Bankers get a free pass; Cohen and Manafort thought they had impunity; Senator Warren pushes anti-corruption law; White House accused of blocking investigations into student loan fraud by banks.
The Trump White House is explicitly curbing white collar criminal investigations and prosecutions. That move is designed to comfort its friends but ends up hitting hard at millions of Americans who are the victims of those financial crimes.
White collar criminal prosecutions in the United States are now at their lowest levels seen in 20 years – a decline of over 30% compared to just five years ago.
No one can be seriously surprised that President Trump has promoted impunity for the wealthy. What he is underestimating is how this could backfire and add significantly to his political problems.
The actions by this White House to curb white-collar crime, provide impunity to top bankers and bury government ethics rules provide substantial ammunition to Trump’s opponents ahead of this November’s crucial Congressional elections.
Trump’s (in)actions notably suit Senator Elizabeth Warren, a likely Democratic candidate for the 2020 U.S. presidential elections. Warren is moving to raise her already high profile in leading the anti-corruption charge.
Free pass for bankers
It is important to remember that the global financial crisis erupted 10 years ago in part because of criminal activities pursued by some of the largest banks in the United States. They systematically and deliberately defrauded American home owners using a range of mortgage lending schemes.
While some of the banks paid huge fines to settle cases brought by the U.S. Justice Department, not a single top U.S. banker was indicted, let alone jailed.
Today, the impunity enjoyed by U.S. bankers is greater than ever. Banks are traditionally big financial supporters of Republican campaigns. The Trump Administration is giving the banks a free pass.
Hitting at consumers
The financial crisis led the U.S. Congress to establish the Consumer Financial Protection Bureau. The CFPB has investigated and uncovered a host of illegal activities by major banks. These range from overcharging customers on their credit cards to falsifying vast numbers of deposit and savings accounts in the names of their customers.
The banks hate being called out by a U.S. government agency for their financial crimes and, ever since the CFPB’s establishment eight years ago, have waged a ceaseless campaign against it
As it happens, Senator Warren was the chief architect of the CFPB. At the time, few members of the U.S. Congress could match the venom of opposition to her plans than then-Congressman Mike Mulvaney, now Trump’s Director of the very powerful Office of Management and Budget.
As of 10 months ago, Mulvaney also became the acting director of the CFPB. Mulvaney lost no time in replacing top agency officials with associates who shared his views.
But despite Mulvaney’s best efforts to suffocate the agency quietly, but effectively, not all is quiet on the CFPB front. A whistleblower has emerged. He highlights the scale of the damage that is being done.
Seth Frotman is the CFPB’s Ombudsman for student loan debt and has been with the agency since it was established seven years ago. He has resigned his post, effective September 1, 2018, and released a letter that explicitly alleges that the leaders of the CFPB are covering-up predatory lending practices that are possibly affecting millions of Americans.
Student debt has almost tripled in the last decade to over $1.5 trillion. It is now the largest source of private sector debt in the United States.
It is thus quite shocking that, as Frotman asserts in his letter to Mulvaney: “The Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”
He went on to say that, “when new evidence came to light showing the nation’s largest banks were ripping off students on campuses across the country by saddling them with legally dubious account fees, Bureau leadership suppressed the public of the report prepared by Bureau staff.”
There are more than 4.4 million Americans with student debt. They and their families had hoped that their government would make efforts to reduce their debt burdens.
Instead, the reverse has happened. Trump’s Department of Education no longer shares data with the CFPB, which makes that agency’s investigations harder.
IRS investigations cut
But Trump’s and the Republicans’ inactions also figure prominently at the opposite end of the income scale. Resources for the investigative arms of the Internal Revenue Service and the white-collar crime divisions of the Justice Department have been cut.
For example, over many years, the investigative branch of the Internal Revenue Service has been cut sharply. The IRS conducted audits on just 0.6% of tax returns last year, the lowest level in 15 years.
For incomes above $1 million, a category that included Trump’s former associates Cohen and Manafort, the IRS audited just 4.4% of returns, down from 12.5% in 2011.
As the zero-prosecution of top bankers underscores, it is no wonder that proven tax cheaters such as Manafort and Cohen probably never believed they would be prosecuted.
The Cohen and Manafort abuses came to light in the course of Special Counsel Robert Mueller’s investigations of Russian involvement in the 2016 president election.
The enormous publicity that these cases have attracted, combined with the bluntness of Frotman’s accusations against Mulvaney and his White House boss, are now catapulting white collar crime into the midst of American politics.
Sensing the momentum behind public outrage over corruption in government and the impunity that abounds, Senator Warren has just proposed detailed new legislation – “The Anti-Corruption and Public Integrity Act.”
The aim of this legislation is to explicitly end stock ownership by public officials, conflicts-of-interest by politicians, including specific clauses that require White House officials to divest themselves of all outside financial interests.
Warren, a fierce defender of the CFPB and the leading voice in the Democratic Party on core issues of corruption as well as a presumable 2020 candidate for the presidency, knows that advocating against systematic financial abuses directly appeals to American consumers.
With student debt holders at the fore, there is rising pressure on the man in the White House to publicly release his own tax returns.