Resisting Elites’ Resistance to the Rule of Law (Review of Glenn Greenwald’s With Liberty and Justice for Some)

posted by Frank Pasquale

(Glenn Greenwald is having a fundraiser; link here.  I think his work is well worth supporting.)

There are few (if any) “free markets” in the largest sectors of the US economy. The health care industry is a labyrinth of public and private payers. Sectors known as “guard labor” are also larded with subsidies.  The Departments of Defense and Homeland security contract with thousands of companies.  The communications industry enjoys various government “givings.” And at this point, everyone knows that our largest financial institutions are taxpayer supported entities. Without the implicit backing of the federal government, they would collapse.

Government subsidy to large industries is not, in and of itself, a bad thing. When wages are stagnant and capital gains are mainly enjoyed by the top thousandth of the population, some entity has to spend for common provision. But the price of that spending should be higher standards for the propped-up industry. In health care, for instance, Medicare Conditions of Participation (and laws like the 1986 EMTALA) require many hospitals to provide care regardless of patients’ ability to pay. Tough fraud and abuse enforcement subjects providers’ bills to rigorous audits; privacy law will soon require audit-capability for digital medical records. Legislation passed in 2009 and 2010 creates many other requirements to channel private provision of health care toward more public ends. It’s certainly not a perfect system, but regulation is serious and purposeful. There are real consequences for many lawbreakers.

Glenn Greenwald tells a very different story about three other heavily subsidized industrial sectors.  He gives us serious reason to doubt that law has constrained banks, telcos, and the security sector when they posed critical threats to our economy, privacy, and liberty. His book With Liberty and Justice for Some is a passionate indictment of four distinct trends:

1) elites who violate laws with impunity,
2) retroactive immunity for acts unlawful at the time they were committed,
3) lobbyists’ power to influence legislators to render bad conduct lawful or even subsidized, and
4) a radical increase in punishment of those who fall outside the charmed circle of political and economic elites.

Greenwald has examined each area in his blog, as have other, lonely voices in corporate law (and a more robust chorus in communications & cyberlaw troubled by telecomms’ sweetheart deals). The vital contribution of With Liberty and Justice for Some is to show how the four trends mutually reinforce one another, contributing to a politics of wealth and privilege defense commonly known as oligarchy.

An Agenda-Setting Book

There is much in Greenwald’s book to interest legal scholars. The very concept of “retroactive immunity” militates against the rule of law, and I could find only twenty or so mentions of it in Westlaw’s database of journals and law reviews prior to 2005.*  While there have been 40 pieces addressing “retroactive immunity” since then, we need both research and activism on the topic. Whose rights are abrogated when retroactive immunity is granted? Is this a taking?

A note by Olivia Radin in the Columbia L. Rev. suggested that legal rights are a form of property. She argues that, “When a state confers retroactive immunity on a defendant, the [Supreme] Court understands that the plaintiff has suffered an injury to his existing legal rights.” Shouldn’t retroactive immunity be costlier, then? If the state entirely takes away a vested right of yours, to enrich another, why shouldn’t there be some sort of compensation? When Congress afforded retroactive to the telecoms for warrantless wiretapping, it should have at least acknowledged the cost of its actions, both to individuals and to the rule of law as a whole.  And it should have stepped in to pay the fines that it spared communications giants from suffering, directing them to future privacy enforcement efforts.

Another question is: how much worse have things gotten over the years? Bill Black has frequently noted that “In the Savings and Loan crisis, which was 1/70th the size of [the current] crisis, our agency made over 10,000 criminal referrals, and that resulted in the conviction on felony grounds of over 1000 elites in what were designated as major cases.” Why so few referrals now? Have priorities shifted so far in the direction of terrorism and homeland security that law enforcers aren’t even accepting criminal referrals? Or have staffers at financial regulatory agencies become so captured by the industry that they are terrified of alienating potential future employers, or exposing their own past deeds? What were the institutional safeguards that let people like Black do their jobs in the aftermath of the S&L crisis, and how can they be replaced? Why is the Nevada AG such an outlier in these matters?  And how have we come to the point where the yearly income of a hedge fund manager can easily be twice or three times the entire annual SEC budget?

Greenwald’s book is also a call to lawyers to “wake up” and try to do something about a legal regime whose deficiencies have been thoroughly documented and theorized. Greenwald doesn’t advance a detailed political program in the book. Rather, he mentions some suggestive historical precedents and principles. Many come from the Founding Fathers, including George Washington’s insistence that constitutional governance rests on “the denial of every preeminence.” Greenwald mentions the example of Theodore Roosevelt, recently revived in Osawatomie by President Obama.  Paine called equal application of the law “the true and only basis for representative government,” and Franklin worried about society divided between the “favored” and the “oppressed” if the rule of law were not applied fairly to all.

