Ethics Presentation

Hey. Here's the link and the article for Thursday's presentation. See you then:
http://opinionator.blogs.nytimes.com/2013/01/07/favoritism-is-good/

Oh and BTW, if you haven't had enough of economics and ethics, I found this interesting (to me at least!) article this morning - http://www.macrobusiness.com.au/2013/04/economists-afraid-of-ethics/

Favoritism Is Good

By STANLEY FISH

Stanley Fish on education, law and society.

Of the columns I have written that have been negatively received, none has been greeted with more outrage than last March’s “Two Cheers for Double Standards.” The case for a single standard is familiar and easy to make. If you’re in a position either to dispense rewards (a promotion, a bonus, an appointment) or level sanctions, you should do so impartially; that is, without being influenced in your decision by family membership, friendship, religious affiliation, ethnic solidarity or any of the other considerations that can skew judgment. When a comrade and someone in the other camp engage in the same behavior, your praise or blame should be independent of the personal feelings you may have for either. Don’t give your friends a pass you wouldn’t give to your enemies. Don’t give your brother the job if someone else not related to you at all is more qualified.
This single-standard standard — employ a calculus of merit rather than a calculus of consanguinity — asks you to regard ideological/political differences as articles of clothing; they are cosmetic rather than essential; the person is what he is apart from them and it is the person, rather than the accidents of birth or belief or nationality, who merits your respect.
In contrast, the double-standard standard says that it’s not only O.K. but positively good to favor those on your side, members of your tribe. These are the people who look out for you, who have your back, who share your history, who stand for the same things you do. Why would you not prefer them to strangers? In this way of thinking, personhood is not what remains after race, gender, ethnicity and filial relationships have been discounted; rather, personhood is the sum of all these, and it makes no sense to disregard everything that connects you to someone and to treat him or her as if the two of you had never met.

Favoritism – giving more than an even break to your own kind — is not a distortion of judgment, but the basis of judgment. And being impartial to those who are a part of you — through blood or creed or association or profession (think of the thin blue line) — is not to be virtuous, but to be ungrateful and disloyal, more concerned with hewing to some abstract principle of respect for all than with discharging the obligations that come along with your most intimate relations. The particularism that in the one vision is an impediment to right action is, in the other, the key to right action.

I have been making arguments like this since 1979, when I inveighed against “blind submission,” the policy of erasing from submissions for publication all the identifying marks that tell the editors of a journal exactly who has produced the essay they are judging — what position he holds, what graduate program he attended, what mentors fashioned him, what school of thought he belongs to, what work he has produced, what influence he has exerted on the field. The idea is that after knowledge of these things has been put behind a veil (much like John Rawls’s “veil of ignorance”), the editors will be able to make their decisions on the basis of “intrinsic merit” — a merit that can display itself, shine through, without being obscured by the distractions of a professional résumé.
I contended that there was no such thing as intrinsic merit and that merit could be calculated only in relation to those factors the policy of blind submission forbids us from considering. The “pure” or cleansed judgment the policy supposedly fosters, I wrote, “is never available,” not because editors cannot distance themselves from the biases attendant upon their professional histories — biases that incline them to value submissions congenial to their scholarly convictions, much as an employer might value the job application of a relative — but because without those biases, “there would be nothing either to see or to say.”
Over the years I have made essentially the same argument in a variety of contexts — when I wrote against interdisciplinarity and for disciplinary narrowness, against openness of mind and for a mind closed to error, against objectivity and for discrimination, against meritocracy and for nepotism, against formal neutrality and for affirmative action, against independent voters and for partisan zeal, against a politics that is not a respecter of persons and for what I called “rational identity politics,” against wind turbines and for Nimby (Not in My Backyard), against a worship of free speech and for the deployment of censorship (not, it should go without saying, a principled censorship, but a censorship tied to my judgment of the harms produced by some forms of speech).
Now, when I make these arguments, there is a book I can refer to in the hope that its author might become the target of the brickbats usually hurled at me. The author is Stephen T. Asma, and the book is titled “Against Fairness.” Asma is a professor of philosophy and his thesis is that “in the background of our usual thinking about fairness is the assumption of the equality of all mankind — of egalitarianism,” the idea that all persons, not just the persons you feel close to, are worthy of respect. Egalitarians believe that “tribal thinking is uncivilized because it draws its circles of respect narrowly, while ‘higher civilizations’ include the whole human species in their circle of respect.”
There is a history and a teleology here: once human beings lived in a Hobbesian state of nature intent only on satisfying their own desires and, perhaps, the desires of their nearest and dearest; only later did they mature and “slowly learn to care for others” until at the highest reaches of understanding they learn to care for everyone. (Richard Rorty used to say that what we need to do is expand our sense of “us.”)
Favoritism in this story is something we outgrow. Asma tells another story (backed up by studies of biological and psychological development): favoritism is something we grow with; it may begin in the private sphere, but “favoritism can segue into the wider public sphere and do much good there as well.” Asma finds an example in the civil rights heroes who are usually, he observes, celebrated as “fairness fighters,” that is, as persons who oppose discrimination as an abstraction and fight for a principle, not for a particular local outcome. No, says Asma, “Rosa Parks and Susan B. Anthony were not fighting for the equality of all people per se, but for the inclusion of their in-groups.”
So what has been characterized as the struggle to end favoritism and replace it with a universal brotherhood is in fact an effect of favoritism: “Some serious allegiance to one’s tribe … is how anything gets done at the social level — including civil rights,” Asma writes. Although diversity is the banner under which our modern moral crusaders often march, no one has ever fought for diversity, for universal, undiscriminating inclusion; rather, everyone fights for the inclusion of one’s own kind.
Seeing everyone as an “idealized equal” — not as a particularized being, but as an abstract autonomous agent indistinguishable in essence from all other agents – may be the imperative of a philosophical line stretching from Kant to Rawls, but it is not an imperative that does the work of the world. That work is done, according to Asma, by locally situated persons who act not out of a concern for all humanity but out of a concern for that portion of humanity with which they identify: “Do many Jewish people privilege their tribe over the interests of non-Jews? Of course, they do, and why shouldn’t they?”
The answer to that question is the content of the tradition Asma argues against, the liberal secular tradition that stipulates “fairness between autonomous individual agents” (agents who know nothing of one another) as “the defining feature of our morality.” Against this tradition, which has had its run for over 200 years, Asma poses a morality found in “other cultures, immigrant groups and … rural cultures in the United States.”
In that morality — the morality of favoritism — fairness and rights are less important than “loyalty and patriotism, sacred/profane issues of purity, temperance [and] obedience to authority.” Those who subscribe to that morality or, rather, live it out, perform acts of generosity and caring for which they need give no impartial justification. “They bring you soup when you’re sick; they watch your kids in an emergency; they open professional doors for you; they rearrange their schedules for you; they protect you; they fight for you; they favor you.”
Sounds good.

