THE DESTRUCTION OF THE SUPREME COURT AS A REVERED INSTITUTION OF AMERICAN DEMOCRACY

The takeaways from this post are that:

The U.S. Supreme Court’s status as a revered institution of American democracy has been destroyed by the actions of the six radical, reactionary, right-wing justices.
There are strong reasons to question the impartiality of three of these justices, Thomas, Gorsuch, and Chief Justice Roberts, on cases that have come before the Court but where they have not recused themselves.
Chief Justice Roberts has done nothing to respond to ethical issues or to address the overarching issue of the lack of ethical standards for the Supreme Court.
Justice Abe Fortas resigned in 1969 due to an ethical issue far less serious than those in which Justices Roberts, Thomas, and Gorsuch have been involved.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

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The U.S. Supreme Court’s status as a revered institution of American democracy has been destroyed by the actions of the six radical, reactionary, right-wing justices. This is not hyperbole but a statement of fact. They are right-wing, politically-driven, radical, and reactionary individuals engaged in an unprecedented undermining of the legitimacy and credibility of the Supreme Court. They have shown time and again that they have no respect for the Supreme Court as an institution or for its processes and precedents. Another way to put this is that they have no respect for the rule of law. They are not conservative, originalists, contextualists, or any of the other things they and their supporters like to call them. Calling them radical reactionaries is appropriate and accurate as this previous post and the three prior posts it has links to explain.

The most recent scandal, of course, is Justice Thomas’s unethical (to say the least, corrupt would probably be more accurate) relationship with the right-wing, politically active, businessman Harlan Crow. Thomas has claimed – and much of the media has echoed – that there isn’t any ethical issue or reason to question Thomas’s impartiality because Crow hasn’t had business before the Supreme Court. That’s only true in the narrowest of meanings in that Crow hasn’t personally had a case before the Court. Some detail on Justice Thomas’s extensive interactions with and financial benefits from Crow, as well as the conflicts of interest that have been present, will be covered in my next post.

This is not Justice Thomas’s first serious ethical violation to come to light. In 2011, he amended 20 years of annual financial disclosure forms to include the sources of his wife’s income, including right-wing political organizations that had been involved in cases before the Court. [1] Thomas didn’t recuse himself from those Court cases nor from cases involving efforts to overturn the 2020 presidential election even though his wife was involved in those efforts.

The media recently reported that Justice Gorsuch, another of the radical reactionaries, sold a piece of property nine days after being confirmed to the Supreme Court. He shared ownership of the home and land, which sold for $1.825 million, and received between $250,000 and $500,000 from the sale. He did report the transaction, but surprisingly did not disclose the buyer, who was the CEO of the law firm Greenberg Traurig that has been involved in at least 22 Supreme Court cases since then. Gorsuch’s failure to disclose the buyer is surprising both because it’s clearly required and because he did report the names of those who gave him a fishing rod, a painting, and a pair of cowboy boots. [2]

A scandal hiding behind the Thomas and Gorsuch scandals, that in some ways is even more serious, is that Chief Justice Roberts has done nothing to respond to these scandals or to address the overarching issue of the lack of ethical standards for the Court. He has stonewalled requests from Congress to provide information and to establish binding ethical standards for the Court. He has failed to take any public action or to make any public statements to address the scandals. His previous apparent concern for maintaining the legitimacy of the Court appears to have lapsed or to have been overwhelmed by his inability to control the three extreme justices appointed by President Trump. His lack of leadership will presumably go down in history as being a major contributor to the destruction of the Supreme Court’s credibility, legitimacy, and revered status. (See this previous post for more detail on Chief Justice Roberts failure to address ethical problems at the Supreme Court and in the federal judiciary more broadly.)

By the way, Chief Justice Roberts has his own ethical problem in that his wife is a legal personnel recruiter for law firms that appear before the Court. It was recently revealed that between 2007 and 2014 (Roberts has been on the Court since 2005) she received over $10 million in commissions with at least hundreds of thousands of dollars of that coming from firms appearing regularly before the Court. [3]

Judicial rules that apply to the Supreme Court require justices to recuse themselves “in any proceeding in which [their] impartiality might be questioned.” Clearly Thomas, Roberts, and Gorsuch have failed to abide by this rule.

