Charles H. Ferguson - Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America

High Stakes, No Prisoners:
A Winners Tale of Greed and Glory in the Internet Wars

No End in Sight:
Iraqs Descent into Chaos

The Broadband Problem:
Anatomy of a Market Failure and a Policy Dilemma

Computer Wars

(coauthored with Charles Morris)

Copyright 2012 by Charles Ferguson
All rights reserved.

Published in the United States by Crown Business, an imprint of the Crown Publishing Group, a division of Random House, Inc., New York.
www.crownpublishing.com

CROWN BUSINESS is a trademark and CROWN and the Rising Sun colophon
are registered trademarks of Random House, Inc.

Crown Business books are available at special discounts for bulk purchases for sales promotions or corporate use. Special editions, including personalized covers, excerpts of existing books, or books with corporate logos, can be created in large quantities for special needs. For more information, contact Premium Sales at (212) 572-2232 or e-mail .

Library of Congress Cataloging-in-Publication Data
Ferguson, Charles H.
Predator nation : corporate criminals, political corruption, and the hijacking of
America / Charles Ferguson. 1st Ed.
p. cm.
1. Financial crisesUnited States. 2. Banks and bankingUnited States. 3. Global Financial Crisis, 20082009. 4. EqualityUnited States. 5. United StatesEconomic conditions2009 6. United StatesEconomic policy. 7. United StatesPolitics and government. I. Title.
HB 3722. F 458 2012
330.9730932dc23 2011052366

eISBN: 978-0-307-95257-8

Jacket illustration and design by Jamie Keenan

v3.1

To Athena Sofia and Audrey Elizabeth,
two women who changed my life

M ANY BOOKS HAVE ALREADY been written about the financial crisis, but there are two reasons why I decided that it was still important to write this one.

The first reason is that the bad guys got away with it, and there has been stunningly little public debate about this fact. When I received the Oscar for best documentary in 2011, I said: Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail. And thats wrong. When asked afterward about the absence of prosecutions, senior Obama administration officials gave evasive nonanswers, suggesting that nothing illegal occurred, or that investigations were continuing. None of the major Republican presidential candidates have raised the issue at all.

As of early 2012 there has still not been a single criminal prosecution of a senior financial executive related to the financial crisis. Nor has there been any serious attempt by the federal government to use civil suits, asset seizures, or restraining orders to extract fines or restitution from the people responsible for plunging the world economy into recession. This is not because we have no evidence of criminal behavior. Since the release of my film, a large amount of new material has emerged, especially from private lawsuits, that reveals, through e-mail trails and other evidence, that many bankers, including senior management, knew exactly what was going on, and that it was highly fraudulent.

But even leaving this crisis aside, there is now abundant evidence of widespread, unpunished criminal behavior in the financial sector. Later in this book, I go through the list of what we already know, which is a lot. In addition to the behavior that caused the crisis, major U.S. and European banks have been caught assisting corporate fraud by Enron and others, laundering money for drug cartels and the Iranian military, aiding tax evasion, hiding the assets of corrupt dictators, colluding in order to fix prices, and committing many forms of financial fraud. The evidence is now overwhelming that over the last thirty years, the U.S. financial sector has become a rogue industry. As its wealth and power grew, it subverted Americas political system (including both political parties), government, and academic institutions in order to free itself from regulation. As deregulation progressed, the industry became ever more unethical and dangerous, producing ever larger financial crises and ever more blatant criminality. Since the 1990s, its power has been sufficient to insulate bankers not only from effective regulation but even from criminal law enforcement. The financial sector is now a parasitic and destabilizing industry that constitutes a major drag on American economic growth.

This means that criminal prosecution is not just a matter of vengeance or even justice. Real punishment for large-scale financial criminality is a vital element of the financial re-regulation that is, in turn, essential to Americas (and the worlds) economic health and stability. Regulation is nice, but the threat of prison focuses the mind. A noted expert, the gangster Al Capone, once said, You can get much further in life with a kind word and a gun than with a kind word alone. If financial executives know that they will go to jail if they commit major frauds that endanger the world economy, and that their illegal wealth will be confiscated, then they will be considerably less likely to commit such frauds and cause global financial crises. So one reason for writing this book is to lay out in painfully clear detail the case for criminal prosecutions. In this book, I demonstrate that much of the behavior underlying the bubble and crisis was quite literally criminal, and that the lack of prosecution is nearly as outrageous as the financial sectors original conduct.

The second reason that I decided to write this book is that the rise of predatory finance is both a cause and a symptom of an even broader, and even more disturbing, change in Americas economy and political system. The financial sector is the core of a new oligarchy that has risen to power over the past thirty years, and that has profoundly changed American life. The later chapters of this book are devoted to analyzing how this happened and what it means.

Starting around 1980, American society began to undergo a series of deep shifts. Deregulation, weakened antitrust enforcement, and technological changes led to increasing concentration of industry and finance. Money began to play a larger and more corrupting role in politics. America fell behind other nations in education, in infrastructure, and in the performance of many of its major industries. Inequality increased. As a result of these and other changes, America was turning into a rigged gamea society that denies opportunity to those who are not born into wealthy families, one that resembles a third-world dictatorship more than an advanced democracy.