The Committee to Destroy the World. Lewitt Michael E.

and the Royal Bank of Scotland, pointing out that this was Barclays’ third waiver since 2007, UBS’s seventh waiver since 2008, JPMorgan’s sixth waiver since 2008, Citigroup’s fourth waiver since 2006, and Royal Bank of Scotland’s third waiver since 2013. She wrote that, “[a]llowing these institutions to continue business as usual, after multiple and serious regulatory and criminal violations, poses risks to investors and the American public that are being ignored. It is not sufficient to look at each waiver request in a vacuum.”

      She pointed out that UBS’s waiver in the earlier LIBOR case was expressly conditioned on no further violations. That condition was violated by its conduct in the foreign exchange case, yet another waiver was granted. She continued: “It is troubling enough to consistently grant waivers for criminal misconduct. It is an order of magnitude more troubling to refuse to enforce our own explicit requirements for such waivers. This type of recidivism and repeated criminal misconduct should lead to revocations of prior waivers, not the granting of a whole new set of waivers. We have the tools, and with the tools the responsibility, to empower those at the top of these institutions to create meaningful cultural shifts, yet we refuse to use them.” In conclusion, she wrote, “I am troubled by repeated instances of noncompliance at these global financial institutions, which may be indicative of a continuing culture that does not adequately support legal and ethical behavior. Further, I am concerned that the latest series of actions has effectively rendered criminal convictions of financial institutions largely symbolic. Firms and institutions increasingly rely on the Commission’s repeated issuance of waivers to remove the consequences of a criminal conviction, consequences that may actually positively contribute to a firm’s compliance and conduct going forward.”

      Large institutions that repeatedly break the law have come to see multibillion dollar fines as another cost of doing business. They may complain about them publicly, but until their senior executives are made to pay the ultimate price – the loss of their jobs or their freedom – little is going to change. This may sound harsh, but the systemic harm resulting from the manipulation of markets as important as LIBOR and foreign exchange is profound.

      Years ago, the senior executives of Salomon Brothers lost their jobs after it was discovered that Treasury auctions were manipulated on their watch; and we don’t need to be reminded what happened to Drexel Burnham Lambert, Inc. and its visionary leader Michael Milken after he was alleged to have violated laws much less serious than the manipulation of major markets like interest rates and currencies. Today the consequences of law-breaking have been gutted due to regulators’ fears of destabilizing large institutions during an epic credit bubble, something that Charles Kindleberger warned about. We should heed that warning and stiffen our spines against the fraud in our midst before it drags down the system with it. Manipulating markets is not business as usual and should not be tolerated; it should be punished severely before it inflicts harm from which the system can’t recover.

The Geopolitics of Appeasement

      In 2008 the world was facing an economic crisis, but at least the geopolitical situation was relatively stable. That is no longer the case in 2016. Inexcusable foreign policy failures by the Obama administration have left the world a shambles.

      The only thing worse than being led by a president lacking the knowledge, experience, and character to lead a great nation is to surround that leader with advisors with similar limitations. But rather than a team of rivals, Barack Obama assembled a confederacy of dunces in Joe Biden, Hillary Clinton, Susan Rice, and John Kerry, a group that supported his worst foreign policy instincts and choices. Principled and competent members of the foreign policy team like Leon Panetta, Robert Gates, General Stanley McChrystal, and General David Petraeus left the administration early. As a result of chronic mismanagement of foreign affairs by the Obama team, the global hegemony of the United States has been profoundly weakened since the financial crisis. It will take decades for America and its allies to recover.

      As Charles Krauthammer writes: “For all the sublimity of art, physics, music, mathematics and other manifestations of human genius, everything depends on the mundane, frustrating, often debased vocation known as politics (and its most exacting subspecialty – statecraft). Because if we don’t get politics right, everything else risks extinction.”33 The Obama administration has gotten virtually nothing right when it comes to foreign policy. In the hands of President Barack Obama and his foreign policy staff, statecraft has been a series of abdications of American power and appeasements of America’s enemies throughout the world. It is virtually impossible to name a single place on the globe that is more stable at the end of Mr. Obama’s two terms in office than when he entered in January 2009.

      The geopolitical stage deteriorated to such a dangerous extent under Mr. Obama that the United States is facing existential risks that didn’t exist during the financial crisis. Many of the forces creating these risks were simmering under the surface in 2008, but they were so badly mismanaged by the Obama administration that one could reasonably ask whether the errors were intentional. After all, even incompetence is supposed to have its limits. But with this administration, that was not the case. Sunni-Shia conflict and radical Islamic terrorism are hardly new phenomena. Nor are Russian aggression in Eastern Europe or Chinese incursions in the South China Sea. Yet the responses to these destabilizing threats on the part of Mr. Obama, Mrs. Clinton, and the rest of this foreign policy team were so incompetent as to beggar reason.

      In November 2008, Americans elected an untested one-term Senator with no foreign policy experience and a desire to set a different course from his predecessor, George W. Bush. Unfortunately, that course was based on an ill-advised retreat from America’s leadership role in a world where anti-American and anti-Western threats were intensifying. There were certainly lessons to be learned from the foreign policy mistakes of Mr. Bush. Tragically, Mr. Obama and his team learned the wrong ones. Much of the country was rightly dissatisfied with the state of the country as George W. Bush ended his tenure and Mr. Obama offered the promise of “hope and change.” But as President Obama approached the end of his second term, “hope and change” had dissolved into the ugly remnants of a sluggish and overindebted economy; record levels of inner city black-on-black violence and minority unemployment; a profoundly weakened American presence abroad; and direct threats to America and its allies from radical Islamic terrorists As disturbing as were the domestic policy failures of the Obama years, the foreign policy failures were potentially catastrophic.

      The world grew far more dangerous in the years after the financial crisis than at any time since the end of the Cold War. This situation was exacerbated by a lack of resolute American leadership to counter rising threats from Iran, ISIS, Russia, and China. By late 2015, Iran was closer to achieving nuclear capability than ever before while solidifying its control over much of the Middle East after signing a one-sided (in its favor) nuclear deal with the Obama administration that was opposed by a majority of Congress and the American people. Russia occupied Ukraine and was threatening all of Eastern Europe while establishing a military presence in the Middle East for the first time to bolster Iran and Syria. China was asserting itself aggressively across the South China Sea. And ISIS was breeding home-grown terrorism throughout the West while carving a swathe of antediluvian horror across the Mideast. Make no mistake – these are not only geopolitical risks but economic and market risks.

      Even those who were unhappy with the aggressive foreign policy of George W. Bush must conclude that things went from bad to worse under Mr. Obama. To some of us, Mr. Obama’s belief that mullahs in Iran, jihadists in the Mideast, and Russian and Chinese leaders would succumb to his charms was dangerously naïve and completely delusional. But in our wildest dreams, even Mr. Obama’s sharpest critic could not have imagined that this president would inflict as much damage on American interests as he has done during his time in the White House.

      As his administration advanced, Mr. Obama managed foreign policy based on the assumption that what he regards as his superior intellect, knowledge, and judgment (for which, by the way, there is not a scintilla of objective evidence) superseded irrefutable and mounting evidence that his policies were producing results at odds with his own statements and the best interests of the American people. The worse the evidence became, the more he pursued the same damaging policies (an approach he shared with the nation’s central bankers). We need only look at the facts on the ground to see the ruins of Mr. Obama’s arrogant misconceptions.

      

33

Charles Krauthammer, “Are We Alone in the Universe?,” The Washington Post, December 29, 2011, reprinted in Things That Matter: Three Decades of Passions, Pastimes and Politics (New York: Crown Forum, 2013), 129.