Although there aren’t rules that require resignation and the only standard in the Constitution for justices is that they exhibit “good behaviour,” there is a precedent for resigning based on an ethics issue. In 1969, Justice Abe Fortas resigned because he had accepted $20,000 for advising the family foundation of Louis Wolfson, a financier who subsequently went to prison for stock fraud. Fortas insisted that there was no wrongdoing – and there was no evidence of anything corrupt – but that he was resigning to protect the reputation of the Court and to spare the Court from controversy. Fortas had terminated his relationship with the foundation in June 1966, less than a year after it had begun, when he decided he didn’t have time to work for the foundation given the workload at the Court. He had returned the $20,000 in December 1966 after Wolfson was indicted in September and October 1966. The relationship with the foundation and the original payment were disclosed in May 1969 and Fortas resigned 11 days later. [4] (Note: $20,000 in 1966 would be around $185,000 today, adjusted for inflation.)

Clearly, Fortas resigned for an ethical issue far, far less serious than the ethical issues Justice Thomas is involved in, and also less serious than the ethical issues in which Justices Roberts and Gorsuch are involved. Nonetheless, there were bipartisan calls for Fortas’s resignation and talk of possible impeachment from members of Congress, despite the fact that his resignation allowed President Nixon to tilt the balance of the Court in a more conservative direction. If Thomas doesn’t resign, impeachment would be appropriate, however the political partisanship in Congress means this won’t happen.

[1] Kaplan, J., Elliott, J., & Mierjeski, A., 4/7/23, “Clarence Thomas defends undisclosed “family trips” with GOP megadonor. Here are the facts.” ProPublica (https://www.propublica.org/article/clarence-thomas-response-trips-legal-experts-harlan-crow)

[2] Wilkins, B., 4/25/23, “‘So blatant’: Gorsuch failed to disclose he sold home to CEO of major law firm,” Common Dreams (https://www.commondreams.org/news/neil-gorsuch-colorado-home)

[3] Schwartz, M, 4/28/23, “Jane Roberts, who is married to the Chief Justice John Roberts, made $10.3 million in commissions from elite law firms, whistleblower documents show,” Business Insider (https://www.businessinsider.com/jane-roberts-chief-justice-wife-10-million-commissions-2023-4)

[4] MacKenzie, J. P., 4/17/23, “The Supreme Court justice who resigned in disgrace over his finances,” The Washington Post

CORRUPT CORPORATE BEHAVIOR IS EXTENSIVE

A new investigative report finds that large U.S. corporations frequently engage in illegal price fixing and other anti-competitive practices that violate antitrust laws. Since 2000, large corporations have paid almost $100 billion in fines and settlements for more than 2,000 cases of illegal price-fixing. Examining a wider range of illegal corporate activity, 557,000 civil and criminal cases have been prosecuted by over 400 government agencies with total penalties of $917 billion. Despite the billions of dollars paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat offenders. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

An investigative report, Conspiring against competition: Illegal corporate price-fixing in the U.S. economy,” from the Corporate Research Project of Good Jobs First, finds that since 2000, large corporations have paid over $96 billion in fines and settlements on 2,033 cases of illegal price-fixing. Price-fixing steals money from consumers and artificially increases inflation. [1]

Of the 2,033 documented cases, 357 were initiated by the U.S. Department of Justice or other federal agencies, 269 were initiated by state attorneys general, and 1,407 were class action lawsuits initiated by individuals. Cases that were settled out of court are not included in these numbers or the report as public records of them are hard if not impossible to find. (NOTE: Corporations have been working for years to significantly limit the number of class action lawsuits by requiring employees and customers to sign mandatory arbitration agreements in employment contracts and user agreements. These agreements require the use of arbitration to settle a dispute, prohibiting the filing of a lawsuit. The Biden administration is working to limit the use of mandatory arbitration agreements and to restore employees’ and customers’ rights to file lawsuits.)

Capitalism is supposedly an economic system where vigorous competition, coupled with the supply of and demand for goods and services, determines fair prices. This report documents that large corporations frequently avoid competition by colluding with one another to fix prices and control markets to unfairly increase prices and their profits.

The high degree of market concentration in the U.S. (i.e., where one or a few large corporations dominate a market) make it much easier for collusion and price fixing to occur. In the financial services and pharmaceutical sectors of the economy just about every major corporation (or a subsidiary) has been a defendant in one or more price-fixing cases. Nine of the top ten corporations in terms of financial penalties are banks, credit card companies, or other financial firms. Since 2000, the financial sector as a whole has paid $33 billion in fines and settlements, much of this for schemes to rig interest rates that determine the rates paid by consumers on loans and credit card balances. The pharmaceutical industry was the second most penalized sector at $11 billion, primarily for efforts by brand name drug manufacturers to illegally prevent the introductions of lower-priced, generic versions of their drugs. However, price-fixing collusion has occurred in a wide range of sectors from food retailing to auto parts to chemicals to electronic components.