Ethics II

Hey everyone. Thanks to everyone for trying to follow last weeks flustered class; hopefully we won't have any unexpected visitors joining us this week. Another ethics class so here's your article: http://healthland.time.com/2012/02/28/why-the-rich-are-less-ethical-they-see-greed-as-good/
Hopefully having the word ethical in the title will help everyone see how it related to ethics!

Not required, but I'd really like you to take a look at this too - http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=2&pagewanted=all (If you do then you should see this funny parody - http://www.thedailymash.co.uk/news/society/why-i-am-leaving-the-empire-by-darth-vader-201203145007)

See you Thursday. Lots of extra reading if you want http://www.scientificamerican.com/article.cfm?id=how-wealth-reduces-compassion ; http://www.guardian.co.uk/commentisfree/2012/jun/30/fintan-otoole-banking-decency-corrupt-system ; plus an extra from Plato himself http://classics.mit.edu/Plato/republic.3.ii.html

Why the Rich Are Less Ethical: They See Greed as Good

By Maia SzalavitzFeb. 28, 2012Add a Comment

While stereotypes suggest that poor people are more likely to lie and steal, new research finds that it’s actually the wealthy who tend to behave unethically. In a series of experiments — involving everything from dangerous driving to lying in job negotiations and cheating to get a prize — researchers found that, across the board, richer people behaved worse. But, rather than class itself, the authors suggest that it’s views about greed that may largely explain the difference.
In the first two experiments, University of California, Berkeley, psychologists positioned observers at San Francisco intersections to watch for drivers who didn’t wait their turn at lights or yield for pedestrians. The researchers noted the make, age and appearance of cars — a marker for the drivers’ socioeconomic status — as well as the drivers’ gender and approximate age.
If you ever thought that the guy driving a late-model Mercedes is more of a jerk than the one behind the wheel of a battered Honda, you’d be right. Even after controlling for factors like traffic density and the driver’s gender and perceived age (younger men tend to drive faster and often rudely), drivers of the newest, most high-status cars were much more likely to cut other drivers off.
“The drivers of the most expensive vehicles were four times more likely to cut off drivers of lower status vehicles,” says Paul Piff, a doctoral student at Berkeley and lead author of the study published in the Proceedings of the National Academy of Sciences.
Drivers in fancy cars were also three times more likely than those in beaters to threaten pedestrians by failing to yield when the walkers had the right of way at a crosswalk. So much for the theory that owners of expensive cars try to protect their vehicles from being sullied by common blood!

In five further experiments, researchers looked at moral behavior in more controlled lab settings. The experiments were designed to determine what made people lapse into bad behavior, and how difficult it would be to change it. The results offer some hope in an otherwise bleak picture.
In one study, participants reported their own socioeconomic status and then read descriptions of people stealing or benefiting from things to which they were not entitled. When asked how likely they would be to engage in similar behavior, the richest of 105 undergraduates were more likely admit that they would do so, compared with those from middle-class or lower-class backgrounds. Of course, this finding could simply reflect the fact that the rich are more likely to get away with such things — and therefore may feel more comfortable admitting it — so the researchers also studied actual behavior.
In the next experiment, researchers asked 129 students to compare themselves with those who were either far richer or far poorer than they were. Previous studies have found that this manipulation influences people’s perceptions of class and their own behavior, with those primed to feel wealthy behaving less generously and becoming less sensitive to the emotions of others, regardless of their actual socioeconomic class.
The participants were then offered candy from a jar that they were told would otherwise be given to children in another lab. Those primed to feel rich took more candy than those who were made to feel disadvantaged. Fortunately, there were no children actually waiting for the sweets.

But why would people who feel socially elevated behave less ethically? The next set of experiments sought to examine this question, finding a connection between wealth and positive perceptions of greed. Among adults who were recruited online for one such experiment, those who were wealthier were more likely to lie in a simulated job interview scenario. The participants — acting as managers — were told that their hypothetical applicants would be willing to take a lower salary in exchange for job security. The applicants wanted a two-year contract position, but the managers knew that the available job would last only six months before being eliminated — and that they could get a bonus for negotiating a lower salary. People of high social class were more likely to lie to the job seekers, researchers found.
The reason for this was not necessarily their class, but the fact they agreed with Wall Street‘s Gordon Gekko that greed is good. When the researchers examined the connection between beliefs about greed and unethical behavior, they found that class was no longer a significant variable. In other words, rich people tended to take advantage of others primarily because they saw selfish and greedy behavior as acceptable, not just because they had more money or higher social status.
To confirm this, another experiment examined whether a person’s attitudes about greed or his class status would predict cheating on a dice game. Researchers recruited 195 adults on Craigslist, queried them about their backgrounds and greedy attitudes, and then had them play a computerized dice game in which higher rolled scores meant a higher chance of winning $50. Unbeknownst to them, the computer always generated the same score: 12. People who believed greed was good were more likely to cheat and report inflated scores of 15 or higher.
Then, in a final study in which the researchers primed participants by having them talk about either the benefits of greed or something neutral (what they did that day), they found that poor participants were just as likely as rich ones — if they were primed to think greed was good — to support bribery or to cheat unsuspecting customers. In the neutral prime, rich participants were more likely to support unethical behavior.

