, he's guilty of something, they disagree with a 100-year sentence. They say maybe he should have 20 years or five years or eight years. I mean, to my mind, they've lost their mind.

JAY: 'Cause they won't accept that the war is illegal. They won't accept there's war crimes. And then it just becomes this abstract thing, can a soldier reveal secrets.

PRASHAD: Exactly. This is not about a soldier revealing secrets. This is about a soldier seeing that something to his mind illegal and also immoral had happened, the chain of command had lied or covered it up, and he felt therefore legally and morally obliged to do something about it. And I think we need to salute him for that.

JAY: Alright. Thank you.

Alright. Thanks for joining us on this episode of Reality Asserts Itself. The next episode will be coming in a few days. Thanks very much for joining us on The Real News Network.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Paul Jay is CEO and Senior Editor of The Real News Network. As Senior Editor of TRNN Paul has overseen the production of over 4,500 news stories and is the Host of our news analysis programming. As Executive Producer of CBC Newsworld's independent flagship debate show counterSpin he produced over 2,000 shows during its 10 yrs on air. He is an award-winning documentary filmmaker with over 20 films under his belt and was founding Chair of Hot Docs!, the Canadian International Documentary Film Festival (now the largest in North America).

The Ongoing Struggle To Free Ourselves From the Venal Domination of Wall Street, the Banking Industry, and Their Cowardly/Greedy Political Enablers in Congress, the White House, and the Supreme Court



Glass-Steagall Now: Because the Banks Own Washington
Friday, 09 August 2013
By Dean Baker, Campaign for America's Future | Op-Ed

(Photo: Remis Velisque / Flickr)

A bipartisan group of senators recently put forward a proposal for new Glass-Steagall legislation that would restore a strict separation between commercial banks and speculative trading. Anyone familiar with the ways of Washington knows that such legislation is badly needed. It is the only way to prevent the Wall Street gang from continuing to rip off the public and subjecting the rest of us to the risks of their speculation.

The idea of the original Glass Steagall was to create two completely distinct types of banks. On the one hand there would be the standard commercial banks with which most of us are familiar. These are the banks where people have checking and savings accounts and where they might go to take out a mortgage or small business loan.

Because of the central role that commercial banks play in the day-to-day workings of the economy, the government established the Federal Deposit Insurance Corporation (FDIC) to guarantee the vast majority of accounts in full. The goal was to let people know that their money is safe in the bank.

Since the government guaranteed the money, people need never worry about racing to the bank to get their money before the bank vault is empty. As a result we have not seen the sort of old-fashioned bank-runs that were a mainstay of the pre-FDIC era.

The quid pro quo for having the government guarantee deposits was that commercial banks were supposed to restrict their loans to a limited number of relatively safe activities, such as mortgage loans, small business loans, car loans and other simple and standardized forms of credit. These restrictions are essential, because if customers know their money is guaranteed by the government, they won’t care if their bank is taking enormous risks. The government must act to impose discipline on bank behavior that will not come from the market when deposits are insured.

By contrast, investment banks were set free to engage in whatever risky behavior they liked. Investment banks did not take deposits but rather raised money through issuing bonds or other forms of borrowing. In principle, their potential failure did not pose the same risk to the economy.

The ending of Glass-Steagall removed the separation between investment banks and commercial banks, raising the possibility that banks would make risky investments with government-guaranteed deposits. In principle, even after the ending of Glass Steagall banks were supposed to keep a strict separation between their commercial banking and the risky bets taken by their investment banking divisions, but this depends on the ability of regulators to enforce this restriction.

The Volcker Rule provision in Dodd-Frank was an effort to re-establish a Glass Steagall type separation but the industry is making Swiss cheese out of this regulation in the rule-writing process. Serious people cannot believe that this will keep the Wall Street banks from using their government-guaranteed deposits as a cushion to support their speculative game playing.
If anyone questions how this story is likely to play out in practice, we need only go back a few years to the financial crisis of 2008-2009. At that time, most of the major banks, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, almost surely would have failed without government support.

In fact, some of the top economic advisors in the Obama administration wanted to let them fail and have the government take them over, as the FDIC does all the time with insolvent banks. However Larry Summers managed to carry the day by arguing that such a move would be far too risky at a time when the financial markets were so unsettled. As a result, the big banks got their government money and were allowed to consolidate so that they are now bigger than ever.