Over the last 22 years, nineteen corporations (or their subsidiaries) have paid over $1 billion each in penalties for price-fixing and other violations of fair competition laws. At the top of the list are Visa ($6.2 billion), Deutsche Bank ($3.8 billion), Barclays Bank ($3.2 billion), MasterCard ($3.2 billion), and Citigroup bank and financial services ($2.7 billion). Price-fixing scandals continue to emerge on a regular basis, so this appears to be fairly common corporate behavior in the U.S.

Good Jobs First maintains a Violation Tracker website that tracks each corporations’ violations of the law, including laws on banking, finance, consumer protection, false claims, the environment, worker protection, discrimination, price-fixing, fair competition, and government contracting. It aggregates for each corporation the number of cases and the dollars in penalties imposed by federal agencies, state attorneys general, selected state and local regulatory agencies, and selected types of class action lawsuits brought by individuals. In all, the website has recorded 557,000 civil and criminal cases prosecuted by more than 400 agencies with total penalties of $917 billion.

Including all of the types of violations that are in the Violation Tracker database, most corporations had multiple violations including, for example, Walmart (497 cases, $5.5 billion in penalties), Home Depot (290 cases, $220 million), Wells Fargo Bank (236 cases, $25.9 billion), Verizon (219 cases, $2.3 billion), and Citigroup (170 cases, $26.7 billion). I urge you to visit the Violation Tracker website and select a corporation or a few from the pull-down list to see the shocking extent of corporate law-breaking.

Despite the billions of dollars corporations have paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat or frequent offenders, sometimes repeating the same offense multiple times. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

Larger penalties would probably reduce recidivism somewhat. To really change big corporations’ behavior on price fixing and other illegal anti-competitive behaviors, aggressive steps to reduce market concentration and power will be required. Vigorous enforcement of antitrust laws is needed and, where monopolistic market power exists, breaking up big corporations will probably be necessary to achieve a lasting, long-term remedy. Reducing market concentration, monopolistic power, and simply the size and power of huge multi-national corporations will not only create the real competition that capitalism promises, it will also reduce corporations’ threats to democracy and the growth of economic inequality.

The ultimate and definitely effective penalty would be to revoke a corporation’s charter to do business, putting it out of business. This has rarely been done and, to my knowledge, has never been done for a corporation of any significant size.

[1] Stancil, K., 4/19/23, “‘Illegal corporate price-fixing’ is rampant in the US economy: Report,” Common Dreams (https://www.commondreams.org/news/corporate-price-fixing-us-economy)

GOOD NEWS ON THE ECONOMY, BUT A FEW CONCERNS

Inflation is subsiding, unemployment is low, and wage growth is modest. Problems in the banking industry provide some concern. The biggest concern for the economy is that the Federal Reserve (the Fed) will continue to push interest rates higher, hurting banks, increasing unemployment, and possibly pushing the economy into a recession.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

SPECIAL NOTE: I’ve created a new website for my blog that has an image with each post and is easier to navigate. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site or the posts themselves, of course, are most welcome. The old site will continue to be available.

Annual inflation in March was 5.0% (i.e., consumer prices were 5% higher than a year earlier). This continued the steady decline in annual inflation since its peak of 9.0% last June. Consumer prices increased just 0.1% from February to March, which would be an annualized inflation rate of just 1.2%. Consumer prices for housing (a component of the overall inflation rate) increased 0.6% from February to March, but that is expected to decline. Note that housing costs have risen in part because of the Federal Reserves’ increases in interest rates, which increase the cost of mortgages, depress the production of new housing, and reduce the purchases of homes. The latter two increase the number of people needing rental housing, which pushes up rents. [1]

Wholesale prices fell in March, down 0.5% from February. For the whole year, they were up only 2.7%. Wholesale price inflation is generally considered an indicator of future consumer price inflation, so this suggests that consumer inflation will continue to fall. [2] In addition, wage increases have been modest, around 4% on an annual basis. This is lower than the annual price increase, so wage growth is not driving inflation. [3]

Given that inflation appears to be under control and with the uncertainty in banking industry in mind (due to the collapse of three banks in March in part due to high interest rates), the Fed and Chairman Powell should at least pause interest rate hikes.