Fortunately, people can also be easily primed to behave more generously. In an earlier study, Piff and his colleagues found that rich people were less likely to help a person who entered the lab in distress — except when they’d just watched a video about child poverty. “We’re not arguing that rich people are bad at all, but that psychological features of wealth have these natural effects,” says Piff. “There are simple things you can adjust, which suggest that rich people are fairly sensitive and just need little reminders.”
He notes that billionaire Warren Buffett made a similar point in a New York Times op-ed last year, calling for higher taxes on the wealthiest. “I know well many of the mega-rich and, by and large, they are very decent people,” Buffett wrote. “Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.”
In a comment for WebMD, George Mason University professor of education Martin Ford praised Piff’s study. “It is particularly compelling when the same basic phenomenon is demonstrated using a wide variety of experimental methods,” he said.
The findings got me thinking that if we are concerned about negative media content harming the moral development of children, we might want to place positive depictions of greed near or even above sex and violence on the list of exposures that are unsuitable for youth.

Self-Interest Spurs Society’s ‘Elite’ to Lie, Cheat on Tasks, Study Finds

By Elizabeth Lopatto - Feb 28, 2012 6:01 AM GMT+0100

Feb. 28 (Bloomberg) -- Bloomberg's Elizabeth Lopatto reports that the "upper class," as defined by a research in the Proceedings of the National Academy of Sciences, were more likely to break the law while driving, lie in negotiation, and take candy from children. She spoke yesterday on Bloomberg Television's "Street Smart."

That question spurred Paul Piff, a Ph.D. candidate in psychology at the University of California, Berkeley, to explore whether higher social class is linked to higher ideals, he said in a telephone interview.
The answer Piff found after conducting seven different experiments is: no. The pursuit of self-interest is a “fundamental motive among society’s elite, and the increased want associated with greater wealth and status can promote wrongdoing,” Piff and his colleagues wrote yesterday in the Proceedings of the National Academy of Sciences.
The “upper class,” as defined by the study, were more likely to break the law while driving, take candy from children, lie in negotiation, cheat to raise their odds of winning a prize and endorse unethical behavior at work, the research found. The solution, Piff said, is to find a way to increase empathy among wealthier people.
“It’s not that the rich are innately bad, but as you rise in the ranks -- whether as a person or a nonhuman primate -- you become more self-focused,” Piff said. “You can change that by reminding upper-class people of the needs of others. That may not be their default, but have them do it is sufficient to increase their patterns of altruistic behavior.”
That theory will be the basis of his next study. Piff is curious to know how to change patterns of greed and selfishness when they emerge.

Ethics Courses

Previous research has shown that students who take economics classes are more likely to describe greed as good. Pairing ethics courses with economics may be beneficial, Piff said.
“It might be as simple as not only stressing individual performance, but the value of cooperation and improving the welfare of others,” he said. “That goes a long way.”
In the research reported yesterday, the experiments suggest at least some wealthier people “perceive greed as positive and beneficial,” probably as a result of education, personal independence and the resources they have to deal with potentially negative consequences, the authors wrote.
While the tests measured only “minor infractions,” that factor made the results “even more surprising,” Piff said.
One experiment invited 195 adults recruited using Craigslist to play a game in which a computer “rolled dice” for a chance to win a $50 gift certificate. The numbers each participant rolled were the same; anyone self-reporting a total higher than 12 was lying about their score. Those in wealthier groups were found to be more likely to fib, Piff said.

Risks of Cheating

“A $50 prize is a measly sum to people who make $250,000 a year,” he said in a telephone interview. “So why are they more inclined to cheat? For a person with lower socioeconomic status, that $50 would get you more, and the risks are small.”
Poorer participants may be less likely to cheat because they must rely more on their community to get by, and thus are more likely adhere to community standards, Piff said. By comparison, “upper-class individuals are more self-focused, they privilege themselves over others, and they engage in self- interested patterns of behavior,” he said.
In the traffic tests, about one-third of drivers in higher- status cars cut off other drivers at an intersection watched by the researchers, about double those in less costly cars. Additionally, almost half of the more expensive cars didn’t yield when a pedestrian entered the crosswalk while all of the lowest-status cars let the pedestrian cross. These experiments involved 426 vehicles.

Employment Test

Another test asked 108 adults found through Amazon.com Inc.’s (AMZN) work-recruiting website Mechanical Turk to assume the role of an employer negotiating a salary with someone seeking long-term employment. They were told several things about the job, including that it would soon be eliminated. Upper-class individuals were more likely not to mention to the job-seeker the temporary nature of the position, the research found.
“Support for free-market capitalism will collapse if those who do well don’t do good,” said Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania. “Rapacious, intolerant, nonempathetic capitalism that says lie, cheat, steal, it’s only the bottom line that matters -- aside from being morally repugnant, it’s got a dim future.”

Study Design Criticized

Meredith McGinley, an assistant professor at Chatham University in Pittsburgh who wasn’t involved in the study, was critical of how some of the experiments were designed.
The car test complicates the results because having a flashy car doesn’t necessarily mean the driver is wealthy, said McGinley, who studies positive social behavior. In the experiment involving candy, the participants were told they could have it even though children were waiting for it. They may have felt they were doing nothing wrong, she said.
In the candy test, 129 undergraduates were manipulated to view themselves as wealthy or poor. They were then presented with a jar of individually wrapped candy, which researchers said would go to children in a nearby lab, though the participants could take some if they wanted. The undergraduates believing themselves to be upper income took more than those believing themselves to be low income, the study found.
Erik Gordon, a business professor at the University of Michigan in Ann Arbor, wasn’t surprised by the results, he said.

