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Goldman Sachs’ settlement with the SEC in July, 2010 amounts to just two weeks of profits for the bank—hardly even a slap on the wrist.  However, the bankers had to concede that they had not had “full and complete disclosure in their marketing materials.”  Even so, few if any clients left the bank in the wake of the settlement. To be sure, since the impropriety had come to light in Sen. Karl Levin’s investigations subcommittee, Goldman had slipped in the pecking order of top underwriters of stocks and bonds to eighth. There is reason to think this was the extent of the damage.  Oklahoma’s Teachers Retirement System, for example, was unlikely to terminate Goldman even though the system’s general director said he was disappointed in the admission.

In general terms, the US Government was having trouble holding bankers accountable for the financial crisis of 2008. Wall Street’s defense that the bankers had simply made mistakes does not explain the liars’ loans or Goldman’s knowingly misleading clients who went long on subprime derivative securities. The government’s difficulty could itself give Wall Street an incentive to keep up the deceit.  That the market mechanism does not reflect the fraud by removing the offenders suggests a second major drawback—the first being internal volitility from irrational exuberance.  On the government side, even with regulations on the books and a willingness to enforce them, it may simply be too difficult for anyone to prove fraud when Wall Street is hanging together rather than turning each other in. That is to say, both the market mechanism and regulation may not be able to correct for the risk involved in the existence of banks too big to fail. In a way, we all enable the presumptiveness of fraud by refusing to break up the big banks both organizationally and in terms of ownership.  A lesson available from the financial crisis of 2008 might be that we can ill-afford to continue to enable giants who could fall on us any day.

Sources: Thomas Catan and Kara Scannell, “Convictions From Crisis Hard,” Wall Street Journal (July 17-18, 2010), B2; Susanne Craig and Randall Smithy, “For Goldman, Reputation Reclamation Project,” Wall Street Journal (July 17-18, 2010), B1-2.

The UN’s Electoral Complaints Commission recommended in 2009 that Afganistan’s Independent Election Commission invalidate 210 polling stations where the ECC found “clear and convincing evidence of fraud.”  The IEC in turn announced a run-off election because Karzai no longer had over 50% of the vote.  MSNBC reported that “the Karzai-influenced election commission may refuse to call for a runoff.” CNN reported that Karzai and Abdullah were trying to “cut some sort of deal” on a coaliation government that would have obviated, or skirted, a run-off.  Such a compromise would have been woefully inadequate from the standpoint of democratic process.

Even Karzai’s announcement that he would go along with a run-off can be read as presumptuous.  If he didn’t want to go along with it, he need not have taken part.  That one candidate’s feels his refusal to participate would or should cancel an election suggests a rather squalid presumptuousness that ought to be made transparent to the voters.  It is a sad commentary on representative democracy that the Afghan IEC’s decision was probably dependent on Karzai having been under international pressure to agree to the run-off.   Is it too idealist to insist that the candidate should have been informed by the IEC of its decision rather than permitting it?   For one of the candidates to have had a de facto veto on the election commission evinces a lack of democratic infrastructure.  It is like a cart pulling the horse.

In retrospect, we know that Karzai’s victory was fraudulent, even though he continued on in the campaign as a viable candidate.  What does it say when fraud is not punished?  Is having a run-off sufficient punishment?  Were all of the candidates benefitting from the fraud tossed out and a new open election held, would this be so catastrophic? I contend that the protests that occurred in the Middle East in 2011 for greater democracy can be interpreted as having been occassioned by years of frustration stemming from the sort of electoral facade perpetuated by dictators such as Karzai.  If so, the costs of not nipping electoral fraud in the bud far outweight any trouble involved in insisting on electoral accountability.  In the case of the U.S., foreign aid to Afghanistan could have been cut off in 2009 unless or until an open and fair election could be verified. With such a substantive signal given and repeated with regard to other dictators in the Middle East who were using the facade of democracy for legitimacy, some of the mass protests taking place two years later might have been obviated and lives saved that were otherwise lost.

Sources:
http://cnnwire.blogs.cnn.com/2009/10/23/karzai-challenger-prefers-opposition-to-coalition/
http://www.msnbc.msn.com/id/33394277/ns/world_news-south_and_central_asia/

Abdullah Abdullah withdrew on November 1, 2009 from the runoff election in Afghanistan.   Interestingly, Hilary Clinton and a spokesman for President Karzai characterized Abdullah’s withdraw in virtually identical terms—namely, as “his personal decision.”  Such a stance makes sense because both the American Government and Karzai had an interest in the Afghan electoral process being perceived as legitimate.   It is interesting, however, that the identical interpretation was instantly available to the press.   Perhaps U.S. Senator John Kerry had urged Karzai to agree to the runoff by telling him of a secret deal between the American Government and Abdullah that would have Abdullah pull out with a statement affirming the legitimacy of the electoral system.   That is, I wonder if the U.S. senator promised Abdullah something that essentially short-circuited the electoral process.  Karzai would look like a statesman without having to risk losing power, and Abdullah would get something rather than a probable election defeat.  The US would get stability in a Karzai government without having to worry about another controversial election.
As it turned out, Abdullah did not keep to the script; he denounced the continued corruption in the continued occupants of the Karzai-hired electoral commission (a blatant conflict of interest for any electoral body, to be sure).   Also, the runoff itself was cancelled.  Was this part of the deal?  If so, the deal I suspect took place was very well hidden, or subterranean in nature and intention.

What concerns me overall from this case is the extent to which such a deal would deviate from the story that we, the public, were told.  If there was such a deal, it would have been at odds with the democratic process, which really needed a fair runoff election rather than a collapse (or fait accompli).  A runoff could have served as an opportunity to fix or strengthen the democratic process while demonstrating that electoral fraud can be extinguished without resort to revolution.  Not only was the world left with no such hope; we saw the democratic process truncated ,and thus as still deeply flawed. 

This might be naive, but for many years American presidents have been giving lip service to supporting representative democracy around the world.  It would be sad were the same presidents actually thwarting it on account of political expediency (such as clearing the way for a decision on a new troop surge).   I refuse to accept that integrity in place duplicity is too much to realistically ask for.  Ironically, had the US and UN invested people and energy into building fire-walls in Afganistan’s electoral process such that the runoff would have truly been free and fair (including from threats of violence), the American goal with respect to the country would have been much closer to being realized than by sending in a surge of miltary force.   In going for the expedient route, the American elected representatives and their appointees looked corrupt or compromised themselves.  In the end, it is up to us, the citizens—of whatever republic—to say enough is enough and to resist the temptation to pull the lever in the voting booth as we did last time.  Otherwise, we are to blame—as enablers rather than as game changers.

See: http://www.cnn.com/2009/WORLD/asiapcf/11/01/afghanistan.election/index.html