Can Chuck Schumer Lead the Democrats to "Unity" on Economic Issues?

Is it impertinent to say this? Not constructive enough? Or necessary to make the change the country needs? I've heard all three asserted lately.

by Gaius Publius

I'd like to put three thoughts together for consideration as a set.

1. Chuck Schumer recently told George Stephanopolis that "we [Democrats] are united on economic issues." See 33:36 in this video.

Not sure what you think, but that seems the most absurd statement of the month. It's precisely economic issues — trade deals, service to corporate needs, bailouts of Wall Street instead of Main Street, forgiveness of crushing debts like student loans — that divide Democrats most deeply.

And worse, I think Schumer knows that he's lying as he says that.

2. The polling memo that lead to the Democratic Party's "Better Deal" plan contains these two contradictory statements. First, from the middle of the piece:

[A] large majority of battleground state voters respond favorably to [this] statement of the premise and direction that define the Better Deal Economic Agenda...:

"Too many families in America today feel that the rules of the economy are rigged against them. Special interests have a strangle-hold on Washington — from the super-rich spending unlimited amounts of secret money to influence our elections, to the huge loopholes in our tax code that help corporations avoid paying taxes...."

Note the attack on the wealthy that voters agree with. Now, from the first paragraph, in which Democrats who commissioned the polling were told their "themes" were consistent with this message:

As Senate and House Democrats begin to roll out their new Better Deal Economic Agenda, a review of recent public opinion polling shows that the central themes and frames that are at the heart of this agenda match closely with the experiences, values, and priorities of American voters today.

Do you think the Democratic Party, as currently captained by Chuck Schumer and Nancy Pelosi, embraces the themes "the rules of the economy are rigged" and "special interests [the very rich] have a strangle-hold on Washington"?

3. Consider this interesting piece from a David Sirota podcast about when the U.S. government stopped prosecuting "white collar" (i.e., Wall Street) crime. From a partial transcript, this is the introduction:

In 2008 Wall Street banks created a financial crisis that incinerated the economy. It was only a few years after the Justice Department had aggressively prosecuted Enron and Arthur Anderson, and so many folks expected similar prosecutions of financial executives, especially because Democratic presidential candidate Barack Obama promised to “bring a new era of responsibility and accountability to Wall Street.” But as recounted in a new podcast with Pulitzer Prize-winning journalist Jesse Eisinger, it never happened.

Eisinger has just released a new book called “The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives.” It tracks how a furious pressure campaign by corporate America fundamentally changed the culture of the Justice Department. Instead of going after executives who commit white collar crime, the agency now often offers settlements with corporations, forcing shareholders to pick up the tab for fines while leaving executives untouched.

The result, says Eisinger, is a criminal justice system that no longer seriously deters corporate crime, but instead makes it just a mundane cost of doing business. Shareholders may pay some fines, but executives often get a nice get-out-of-jail-free card, avoiding prison or any kind of punishment.

From near the end of the interview (emphasis mine):

Sirota: So a successful prosecution of Arthur Andersen becomes the justification for, "We shouldn't prosecute Arthur Andersens in the future because the prosecutors in theory were too strong, were too harsh, went after them too vigorously." Meanwhile, your book tracks the concurrent rise of the so-called “too big to jail” idea. How did that evolve?

Eisinger: What happens is, there's a 1909 Supreme Court ruling [that says] if there is an employee who in the course of his or her job commits a crime, the entire company can be prosecuted. That is the power that the government has. It's essentially neglected. They don't really prosecute companies for a very long time.

Note that last paragraph; it's important. Eisinger continues:

In the 1990s, starting out, they're unsatisfied with this. They don't really want to prosecute companies all the time. They used to be focused on individuals, but they started shifting the focus on trying to root out the rotten cultures at companies. They hit on this haphazardly. Mary Jo White, as the U.S. Attorney in the Southern District, comes up with this settlement. Then, she sends her lieutenant and writes a memo that Eric Holder signs saying, "Here are the principles for how we're going to prosecute a company." One of the principles is, "We'll take into account collateral consequences." Eric Holder gets a lot of blame for this in retrospect, but he didn't really write it…

Then, [the] Arthur Anderson [investigation] happens, and they ignored these principles, quite rightly in my view, and prosecute the company. Larry Thompson updates them, and that becomes the locus for the lobbying, where they hit on one aspect of these principles to try to tear them all down. The aspect of the principles is that they attack the fact that the government can ask for companies to waive attorney-client privilege when they're doing investigations, so that the government can get access to all that's going on in their own internal investigation. If companies want to cooperate and they want to get leniency from the government, they have to waive attorney-client privilege.