Greed ‘on Upswing’

“Greed has been on the upswing for 20 years,” Gordon said in a telephone interview. “Wealth or power that comes with high socioeconomic status means you are indeed enabled to ignore other people and might think that rules that apply to other people don’t apply to you.”
Gordon, though, thinks the research has its limits. It isn’t as much about wealth, he said, as it is about greed, a behavior that can be changed.
The very wealthy, who “tend to drive 8-year-old cars” and “don’t wear logos,” may offer a very different profile, he said, suggesting that the group targeted by Piff’s experiments with cars are more likely the “nouveau riche.”
To be sure, Piff and his colleagues said there are exceptions to the associations they found, pointing to Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., who has pledged the majority of his holdings to the Bill & Melinda Gates Foundation and other charities.
Less wealthy individuals also can behave badly, they wrote, noting the relationship between poverty and violent crime in previous research.
The study urged further research to determine the “boundaries” of bad behavior spurred by greed. Adam Smith, the 18th century author of “The Wealth of Nations,” may provide an example, as his first book, “The Theory of Moral Sentiments,” was about ethics.
“A long time ago, you couldn’t leave the university without having a course in ethics,” Caplan said. “One of the things college should do is provide you with the moral framework to operate in a capitalist society. When people ask about the value of philosophy, I point them there.”

Ethics

Hey. Thursday we'll start the next unit, ethics. It'll be like deja vu all over again though as the article focuses on the financial industry. I'll repeat to those who missed last class, it's more than a good idea to watch the movie you missed, the link is here. Oh, it's more than a good idea to start coming to class, too! Here's your (long) article:
http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216

Of course, not being punished has led to even more egregious criminal activity. Here's something I wrote about 6 months ago on some of the crimes committed in just the past year. At least I think it's worth a read!:
http://theendisalwaysnear.blogspot.com/2012/08/the-hazardous-morals-of-bankers.html

Oh, you really should read some of this. Just the first paragraph would be enough - http://www.pogo.org/our-work/reports/2013/big-businesses-offer-revolving-door-rewards.html

If you really wanna be smart, you'll get a lot of insight from watching this PBS show...http://www.pbs.org/wgbh/pages/frontline/untouchables/

...then reading this article - http://www.nationaljournal.com/politics/mary-schapiro-and-lanny-breuer-give-us-the-ultimate-dog-bites-man-story-20130403

Aaaah, ain't the revolving door grand? - http://www.businessinsider.com/wall-street-washington-revolving-door-2011-4?op=1

Why Isn't Wall Street in Jail?

Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

By Matt Taibbi

February 16, 2011 9:00 AM ET

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."
I put down my notebook. "Just that?"
"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."

To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."
But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.
Just ask the people who tried to do the right thing.

Here's how regulation of Wall Street is supposed to work. To begin with, there's a semigigantic list of public and quasi-public agencies ostensibly keeping their eyes on the economy, a dense alphabet soup of banking, insurance, S&L, securities and commodities regulators like the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC), as well as supposedly "self-regulating organizations" like the New York Stock Exchange. All of these outfits, by law, can at least begin the process of catching and investigating financial criminals, though none of them has prosecutorial power.
The major federal agency on the Wall Street beat is the Securities and Exchange Commission. The SEC watches for violations like insider trading, and also deals with so-called "disclosure violations" — i.e., making sure that all the financial information that publicly traded companies are required to make public actually jibes with reality. But the SEC doesn't have prosecutorial power either, so in practice, when it looks like someone needs to go to jail, they refer the case to the Justice Department. And since the vast majority of crimes in the financial services industry take place in Lower Manhattan, cases referred by the SEC often end up in the U.S. Attorney's Office for the Southern District of New York. Thus, the two top cops on Wall Street are generally considered to be that U.S. attorney — a job that has been held by thunderous prosecutorial personae like Robert Morgenthau and Rudy Giuliani — and the SEC's director of enforcement.
The relationship between the SEC and the DOJ is necessarily close, even symbiotic. Since financial crime-fighting requires a high degree of financial expertise — and since the typical drug-and-terrorism-obsessed FBI agent can't balance his own checkbook, let alone tell a synthetic CDO from a credit default swap — the Justice Department ends up leaning heavily on the SEC's army of 1,100 number-crunching investigators to make their cases. In theory, it's a well-oiled, tag-team affair: Billionaire Wall Street Asshole commits fraud, the NYSE catches on and tips off the SEC, the SEC works the case and delivers it to Justice, and Justice perp-walks the Asshole out of Nobu, into a Crown Victoria and off to 36 months of push-ups, license-plate making and Salisbury steak.
That's the way it's supposed to work. But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power. To understand how the machinery functions, you have to start back at least a decade ago, as case after case of financial malfeasance was pursued too slowly or not at all, fumbled by a government bureaucracy that too often is on a first-name basis with its targets. Indeed, the shocking pattern of nonenforcement with regard to Wall Street is so deeply ingrained in Washington that it raises a profound and difficult question about the very nature of our society: whether we have created a class of people whose misdeeds are no longer perceived as crimes, almost no matter what those misdeeds are. The SEC and the Justice Department have evolved into a bizarre species of social surgeon serving this nonjailable class, expert not at administering punishment and justice, but at finding and removing criminal responsibility from the bodies of the accused.
The systematic lack of regulation has left even the country's top regulators frustrated. Lynn Turner, a former chief accountant for the SEC, laughs darkly at the idea that the criminal justice system is broken when it comes to Wall Street. "I think you've got a wrong assumption — that we even have a law-enforcement agency when it comes to Wall Street," he says.
In the hierarchy of the SEC, the chief accountant plays a major role in working to pursue misleading and phony financial disclosures. Turner held the post a decade ago, when one of the most significant cases was swallowed up by the SEC bureaucracy. In the late 1990s, the agency had an open-and-shut case against the Rite Aid drugstore chain, which was using diabolical accounting tricks to cook their books. But instead of moving swiftly to crack down on such scams, the SEC shoved the case into the "deal with it later" file. "The Philadelphia office literally did nothing with the case for a year," Turner recalls. "Very much like the New York office with Madoff." The Rite Aid case dragged on for years — and by the time it was finished, similar accounting fiascoes at Enron and WorldCom had exploded into a full-blown financial crisis. The same was true for another SEC case that presaged the Enron disaster. The agency knew that appliance-maker Sunbeam was using the same kind of accounting scams to systematically hide losses from its investors. But in the end, the SEC's punishment for Sunbeam's CEO, Al "Chainsaw" Dunlap — widely regarded as one of the biggest assholes in the history of American finance — was a fine of $500,000. Dunlap's net worth at the time was an estimated $100 million. The SEC also barred Dunlap from ever running a public company again — forcing him to retire with a mere $99.5 million. Dunlap passed the time collecting royalties from his self-congratulatory memoir. Its title: Mean Business.