Powell’s recent interest rate hikes have caused the value of banks’ investments in bonds to fall an estimated $620 billion as-of the end of 2022. The Fed has announced a bailout for banks with bond losses; a safety net for financiers for a systemic crisis created by the Feds’ dramatic interest rate increases. In addition, the Fed has announced what is in effect a bailout for foreign central banks (i.e., other countries’ equivalent of the Fed), so that their dollar-based holdings don’t rapidly flow out to be invested in the high interest rates available in the U.S. [4]

Corporate profits have played a central role in creating and sustaining the inflation experienced since 2021. Profit markups (the percentage that profits are of all production costs) in the non-financial corporate sector of the economy jumped from about 12.5% in 2017 through early 2020 to an average of 15% from the 2^nd quarter of 2020 through 2023. Putting this in terms of inflation, from 2017 through early 2020, profits represented 13% of inflation, with labor costs being almost 60% and non-labor costs about 30%. From the 2^nd quarter of 2020 through the end of 2022, profits represented over one-third of inflation (about 34%), while labor costs and non-labor costs each accounted for roughly one-third of inflation (about 33%). The noteworthy change is that the contribution of profits to inflation jumped from 12.5% to 34%.

Given that the Feds’ increases in interest rates have no effect on corporate profit markups and no effect on the supply chain issues (which have been a major contributor to inflation but are easing), further interest rate increases are likely to be ineffective in reducing inflation. Moreover, they may push the economy into a recession, which won’t be good for anyone. [5]

Unemployment has fallen to 3.5%, the lowest level since 1969, while Black unemployment is at an all-time low of 5.0%. The percentage of prime age workers (those 25 to 54 years old) who are in the labor force is the highest it’s been since 2001. This is all good news for workers.

Much of the credit for this good jobs news goes to President Biden and the Democrats in Congress for passing the American Rescue Plan in the spring of 2021. Much of the mainstream media chooses to ignore the health of the job market and fails to give Biden and the Democrats credit for this accomplishment. By way of contrast, it took nearly 13 years for the job market to recover to this extent after the Great Recession of 2008. A major reason for this difference is that the 2009 stimulus package was much smaller and, in hindsight, clearly inadequate (as many progressives said at the time). Biden was Vice President then and may have learned a lesson from that experience that informed his decision to go big in 2021. In addition, President Biden’s economic advisors are ones who are more focused on Main St. and workers than on Wall St. and financiers. In contrast, in 2009, President Obama’s economic advisors were Wall St.-types – Bob Rubin, Tim Geithner, and Larry Summers. [6]

[1] Kuttner, R., 4/12/23, “Will the Fed wreck an improving economy?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-12-will-fed-wreck-improving-economy/)

[2] Wiseman, P., 4/14/23, “Wholesale inflation pressure eases,” The Boston Globe from the Associated Press

[3] Kuttner, R., 4/12/23, see above

[4] Galbraith, J. K., April 17/24, 2023, “The Fed, the banks, and the dollar,” The Nation (https://www.thenation.com/article/economy/svb-collapse-fed-causes-bailout/)

[5] Bivens, J., 3/30/23, “Even with today’s slowdown, profit growth remains a big driver of inflation in recent years,” Economic Policy Institute (https://www.epi.org/blog/even-with-todays-slowdown-profit-growth-remains-a-big-driver-of-inflation-in-recent-years-corporate-profits-have-contributed-to-more-than-a-third-of-price-growth/)

[6] Meyerson, H., 4/13/23, “Are good jobs good news?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-13-good-jobs-good-news/)

EFFECTIVE GOVERNMENT IS NEEDED TO PROTECT OUR RIGHTS AND WELL-BEING

Governments are established to ensure people’s rights and well-being, along with a fair, well-functioning society. Government agencies need to have appropriate levels of human and financial resources to effectively carry out this mission. Since the 1980s, Republicans have led on-going efforts to shrink government and reduce agency resources (except for Defense). The result is that government agencies are unable to effectively fulfill their missions and serve the public. This undermines the public’s faith in government and in democracy.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

According to the Declaration of Independence, governments are established to secure people’s rights to life, liberty, and the pursuit of happiness. To ensure these rights, governments must have the resources and policies to function effectively. Well-functioning government agencies are necessary to have a fair and smoothly operating society. (See previous posts here and here for more details.)

Since 1980, it has been the ideology of the Republican Party to shrink government so that it does not have the capacity to ensure these rights for residents – although Republicans rarely say the second part of this out loud. In the 1980s, President Reagan and other Republicans (abetted by some Democrats) began cutting taxes (primarily for the wealthy) and the budgets of many government agencies, while claiming that they could do this without cutting government services.

