In the classic film Casablanca, Captain Renault, thelocal constable, feigns shock when, in a raid on Humphrey Bogart's nightclub,he discovers rampant gambling. His prosecutorial zeal quickly evaporates whenhe is plied with his regular cut of the action.
I don't know why I recalled this vignette when I read ofthe president establishing an "inter-agency" Financial FraudEnforcement Task Force, that on paper, will ostensibly work with both state andlocal authorities to investigate and ultimately, prosecute financial crimes.
The new entity will be led by the Justice Department,along with Treasury, the SEC and, strangely, the Department of Housing andUrban Development, a unit that was at one time so mismanaged as to qualify forstand-up routines on open mike nights.
Also, according to the release sent out, part of themission will be to involve addressing discrimination in the lending and thefinancial markets and recovering proceeds for alleged victims.
But I guess what really got me thinking was AttorneyGeneral Eric Holder's statement upon the unveiling of this new special unit.
"This task force's mission is not just to holdaccountable those who helped bring about the last financial meltdown, but toprevent another meltdown from happening," he said. He pledged that thetask force - I'll assume unlike Captain Renault - would be relentless in itspursuit of corporate wrongdoing.
If the AG is serious about holding people accountable forthe last meltdown, perhaps someone should direct his attention to a roster ofwilling enablers in the nation's capital.
For a start, let's hearken back to 1977 and the CommunityReinvestment Act, which for lack of a better description basically held a gunto lender's heads and forced them to lend to people and communities who had nosemblance of a viable credit history or any method in which to meet paymentobligations. The cost of that debacle alone is estimated to exceed $1 trillion.
Exactly 22 years later, we were treated to theGramm-Leach-Bliley Act which was passed under the Clinton administration (yethis successor was accorded most of the blame for its aftermath), which repealedcritical parts of Glass-Steagall, shattering the wall that had separated abanks' savings and investment channels and allowing commercial banks,investment banks, securities firms and insurance companies to consolidate intofinancial services conglomerates.
That ushered in a whole new buffet of strange and murkyfinancial instruments like credit default swaps and collateralized debtobligations that few understood and even fewer cared to investigate. WallStreet firms were basically allowed to run around like 12-year olds afterdrinking Red Bull.
Then there was the over-emphasis on home ownership, whichswelled the portfolios of both Fannie Mae and Freddie Mac so far beyond theirmanageable means, that subsequent billion-dollar accounting frauds of bothshould have come as a shock to exactly no one, especially current HouseFinancial Services Committee Chair Barney Frank and omnipresent media favoriteSen. Charles Schumer of New York, each of whom gave their stamp of approval tothe solvency and long-term strength of those government-sponsored enterprises.
And lastly we had the consumers and borrowers themselves,far too few of whom assumed stewardship of their own personal systemic risk bysigning loans without reading or understanding what terms like adjustable ratemortgages meant and later found willing and gullible sympathizers in lawmakerswho took their plight straight to the TV cameras.
Realize that this is a rather truncated list of whatCaptain Renault would call "the usual suspects," but it appears thatif this task force is to be taken seriously, it has a lot of work to do closerto home than originally thought.
