As I recall, the predominant critique of the Obama bailouts was not criminal prosecutions but that with the exception of Bear Stearns none of the masters of the universe lost their jobs or had their salaries reduced but instead took huge bonuses indirectly subsidized by the bailout funds.
Bailing out the big investment banks left their lobbying power intact. The interesting what-if is what would have happened if they were allowed to go bankrupt, nationalised for a brief period, during which Congress could have gotten the regulation right, and reprivatised as smaller more focused institutions with a lot fewer conflicts of interest
At the end of the Obama administration there was also this canard that Obama had the unilateral authority to end deportation of immigrants.
Clearly not true! Especially when the courts already tested the limits of the Obama administration's ability to prioritize border enforcement actions.
And of course unlike "round up some bad bankers", the politics of "stop deportations unilaterally" are especially doomed when we know a year later Trump would win the general on the strength of his anti-immigrant furor.
A friend recommended a podcast to me in 2015 which repeatedly this canard uncritically in the first episode I tried. Even though I was very progressive and desperate for a way forward on this issue, I couldn't go on with this podcast. I want a real progressive strategy not truthy wish-casting. To this day, a continual source of frustration when progressives won't "get real".
“So it’s worth actually asking: Is it factually true that the Obama administration deliberately tanked winnable criminal cases against major American banks?”
Is it, though? You really think the Obama-Trump voter switched sides because they believed Obama covered for Wall Street? It’s the appearance of impunity, for whatever you wanna call it: malfeasance, fraud, criminality, etc that led most who voted for “populist” Obama (vis-a-vis Bain Capital guy) to say FTS in 2016 and vote for the orange ogre.
Btw Bush, Cheney & associates also remain unpunished for having committed, forget war crimes, but crimes against the Republic. It’s this kinda unaccountability that has pushed voters towards authoritarians like Trump, and away from mainstream parties.
This article omits a crucial topic: robosigning. One million counts of perjury, settled for some writeoffs. No justice for the victims. This is the essence of "too big too fail", and that mentality is a specific contributor to our current sociopolitical situation.
I realise it causes some issues, but I'm actually very sympathetic to the judicial pushback on white collar crime. The basic issue is that there isn't really a statutory basis for many things you would want to prohibit, and rather than fix this governments keep trying to respond to various bad things by inventing new crimes in existing broad statutes. But this really defeats the point of having written laws in the first place, and has many of the same fairness and predictability issues as ex post facto laws.
In the Litvak case, for example, many of his counterparties were surprised to hear that what he was doing could be considered criminal fraud. It's not unreasonable for the government to want to change the common practices and expectations to involve less dishonesty, but they should do this by passing new laws and regulations so that people can know their behaviour needs to change.
For another example, insider trading is currently prosecuted under a broad fraud statue on the theory that this is fraud against the market as a whole by violating expectations for traders. Now, unlike the previous case, prohibitions on insider trading have clearly made it into the general understanding of proper behaviour for securities traders, so calling it "fraud on the market" isn't really *false*, but to someone who wasn't already aware of this securities fraud statues offer no hint of it. It would be good if Congress wrote a law actually saying this, and setting out the boundaries of what is and isn't insider trading.
I guess I felt I was always crystal clear on what was scandalous about the Bush Recession: what SHOULD have been illegal but wasn’t. The actions of the bankers cost me several tens of thousands of dollars at the time, compounded to easily over $100,000 today. There was literally nothing I could do except eat it. The worst that happened to any cause of the problem who I could observe, was the time I saw my Realtor® waiting tables at a breastaurant.
"They could have tried to pick a huge political fight with the court system and criminal justice reform groups. I don’t think that either of those things would have been a good idea, but if someone wants to write an article taking the other side of the argument, it would be a reasonable thing to suggest."
Trump takes on these kind of political fights all the time, and frequently loses, but if anything is helps him with his base and feeds into the notion that he "fights for you" and is "against the elites." There is actually value in taking on losing cases. The fact Democrats will talk themselves into not doing this is part of why the two parties are where they are right now.
The misconceptions surrounding the Obama-era prosecutions are downstream of misconceptions around the crisis itself. These lefties think that banks acted criminally, while for the most part, they did not. Losing money isn't a crime.
