Congress is starving federal white-collar law enforcement — a subtle and lucrative favor to the crooks and connivers among the political donor class. The move is costing honest people everywhere, damaging economic growth and perverting government.
This year the number of federal white-collar crime prosecutions will be about 37 percent below 20 years ago, when Bill Clinton was in the White House.
The decline grows from our corrupt campaign finance system, which by its nature shifts the focus of elected leaders away from crimes in the C-suites to harsh enforcement of laws on the streets.
The reduction in prosecutions for white-collar crimes was revealed in Department of Justice data analyzed by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.
Except for a brief upswing in the first three years of Barack Obama’s administration, the number of federal white-collar prosecutions has been trending downward for two decades. This fiscal year, which ends Sept. 30, will see fewer than 6,900 white-collar prosecutions, down from nearly 11,000 in 1995, the TRAC report shows.
Even in 1995, federal enforcement of laws on fraud against individuals and the government was a minor activity.
I reanalyzed the TRAC report to take into account population growth and found a nearly 50 percent decline in the prosecution rate, from 1 for every 24,400 Americans in 1995 to about 1 in 46,600 this year.
This shift from already modest enforcement of federal fraud laws has received almost no news coverage — part of another related trend. As newsroom budgets shrink, we get more coverage of controversies and folderol and less scrutiny of government. The heavy lifting on serious news in America comes mostly from five major newspapers, all of which ignored the TRAC findings: The New York Times, The Wall Street Journal, USA Today, The Washington Post and the Los Angeles Times.
No group of thieves benefits more from this trend than the bankers who sold mortgages they knew would never be repaid and then bundled them into packages of securities that were often bought by public employee pension funds.
Insiders knew about these crimes — from compliance officers who were ignored to paper processors to honest real estate appraisers — as thoroughly documented by the Financial Crisis Inquiry Commission in a report Congress paid for and then tossed aside.
Had the Obama Justice Department wanted to prosecute bankers, it would have been easy, according to William K. Black, a former banking regulator whose diligence in the savings and loan scandal a generation ago resulted in more than 3,000 felony convictions and more than 800 high-level bankers going to prison.
All prosecutors need are emails, memos and testimony instructing subordinates how to cheat, falsified banking records (which exist in abundance) and the transfer of funds by wire or sending documents by mail. Yet from Obama to Benjamin Wagner, the chief federal prosecutor in Sacramento, California, officials said they could see only bad choices, not crimes.
The White House, the Justice Department and members of Congress would not respond to Black’s calls and emails offering his help. They did not return my calls either, when I asked about their lack of interest. This should not be surprising to those who have followed the ongoing institutional corruption of our politics. By making massive campaign contributions, the donor class funds who wins elections and, as a result, purchases influence over our representatives. Predictably, politicians then look the other way at minor indiscretions, errors in judgment and outright frauds.
Consider what former President Jimmy Carter said on a radio show the other day about the effect of the Supreme Court’s 2010 Citizens United decision, which removed nearly all limits on campaign donations. Carter, advancing an argument I have made for several years, said of our democracy:
Now it’s just an oligarchy, with unlimited political bribery being the essence of getting the nominations for president or to elect the president. And the same thing applies to governors and U.S. senators and Congress members. So now we’ve just seen a complete subversion of our political system as a payoff to major contributors, who want and expect and sometimes get favors for themselves after the election’s over.
Congress has cut the capacity of more than just the Justice Department to enforce the law against those among the oligarchs who engage in frauds. Our lawmakers have also slashed the budget of the Internal Revenue Service and other federal law enforcement agencies.
This fiscal year, which ends on Sept. 30, Congress gave the IRS $33.90 per American to administer and enforce the tax laws — down from $44.54 in 1995. What that means is wages, pensions and other verified income get thoroughly taxed through a mostly automated system while the largely unverified income of the donor class gets audited rarely and only lightly.
This lack of resources is so severe that the American Institute of Certified Public Accountants passed a resolution in May asking Congress to appropriate enough money so that the tax police can ‘‘enforce the law with integrity and fairness to all.’’
Would that we had a lobby to promote all aspects of white-collar law enforcement. But I can’t figure out how vigorously pursuing frauds would be profitable for any major industry. On the contrary, lack of enforcement has been enormously profitable for many in the donor class. For the crooks among those at the top, that’s paradise. The rest of us who don’t have money to donate get a government that doesn’t pay attention to our concerns and needs.