Research Briefing

18 Months In And Obama’s Top Lawman Has Yet To Crack Down On Wall Street

OBAMA AND HOLDER PROMISED TO BE TOUGH ON WALL STREET

Attorney General Holder Promised To Be “Relentless” In Going After Wall Street. “Attorney General Eric H. Holder Jr. reinforced that message in November when he vowed to prosecute Wall Street executives and others responsible for the crisis. ‘We will be relentless in our investigation of corporate and financial wrongdoing, And we will not hesitate to bring charges,’ Holder said as he launched a Financial Fraud Task Force.’” (Jerry Markon, “Cases Against Wall Street Lag Despite Holder's Vows To Target Financial Fraud,” The Washington Post, 6/18/10)

President-Elect Obama Promised To Hold Wall Street Accountable. “And so, as part of our economic recovery package, what you will see coming out of my administration right at the center is a strong set of new financial regulations in which banks, ratings agencies, mortgage brokers, a whole bunch of folks start having to be much more accountable and behave much more responsibly because we can't put ourselves--we, we can't create the kind of systemic risks that we're creating right now, particularly because everything is so interdependent.” (NBC, “Meet The Press,” 12/7/08)

BUT THEIR CLAIMS HAVE RESULTED IN NOTHING MORE THAN BROKEN PROMISES

Obama Administration Has Not Brought Any Charges Against Big Banks That Contributed To The Crisis. “Nearly 1 1/2 years into Obama's tenure, despite several cases against mortgage companies whose lending practices contributed to the crisis, the administration has not brought any charges against the big Wall Street banks that took those loans, converted them into toxic securities and pumped them into the world's financial markets. Law enforcement sources say no such charges are imminent.”  (Jerry Markon, “Cases Against Wall Street Lag Despite Holder’s Vows To Target Financial Fraud,” The Washington Post, 6/18/10)

OBAMA PROVING AS INCAPABLE OF CRACKING DOWN ON WALL STREET AS HE IS INEFFECTIVE IN DEALING WITH THE GULF

Richmond Federal Reserve President Says Obama's Financial Regulations Bill Could Create “More Instability In Financial Markets Rather Than Less.” “In fact, it seems to me that a major danger is that there's going to be more instability in financial markets rather than less.” (CNBC's "The Call," 4/6/10)

MIT Finance Professor Says Obama-Dodd Bill May Be “Ineffective” At Best, “Counterproductive”At Worst Because “So Much About The Crisis Remains Unclear.” “Others simply argue that it is premature to pass sweeping legislation while so much about the crisis remains unclear and so many inquiries are in progress. ‘Until we understand what the causes were, we may be implementing ineffective and even counterproductive reforms,' said Andrew W. Lo, a finance professor at the Massachusetts Institute of Technology.” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

• Lo: “I understand the need for something to be done. But what I expect from political leaders is for them to demonstrate leadership in telling the public that we need to proceed about this in a much more deliberate and rational and thoughtful way.” (Binyamin Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

Letter From 36 Economists, Experts Say Obama's Bill Would Not Have Prevented Financial Crisis. “Nineteen months after the most devastating financial crisis since the great depression, our financial system remains at risk. Neither the bill passed earlier this year by the House, nor the one currently under consideration in the Senate would have prevented the crisis.” (Marcellus Andrews, et al., Letter To Senators Reid and McConnell, 4/14/10)

Yale Finance Professor Calls Obama-Dodd Bill “Tragic” Because “Financial System Would Remain Vulnerable To Panics.” “Gary B. Gorton, a finance professor at Yale, said the financial system would remain vulnerable to panics because the legislation would not improve the reliability of the markets where lenders get money ... ‘It is unfortunate if we end up repeating history ... It's basically tragic that we can't understand the importance of this issue.’” (Binya min Appelbaum and Sewell Chan, "Senate Financial Bill Misguided, Some Academics Say," The New York Times, 5/3/10)

Meanwhile, In The Gulf The Administration’s Response Has Been “Bedeviled By A Lack Of Preperation [And] Organization,” “With No Command And Control.’” “From the beginning, the effort has been bedeviled by a lack of preparation, organization, urgency and clear lines of authority among federal, state and local officials, as well as BP. As a result, officials and experts say, the damage to the coastline and wildlife has been worse than it might have been if the response had been faster and orchestrated more effectively. … ‘The information is not flowing’ Senator Nelson said. ‘The decisions are not timely. The resources are not produced. And as a result, you have a big mess, with no command and control.’” (Campbell Robertson, “Efforts To Repel Gulf Oil Spill Are Described As Chaotic,” The New York Times, 6/15/10)