In the last month or so, the Securities and Exchange Commission received almost $750 million in four settlements: $550 million from Goldman Sachs; $100 million from Dell Computer; $75 million from Citigroup; and $23 million from General Electric. Including the settlement from State Street Bank and Trust (at $300 million) in February, the SEC has netted over $1 billion this year in settlements that claim ‘no wrongdoing,’ most of which are related to misleading investors about everything from subprime loans to padding their books.
Uniquely GE’s investigation was related to kickbacks given to Iraqi officials for lucrative contracts. Charming.
In fact, even Bernie Madoff—who plead guilty in court and is currently serving time in prison—was let off with a ‘no wrongdoing’ admission in the civil complaint filed by the SEC for his $65 billion Ponzi scheme. And AIG’s record of $800 million SEC settlement in 2006 also admitted ‘no wrongdoing.’
So, defrauding investors, tanking the world economy, conning homeowners and bribing Iraqi officials all falls under the heading of ‘no wrongdoing,’ even while paying out billions of dollars in settlements?
All of these settlements are done under the Sarbanes-Oxley Act, which passed with overwhelming support from Congress and then-President George W. Bush in 2002 in the wake of the Enron and Tyco scandals. Prior to that, comparatively paltry fines of $10 million were the norm and regulation of publicly traded firms accounting practices was must less strict.
But if Sarbanes-Oxley is the intrusive, burdensome entity that impedes American growth that its critics frame it as, then why are megacorporations getting off with a slap on the wrist? And why are these financial malfeasances—such as Lehman Brothers’ creation of a shell company to hide its debt each quarter—not picked up by the Sarbanes-Oxley regulators?
And yes, a $500 million fine for Goldman Sachs is a slap on the wrist.
The screams for blood that accompanied the financial crisis have died down to mere acquiescence to the idea that financial malfeasance is only adequately punished by financial penalty—when it comes to corporations. Bernie Madoff went to jail, while AIG and Goldman Sachs just got a chunk of their yearly earnings taken out of their backs.
It begs the question that if corporate personhood implies that rights for corporations are “equal” to those of American citizens, then penalties for corporations should be equal as well. Therefore, if there exists endemic fraud within a company, why not send the entire company to jail? Or at least those responsible?
Right now, it appears that with unlimited right to lobby and fund political advertising but without the penalty of jail time, that corporate personhood has it both ways.
The SEC’s and the Federal Reserve’s complicity in the game is shocking. Billions of dollars were made in subprime investments, and the billions that were lost were mostly lost at the expense of taxpayers. We’re privatizing corporate earnings and nationalizing corporate losses. By making a deals with where corporations admit ‘no wrongdoing’ just amplifies the bailout’s moral hazard and the increasingly incestuous relationship between large corporations and the U.S. government.
The additional powers given to Treasury Secretary manboy Timothy Geithner only underlines this trend. Over the next few months, he’ll be the acting chief of a new consumer protection bureau and he’ll be the one deciding case-by-case which types of risky financial derivatives will and will not be regulated.
It all amounts to more power to the guy who was regulating Wall Street while the investment banks and insurers were at their most irresponsible and criminal in the last several generations.