Where is Senator Elizabeth Warren when we need her? Senator Warren — whose main mode of political operation is grandstanding during financial-oversight hearings — recently browbeat some feckless Treasury officials over the HSBC money-laundering case. HSBC was fined just under $2 billion in the settlement, but that was not enough for the crusading Senator Warren: She wanted to see bankers led off in leg irons. Good!
“Your company pays a fine,” she said, “and you go home and sleep in your own bed at night — every single individual associated with this — and I just think that’s fundamentally wrong.”
So I am hoping that Senator Warren will join me in asking: Why haven’t the powers that be in the ailing state of Illinois been dragged off to the hoosegow? Or at least given a $2 billion fine, as HSBC was?
The state of Illinois is a criminal enterprise engaged in securities fraud. Illinois this week became only the second state in history to be charged with fraud by the Securities and Exchange Commission. The state of Illinois is habitually underfunding its public-employee pensions, placing the state government’s finances in an ever more precarious state. And the Illinois government systematically misled the public about the state of its finances in order to allow it to keep selling bonds to witless investors. As the SEC puts it: “Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system.”
Illinois did not even get a fine — just a settlement in which it agrees to mend the error of its ways. Why is that? A cynic might be tempted to think that, because all this governmental book-cooking helps the authorities in Springfield and elsewhere keep their public-sector unions fat and happy — which in turn helps keep Democratic campaign coffers full — the Obama administration may be taking it a little easy on the president’s friends and colleagues back home in Illinois. Maybe it’s political self-interest.
It is a very bad thing when private-sector bankers commit crimes. It is a much more serious thing when government commits crimes, because criminal governments undermine the entire enterprise of law enforcement, weakening our institutions and thereby interfering with the operation of markets. If you are a victim of fraud in Illinois, to whom do you take your complaint? To a state that is itself guilty of fraud? That is a serious problem in a free society."