The pattern of inaction toward shady deals on Wall Street grew worse and worse after Turner left, with one slam-dunk case after another either languishing for years or disappearing altogether. Perhaps the most notorious example involved Gary Aguirre, an SEC investigator who was literally fired after he questioned the agency's failure to pursue an insider-trading case against John Mack, now the chairman of Morgan Stanley and one of America's most powerful bankers.
Aguirre joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial. "It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller," Aguirre recalls. "And he wasn't just buying shares — there were some days when he was trying to buy three times as many shares as were being traded that day." A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.
After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg's who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg's case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. "Mack is busting my chops" to give him a piece of the action, Samberg told an employee in an e-mail.
A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank's clients, as it happened, was a firm called Heller Financial. We don't know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE — a suspiciously timed move that earned him the equivalent of Derek Jeter's annual salary for just a few minutes of work.
The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn't likely to fly, explaining that Mack had "powerful political connections." (The investment banker had been a fundraising "Ranger" for George Bush in 2004, and would go on to be a key backer of Hillary Clinton in 2008.)
Aguirre also started to feel pressure from Morgan Stanley, which was in the process of trying to rehire Mack as CEO. At first, Aguirre was contacted by the bank's regulatory liaison, Eric Dinallo, a former top aide to Eliot Spitzer. But it didn't take long for Morgan Stanley to work its way up the SEC chain of command. Within three days, another of the firm's lawyers, Mary Jo White, was on the phone with the SEC's director of enforcement. In a shocking move that was later singled out by Senate investigators, the director actually appeared to reassure White, dismissing the case against Mack as "smoke" rather than "fire." White, incidentally, was herself the former U.S. attorney of the Southern District of New York — one of the top cops on Wall Street.
Pause for a minute to take this in. Aguirre, an SEC foot soldier, is trying to interview a major Wall Street executive — not handcuff the guy or impound his yacht, mind you, just talk to him. In the course of doing so, he finds out that his target's firm is being represented not only by Eliot Spitzer's former top aide, but by the former U.S. attorney overseeing Wall Street, who is going four levels over his head to speak directly to the chief of the SEC's enforcement division — not Aguirre's boss, but his boss's boss's boss's boss. Mack himself, meanwhile, was being represented by Gary Lynch, a former SEC director of enforcement.
Aguirre didn't stand a chance. A month after he complained to his supervisors that he was being blocked from interviewing Mack, he was summarily fired, without notice. The case against Mack was immediately dropped: all depositions canceled, no further subpoenas issued. "It all happened so fast, I needed a seat belt," recalls Aguirre, who had just received a stellar performance review from his bosses. The SEC eventually paid Aguirre a settlement of $755,000 for wrongful dismissal.
Rather than going after Mack, the SEC started looking for someone else to blame for tipping off Samberg. (It was, Aguirre quips, "O.J.'s search for the real killers.") It wasn't until a year later that the agency finally got around to interviewing Mack, who denied any wrongdoing. The four-hour deposition took place on August 1st, 2006 — just days after the five-year statute of limitations on insider trading had expired in the case.
"At best, the picture shows extraordinarily lax enforcement by the SEC," Senate investigators would later conclude. "At worse, the picture is colored with overtones of a possible cover-up."