I think left wing thinkers, like right wing thinkers, are increasingly victims of their own filler bubbles. Somebody first makes a claim like this because it’s good politics even if it isn’t entirely true. Enough people do this and it’s just taken as fact. Who is there to correct them? The conservative press? Nobody reads that and with good reason. They’re a bunch of wingnuts too.
Hm. While I agree with the directional thrust of this article -- people should say true things -- it's unfortunate Matt chose to highlight what could have been a rhetorical flourish.
I worked in banking for a long time, and then banking-adjacent. My employer had to lay off 70% of its staff with no warning because our three major clients, all hedge funds, refused to pay their bills for July, 2007.
I was one of the remaining employees, and I saw what happened to the employees of those hedge funds. None of them received their $500k bonuses that year, but they did the next. Their lives largely went on as usual. Their downside was comically smaller than what the rest of the country suffered.
Obama's bailout, while absolutely necessary, was IMO not nearly punitive enough from a financial and regulatory perspective. Nobody at those hedge funds deserved to go to jail, but the banks that took bailouts should have been forced to remain at least partially publicly owned.
I'm confused by what you're describing here. Your employer suffered a massive financial loss because a small number of counterparties just refused to pay their obligations? And they didn't sue over it? Why not?
It was a long time ago, and I wasn't privy to the senior negotiations. But we only had a few weeks between "that's strange, X,Y and Z usually pay their bills on time, and they're all late" and "we can't make payroll." We were also a small company, maybe a few dozen employees. We didn't have a legal department.
I assume some settlement was negotiated, but it wasn't just that we were short one month. They all terminated their contracts. I survived because my primary client wasn't one of the three who stopped paying us.
Right but for it all to work the currency trading savant that was brining in $100 million in revenue and being paid a $25 million bonus - needs to keep getting that bonus. If he doesn’t he’ll walk across the street to some family office or hedge fund that will stake him.
There is no such thing as a trading savant. Again, I worked in investment banking, and The Big Short accurately describes how the industry works. You basically make up all the financial projections, and the rating agencies take your word for it. The people are very smart, and investment banking provides value, but a lot of it is bullshit. And everyone knows it's bullshit, but the bullshit seems to be working, and you're not going to be the one person who stands up and says "this is bullshit, let's stop making tons of money doing it."
Please don't be so condescending. I have read about this topic extensively, and as I've stated, also have extensive professional experience. Basically no traders beat the market. That's the entire reason why investment banks have both banking and trading arms. The banking functions carry the trading floor on the years trading inevitably belly flops.
I'm not familiar with their backstory. But this has been *extensively* documented. There is *zero* correlation between how well a trader does one year versus the next.
There are a few, well, black swans like Taleb, who had unique insight into how markets work. And of course, there's Warren Buffet. But your average trader working for Morgan Stanley isn't going to do any better than an index fund, unless they're getting insider information.
I'm not sure why you've chosen to focus on currency trading, when the 2007 financial crash was caused by elaborately structured real estate instruments (incidentally, I also worked with "overcollateralized" bonds in junk debt for most of my banking career).
When I switched over to consulting, my primary client focused on illiquid real estate investments. As I stated, those guys didn't get bonuses in the wake of the financial crises, but they got them the following year. They weren't savants. Again, they were very smart, and worked very hard. But their skills were essentially interchangeable. So were all the traders at Goldman Sachs.
I am broadly sympathetic to the idea that bankers should have been somehow punished for the 2008 crisis. The banks reaped huge profits from risky investments, while the losses — as it turned out — were socialized. Top bankers made billions in compensation, which was ultimately subsidized by the taxpayer. I’m no leftie, but this struck me and many other people as deeply unfair.
I remember at the time being convinced that temporarily nationalization of the banks (or many of them) was the way to go, after which the government could have done some high profile firings, clawing back of bonuses, etc. You don’t need to throw people in jail to punish them in a splashy and public way.
Ireland did something like this, and it my sense is that it helped dissipate the populist anger at the bailouts. (Although there was still a lot of populist anger at the bailouts!)
As I recall, the predominant critique of the Obama bailouts was not criminal prosecutions but that with the exception of Bear Stearns none of the masters of the universe lost their jobs or had their salaries reduced but instead took huge bonuses indirectly subsidized by the bailout funds.
Bailing out the big investment banks left their lobbying power intact. The interesting what-if is what would have happened if they were allowed to go bankrupt, nationalised for a brief period, during which Congress could have gotten the regulation right, and reprivatised as smaller more focused institutions with a lot fewer conflicts of interest
Yes that is an interesting counter factual. It would have required more risk-taking than Obama administration seemed to have appetite for.
