With Liberty and Justice for Some (11 page)

Opponents of telecom immunity also asked Senator Chris Dodd—who had made a defense of civil liberties and restoration of the rule of law a centerpiece of his campaign for the Democratic nomination—to take the lead in blocking Senate enactment of the immunity. He agreed to do so and publicly announced that he would not only filibuster any bill containing amnesty for telecoms but also use his power as a senator for the first time in his career to place a so-called hold on any such bill.

So eager were many citizens for leadership against corporate lawlessness that, as a result of this bold commitment, Dodd’s anemic presidential campaign received literally hundreds of thousands of dollars in donations overnight from small donors.

Hundreds of thousands of dollars were also raised from small donors to pay for political ads opposing telecom immunity. With that money, “robocalls” were run in the districts of Democratic leaders, such as then–House minority whip Steny Hoyer, who were signaling their support for immunity. And full-page advertisements were placed in the
Washington Post
in the days before the vote, warning of the threat to the rule of law posed by retroactive immunity for telecoms.

Working with Dodd, bloggers and online activist groups were able to catapult the issue of telecom immunity from the darkened back rooms in Washington where bills are typically drafted into the light of mainstream political debate. What would have otherwise been a measure quietly passed without much public notice became a genuine source of contention and conflict. Other allies in Congress were recruited to the cause, and with Dodd fulfilling his promise to use every obstructionist measure available, telecom immunity—which looked to be on the easy road of lobbyist-driven, quick, and painless bipartisan enactment—lingered in Congress for months and months. In March 2008, it even appeared that the measure had suffered a potentially fatal defeat, when the Democratic-led House rejected a new FISA bill (which came complete with full-scale immunity) by a narrow margin.

But democratic activism is no match for the army of corporate money, lobbyists, national security officials, and media servants. Ordinary Americans, even when united in a coordinated campaign, may be able to delay or disrupt this limitlessly funded onslaught, but they eventually will be steamrolled by it. And that’s precisely what happened.

In late June, the Democratic-controlled House passed a new FISA bill that vastly expanded the warrantless eavesdropping powers of the government, in the process legalizing most of what had previously been illegal. On July 9, 2008, the U.S. Senate did the same. Titled the FISA Amendments Act of 2008, the bill also granted full retroactive immunity, both civil and criminal, to the entire telecom industry, thus guaranteeing an end to the multiple lawsuits that had been filed against them. All possibility for further investigation into the massive spying program, and for a judicial review of its legality, permanently ended on that day.

The bill passed with the support of virtually the entire Democratic congressional leadership. Barack Obama, by then the Democratic nominee for president, blatantly violated his vow to filibuster any bill containing telecom immunity. Instead, he voted
against
the Dodd-sponsored filibuster; with the filibuster defeated, Obama then voted
in favor
of the underlying bill itself. (Hillary Clinton, no longer a presidential candidate, fulfilled her campaign promise by voting against it.) The vote in the Democratic-controlled Senate was not even close: 69–28 in favor of the bill. The vote in the House was similarly lopsided (293–129), with Democrats evenly split but with the entire Democratic leadership—including Speaker Nancy Pelosi, Majority Leader Steny Hoyer, and Rahm Emanuel—supporting the bill.

The day after the Senate vote, President Bush celebrated the harmless end to a scandal that began almost three years earlier when the
New York Times
told the nation that he had been illegally spying on American citizens for years. He invited numerous leaders of both political parties to the White House for the ceremony at which the new FISA bill was signed into law. Those members of Congress mingled with Admiral McConnell and the other national security officials who had worked so tirelessly to ensure that telecoms (and therefore the president) would be shielded from all liability. In his remarks, the president heaped particular praise on Senator Rockefeller for leading the way in ensuring the bill’s passage.

Very soon after Bush’s signing ceremony, the telecoms filed papers in the federal court where the lawsuits against them were proceeding and—citing the immunity they had just received—demanded the summary dismissal of those suits. The judges, their hands bound by the new law, threw those cases out of court, and the telecoms were forever shielded from paying any compensation to the customers whose privacy they had sacrificed. They were also shielded from any criminal investigations or prosecutions for those crimes.

The Washington establishment and the telecom industry exulted over their great victory, and understandably so. It signaled that there is literally no limit on the ability of corporate elites, using their control of government, to be immunized from the rule of law, potently foreshadowing Wall Street’s full-scale protection after the 2008 financial crisis.