Episodes like this help explain why so many Wall Street executives felt emboldened to push the regulatory envelope during the mid-2000s. Over and over, even the most obvious cases of fraud and insider dealing got gummed up in the works, and high-ranking executives were almost never prosecuted for their crimes. In 2003, Freddie Mac coughed up $125 million after it was caught misreporting its earnings by $5 billion; nobody went to jail. In 2006, Fannie Mae was fined $400 million, but executives who had overseen phony accounting techniques to jack up their bonuses faced no criminal charges. That same year, AIG paid $1.6 billion after it was caught in a major accounting scandal that would indirectly lead to its collapse two years later, but no executives at the insurance giant were prosecuted.
All of this behavior set the stage for the crash of 2008, when Wall Street exploded in a raging Dresden of fraud and criminality. Yet the SEC and the Justice Department have shown almost no inclination to prosecute those most responsible for the catastrophe — even though they had insiders from the two firms whose implosions triggered the crisis, Lehman Brothers and AIG, who were more than willing to supply evidence against top executives.
In the case of Lehman Brothers, the SEC had a chance six months before the crash to move against Dick Fuld, a man recently named the worst CEO of all time by Portfolio magazine. A decade before the crash, a Lehman lawyer named Oliver Budde was going through the bank's proxy statements and noticed that it was using a loophole involving Restricted Stock Units to hide tens of millions of dollars of Fuld's compensation. Budde told his bosses that Lehman's use of RSUs was dicey at best, but they blew him off. "We're sorry about your concerns," they told him, "but we're doing it." Disturbed by such shady practices, the lawyer quit the firm in 2006.
Then, only a few months after Budde left Lehman, the SEC changed its rules to force companies to disclose exactly how much compensation in RSUs executives had coming to them. "The SEC was basically like, 'We're sick and tired of you people fucking around — we want a picture of what you're holding,'" Budde says. But instead of coming clean about eight separate RSUs that Fuld had hidden from investors, Lehman filed a proxy statement that was a masterpiece of cynical lawyering. On one page, a chart indicated that Fuld had been awarded $146 million in RSUs. But two pages later, a note in the fine print essentially stated that the chart did not contain the real number — which, it failed to mention, was actually $263 million more than the chart indicated. "They fucked around even more than they did before," Budde says. (The law firm that helped craft the fine print, Simpson Thacher & Bartlett, would later receive a lucrative federal contract to serve as legal adviser to the TARP bailout.)
Budde decided to come forward. In April 2008, he wrote a detailed memo to the SEC about Lehman's history of hidden stocks. Shortly thereafter, he got a letter back that began, "Dear Sir or Madam." It was an automated e-response.
"They blew me off," Budde says.
Over the course of that summer, Budde tried to contact the SEC several more times, and was ignored each time. Finally, in the fateful week of September 15th, 2008, when Lehman Brothers cracked under the weight of its reckless bets on the subprime market and went into its final death spiral, Budde became seriously concerned. If the government tried to arrange for Lehman to be pawned off on another Wall Street firm, as it had done with Bear Stearns, the U.S. taxpayer might wind up footing the bill for a company with hundreds of millions of dollars in concealed compensation. So Budde again called the SEC, right in the middle of the crisis. "Look," he told regulators. "I gave you huge stuff. You really want to take a look at this."
But the feds once again blew him off. A young staff attorney contacted Budde, who once more provided the SEC with copies of all his memos. He never heard from the agency again.
"This was like a mini-Madoff," Budde says. "They had six solid months of warnings. They could have done something."
Three weeks later, Budde was shocked to see Fuld testifying before the House Government Oversight Committee and whining about how poor he was. "I got no severance, no golden parachute," Fuld moaned. When Rep. Henry Waxman, the committee's chairman, mentioned that he thought Fuld had earned more than $480 million, Fuld corrected him and said he believed it was only $310 million.
The true number, Budde calculated, was $529 million. He contacted a Senate investigator to talk about how Fuld had misled Congress, but he never got any response. Meanwhile, in a demonstration of the government's priorities, the Justice Department is proceeding full force with a prosecution of retired baseball player Roger Clemens for lying to Congress about getting a shot of steroids in his ass. "At least Roger didn't screw over the world," Budde says, shaking his head.
Fuld has denied any wrongdoing, but his hidden compensation was only a ripple in Lehman's raging tsunami of misdeeds. The investment bank used an absurd accounting trick called "Repo 105" transactions to conceal $50 billion in loans on the firm's balance sheet. (That's $50 billion, not million.) But more than a year after the use of the Repo 105s came to light, there have still been no indictments in the affair. While it's possible that charges may yet be filed, there are now rumors that the SEC and the Justice Department may take no action against Lehman. If that's true, and there's no prosecution in a case where there's such overwhelming evidence — and where the company is already dead, meaning it can't dump further losses on investors or taxpayers — then it might be time to assume the game is up. Failing to prosecute Fuld and Lehman would be tantamount to the state marching into Wall Street and waving the green flag on a new stealing season.
The most amazing noncase in the entire crash — the one that truly defies the most basic notion of justice when it comes to Wall Street supervillains — is the one involving AIG and Joe Cassano, the nebbishy Patient Zero of the financial crisis. As chief of AIGFP, the firm's financial products subsidiary, Cassano repeatedly made public statements in 2007 claiming that his portfolio of mortgage derivatives would suffer "no dollar of loss" — an almost comically obvious misrepresentation. "God couldn't manage a $60 billion real estate portfolio without a single dollar of loss," says Turner, the agency's former chief accountant. "If the SEC can't make a disclosure case against AIG, then they might as well close up shop."
As in the Lehman case, federal prosecutors not only had plenty of evidence against AIG — they also had an eyewitness to Cassano's actions who was prepared to tell all. As an accountant at AIGFP, Joseph St. Denis had a number of run-ins with Cassano during the summer of 2007. At the time, Cassano had already made nearly $500 billion worth of derivative bets that would ultimately blow up, destroy the world's largest insurance company, and trigger the largest government bailout of a single company in U.S. history. He made many fatal mistakes, but chief among them was engaging in contracts that required AIG to post billions of dollars in collateral if there was any downgrade to its credit rating.
St. Denis didn't know about those clauses in Cassano's contracts, since they had been written before he joined the firm. What he did know was that Cassano freaked out when St. Denis spoke with an accountant at the parent company, which was only just finding out about the time bomb Cassano had set. After St. Denis finished a conference call with the executive, Cassano suddenly burst into the room and began screaming at him for talking to the New York office. He then announced that St. Denis had been "deliberately excluded" from any valuations of the most toxic elements of the derivatives portfolio — thus preventing the accountant from doing his job. What St. Denis represented was transparency — and the last thing Cassano needed was transparency.