Their claim to be able to cut taxes and budgets without cutting services is essentially promising people a free lunch. It was a lie, as has been proven over time, and as I believe many of them knew at the time. In many cases, this claim was a smoke screen for two Republican ideological initiatives:

Defunding of services and supports for poor people, which has racist implications, and
Privatization of public services to allow the private sector to make profits delivering them.

Forty years of work defunding and shrinking the federal government have taken a toll. Public services and regulation of the private sector that people want and that protect their rights as stated in the Declaration of Independence have been weakened or eliminated. One measure of this is the decline in the number of federal employees, despite growth in the economy and the population. Furthermore, the scope and complexity of what society needs and wants public employees to do has escalated. For example, the Covid pandemic and the growing number and severity of disasters (from hurricanes to forest fires) have placed new burdens and challenges on the federal government and agency employees.

Declining financial and human resources coupled with a growing workload mean that the government can’t effectively serve the public. This undermines faith in government and democracy, which may have been a goal of some of the right-wing architects of the efforts to shrink government. Underfunding not only starves agencies of the employees needed to fulfill their mandates, but also of other necessary infrastructure such as effective, up-to-date computer systems. [1]

In 2011, the Republicans in Congress used negotiations on lifting the debt ceiling cap to force dramatic cuts in federal civilian employment. (They are trying to do this again right now.) After these cuts were implemented, largely between 2013 and 2017, President Trump took office in 2017 and implemented further cuts in executive branch employees especially at the Departments of Interior, Labor, Justice, State, Agriculture, and Health and Human Services. The number of employees at independent agencies like the Environmental Protection Agency (EPA) and the Social Security Administration have also dropped significantly.

From 2010 to 2022, the number of employees at most federal agencies (other than Defense and Veterans’ Affairs) declined, some dramatically. For example: [2]

Interior: down 23%, i.e., 18,500 employees (manages national parks and wildlife refuges; responsible for environmental initiatives and protecting endangered species)
Agriculture: down 21%, i.e., 22,500 employees (oversees food safety, nutrition programs, agriculture, natural resources, and rural development)
Environmental Protection Agency: down 20% (protects the environment and public health)
Housing and Urban Development: down 18% (provides housing and community development assistance; works to ensure fair housing)
Treasury: down 10%, i.e., 10,900 employees (manages federal finances, collects taxes, oversees banks, enforces finance and tax laws)
Labor: down 10% (oversees workers’ rights to fair, safe, and healthy working conditions; minimum wage and overtime pay; unemployment insurance)

On top of the reduced number of employees, there has been a significant loss in experience, expertise, and institutional knowledge due to the departure of employees with longevity. There has also been a serious loss of diversity. The Biden administration is beginning to rebuild federal agencies, but, even if Congress were cooperative, it would take significant time to rebuild the numbers, and even longer to rebuild the expertise and therefore the full effectiveness of the federal government.

From a longer-term perspective, the number of federal civilian employees is about 2 million, roughly the same as in 1966, despite a population that has grown by 68% and a federal budget that is five times what it was then.

These cuts mean, for example, that the EPA is taking the fewest civil enforcement actions against polluters in 20 years. Food inspections are down and our railroads aren’t as safe as they should be. At the Internal Revenue Service, audit and enforcement actions on taxpayers earning $1 million a year or more has dropped from 7.2% of returns filed in 2011 to just 0.7% in 2019. [3]

Providing federal government agencies with appropriate financial and human resources is essential to their ability to fulfill their missions, serve the public effectively, ensure people’s rights, and oversee a fair, well-functioning society and democracy.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support appropriate funding for federal government agencies so they can fulfill their missions and effectively serve and protect the public. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Panditharatne, M., 4/5/23, “Rebuilding federal agencies hollowed out by Trump and Congress,” Brennan Center for Justice (https://www.brennancenter.org/our-work/analysis-opinion/rebuilding-federal-agencies-hollowed-out-trump-and-congress)

[2] Panditharatne, M., 4/5/23, see above

[3] Cox Richardson, H., 4/7/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/april-7-2023)

HOLDING EXECUTIVES OF FAILED BANKS ACCOUNTABLE

A history of greed, mismanagement, deregulation, and weak oversight has resulted in a litany of banking and financial system crises over the last 40 years. Future crises could be prevented by:

Strengthening regulation,
Increasing deposit insurance, and
Holding bank executives personally liable and culpable.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Greed and mismanagement by bank executives led to the collapse of three banks in early March. Deregulation of “mid-size” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve (the Fed), were also major factors in the banks’ collapses. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that led to these bank failures. (See this previous post for more details.) The first two strategies above for preventing future banking crises – strengthening regulation and increasing deposit insurance – were discussed in this previous post.

