I could talk about a lot of things that were included in the State of the Union address. There were parts that I loved and parts that I hated. The following excerpt, however, addressed something I have been begging the administration to address. Last Wednesday, I reacted to another insider trading prosecution with the following observation:
…I think everyone would like to see some aggressive and creative legal thinking with the purpose of getting accountability for the financial collapse. Because the truth is that every time I see an announcement about another insider trading case, I think to myself, “That’s nice, but all the really big criminals are still untouched.”
Tonight, the president said this:
And I will not go back to the days when Wall Street was allowed to play by its own set of rules. The new rules we passed restore what should be any financial system’s core purpose: Getting funding to entrepreneurs with the best ideas, and getting loans to responsible families who want to buy a home, start a business, or send a kid to college.
So if you’re a big bank or financial institution, you are no longer allowed to make risky bets with your customers’ deposits. You’re required to write out a “living will” that details exactly how you’ll pay the bills if you fail – because the rest of us aren’t bailing you out ever again. And if you’re a mortgage lender or a payday lender or a credit card company, the days of signing people up for products they can’t afford with confusing forms and deceptive practices are over. Today, American consumers finally have a watchdog in Richard Cordray with one job: To look out for them.
We will also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments. Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.
And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.
Sam Stein of the Huffington Post reported that this special unit will be led by New York Attorney General Eric Schneiderman. If you’ve been following the negotiations between the big banks, the attorneys general, and the federal government, you know that Eric Schneiderman has been one of the strongest opponents of a slap-on-the-wrist approach to settling the case against the banks for their role in creating the financial crisis. He appears to have won the argument. Here’s a statement from his office:
I would like to thank President Obama for his leadership in the creation of a coordinated investigation that marshals state and federal resources to bring justice for the victims of the misconduct that caused the mortgage crisis.
In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again.
The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today’s announcement is a major step in the right direction.
There has been tremendous skepticism and criticism of the administration for pushing for a deal that would provide immunity to the banks in return for a paltry settlement. It would seem that that criticism was unfair. But it is possible that the criticism was convincing. Maybe it stung enough to convince the administration to get rough with the criminals that ruined the global economy and almost caused a second Great Depression. Maybe they were planning to get rough all along.
In any case, whether the administration followed its own instincts or was convinced by its harshest progressive critics or was persuaded by the pleas of friendlier voices like my own, they appear to be doing the right thing.
Priority number one was standing the financial sector back on its feet. Justice had to be delayed. But it couldn’t be deferred indefinitely. Some rich assholes need to go to jail.