The telecom industry issued fulsome expressions of gratitude. As it happened, the new FISA bill was passed shortly before the Democratic National Convention was to meet in Denver and formally announce Barack Obama as the party’s presidential nominee. Within two weeks after the bill’s passage, the steering committee of the DNC unveiled AT&T’s generous sponsorship of various aspects of the convention, including products such as an AT&T-branded tote bag to be distributed to all convention delegates.

At the convention itself, AT&T’s signature globe was prominently placed at virtually every DNC event. While this sponsorship was relatively trivial from a financial perspective, few things were more appropriate than having a telecom logo hover over the Democratic Party’s principal gathering. After all, the party had just delivered an extraordinary gift to that industry. The omnipresence of AT&T was a refreshingly, if not intentionally, honest expression of the Democrats’ true allegiance.

The second day of the Democratic convention fell on August 25, 2008. That night, at the Mile High Station—next to Invesco Stadium, where Barack Obama was to accept the party’s nomination in front of a crowd of eighty thousand people two nights later—AT&T threw a lavish private party for Blue Dog House Democrats. This was one of the listings for the event:

Armed with full-scale convention press credentials issued by the DNC (though lacking an invitation to the party), I went with several other people to report on the festivities. Deployed around the building was a wall of private security guards, who informed us that the press was barred from the gathering—even though what was taking place inside was a meeting between one of the nation’s largest corporations and the numerous members of one of the most influential elected factions in Congress.

Denied access to the building, we stood in front of the entrance and began videotaping and trying to interview the parade of Blue Dog representatives, AT&T executives, assorted lobbyists, and convention delegates pulling up in their rented limousines, chauffeured cars, and SUVs. We wanted to find out who was attending and why AT&T would be throwing such a lavish party for the Blue Dog members of Congress.

Amazingly, not a single one of the twenty-five to thirty people we tried to interview would speak to us about who they were, how they got invited, what the party’s purpose was, or why they were there. One attendee said that he was with an “energy company,” and another confessed that she was affiliated with a “trade association,” but this was the full extent of anyone’s willingness to describe themselves or this event. After just a few minutes, the private security teams demanded that we leave. When we refused and continued trying to interview the reticent attendees, the Denver police forced us to move farther and farther away from the entrance until finally we were unable to approach any more of the arriving guests.

It was really the perfect symbol for how the Beltway political system functions: those who dictate the nation’s laws (the largest corporations and their lobbyists) cavorting with those who are elected to write those laws (members of Congress) while completely prohibiting the public from having any access to and knowledge of—let alone involvement in—what they are doing. All of this was arranged by AT&T, the corporation that paid for part of the Democrats’ national convention after having just received an extraordinary gift of retroactive amnesty from the Congress controlled by that party. And all of it took place right next to the stadium where the Democratic presidential nominee—who had spent months righteously claiming that, if elected, he would cleanse the Beltway of corporate and lobbying influences—was to accept the presidential nomination.

The telecom immunity law was one of the most striking pieces of evidence demonstrating that the royal Beltway court and its corporate partners placed themselves above and beyond the reach of the law even for the most blatant transgressions. But more important, it also proved that they no longer cared who knew it. And the vital enabling role that the Democratic Party and Barack Obama played in those events was a powerful foreshadowing of how—once they consolidated their hold on political power—the Democrats would not just maintain, but entrench and expand, this culture of elite impunity.

In July 2010, Martin Joel Erzinger, a hedge fund manager for extremely wealthy investors at Morgan Stanley Smith Barney, was driving his car near Vail, Colorado, when he hit a bicyclist from behind and then sped away. The
Vail Daily
reported that the victim, Steven Milo, suffered “spinal cord injuries, bleeding from his brain and damage to his knee and scapula,” which left him facing multiple surgeries. The newspaper’s account of the incident makes clear that Erzinger should have been prosecuted for this incident.

Committing a hit-and-run is a felony in Colorado, and leaving the scene of a crime constitutes a felony as well. Nevertheless, the district attorney, Mark Hurlbert, announced that Erzinger would be charged only with a misdemeanor, which carries no jail time. Hurlbert’s explanation for not charging Erzinger with any felonies was blunt: “Felony convictions have some pretty serious job implications for someone in Mr. Erzinger’s profession.”

