I’m sure I’m not the only one is flabberghasted by the complete absence of criminal proceedings against major financial institutions guilty of myriad crimes resulting in the financial crisis. From the Office of Thrift Supervision, who is responsible for the regulation of entities such as Washington Mutual, IndyMac and Countrywide, to the Office of the Comptroller of the Currency – the regulators responsible for JP Morgan, Bank of America, Wells Fargo, et al – there have been zero criminal referrals.
The closest we’ve come to seeing anything approaching criminal proceedings was the SEC’s action against Fabrice Tourre,, which determined the Tourre alone was responsible for causing $1 billion in losses by three major banks through the sale of complex securitized debt instruments by Goldman Sachs, for whom Mr. Tourre was a junior employee.
The fact that Goldman Sachs fired him, but continues to pay his legal bills, is clear evidence that he was the fall guy for Goldman Sachs, and by offering Tourre up as sacrificial lamb, Goldman successfully averted further action against the firm itself.
The list of an absence of criminal proceedings in other, non-financial crisis related disasters that by all accounts should have resulted in criminal charges against senior management is substantial too.
What about Steve Cohen and SAC Capital Advisors? Cohen’s ability to deliver 25% average annual returns was obviously only possible with the insider information his firm (not him though) is charged with utilizing to make investment decisions. How is it that the head of such a long-life criminal enterprise is not himself charged with any criminal wrong-doing?
And how about the most glaring abdication of legal application yet – the “disappearance” of customer’s supposedly segregated $1.6 billion in funds as MF Global hit the wall on reckless wrong-way bets on sovereign debt instruments. It is shocking and outrageous that Jon Corzine has not himself been charged. Eaglerock Capital Management Chief Executive Nader Tavakoli – a litigation trustee in the US Bankruptcy Court in Manhattan, has alleged that a scheme masterminded by Mr. Corzine to buy billions of dollars in European sovereign debt with borrowed money while artificially inflating the company’s revenue ultimately drove the company into Chapter 11.
William K. Black, now a professor of law at the University of Missouri at Kansas City, is a former bank regulator who played an integral role in throwing a number of high-level executives in jail for white-collar crimes during the savings and loan crisis in the 1980s.
He was involved in the prosecution of over 600 senior level executives – achieving a 90% conviction rate – as a result of the savings and loan scandal of the 1980s.
According to him,
The savings and loan debacle was one-seventieth the size of the current crisis, both in terms of losses and the amount of fraud. In that crisis, the savings and loan regulators made over 30,000 criminal referrals, and this produced over 1,000 felony convictions in cases designated as “major” by the Department of Justice. But even that understates the degree of prioritization, because we, the regulators, worked very closely with the FBI and the Justice Department to create a list of the top 100 — the 100 worst fraud schemes. They involved roughly 300 savings and loans and 600 individuals, and virtually all of those people were prosecuted. We had a 90 percent conviction rate, which is the greatest success against elite white-collar crime (in terms of prosecution) in history.
In the current crisis, that same agency, the Office of Thrift Supervision, which was supposed to regulate, among others, Countrywide, Washington Mutual and IndyMac — which collectively made hundreds of thousands of fraudulent mortgage loans — made zero criminal referrals. The Office of the Comptroller of the Currency, which is supposed to regulate the largest national banks, made zero criminal referrals. The Federal Reserve appears to have made zero criminal referrals; it made three about discrimination. And the FDIC was smart enough to refuse to answer the question, but nobody thinks they made any material number of criminal referrals [either].
So my question is this. If the regulators of the United States financial system are NOT collaborating with the originators of thousands of fraudulent mortgages and loans, then why have there been no criminal referrals?
And why is there not even the slightest sign of outrage in any of America’s mainstream financial press?
