Why do people not punish useless status-seeking behavior?

They do, whenever such behavior seems like it's bound to fail. However, when it looks like it will succeed (and thus bring high status to whoever is practicing it), an attempt to punish would mean a declaration of war against someone of high status, which is usually not a smart move.

Do they assume that swaggerers might have social clout to match their personalities and are afraid of having them as enemies?

Often yes, as explained above, but it's usually not done consciously. Most status-related behaviors are instinctive, and the conscious mind only invents rationalizations for them (which can be of many different kinds).