In other words, Erzinger engages in such vital activity that charging him with a felony would be wrong because it might seriously disrupt his work: managing the money of multimillionaires and billionaires. According to
Worth
magazine, Erzinger “oversees over $1 billion in assets for ultra high net worth individuals, their families and foundations.” If he were charged with a felony, he would be required to report that fact to licensing agencies; a felony conviction could result in his fund manager license being rescinded. Apparently, as far as the district attorney was concerned, it would be terribly unfair to subject someone like Erzinger to the risk of damaging his career, though presumably someone with less to lose could—and would—be charged as a felon without any such worries.

Hurlbert added that Erzinger’s willingness to pay restitution to his victim also militated against prosecuting him: “The money has never been a priority for [the victim]. It is for us. Justice in this case includes restitution and the ability to pay it.” As Felix Salmon of Reuters put it, the Erzinger case was thus a classic demonstration of how to “buy your way out of a felony charge.” But it was also more than that. Hurlbert’s decision was grounded in what has become a well-entrenched principle: certain individuals are simply too important to be subjected to criminal prosecution.

Once the Erzinger case was publicized by the talk radio host David Sirota and by Colorado newspapers, there was a public uproar. More than ten thousand local residents signed petitions demanding the filing of felony charges, to no avail. And although the incident eventually attracted significant attention, Hurlbert’s logic is notable precisely because it is so common. Indeed, the same type of immunity from legal consequences is continuously granted to the financially powerful on a much larger and more consequential scale.

The shielding of the Colorado hedge fund manager illustrates how reflexively exemption from the rule of law is now bestowed on the nation’s wealthiest, and it highlights the means used to accomplish that. Even the massive recklessness and fraud that in 2008 spawned one of the worst financial crises in modern history has produced very little legal accountability—and almost no criminal liability—for the perpetrators so far, and is quite unlikely to do so in the future. Nor have the 2010 revelations of systematic industry-wide fraud by mortgage-holding banks prompted anything besides efforts by the political class to protect that plundering industry. And to justify this lack of accountability for the nation’s wealthiest lawbreakers, the all-too-familiar excuses long used to shield the politically powerful are trotted out on cue. Once again, we are told that prosecutions are too disruptive; that it’s more important to fix the system than to seek retribution for the past; that because the wrongdoers’ reputation is in tatters, they have already suffered enough; that we need the goodwill of financial titans to ensure our common prosperity; and so on.

The granting of immunity to the telecoms after the Bush wiretapping program was a travesty because corporate giants were able so flagrantly to purchase retroactive exemption from the rule of law. But the steadfast refusal to hold financial elites accountable for the 2008 financial crisis and 2010 mortgage fraud scandal represents a whole new level of lawlessness. As disgraceful as the telecom amnesty was, at least it was given by an act of Congress and thus had some legal pretense to it. By contrast, in protecting Wall Street, the executive branch simply violated its core constitutional duty: to “take care that the laws be faithfully executed.” Moreover, while the immunized telecoms had broken the law in conjunction with government programs, the crimes for which Wall Street barons are being protected are purely private ones. Worse still, the scope of these financial crimes is so vast, and the suffering they have caused so deep and enduring, that the refusal to impose any consequences on the culprits proves the near-absolute nature of this elite lawbreaking license. It is now clear that there are virtually no limits on the magnitude of the crimes that the nation’s most powerful private actors can commit with impunity.

Mass Economic Destruction

In the fall of 2008, the American and world economies were brought to the brink of complete collapse. On September 19 of that year, the
New York Times
reported on a secret congressional briefing given by top financial officials at which they described the extraordinary threat as they perceived it. According to that account, when the Federal Reserve chairman, Ben Bernanke, “laid out the potentially devastating ramifications of the financial crisis before congressional leaders…there was a stunned silence.” The New York senator Chuck Schumer, who was present at the meeting, told the
Times
: “When you listened to [Bernanke] describe it, you gulped.”

The warnings issued to the congressional leaders were apocalyptic. According to the Connecticut senator Chris Dodd, chairman of the Banking, Housing, and Urban Affairs Committee, the senators were informed that the country was “literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.” In his thirty years in Congress, Dodd told
Good Morning America
, he had “never heard language like this.”

Full-scale destruction of the economy was averted by quickly transferring $700 billion in taxpayer money to the very banks that spawned the crisis. That infusion of cash not only saved the banks but enabled them to return almost immediately to great profitability, which in some cases surpassed even the massive earnings they had been generating throughout the prior decade.