This was primarily a problem of banks that are too big and too interconnected to fail, not just a problem of commercial banks merging with investment banks. But these mergers certainly help banks to reach too-big-to-fail status.

Some may argue that the crisis of 2008-2009 involved extraordinary circumstances. However when banks fail it is generally because the economy faces a crisis. They do not typically fail in good times. And it is a safe bet that there will always be a smart and belligerent Larry Summers on the scene aggressively arguing the case against anyone who wants to subject the banks to market discipline.

What is striking about the argument on re-instating Glass-Steagall is that there really is no downside. The banks argue that it will be inconvenient to separate their divisions, but companies sell off divisions all the time.

They also argue that foreign banks are not generally required to adhere to this sort of separation. This is in part true, but irrelevant.

Stronger regulations might lead us to do more business with foreign-owned banks since weaker regulations could give them some competitive edge. That should bother us as much as it does that we buy clothes and toys from Bangladesh and China.

If foreign governments want to subject themselves and their economies to greater risk as a result of bad financial regulation, that is not an argument for us to do the same. Are we anxious to be the next Iceland or Cyprus?

In short, the senators are on the right track pushing for a new Glass-Steagall. The public should hope that bankers’ lobby doesn’t derail their efforts.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research

Seven Things You Wanted to Know About Prosecuting Wall Street
Friday, 09 August 2013
By Richard Eskow 
Campaign for America's Future | Op-Ed
(Photo: Justin Pickard / Flickr)

President Obama’s Justice Department, under the direction of Attorney General Eric Holder, hasn’t indicted a single bank executive for the massive Wall Street crime wave that devastated the economy. The regulatory reform that followed the 2008 crisis wasn’t nearly enough, and yet Republicans are trying to weaken even that.

And just this week there were several news stories about bank crime. What do they mean? Why haven’t any bankers gone to jail? What’s going on in this country?

Here are seven things about Wall Street crime and Washington “justice” you might have wanted to know, but were probably too depressed to ask. It’s true that there’s a shortage of justice where bankers are concerned. But don’t get depressed. Get serious – about demanding change.

1. Why did Holder say mega-banks are “too big to jail”?

Attorney General Holder recently said the Justice Department can’t indict too-big-to-fail banks because it would endanger the nation’s, and possible the world’s, economy. Those comments were misleading at best, because Holder doesn’t offer any plausible reason not to indict individual bank executives at those institutions.

Criminal indictments against bankers are necessary – both for the cause of justice, and the safety of our economy. And yet no bank executives have faced criminal prosecution.

Why did Holder make these comments? It’s called misdirection. It gets everybody thinking about one question – Why aren’t they indicting banks? – so they won’t think about a more important question: Why aren’t they indicting bankers?

2. If hurting ‘too big to fail’ banks is such a concern, why did the Justice Department and the Securities and Exchange Commission just sue Bank of America? By some measures it’s the biggest mega-bank of them all.

The latest lawsuit against Bank of America describes massive, systematic, and very deliberate fraud against investors who backed residential mortgage-backed securities (RMBS). Those investors included many pension funds, like the one that serves Detroit’s retirees. There’s evidence BofA bankers knowingly sold securities in which up to 40 percent of the mortgages failed to meet underwriting standards. That’s against the law.

Shareholders bear the costs and the consequences of these suits, which are directed against the banks as institutions – even when the suit in question involves fraud against the shareholders themselves. That means the executives who profit from criminal behavior have absolutely no reason not to commit those crimes again and again and again – which, as the record shows, is exactly what they have been doing.

Suits like these do not endanger the institution being sued. The amounts of money involved – $850 million, in this case – sound large. But they’re negligible when compared to the revenue at America’s bloated mega-banks.

The Justice Department’s indictment says things like this: “The Offering Documents contained untrue statements of material fact and omitted to state other material facts required to be disclosed that misled investors.” Note the use of the passive voice: The indictment doesn’t say “Defendants A through E published untrue statements …”

For the first statement to be true, the second statement must also be true. But to hear the Justice Department tell it, it’s as if these frauds committed themselves. Its pattern has been: Sue the bank, but only for amounts it can easily pay. And never hold the individuals who committed the fraud personally responsible.