To hold bank executives personally liable and culpable when their banks fail, banking regulators and the Justice Department should:

Demand the return of executives’ compensation (i.e., “claw back” compensation), especially when it was linked to the stock price or other metrics that were inflated by inappropriate risks taken by the executives. For example, CEO Becker of the failed Silicon Valley Bank (SVB) received $9.9 million in compensation last year, including a $1.5 million bonus for increasing profitability. He made $3.6 million from selling SVB stock in late February, just weeks before his bank collapsed. In the previous four years, he collected $58 million from the sale of stock received as part of his compensation. Similarly, several top executives at First Republic Bank, which was also bailed out, sold almost $12 million in stock in the two months before their bank went under. Senator Warren (D-MA) is asking for the details of ten years of compensation for the executives at the bailed-out banks, including what criteria were used to determine their bonuses. Senator Warren is calling on bank regulators to demand repayment of executives’ pay and bonuses when they are linked to engagement in high-risk activities.
Investigate bank executives for possible illegal insider trading. Senator Warren is also calling for an investigation into whether these executives engaged in illegal sales of their banks’ stock based on inside information and into other possible illegal activities.
Charge executives of bailed-out banks with criminal offenses. Prior to 2003, criminal prosecutions were the norm. In the 1980s savings and loan scandal, more than 1,000 bank executives were prosecuted and many went to jail. Then, under President G. W. Bush, the prosecutions of bank executives stopped and were replaced by Deferred Prosecution Agreements (DPAs). These DPAs typically impose corporate fines and include promises of remedial action, but criminal prosecution is deferred and almost never invoked, even when repeat offenses occur. [1]
Ban senior executives of failed banks from future employment in the financial industry.

One exception to the new norm of using DPAs instead of criminal prosecutions is occurring now and may indicate a shift in the norm under the Biden administration. Wells Fargo bank created roughly 3.5 million unauthorized customer accounts and issued about 500,000 unauthorized credit cards, costing customers billions of dollars. The corporation and the Trump Justice Department settled with a DPA that required Wells Fargo to pay $6.7 billion in fines and restitution, while five senior executives personally paid civil fines of tens of millions of dollars. The CEO lost his job and the executive under him who presided over the creation of the fraudulent accounts was prosecuted and just pled guilty to a reduced charge of interfering with a bank examination. She might actually do some jail time, although sentencing hasn’t occurred yet. [2]

In conclusion, it’s well past time to stop bank executives from pocketing private profits while socializing risk (i.e., dumping losses on the government and taxpayers). Repeated bailouts and the failure to prosecute individuals reinforces and incentivizes inappropriate risk-taking by bank executives. And, as history has proven, they will take inappropriate risks in order to enrich themselves. Accountability and deterrence are sorely needed; they are essential to preventing the next banking crisis. The steps listed above would serve as strong deterrents to future bad behavior by bank executives.

In the aftermath of this (hopefully mini-) banking crisis, President Biden has called for more accountability and punishment for executives of the failed banks, including clawing back compensation, imposing fines, and banning them from working in the banking industry. [3] He has also called for stricter regulation by executive branch agencies, noting that the Trump administration weakened key regulations. Treasury Secretary Yellen has echoed Biden’s statements and has noted that “the costs of proper regulation pale in comparison to the tragic costs of financial crises.” [4]

Senator Warren and Representative Porter (D-CA) have filed legislation that would strengthen banking regulations, including reversing the provisions in the 2018 EGRRCP law that dramatically weakened regulation of mid-size banks, like the three that just collapsed.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the strengthening of banking regulations and the holding of bank executives accountable with financial, criminal, and other consequences. Urge them to call on Fed Chair Powell to resign due to his complicity in these bank failures.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Kuttner, R. 3/20/23, “Former Wells Fargo exec could do prison time,” The American Prospect https://prospect.org/justice/2023-03-20-wells-fargo-exec-justice/

[2] Kuttner, R., 3/20/23, see above

[3] Gardner, A. 3/18/23, “Biden calls for tougher penalties on bank execs,” The Boston Globe from Bloomberg

[4] Hussein, F., & Boak, J., 3/31/23, “Biden calls to revive bank regulations,” The Boston Globe from the Associated Press