Outside the banks, meanwhile, the worldwide economic disruption was so severe that nothing since the Great Depression could compare to it. A full two years after the crisis began, the human misery it wrought had barely been mitigated. Further, the harmful effects have almost certainly not completely materialized yet, and more suffering is still to come.

In the United States alone, more people have been unemployed for a longer period of time than at any point since the 1930s. In August 2009, the
New York Times
reported that “almost 45 percent of today’s unemployed workers have been without a job for at least 27 weeks. In no other downturn since World War II did the share exceed 26 percent.” Andrew Stettner of the National Employment Law Project told the
Huffington Post
in January 2010 that “long term unemployment is more than ever the norm…and it’s across the country and across the economy that this is happening.”

Long-term unemployment has serious consequences. People who are out of the workforce for even a few months suffer severe erosion of self-esteem, great stress, and dramatic changes to their lives. People who are out for a year or more are at risk of becoming permanently unemployable. Brian Bethune, chief financial economist at IHS Global Insight, warned in
Daily Finance
in March 2010: “People who are unemployed tend to get de-skilled. Anytime you go through a recession and there is an extended time of unemployment, there is a dead-weight loss of skills.”

The unemployment crisis not only led to suffering and lost opportunity in its own right, but further entrenched and exacerbated America’s already-shocking inequality. The hardest-hit, by far, were those in the lower income brackets. In late 2009, when the Center for Labor Market Studies at Northeastern University analyzed labor conditions for ten groups of American households based on annual household income, it found that the poorest group had a jobless rate of 30.8 percent—which, as the
New York Times
columnist Bob Herbert pointed out, is “more than five points higher than the overall jobless rate at the height of the Depression.”

The next-lowest group suffered a still-staggering jobless rate of 19.1 percent. As one ascended into the higher levels of income earners, though, the unemployment rate steadily decreased. Pervasive joblessness afflicted the middle classes less severely than the poor, while at the two richest levels only 3.2 percent and 4 percent of job seekers, respectively, were without work. As the Center for Labor Market Studies explained in its report, “A true labor market depression faced those in the bottom two deciles of the income distribution; a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top.”

Beyond the miseries of long-term unemployment, the impact of the financial crisis was visible in many other ways. In 2009, 2.8 million American homes had foreclosure proceedings filed against them. As Reuters put it at the beginning of 2010: “U.S. foreclosure actions shattered all records in 2009 and will do so again this year.” Deep into 2010, that trend showed no signs of abating. In September, as Reuters reported, “The number of homes taken over by banks topped 100,000 for the first time.”

In sum, the financial crisis caused by Wall Street was easily one of the most devastating and misery-producing events in American history. To the limited extent its causes have been investigated, it has become increasingly clear that the crisis was the result of plundering, fraud, lawlessness, and criminality on a massive scale. Major sectors of the financial industry turned out to be little more than glorified Ponzi schemes. Credit agencies on which investors relied routinely gave their stamp of approval to debt and loan instruments that were backed by “assets” of little or no value. Wall Street flooded the nation with toxic “derivative products,” which Warren Buffett had denounced back in 2003 as “financial weapons of mass destruction” posing a “mega-catastrophic risk.” And yet there has been virtually no punishment for the perpetrators, and it is highly unlikely that there will ever be any.

On the contrary, those who have brought the world economy to its knees are the ones who have prospered—the only ones who have prospered. “A lot of people who are responsible (for the crisis) seem to have gotten awfully rich,” Barbara Roper, the director of investor protection for the Consumer Federation of America, told a McClatchy reporter on the one-year anniversary of the crisis. It’s not hard to see why that happened. The political responses to this crisis have been shaped by the very financial elites whose recklessness caused the crisis in the first place, and thus it is those very elites who have been the prime beneficiaries.

In August 2009, Simon Johnson, the former chief economist at the International Monetary Fund and current economics professor at MIT, wrote a widely hailed article in the
Atlantic
titled “The Quiet Coup.” He documented the similarities between the U.S. response to the financial crisis and the response of “emerging markets” countries to similar upheavals of the past. Arguing that a “financial oligarchy” exerts nearly full control over America’s political institutions, Johnson pointed to parallels with the elites that caused previous financial meltdowns in places such as Ukraine, Russia, Thailand, Indonesia, and South Korea. In all those cases, the same financial elites whose recklessness and illegality brought on the economic crisis used their power over political institutions to ensure that they were the prime beneficiaries of the governments’ response. Johnson writes: