The Trump administration is a crime magnet

But "Springtime for Scammers" has flaws that can be exploited

There is one thing that this newsletter avoids like the dreaded lurgy: specific recommendations for political strategies. There are a lot of people who talk at length online about the One Weird Trick that would ensure the political success of the Democrats (or Republicans), if only it were implemented. As Eitan Hersh argues, these recommendations are usually no more valuable than sports fans yelling out their sure-fire strategies to their teams. They are imagined political agency, rather than effective political action. Here, I’m going to hope that I am not just providing Hersh with another illustration of his argument. I’m going to break my own rule, since there is actually relevant expertise that I can draw on.

The Trump administration is a crime magnet. Specifically, it is becoming a magnet for political corruption. Rod Blagojevich, who was convicted of corruption and served prison time, just got a full pardon. New York mayor Eric Adams was under federal indictment for alleged corruption: Trump’s Justice Department has just requested that prosecutors drop the charges on the justification that “the mayor’s indictment had limited Mr. Adams’s ability to cooperate in President Trump’s immigration crackdown” (Adams had previously signaled that he wanted New York authorities to cooperate with Trump). In a move that Paul Krugman calls, “Springtime for Scammers,” Trump’s enforcer, Russell Vought, has effectively shut down the Consumer Financial Protection Bureau. Musk’s proposed remaking of government will enable all sorts of corrupt sweetheart deals if it succeeds. Finally, yesterday, Trump directed Pamela Bondi, the attorney-general, to “pause enforcement” of the Foreign Corrupt Practices Act (FCPA), a law that penalizes businesses that bribe foreigners.

It’s the last bit where I think that there is academic expertise that can help orient political action. Trump’s justification for stopping enforcement of bribing rules was as follows:

“It sounds good on paper, but in [practice] it’s a disaster, … It means that if an American goes over to a foreign country and starts doing business over there legally, legitimately or otherwise, it’s almost a guaranteed investigation, indictment and nobody wants to do business with the Americans because of it.”

This is, unsurprisingly, horseshit. The great value of the FCPA is that it penalizes big foreign companies (which depend on access to U.S. markets for bribery as well as U.S. business. Sarah Kaczmarek and my co-author, Abe Newman, explain this in an article published in International Organization. As they explain, the FCPA:

has significant transnational implications as its prohibitions extend to foreign companies that have some connection to the United States. U.S. jurisdiction applies to any foreign firm that takes advantage of U.S. markets - for example, their stock trades on U.S. exchanges - and if the firm has to register or file reports with the SEC. Additionally, jurisdiction applies to firms that make use of the “mails or other instrumentalities of interstate commerce” or do “any acts within the territory of the United States” in furtherance of an offer, promise, or payment of an unlawful payment to a non U.S. official. However, if the foreign company is not an issuer and causes no act - for example, wire transfer through U.S. banks. in the United States in furtherance of the bribe, then the antibribery provisions would not apply to the firm, and the United States would not have jurisdiction.

As Abe and I explain in our book, Underground Empire: How America Weaponized the World Economy (on which more in a bit: also, please buy it!), it often turns out in practice to be very hard to consummate international financial transactions without touching the U.S. banking system.

But there’s more! Kaczmarek and Newman explain how U.S. enforcement against foreign businesses has plausibly led those foreign businesses’ home governments to tighten up their own enforcement. When the U.S. enforces FCPA or related legislation against a foreign company, foreign regulators begin to get much more active. Their key finding:

Holding all other variables constant, the odds of a country enforcing its first case are twenty times greater if a country has experienced extraterritorial application of the FCPA as compared to countries that have not.

This is more or less the opposite of what Trump claims. U.S enforcement apparently makes foreign countries far more likely to start prosecuting their own businesses for offering bribes.

This leads into the political strategy recommendation. The Trump administration isn’t getting rid of the FCPA. It can’t. All it can do is say that it is ceasing to enforce it. So why don’t Democrats do what Republicans have done in the past, warning businesses that they shouldn’t rely on Trump’s promises to last?

As Abe and I explain in Underground Empire, the Obama administration reached a deal with Iran over nuclear weapons under which it promised to get rid of sanctions against foreign banks and businesses that wanted to do business with Iran. However, Republican politicians and former Republican officials, including George W. Bush’s Under-Secretary for the Treasury, Stuart Levey, told businesses that they shouldn’t rely on these promises. In our description:

The United States … couldn’t credibly promise that it wouldn’t break its word to business under a different administration or a different interpretation of the rules. Stuart Levey—who had left politics to become the chief legal officer at HSBC, complained in the Wall Street Journal that the Obama administration was “pushing non-U.S. banks to do what it [sic] is still illegal for American banks.” He furthermore hinted heavily that current or future U.S. regulators might decide to punish banks that entered the Iranian market.

There is nothing stopping Democratic politicians and former Democratic officials from following the Stuart Levey playbook. In other words, they can loudly, repeatedly and vociferously tell businesses that they should absolutely not rely on the Trump cessation to last. They can make it clear that as soon as they have power again, they will take every step they can to prosecute American and non-American businesses that have bribed foreign officials. And they can perhaps even set up some non-official Commission on the New Corruption or somesuch to keep on hammering home the point (and build the foundations for possible Congressional actions if they win the House in 2026).

This plausibly (although here is where Abe’s and my expertise gets fuzzy, at best) combines good politics with good policy. The Trump administration clearly wants to create what Dan Davies calls a “criminogenic” environment; an environment of lax or non-existent enforcement, where the incentives all point towards corruption. That is a global and national environment where Trump and his people can flourish. Equally, universal corruption is politically unpopular, across the left, center and right.

By making corruption into their beat, by amplifying media structures to pull all of the various forms of peculation together into a single compelling story, and by building on whatever enforcement capacities there are at the state and local level (the Southern District of New York the Manhattan D.A.’s office *e.g. is Democratic, has jurisdiction over lots of potential criming, and has traditionally had very politically ambitious prosecutors), Democrats can at the least inspire nervousness in those who would like to ride the wave of sleaze. And perhaps, in so doing, they will also build a frame on which they and others can hang the disparate bits and pieces of what the administration is doing, that clarifies the stakes to voters.

* Thanks to a legally knowledgeable friend for the correction.