Companies scream bloody murder, and so does the white-collar bar. Over the course of the next decade, those powers are completely rolled back, which really strip the ability for prosecutors to get inside companies to investigate. That has a whole cascading series of effects.

Sirota: Okay. Now let's move up to the Obama era. What could the Obama administration have done based on all of the trends you've just charted, and what did it do instead?

Eisinger: The first thing they could have done is created a task force, a big, giant task force to address a variety of financial crisis-era cases. People should remember, the financial crisis hits in the end of the Bush administration. The height is September. The election is in November. All the firms that collapse, the criminal investigations are going on, and the late Bush administration folks who are on their way out don't take a series of serious decisions and let the investigations start to percolate. That's the first mistake.

The Obama administration inherits that mistake, but they compound it by not doing anything about it. One thing they needed to do was create a task force where you figuratively lock 50 prosecutors in a room together to look at — five needed to look at Lehman Brothers, and 10 needed to look at the CDO business, and five needed to look at Citi, and six needed to look at JP Morgan, etc., etc. If you had, they would have found crimes.

In fact, what happens is they don't really look in a serious way. Whenever you hear Eric Holder or Preet Bharara or Lanny Breuer saying, "We looked seriously and nobody ever presented us a criminal case without a doubt prosecuting a high-level individual," the secret is that they didn't look. That was mistake number one.

Sirota: What are the continuing effects of the Justice Department culture that the Obama administration basically helped cement?

Eisinger: The day-to-day legacy now is that the Department of Justice has lost the will and ability to prosecute top corporate executives. This is the flip side. [We] know about mass incarceration and the scandal of that, and that we disproportionately punish mostly poor, mostly people of color, in this country. This is the flip side of that, which is that we allow the rich and powerful to commit crimes with impunity if they are in executive positions at major corporations. That is a scandal, and it undermines the fairness and justice of our system and the rule of law.

The Obama administration has contributed to it. What they do now is they settle with corporations rather than focusing on prosecuting individuals. They have lost the skill set to do with it, because settling with corporations is so easy and because of the way settlements come about, which is that we have outsourced and privatized investigations to the corporations themselves. It's basically like allowing Pablo Escobar to hire the major law firm of Medellin to investigate whether Escobar is dealing drugs or not. That surprisingly is an investigation that might yield a few street-level drug users but is not going to actually implicate Pablo himself.

And note the Obama administration-confirmed process for handling major white-collar crime:

[Eisinger:] We have corporations who have a scandal. They hire a law firm. The law firm does the investigation. The investigation is studiously incurious about going to the top levels, and worse than that, they negotiate, then they hand the results to the Department of Justice. The Department of Justice looks over it, and then comes up with some kind of fine that the shareholders pay. The executives don't pay it. The company, the piece of paper has to pay it, but that comes out of shareholder pockets. Then those prosecutors, many of them, go to work for those law firms themselves after a few years. That is a deeply corrupt process.

"That is a deeply corrupt process." Not only that, but everyone in America knows it. These are the voters who think "the rules of the economy are rigged" and "[the very rich] have a strangle-hold on Washington." Do Americans expect the Democratic Party, as currently led, to change any of this? Will a slogan — "A Better Deal" do it?

No, Mr. Schumer, Democrats are deeply divided on "economic policy" — dead-opposite divided in fact. And in other fact, Chuck Schumer is Wall Street's Democrat. Will he change his spots?

It will be interesting to see how all this plays out. Seems to me though, you have to change the singers, not just music, to get a different sound from the choir. On the other hand, you go to war with the singers you have, my more hopeful friends tell me. Let's see how this plays out.

GP