Corrupt Government Officials Should Be In Jail … Alongside Corrupt Banksters

Those who Benefited from Wall Street Fraud Must be Prosecuted … Including Rogue Government Officials who Aided and Abetted the Crimes

Wall Street fraud caused the Great Depression and the current financial crisis. Top economists and financial experts agree that our economy will never recover unless Wall Street fraud is prosecuted.

Yet the government has more or less made it official policy not to prosecute fraud, and instead to do everything necessary to cover up for Wall Street.  For example, the Obama administration is prosecuting fewer financial crimes  than under Reagan or either Bush.

For example, we pointed out in 2010:

The government’s entire strategy now – as during the S&L crisis – is to cover up how bad things are.

But it is not only a matter of covering up fraud that has already happened. The government also created an environment which greatly encouraged fraud.

Here are just a few of many potential examples:

  • Tim Geithner was complicit in Lehman’s accounting fraud, (and see this), and pushed to pay AIG’s CDS counterparties at full value, and then to keep the deal secret. And as Robert Reich notes, Geithner was “very much in the center of the action” regarding the secret bail out of Bear Stearns without Congressional approval. William Black points out: “Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth”
  • The former chief accountant for the SEC says that Bernanke and Paulson broke the law and should be prosecuted
  • The government knew about mortgage fraud a long time ago. For example, the FBI warned of an “epidemic” of mortgage fraud in 2004. However, the FBI, DOJ and other government agencies then stood down and did nothing. See this and this. For example, the Federal Reserve turned its cheek and allowed massive fraud, and the SEC has repeatedly ignored accounting fraud. Indeed, Alan Greenspan took the position that fraud could never happen
  • Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not

Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:

The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy. In 2004, the FBI warned publicly of “an epidemic of mortgage fraud.” But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ….

This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.


The government that permits this to happen is complicit in a vast crime.

In other words, the fraud started at the very top with Greenspan, Bush, Paulson, Negraponte, Bernanke, Geithner, Rubin, Summers and all of the rest of the boys.

As William Black told me today:

In criminology jargon: they created an intensely criminogenic environment.

The government’s special inspector general in charge of oversight of the Troubled Asset Relief Program (the “TARP” bank bailouts) – Neil M. Barofsky – told me that regulators should be prosecuted if the evidence shows that they lied either to Congress or the Department of Justice to cover up illegal conduct.

Government regulators have become so corrupted and “captured” by those they regulate that Americans know that the cop is on the take.  (Even top justice officials are incredibly cozy with Wall Street fraudsters.)

Institutional corruption is killing people’s trust in our government and our institutions, which is one of the reasons the economy is faltering again.

Indeed, polls show that very few Americans believe that the U.S. government has the “consent of the governed”, a higher percentage of Americans liked King George during the Revolutionary War than like Congress today, and people are publicly discussing whether it’s a good or bad idea to “hang bankers”.

I noted 7 years ago:

I am NOT calling for the overthrow of the government. In fact, I am calling for the reinstatement of our government. I am calling for an end to lawless dictatorship and a return to the rule of law. Rather than trying to subvert the constitution, I am calling for its enforcement.


The best way to avoid all types of revolution would be for the government to start following the rule of law. I passionately hope it will do so.

While conservatives tend to view government as the problem, and liberals tend to view corporations as the problem, the real problem is the malignant, symbiotic relationship between corrupt officials and criminal  corporate leaders.  Without the cancerous relationship, neither side could cause so much damage.  If America returns to the rule of law, we might have a fighting chance.

The justice system may be the only thing which stands between peace and violence.   All of those who benefited from Wall Street fraud must be prosecuted … including corrupt government officials who aided and abetted their crimes, helped cover them up, or have blocked prosecution.

Iceland should be a role model:

Iceland has prosecuted the fraudster bank heads (and here and here) and their former prime minister, and their economy is recovering nicely… because trust is being restored in the financial system.

Indeed, even evangelical leader Pat Robertson agrees:

Pat Robertson discussed the banking crisis and glowingly spoke about how Iceland jailed many of the bankers who devastated their nation’s economy by taking out fraudulent loans. Robertson hailed the Nordic nation for its actions and said that Americans should deal with the financial crisis in the same way.