3. Why sue Bank of America at all, if they’re in the banks’ pockets?

Here we’re getting into the realm of speculation. But Washington officials have multiple constituencies, presumably including wronged investors who want restitution of some kind.

They presumably want to make sure the banks’ exposure is kept manageable – from the bank’s perspective – but don’t want to anger the investors any more than necessary.

4. The Justice Department has said it’s too hard to get convictions in financial fraud cases. Is that true?

They’ve said it again and again: It’s too hard to win convictions in financial fraud cases. The brief response to that is: How would they know?   They’ve never tried.

The longer answer to this question is:

More than 1,000 people were convicted after the much smaller savings and loan scandal of the 1980s. These are the words of law and economics professor William K. Black Jr., who was a regulator during that period:

“In the Savings and Loans crisis, which was 1/70th the size of this crisis, our agency made over 10,000 criminal referrals that resulted in the conviction on felony grounds of over 1,000 elites in what were designated as major cases.”

It wasn’t “too hard” to get a conviction then. But then, in those days they were trying.

It wasn’t hard to get convictions against low-level employees of GE Capitallast year on very complex charges involving bid-rigging fraud against municipalities.

That indictment - United States of America v. Carollo, Goldberg and Grimm – wasn’t brought by the President’s much-touted Mortgage Fraud Task Force, which has yet to produce any criminal indictments. Instead it was successfully prosecuted by local U.S. attorneys.

A rare courtroom victory against Goldman Sachs was achieved just last week. Needless to say, it was not against a Goldman executive, but against a relatively junior employee, trader “Fab” Tourre. It was not a criminal prosecution, but a civil case. And the verdict was won by the SEC, not the Justice Department.

5. Why don’t they want to indict bank executives?

Again, we’re dealing in speculation. But it isn’t hard to come up with a guess. Both Attorney General Holder and his recently departed No. 2, Lanny Breuer, had high-priced jobs defending Wall Street bank executives. Breuer has already cashed out and gone back to Covington & Burling, Holder’s once (and future?) firm, with a special title and position created especially for him.

As for elected officials, let’s face it: Bank executives write very big campaign checks. They also hobnob with powerful politicians. When JPMorgan Chase CEO Jamie Dimon testified before the Senate Banking Committee earlier this year about the “London Whale” scandal, only two of the senators facing him had not received campaign contributions from his bank.  Dimon was also called “Obama’s Favorite Banker” for a while.

Another executive with a large financial operation, GE’s Jeffrey Immelt, was named head of the President’s “Jobs Council.” Immelt was responsible for GE Capital while those municipalities were being criminally defrauded in the case which became United States of America v. Carollo, Goldberg and Grimm.

6. Why are they saying that the SEC’s “winding down” its fraud investigations?

The Wall Street Journal ran an article today called “SEC’s Hunt for Crisis-Era Wrongdoing Loses Steam.” The article says that “securities regulators are quietly winding down some of their highest-profile investigations related to the crisis.”
The SEC’s pursuit of lawbreaking Wall Streeters had “steam”? Who knew?

One possible, and flippant, answer to this question: They got “Fab” Tourre. Their work here is done.

Another, more serious answer – the one the SEC prefers – is that the impending statute of limitations makes it more difficult to keep pursuing pre-2008 misdeeds. There’s some truth in that, although it underscores the bitter perception that the Justice Department and SEC chose to “run out the clock” on Wall Street’s crimes.

There is, however, some research being conducted into useful legal avenues that still may be open under national and/or New York state law. Negotiators in civil cases are also able to demand leadership changes, admissions of wrongdoing, and personal liability. They just haven’t done it.

There is no indication that federal authorities have an appetite for either route, however.

7. What can we do about it?
Don’t get depressed; get busy. Let elected officials, from the president on down, know that you want:

A full investigation of Wall Street crimes.

Expanded powers for the Consumer Financial Protection Bureau.

A reinstatement of Glass-Steagall and the breakup of too-big-to-fail banks.

A rejection of the Republicans’ lunatic plans to take already-inadequate bank regulations and weaken or eliminate them.

No more deals where banks “neither admit nor deny wrongdoing.”

You can also let them know that bankers sould personally pay for their misdeeds – with their money, their reputations, and their jobs.

Lastly, you can demand new leadership at the Department of Justice – leadership that takes the word “Justice” a little more seriously when it comes to Wall Street.

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