Banks also mostly repaid TARP. It wasn’t a “bailout”. The gov’t took preferred equity stakes and made a profit
At the end of the Obama administration there was also this canard that Obama had the unilateral authority to end deportation of immigrants.
Clearly not true! Especially when the courts already tested the limits of the Obama administration's ability to prioritize border enforcement actions.
And of course unlike "round up some bad bankers", the politics of "stop deportations unilaterally" are especially doomed when we know a year later Trump would win the general on the strength of his anti-immigrant furor.
A friend recommended a podcast to me in 2015 which repeatedly this canard uncritically in the first episode I tried. Even though I was very progressive and desperate for a way forward on this issue, I couldn't go on with this podcast. I want a real progressive strategy not truthy wish-casting. To this day, a continual source of frustration when progressives won't "get real".
I know Matt loves him, but we gotta quit it with the “Obama did a good job, all things considered.” Give me some fresh takes!
“So it’s worth actually asking: Is it factually true that the Obama administration deliberately tanked winnable criminal cases against major American banks?”
Is it, though? You really think the Obama-Trump voter switched sides because they believed Obama covered for Wall Street? It’s the appearance of impunity, for whatever you wanna call it: malfeasance, fraud, criminality, etc that led most who voted for “populist” Obama (vis-a-vis Bain Capital guy) to say FTS in 2016 and vote for the orange ogre.
Btw Bush, Cheney & associates also remain unpunished for having committed, forget war crimes, but crimes against the Republic. It’s this kinda unaccountability that has pushed voters towards authoritarians like Trump, and away from mainstream parties.
This article omits a crucial topic: robosigning. One million counts of perjury, settled for some writeoffs. No justice for the victims. This is the essence of "too big too fail", and that mentality is a specific contributor to our current sociopolitical situation.
I realise it causes some issues, but I'm actually very sympathetic to the judicial pushback on white collar crime. The basic issue is that there isn't really a statutory basis for many things you would want to prohibit, and rather than fix this governments keep trying to respond to various bad things by inventing new crimes in existing broad statutes. But this really defeats the point of having written laws in the first place, and has many of the same fairness and predictability issues as ex post facto laws.
In the Litvak case, for example, many of his counterparties were surprised to hear that what he was doing could be considered criminal fraud. It's not unreasonable for the government to want to change the common practices and expectations to involve less dishonesty, but they should do this by passing new laws and regulations so that people can know their behaviour needs to change.
For another example, insider trading is currently prosecuted under a broad fraud statue on the theory that this is fraud against the market as a whole by violating expectations for traders. Now, unlike the previous case, prohibitions on insider trading have clearly made it into the general understanding of proper behaviour for securities traders, so calling it "fraud on the market" isn't really *false*, but to someone who wasn't already aware of this securities fraud statues offer no hint of it. It would be good if Congress wrote a law actually saying this, and setting out the boundaries of what is and isn't insider trading.
I guess I felt I was always crystal clear on what was scandalous about the Bush Recession: what SHOULD have been illegal but wasn’t. The actions of the bankers cost me several tens of thousands of dollars at the time, compounded to easily over $100,000 today. There was literally nothing I could do except eat it. The worst that happened to any cause of the problem who I could observe, was the time I saw my Realtor® waiting tables at a breastaurant.
Dahlia Lithwick nailed it at Slate. The Doge of 47 is running a mob boss’s protection racket.
https://slate.com/news-and-politics/2025/02/elon-musk-doge-trump-mafia-dahlia-lithwick.html
"They could have tried to pick a huge political fight with the court system and criminal justice reform groups. I don’t think that either of those things would have been a good idea, but if someone wants to write an article taking the other side of the argument, it would be a reasonable thing to suggest."
Trump takes on these kind of political fights all the time, and frequently loses, but if anything is helps him with his base and feeds into the notion that he "fights for you" and is "against the elites." There is actually value in taking on losing cases. The fact Democrats will talk themselves into not doing this is part of why the two parties are where they are right now.
When I saw the name American Economic Liberties Project, I thought they might, you know, favor economic liberty. Alas, no.
The misconceptions surrounding the Obama-era prosecutions are downstream of misconceptions around the crisis itself. These lefties think that banks acted criminally, while for the most part, they did not. Losing money isn't a crime.
