THE DIVIDE: American Injustice in the Age of the Wealth Gap

By Matt Taibbi (Spiegel& Grau)

In a speech last year that chilledWall Street, New York FederalReserve PresidentWilliam Dudley said he feared that the tax dodging, money laundering, mortgage fraud and trampling on homeowners by America’s big banks might reflect not just a fewbad actors but ethical flaws deep in the fabric ofWall Street.

In 2010, Attorney General Eric Holder Jr. warned that “mortgage-fraud crimes have reached crisis proportions.” He vowed bravely to fight back, but the Justice Department’s inspector general recently reported that, in fact, Holder’s department has madeWall Street crime its lowest priority and that, since 2009, the FBI has closed 747 mortgage-fraud cases with little or no investigation.

Nowonder, writesMatt Taibbi, who has written about the banks’ rigging of financial markets. In “The Divide,” Taibbi offers the searing indictment that America’swealth gap has corrupted the nation’s systemof justice, fostering a “legal schizophrenia” that harshly prosecutes the poor but practices selective leniency onWall Street.

After “the greatest crime wave in a generation,” the Obama administration’s failure to jail top bankers, Taibbi contends, shows that theUnited States nowlives by a hypocritical double standard—“letting major systemic offenderswalk, bypassing the opportunity for important symbolic prosecutions and instead ... putting the smallest of small fry on the rack for negligible offenses.”

Taibbi is a relentless investigative reporter. He takes readers inside not only investment banks, hedge funds and the blood sport of short-sellers, but also into the lives of the poor, minorities, drifters and illegal immigrants, to juxtapose justice for the impoverished and the powerful. Howcan it be, he asks, that a drifter such as Tory Marone serves 40 days in jail after cops find half a joint in his pocket, but not one executive of HSBC faces criminal charges after the bank “admitted to laundering billions of dollars for drug cartels in Mexico and Colombia, washing money for terrorist-connected organizations in the Middle East, allowing rogue states under formal sanctions by the U.S. government to move money freely by the tens of billions through its American subsidiary, [and] letting Russian mobsters wash money on a grand scale”?

To those who see welfare fraud as routine, Taibbi counters that “every day onWall Street, money is stolen, embezzled, burgled, and robbed. But the mechanisms of these thefts are often so arcane and idiosyncratic that they don’t fit neatly into the criminal code, which is written for the dumb crimes committed by common stick-up artists and pickpockets.”

He provides a litany of big-time financial cheating: the fraud atCountrywide under former chief executive AngeloMozilo; the $4 billion bank swindle in Barclays’ buyout of Lehman Brothers; the fraudulent finagling of the London Interbank OfferedRate, the North Star of global interest rates, that hurt billions of borrowers; and the massive mortgage fraud perpetrated