Paradoxes of Penality

What would Franklin, Paine, or Washington think of today’s great divide between the 1% and the 99%? Greenwald details case after case in which connected, wealthy individuals escape sanctions for transgressions costing millions or billions of dollars. But law enforcers turn from lamb to lion upon ordinary citizens.

Bernard Harcourt has both documented and theorized the “neoliberal penality” that lets Dick Fuld walk away with hundreds of millions of dollars from what was in essence a disastrous mix of gambling and misrepresentation, but unleashes new Inspectors Javert on food stamp recipients. (Or: sell a school system toxic investments, and retire rich; try to enroll your kid outside your district, and get arrested for a $15,000 theft.) Harcourt describes “two paradoxical tenets” that seem to rule contemporary politics: “government incompetence when it comes to regulating the economy and government competence when it comes to policing and punishing.”  Greenwald explores these tenets’ effects: incredible wealth for a connected “top 0.1%,” and untold misery for a bottom 1%—my conservative estimate of the number of now-jailed or stigmatized Americans who would not be in prison (or suffering from collateral consequences) if they lived in a country like Canada, which regularly gives sentences as third as long as US prison terms for the same crimes (235).

Greenwald’s chapter on “American Justice’s Second Tier” is a tour de force compilation of stories and stats: America’s spectacularly high level of incarceration, the 1 in 9 black children with a parent behind bars, the manifest failure of the War on Drugs.  These are depressingly familiar themes. However, they feel newly urgent in Greenwald’s hands.  Mass incarceration for drug possessors seems a far more disproportionate punishment when it’s contrasted with the coddling of politically connected torturers and perjurers.

Next time an apologist for the finance industry says that suits against the likes of Citi must be settled because the SEC lacks resources (after other apologists for the finance industry defunded them), we might wonder if the Florida foreclosure kangaroo courts provide a model for action:

The judges . . .  openly admit that their primary mission is not justice but speed. One Jacksonville judge . . . even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one [person] on the street every 2.4 minutes.

A society which “efficiently” dispossesses homeowners cannot long stand as a democracy if it fails to apply the same standards of “swift justice” to its largest debtors. As Loic Wacquant and Mike Konczal have argued, there is something essentially feudal in this logic of “rule by men,” not law.

Does Inequality Breed Instability?

Toward the end of the book, Greenwald concludes that “In the face of … massive financial inequality, the notion of equal legal treatment for everyone has crumbled away completely” (270).  With Liberty and Justice for Some is often bleak. By the last chapter, Greenwald predicts that “ever-greater inequality will result” from America’s 2-tiered justice system, and “the inevitable discord that such inequality provokes will come to threaten the country itself” by generating social unrest. He says that this could prove the “undoing” of American elites, an analysis that Bruce Judson has developed in more detail in his book It Can Happen Here. The Occupy Wall Street movement may seem to vindicate this perspective. However, as I noted about 2 weeks before OWS started, I have my doubts.

US authorities are getting more creative in defusing protests, deploying chemical agents, smear campaigns, and increasingly militarized police forces. Technologies of surveillance have made dissent more costly. Sarah Jaffe has explained the consequences of the application of military-grade technology on the homefront:

As a burgeoning international protest movement takes shape, opposing austerity measures, decrying the wealth gap and rising inequality, and in some cases directly attacking the interests of oligarchs, we’re likely to see the surveillance state developed for tracking “terrorists” turned on citizen activists peacefully protesting the actions of their government. And as U.S. elections post-Citizens United will be more and more expensive, look for politicians of both parties to enforce these crackdowns. Despite growing anger at austerity in other countries, those policies have been embraced by both parties here in the States.

Add into the mix the growing power of entities that secretly generate reputational data about individuals, and you have a variety of “chilling effects” on political activism that challenges inequality in the US. Meanwhile, the Bush-Obama war on whistleblowers has demonstrated the dangerous consequences of trying to publicize misuses of that technology. The end result is a mass “learned helplessness,” as the very idea of collective action becomes a bitter joke to a critical mass of the populace.

Is Disclosure the Answer?

But there are at least three ways out of that “doom loop.”  First, the punitive policing of the “99%” could be redirected toward corporate wrongdoing. As Bernard Harcourt has written,

What is required is constant vigilance of all the micro and macro rules that permeate our markets, our contracts, our tax codes, our banking regulations, our property laws — in sum, all the ordinary, often mundane, but frequently invisible forms of laws and regulations that are required to organize and maintain a colossal economy in the 21st-century and that constantly distribute wealth and resources.

A lot of what I’ve written in the past few years, in fields ranging from internet governance to health law, explores when and how such strategies work.  There is some hope here: agencies ranging from the SEC to the HHS are trying to entrench “audit trails” in order to create a digital record of suspect corporate behavior.  The FTC will be auditing the privacy practices of companies like Google and Facebook. Corporate actors may engage in better behavior once they understand their misdeeds can be exposed.

