Instaread - The Divide: by Matt Taibbi / Key Takeaways, Analysis & Review: American Injustice in the Age of the Wealth Gap

Guide to

Matt Taibbis

The Divide

American Injustice in the Age of the Wealth Gap

by

Instaread

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This is a companion to the original book.

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Table of Contents

The Divide by Matt Taibbi approaches the complicated topic of the unequal treatment of defendants in the United States criminal justice system based on wealth, through individual stories and rarely heard cases revealed in court proceedings.

In the US, bankers and financial officials whose unethical and illegal behavior contributed to the 2008 financial crisis and subsequent economic scandals rarely faced prosecution for their activities. Instead, either the very smallest actors in those activities were prosecuted, or the companies negotiated fines and settlements outside of court. Many of these cases made use of the collateral consequences, a principle based on a memorandum written by Attorney General Eric Handler that states prosecutors should consider whether prosecution would cause too many lost jobs or too much financial harm to the company.

Policing in major US cities generates a high volume of arrests, criminal charges for trivial offenses, and economic incentives not to fight allegations in court. The broken windows theory of crime is a theory that preventing small crime can lead to the prevention of larger crimes. Similarly, stop-and-frisk works on the notion that prosecuting minor offenders will catch a wider variety of major offenses and deter anyone looking to commit more serious crimes. These two strategies make the lives of residents in high-crime areas more difficult because they are often arrested on inflated charges.

For undocumented immigrants, being discovered at all by a justice official, is grounds for deportation. Politicians are so focused on detecting cases of welfare fraud that innocent welfare recipients are often accused of fraud and then punished many times over for the agency's error. Even a minor criminal error for a poor individual results in jail time, while bank officials involved in large-scale fraud are not punished at all for their involvement.

Matt Taibbi is a contributor to Rolling Stone and author of several books about fraud in the financial services industry. He founded the satirical publication The Beast and was a founding contributor at Racket, a satirical digital magazine, before its cancellation.

Eric Holder was appointed as the Attorney General of the United States in 2009 by President Barack Obama. Prior to his appointment, he was Janet Reno's deputy attorney general and worked for international law firm, Covington & Burling LLP, in private practice.

Cyrus Vance, Jr. is the New York County District Attorney who prosecuted employees at a small Chinatown-based bank for falsifying loan documents.

Lanny Breuer was the US Department of Justice Criminal Division's assistant attorney general who led the office in investigations of major investment banks for fraud.

Andrew Brown was a resident in the Bedford-Stuyvesant neighborhood of Brooklyn, New York when he began a criminal career as a youth. When he ended his criminal activities, the police continued to harass him and began trying to hold them accountable for the charges filed against him.

Richard Fuld, Jr. was the last chairman and CEO of Lehman Brothers before its acquisition by Barclays. He engaged in subprime mortgage investment behavior that is widely believed to have contributed to the 2008 financial collapse.

Saul Burian represented unsecured creditors in the bankruptcy of Lehman Brothers. He and his clients were shut out of negotiations during the sale of Lehman Brothers to Barclays.

Spyro Contogouris was hired by hedge fund managers to research, harass, and damage the reputation of Canada's Fairfax Financial Holdings, against which the hedge fund managers were attempting a short trade, a bet on the company's failure.

Prem Watsa is the chairman and CEO of Fairfax Financial Holdings that was targeted as the subject of a short trade by hedge fund managers. In the end, Watsa and Fairfax Financial survived the attack.

1. Following the financial crisis of 2008, prosecutors opted for settlements and fines to punish the major banks whose dangerous behavior caused the recession. Bankers did not generally face jail time, as a result of US Attorney General Eric Holder's collateral consequences memorandum.
2. Policing in New York City at the time of the financial crisis was characterized by aggressive policing policies, using both the broken windows theory and stop-and-frisk policing, that resulted in a high volume of arrests.
3. Once arrested, individuals are often motivated to plead guilty regardless of whether they are factually guilty or innocent. Poor people who are arrested can seldom pay bail and punishment for offenders who do plead guilty can sometimes drag out much longer than necessary.
4. Clear cases of unethical investment behavior or circumvention of federal law escape prosecution because lawyers and judges often lack a complete understanding of the schemes, and they have few tools and little motivation to reconsider new findings in court.
5. Undocumented immigrants face increasingly punitive measures that can lead to deportation, regardless of whether they have committed crimes, while foreign corporations and their executives are not similarly forced from the US after their unethical investment behavior comes to light.
6. Blatant harassment, market manipulation, and fraud among wealthy defendants are crimes rarely punished, despite the volume of evidence, because of legal loopholes, the expectation that anyone involved in trading should be sophisticated enough to handle the risk, and the active involvement of US officials who are motivated to prevent market shocks.
7. Welfare applicants are often subjected to an invasion of privacy because the general public expects those in need to sacrifice rights for the sake of fraud prevention. Wealthy fraud defendants receive the benefit of every doubt because they receive no assistance.
8. The treatment of the factually guilty in court matters even to individuals who expect they will never be involved in crime because the consistent application of the law is the basis of its validity.

Following the financial crisis of 2008, prosecutors opted for settlements and fines to punish the major banks whose dangerous behavior caused the recession. Bankers did not generally face jail time, as a result of US Attorney General Eric Holder's collateral consequences memorandum.

Analysis

The popular sentiment among politicians states that Wall Street should be held accountable for the consequences of their actions on Main Street, the general term that refers to individual investors and the overall economy, as related to the 2008 financial crisis. It is an easy way to gain support for a presidential campaign, for example, and it is easy for elected officials to say when they do not have any special power to bring anyone to court. Strictly speaking, the only individuals with that kind of power in the United States are prosecutors and grand juries. Elected officials have the ability to affect change if they can appoint the right attorney general on the state or national level. Since President Obama himself has expressed a desire to bring the instigators of the financial crisis to justice, people would expect his attorney general to act according to the same goal.