I think left wing thinkers, like right wing thinkers, are increasingly victims of their own filler bubbles. Somebody first makes a claim like this because it’s good politics even if it isn’t entirely true. Enough people do this and it’s just taken as fact. Who is there to correct them? The conservative press? Nobody reads that and with good reason. They’re a bunch of wingnuts too.
Hm. While I agree with the directional thrust of this article -- people should say true things -- it's unfortunate Matt chose to highlight what could have been a rhetorical flourish.
I worked in banking for a long time, and then banking-adjacent. My employer had to lay off 70% of its staff with no warning because our three major clients, all hedge funds, refused to pay their bills for July, 2007.
I was one of the remaining employees, and I saw what happened to the employees of those hedge funds. None of them received their $500k bonuses that year, but they did the next. Their lives largely went on as usual. Their downside was comically smaller than what the rest of the country suffered.
Obama's bailout, while absolutely necessary, was IMO not nearly punitive enough from a financial and regulatory perspective. Nobody at those hedge funds deserved to go to jail, but the banks that took bailouts should have been forced to remain at least partially publicly owned.
I'm confused by what you're describing here. Your employer suffered a massive financial loss because a small number of counterparties just refused to pay their obligations? And they didn't sue over it? Why not?
It was a long time ago, and I wasn't privy to the senior negotiations. But we only had a few weeks between "that's strange, X,Y and Z usually pay their bills on time, and they're all late" and "we can't make payroll." We were also a small company, maybe a few dozen employees. We didn't have a legal department.
I assume some settlement was negotiated, but it wasn't just that we were short one month. They all terminated their contracts. I survived because my primary client wasn't one of the three who stopped paying us.
Right but for it all to work the currency trading savant that was brining in $100 million in revenue and being paid a $25 million bonus - needs to keep getting that bonus. If he doesn’t he’ll walk across the street to some family office or hedge fund that will stake him.
There is no such thing as a trading savant. Again, I worked in investment banking, and The Big Short accurately describes how the industry works. You basically make up all the financial projections, and the rating agencies take your word for it. The people are very smart, and investment banking provides value, but a lot of it is bullshit. And everyone knows it's bullshit, but the bullshit seems to be working, and you're not going to be the one person who stands up and says "this is bullshit, let's stop making tons of money doing it."
You’re conflating trading with IB.
Please don't be so condescending. I have read about this topic extensively, and as I've stated, also have extensive professional experience. Basically no traders beat the market. That's the entire reason why investment banks have both banking and trading arms. The banking functions carry the trading floor on the years trading inevitably belly flops.
"Basically no traders beat the market"
Renaissance Technologies would disagree.
I'm not familiar with their backstory. But this has been *extensively* documented. There is *zero* correlation between how well a trader does one year versus the next.
There are a few, well, black swans like Taleb, who had unique insight into how markets work. And of course, there's Warren Buffet. But your average trader working for Morgan Stanley isn't going to do any better than an index fund, unless they're getting insider information.
Explain how a currency trader would “beat” or not “beat” the market?
I'm not sure why you've chosen to focus on currency trading, when the 2007 financial crash was caused by elaborately structured real estate instruments (incidentally, I also worked with "overcollateralized" bonds in junk debt for most of my banking career).
When I switched over to consulting, my primary client focused on illiquid real estate investments. As I stated, those guys didn't get bonuses in the wake of the financial crises, but they got them the following year. They weren't savants. Again, they were very smart, and worked very hard. But their skills were essentially interchangeable. So were all the traders at Goldman Sachs.
I am broadly sympathetic to the idea that bankers should have been somehow punished for the 2008 crisis. The banks reaped huge profits from risky investments, while the losses — as it turned out — were socialized. Top bankers made billions in compensation, which was ultimately subsidized by the taxpayer. I’m no leftie, but this struck me and many other people as deeply unfair.
I remember at the time being convinced that temporarily nationalization of the banks (or many of them) was the way to go, after which the government could have done some high profile firings, clawing back of bonuses, etc. You don’t need to throw people in jail to punish them in a splashy and public way.
Ireland did something like this, and it my sense is that it helped dissipate the populist anger at the bailouts. (Although there was still a lot of populist anger at the bailouts!)
100% agree. The people most culpable suffered the smallest setbacks.