Another clue that something was amiss with AIGFP's portfolio came when Goldman Sachs demanded that the firm pay billions in collateral, per the terms of Cassano's deadly contracts. Such "collateral calls" happen all the time on Wall Street, but seldom against a seemingly solvent and friendly business partner like AIG. And when they do happen, they are rarely paid without a fight. So St. Denis was shocked when AIGFP agreed to fork over gobs of money to Goldman Sachs, even while it was still contesting the payments — an indication that something was seriously wrong at AIG. "When I found out about the collateral call, I literally had to sit down," St. Denis recalls. "I had to go home for the day."
After Cassano barred him from valuating the derivative deals, St. Denis had no choice but to resign. He got another job, and thought he was done with AIG. But a few months later, he learned that Cassano had held a conference call with investors in December 2007. During the call, AIGFP failed to disclose that it had posted $2 billion to Goldman Sachs following the collateral calls.
"Investors therefore did not know," the Financial Crisis Inquiry Commission would later conclude, "that AIG's earnings were overstated by $3.6 billion."
"I remember thinking, 'Wow, they're just not telling people,'" St. Denis says. "I knew. I had been there. I knew they'd posted collateral."
A year later, after the crash, St. Denis wrote a letter about his experiences to the House Government Oversight Committee, which was looking into the AIG collapse. He also met with investigators for the government, which was preparing a criminal case against Cassano. But the case never went to court. Last May, the Justice Department confirmed that it would not file charges against executives at AIGFP. Cassano, who has denied any wrongdoing, was reportedly told he was no longer a target.
Shortly after that, Cassano strolled into Washington to testify before the Financial Crisis Inquiry Commission. It was his first public appearance since the crash. He has not had to pay back a single cent out of the hundreds of millions of dollars he earned selling his insane pseudo-insurance policies on subprime mortgage deals. Now, out from under prosecution, he appeared before the FCIC and had the enormous balls to compliment his own business acumen, saying his atom-bomb swaps portfolio was, in retrospect, not that badly constructed. "I think the portfolios are withstanding the test of time," he said.
"They offered him an excellent opportunity to redeem himself," St. Denis jokes.
In the end, of course, it wasn't just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed — not even Fabrice "Fabulous Fab" Tourre, Goldman's outrageous Euro-douche who gleefully e-mailed a pal about the "surreal" transactions in the middle of a meeting with the firm's victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.
Another major firm, Bank of America, was caught hiding $5.8 billion in bonuses from shareholders as part of its takeover of Merrill Lynch. The SEC tried to let the bank off with a settlement of only $33 million, but Judge Jed Rakoff rejected the action as a "facade of enforcement." So the SEC quintupled the settlement — but it didn't require either Merrill or Bank of America to admit to wrongdoing. Unlike criminal trials, in which the facts of the crime are put on record for all to see, these Wall Street settlements almost never require the banks to make any factual disclosures, effectively burying the stories forever. "All this is done at the expense not only of the shareholders, but also of the truth," says Rakoff. Goldman, Deutsche, Merrill, Lehman, Bank of America ... who did we leave out? Oh, there's Citigroup, nailed for hiding some $40 billion in liabilities from investors. Last July, the SEC settled with Citi for $75 million. In a rare move, it also fined two Citi executives, former CFO Gary Crittenden and investor-relations chief Arthur Tildesley Jr. Their penalties, combined, came to a whopping $180,000.
Throughout the entire crisis, in fact, the government has taken exactly one serious swing of the bat against executives from a major bank, charging two guys from Bear Stearns with criminal fraud over a pair of toxic subprime hedge funds that blew up in 2007, destroying the company and robbing investors of $1.6 billion. Jurors had an e-mail between the defendants admitting that "there is simply no way for us to make money — ever" just three days before assuring investors that "there's no basis for thinking this is one big disaster." Yet the case still somehow ended in acquittal — and the Justice Department hasn't taken any of the big banks to court since.
All of which raises an obvious question: Why the hell not?
Gary Aguirre, the SEC investigator who lost his job when he drew the ire of Morgan Stanley, thinks he knows the answer.
Last year, Aguirre noticed that a conference on financial law enforcement was scheduled to be held at the Hilton in New York on November 12th. The list of attendees included 1,500 or so of the country's leading lawyers who represent Wall Street, as well as some of the government's top cops from both the SEC and the Justice Department.
Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats. At the Hilton conference, regulators and banker-lawyers rubbed elbows during a series of speeches and panel discussions, away from the rabble. "They were chummier in that environment," says Aguirre, who plunked down $2,200 to attend the conference.
Aguirre saw a lot of familiar faces at the conference, for a simple reason: Many of the SEC regulators he had worked with during his failed attempt to investigate John Mack had made a million-dollar pass through the Revolving Door, going to work for the very same firms they used to police. Aguirre didn't see Paul Berger, an associate director of enforcement who had rebuffed his attempts to interview Mack — maybe because Berger was tied up at his lucrative new job at Debevoise & Plimpton, the same law firm that Morgan Stanley employed to intervene in the Mack case. But he did see Mary Jo White, the former U.S. attorney, who was still at Debevoise & Plimpton. He also saw Linda Thomsen, the former SEC director of enforcement who had been so helpful to White. Thomsen had gone on to represent Wall Street as a partner at the prestigious firm of Davis Polk & Wardwell.
Two of the government's top cops were there as well: Preet Bharara, the U.S. attorney for the Southern District of New York, and Robert Khuzami, the SEC's current director of enforcement. Bharara had been recommended for his post by Chuck Schumer, Wall Street's favorite senator. And both he and Khuzami had served with Mary Jo White at the U.S. attorney's office, before Mary Jo went on to become a partner at Debevoise. What's more, when Khuzami had served as general counsel for Deutsche Bank, he had been hired by none other than Dick Walker, who had been enforcement director at the SEC when it slow-rolled the pivotal fraud case against Rite Aid.
"It wasn't just one rotation of the revolving door," says Aguirre. "It just kept spinning. Every single person had rotated in and out of government and private service."
The Revolving Door isn't just a footnote in financial law enforcement; over the past decade, more than a dozen high-ranking SEC officials have gone on to lucrative jobs at Wall Street banks or white-shoe law firms, where partnerships are worth millions. That makes SEC officials like Paul Berger and Linda Thomsen the equivalent of college basketball stars waiting for their first NBA contract. Are you really going to give up a shot at the Knicks or the Lakers just to find out whether a Wall Street big shot like John Mack was guilty of insider trading? "You take one of these jobs," says Turner, the former chief accountant for the SEC, "and you're fit for life."
Fit — and happy. The banter between the speakers at the New York conference says everything you need to know about the level of chumminess and mutual admiration that exists between these supposed adversaries of the justice system. At one point in the conference, Mary Jo White introduced Bharara, her old pal from the U.S. attorney's office.
"I want to first say how pleased I am to be here," Bharara responded. Then, addressing White, he added, "You've spawned all of us. It's almost 11 years ago to the day that Mary Jo White called me and asked me if I would become an assistant U.S. attorney. So thank you, Dr. Frankenstein."
Next, addressing the crowd of high-priced lawyers from Wall Street, Bharara made an interesting joke. "I also want to take a moment to applaud the entire staff of the SEC for the really amazing things they have done over the past year," he said. "They've done a real service to the country, to the financial community, and not to mention a lot of your law practices."
Haw! The line drew snickers from the conference of millionaire lawyers. But the real fireworks came when Khuzami, the SEC's director of enforcement, talked about a new "cooperation initiative" the agency had recently unveiled, in which executives are being offered incentives to report fraud they have witnessed or committed. From now on, Khuzami said, when corporate lawyers like the ones he was addressing want to know if their Wall Street clients are going to be charged by the Justice Department before deciding whether to come forward, all they have to do is ask the SEC.
"We are going to try to get those individuals answers," Khuzami announced, as to "whether or not there is criminal interest in the case — so that defense counsel can have as much information as possible in deciding whether or not to choose to sign up their client."
Aguirre, listening in the crowd, couldn't believe Khuzami's brazenness. The SEC's enforcement director was saying, in essence, that firms like Goldman Sachs and AIG and Lehman Brothers will henceforth be able to get the SEC to act as a middleman between them and the Justice Department, negotiating fines as a way out of jail time. Khuzami was basically outlining a four-step system for banks and their executives to buy their way out of prison. "First, the SEC and Wall Street player make an agreement on a fine that the player will pay to the SEC," Aguirre says. "Then the Justice Department commits itself to pass, so that the player knows he's 'safe.' Third, the player pays the SEC — and fourth, the player gets a pass from the Justice Department."