But there are many pitfalls to an “audit society.” Greenwald painstakingly documents a government revolving door in the national security and finance sectors that spins so fast it’s hard to know where critical officials’ “public service” begins and their private employ begins.  Both corporate and government leaders are fighting a “war against disclosure,” trying to assure that whatever monitoring happens is too episodic, fragmentary, and amateurish to deter bad behavior.

A passion to hide potential wrongdoing provokes a second strategy: extraordinary and possibly illegal disclosures, as exemplified by Bradley Manning and Wikileaks.  I am less of an enthusiast for this strategy than Greenwald is; I’ve worried both about backlash and unintended consequences.

But perhaps most dangerous is the possibility that disclosures will have no effect at all. Alastair Roberts’s book Blacked Out is one of the best recent treatments of government secrecy. After analyzing freedom of information movements around the world, Roberts considers in his closing chapter whether they actually can do any good. For example, Mark Danner lamented a near complete lack of action against high Bush administration officials who had authorized torture even after details of their chilling program became clear.  “Wrongdoing is still exposed; we gaze at the photographs and read the documents,” Danner observed, “and there the story ends.”  Indeed, exposure may just have made the US a more torture-accepting nation, as programs like 24 lionized “whatever-it-takes” law enforcement.

Resisting Elites’ Resistance to the Rule of Law

If disclosures can’t rouse the nation’s conscience, the third option is resistance.  There is a telling contrast between the lawbreaking along the securitization chain in foreclosure fraud, and the defiance of the subsequent dispossession that leads to homelessness and community decay.  A firsthand account of OccupyLA gets to the heart of the matter:

Each seated, nonviolent protester beside me who refused to cooperate by unlinking his arms had the following done to him: an LAPD officer would forcibly extend the protestor’s legs, grab his left foot, twist it all the way around and then stomp his boot on the insole, pinning the protestor’s left foot to the pavement, twisted backwards. Then the LAPD officer would grab the protestor’s right foot and twist it all the way the other direction until the non-violent protestor, in incredible agony, would shriek in pain and unlink from his neighbor. . . . My hands were then zipcuffed very tightly behind my back, where they turned blue. I am now suffering nerve damage in my right thumb and palm. . . . I spent most of my day and night crammed into an eight-man jail cell, along with sixteen other Occupy LA protesters. My sleeping spot was on the floor next to the toilet.

So that’s what happened to the 292 women and men were arrested last Wednesday. Now let’s talk about a man who was not arrested last Wednesday. He is former Citigroup CEO Charles Prince. Under Charles Prince, Citigroup . . . . spent years intentionally buying up every bad mortgage loan it could find, creating bad securities out of those bad loans and then selling shares in those bad securities to duped investors. And then they sometimes secretly bet *against* their *own* bad securities to make even more money. For one such bad Citigroup security, Citigroup executives were internally calling it, quote, “a collection of dogshit”. To investors, however, they called it, quote, “an attractive investment rigorously selected by an independent investment adviser”.

[Prince] received fifty-three million dollars in salary and also received another ninety-four million dollars in stock holdings. What Charles Prince has *not* received is a pair of zipcuffs. The nerves in his thumb are fine. No cop has thrown Charles Prince into the pavement, face-first. Each and every peaceful, nonviolent Occupy LA protester arrested last week has has spent more time sleeping on a jail floor than every single Charles Prince on Wall Street, combined.

To date, about 5,000 people have been arrested, and many of those jailed, for protesting Wall Street firms’ destructive and often illegal acts leading to the financial crisis.  Virtually no executives in critical firms have been prosecuted.  I cannot imagine a jurisprudence which could rationalize this asymmetry. And as Greenwald continues to chronicle the disparities in our two-tiered system of justice, arrested protesters start looking more and more like Lech Walesa and Vaclav Havel than the hippies or dilettantes the media loves to portray them as.  (Lest that seem overdramatized, Janine Wedel recently directly compared “the sense of helplessness, the gut-wrenching frustration and mounting anger” she felt at Bank of America to the desperation she felt in communist Poland in the early 1980s.) The “power of the powerless” begins when they realize that the playing field truly isn’t level, that there is one set of rules for elites and another for everyone else.

Greenwald has eloquently and passionately documented the failures of American justice for years.  When future historians explore the tenor of our time, they will turn to With Liberty and Justice for Some for a powerful account of ideals betrayed, elites run amok, and the terrible human toll left in their wake. After reading Greenwald, one truly understands why Occupy Wall Street began on September 17—America’s Constitution Day.

* Many had to do with the Truth in Lending Act Amendments of 1995, which “gave retroactive immunity to creditors for certain violations”—one more bank error in their favor.

Images: 1) Picture of the copy of the book that was part of the Occupy Wall Street People’s Library.  The police trashed the library when they cleared the park in November. 2) Pepper Spray Liberty, via Michael Shaw and Bag News Notes.

 December 9, 2011 at 8:51 am   Posted in: Book Reviews, Corruption, Criminal Law, Financial Institutions, Law and Inequality    Print This Post

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