“They are putting people in jail.  Prime ministers are being indicted. They are going after banks. The people said the banks are ripping us off. We don’t like what they did, and they brought our country to ruin. Suddenly, Iceland is turning around and they look like a big success story!”


“We could start putting all of those bankers in jail. There was not one banker prosecuted and so many people were lying, and so-called “no-doc loans” and liars’ loans, and none of them have been held accountable.


Iceland is leading the way and their GDP is growing, and all of a sudden, they were in a terrible mess, terrible mess, and look what is happening!”

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  • Carl Herman

    Well said, GW; thank you.

    This is the ongoing test: can the US reach critical mass to recognize “emperor has no clothes” obvious crimes?

    Until that time, the 1% is doing a great job of providing the 99% ongoing opportunity to either recognize the crimes or have escalating economic consequences for failure to do so.

  • Charlie

    Government is not your friend, and never will be.

    Never. Ever.

    The sooner people abandon the delusion that government can be good, the sooner we all become healthier, safer, and live in peace.

  • Stung

    Jailing the people who are ripping everybody else off should oughta have, prior to any restoration of confidence, the immediate and measurable economic effect of: not siphoning billions of dollars out of masses of wages into handfuls of Swiss bank accounts. Maybe? It strikes me as funny how erudite economic graphs don’t ever seem to have a line for “racketeering take”, which would really rock the didact factor.

  • Excellent comments above, to which I wish to add:

    Harry Reid may have pulled a supreme Mitt Romney FLIP FLOP on us all, but, there is SOMETHING YOU CAN DO!

    CONTACT Sen. Harry Reid on H.R. 459′s Passage (327-98) – TODAY!

    I did! Here is the text of my message (you may copy/paste in an email to H. Reid):

    “I was just informed, that the House voted, 327-98, on H.R. 459, & AUDIT THE ‘FED’ passed! I was also just informed, that ‘Sen. HARRY REID is refusing to put Audit the Fed up for a vote in the Senate.’ And, to ‘Please contact his office today and tell him to support AUDIT THE ‘FED’ and allow for a Senate vote!’

    327-98, Senator, is a CLEAR MAJORITY. THE PEOPLE have spoken. Question: Do you represent THE PEOPLE? I noticed, that in 1995, you spoke openly FOR an AUDIT OF THE ‘FED’ – of course, the need for such an audit has not changed since then – why has your stance (on this issue) changed?

    (Feel free to Copy and Paste the message above, if you wish)

    Related News:

    Audit the Fed Passes the House! 327(Y)-98(N)

    Harry Reid vows Federal Transparency Act will never be voted on in the Senate 7/25/12

    Harry Reid’s ULTIMATE FLIP-FLOP Passionate Speech Pleading for an Audit of The Federal Reserve 1/23/1995

  • roy harris

    the “problem” is more basic than a corrupt governemnt or corrupt corporation or corrupt corporations.

    the problem is that human beings have a dark side.

    history demonstrates that humans cannot be governed.

    that is, regardless of all of the enacted laws, there will always be law breakers and some will go unpunished.

  • You know perfectly well only one man will take on that fight. How can we force him to be nominated?

  • orlando pride

    The Wall St criminals & the progressive ilk, like Harry Reid, have squandered our nation’s
    wealth ( to the tune of $ 16,000,000,000,000 they never had ). At this level, there is zero $ left for
    SSA,Medicare,Medicaid,Food Stamps,Disability,Unemployment Comp, Post Office,Welfare,Amtrak,
    etc. There is not $ 5.00 left to pay for any woman’s morning after pill let alone abortion !!!
    Because the mandated programs require 2.5 trillions per year & the govt only takes in 2.45 trillions,
    this surely means that the 1.3 trillions needed for the Air Force,Army,Marines,Navy, Homeland
    Security,FBI,CIA, etc., must be borrowed or printed !! This 1.3 trillions deficit per year will then add
    to the National Debt !! The road to Hell is not ” being ” paved with good intentions — we are in Hell right now & a majority of Americans have no realization of this pending disaster. Moreover,
    these keynesian progressives running our country since 1935 have totally lost their chance license
    to manage a popsicle stand let alone a country as large & complex as the USA. Off With Their Heads !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Hurray for the Tea party !!!!!!!!!!!!!!