When I ask a former federal prosecutor about the propriety of a sitting SEC director of enforcement talking out loud about helping corporate defendants "get answers" regarding the status of their criminal cases, he initially doesn't believe it. Then I send him a transcript of the comment. "I am very, very surprised by Khuzami's statement, which does seem to me to be contrary to past practice — and not a good thing," the former prosecutor says.
Earlier this month, when Sen. Chuck Grassley found out about Khuzami's comments, he sent the SEC a letter noting that the agency's own enforcement manual not only prohibits such "answer getting," it even bars the SEC from giving defendants the Justice Department's phone number. "Should counsel or the individual ask which criminal authorities they should contact," the manual reads, "staff should decline to answer, unless authorized by the relevant criminal authorities." Both the SEC and the Justice Department deny there is anything improper in their new policy of cooperation. "We collaborate with the SEC, but they do not consult with us when they resolve their cases," Assistant Attorney General Lanny Breuer assured Congress in January. "They do that independently."
Around the same time that Breuer was testifying, however, a story broke that prior to the pathetically small settlement of $75 million that the SEC had arranged with Citigroup, Khuzami had ordered his staff to pursue lighter charges against the megabank's executives. According to a letter that was sent to Sen. Grassley's office, Khuzami had a "secret conversation, without telling the staff, with a prominent defense lawyer who is a good friend" of his and "who was counsel for the company." The unsigned letter, which appears to have come from an SEC investigator on the case, prompted the inspector general to launch an investigation into the charge.

All of this paints a disturbing picture of a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance. Even before the corruption starts, the state is crippled by economic reality: Since law enforcement on Wall Street requires serious intellectual firepower, the banks seize a huge advantage from the start by hiring away the top talent. Budde, the former Lehman lawyer, says it's well known that all the best legal minds go to the big corporate law firms, while the "bottom 20 percent go to the SEC." Which makes it tough for the agency to track devious legal machinations, like the scheme to hide $263 million of Dick Fuld's compensation.
"It's such a mismatch, it's not even funny," Budde says.
But even beyond that, the system is skewed by the irrepressible pull of riches and power. If talent rises in the SEC or the Justice Department, it sooner or later jumps ship for those fat NBA contracts. Or, conversely, graduates of the big corporate firms take sabbaticals from their rich lifestyles to slum it in government service for a year or two. Many of those appointments are inevitably hand-picked by lifelong stooges for Wall Street like Chuck Schumer, who has accepted $14.6 million in campaign contributions from Goldman Sachs, Morgan Stanley and other major players in the finance industry, along with their corporate lawyers.
As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff. "The betrayal that this represents by Obama to everybody is just — we're not ready to believe it," says Budde, a classmate of the president from their Columbia days. "He's really fucking us over like that? Really? That's really a JP Morgan guy, really?"
Which is not to say that the Obama era has meant an end to law enforcement. On the contrary: In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers — of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. Since 2007, felony immigration prosecutions along the Mexican border have surged 77 percent; nonfelony prosecutions by 259 percent. In Ohio last month, a single mother was caught lying about where she lived to put her kids into a better school district; the judge in the case tried to sentence her to 10 days in jail for fraud, declaring that letting her go free would "demean the seriousness" of the offenses.
So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime. Prison is too harsh. Get them to say they're sorry, and move on. Oh, wait — let's not even make them say they're sorry. That's too mean; let's just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don't make them pay it out of their own pockets, and don't ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What's next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?
The mental stumbling block, for most Americans, is that financial crimes don't feel real; you don't see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality.

Business & Finance - Film

Hey y'all. Well, we haven't exactly what I'd call stellar attendance the last few classes. For both those who missed the last class and those who came, here's a site where you can stream the movie we watched. If you were in class you might want to start somewhere around the 72 minute mark where we stopped. I will have a pen drive with the movie on it (and subtitles) with me for the next few weeks if you want to get it from me that way. There will be questions from the film on the final exam.

http://www.movie2k.to/movie-525565-Inside-Job-film.html

As for the previous two classes, here are some links to help you whether you were there or not:

http://www.equalitytrust.org.uk/resources/spirit-level-slides You can download the inequality slides I used in class here. The site has other inequality stories but if you want full context there's no replacement for reading the book. I do have it if anyone wants to borrow it.
http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html
http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph
http://www.huffingtonpost.com/2013/02/12/top-one-percent-income-gains_n_2670455.html

I'll try to get our article for the next topic, ethics, up in the next few days.