On Financial Meltdown Prosecutions

Matt Taibbi at Rolling Stone is noted for his investigations of the Financial Community particulary since the Financial Meltdown of 2007 to 2009. In an article in Rolling Stone for February 2011 Matt asked the question Why Isn’t Wall Street in Jail?. he concluded that it was two major factors – The Obama administration and Treasury was a)protecting those who contributed to the President campaign finances and b)were protecting the US Financial industry from scandal, loss of business, and even more Financial Turbulence if prosecutions and trials exposed the gross manipulations of Wall Street. Instead, we get spoon fed morsels as Goldman Sachs is exposed for setting up and betting against its own clients or Country Wide Financial engaged in pay and financial incentives for staff officers that rounded up and helped dupe mortgage clients into taking premium variable rate instruments they could barely afford. “Nobody goes to jail is the mantra of the financial era”.

William Black, professor at Univ of Missouri, Kansas City and Huffington Post columnist essentially sustains the Taibbi verdict. “From roughly 1999 to the present, three administrations have displayed hostility to vigorous regulation and have appointed regulatory leaders largely on the basis of their opposition to vigorous regulation. ” Black confirms the notion that for their campaign contributions of as much as half a billion dollars in the last 5 years, the Financial Industry is not getting just access to Washington leaders both Democratic and Republican but also a tremendous return on their investments with continued subsidies to the major financial corporations to the tune of of over $3trillion and effective immunity from prosecution for their frauds and deceptions  during the financial crisis.

in looking at the question of no financial prosecutions, investigated what the investigators had to say. “Why No Financial Crisis Prosecutions? Ex-Justice Official Says It’s Just too Hard”. Here is the essence of the argument:

Why’s that? Well, according to a now-departed Justice Department official who used to be in charge of investigating such matters, the Justice Department has decided that holding top Wall Street executives criminally accountable is too difficult a task.

David Cardona, who recently left the FBI for a job at the Securities and Exchange Commission, told the Wall Street Journal that bringing financial wrongdoing to account is “better left to regulators,” who can bring civil cases. Civil cases, of course, can produce penalties from the banks — as well as promises to be on better behavior — but don’t put any executives behind bars.

But the gist of the argument is that Criminal cases required to put financial fraudsters in jail carry a higher burden of proof than civil cases. So Jusice goes for other low hanging fruit and leaves the big Finacial Misdeed cases with SEC and others who are taking cicil actions.

Infowars.com asks Is “This Why They Won’t Prosecute? Top Justice Officials Represented Big Banks, Freddie, Fannie”

Obama’s Department of Justice isn’t prosecuting any big fish.

Indeed, the Obama administration is prosecuting fewer financial crimes than Ronald Reagan, George W. Bush, George H.W. Bush or Bill Clinton.

This is true even though the big banks – such as Bank of America, Citigroup, JP Morgan and Wells Fargo – committed some fraud, but their entire business model is fraudulent. See thisthisthisthis andthis.

The same is true of Fannie, Freddie. And even more so with Mers, where its entire purpose – from day one – was fraudulent. Herehereherehere and here.

So why haven’t the fraudsters running these chop shops been prosecuted by Attorney General Eric Holder, and the head of the DOJ’s criminal division Lanny Breuer?

Reuters helps explain why today – “U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division [watch this to get a sense of Breuer], were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.”

In sum, the argument goes beyond the claim that criminal cases are harder to win and says that the Attorney General Holder and key Justice officials are disinclined to prosecute former clients. There is a consequence to this and that is a sense of immunity among top executives – that White Collar Crime does pay very well.

Finally DealBook at the NYTimes, which is along with the Wall Street Journal a major scorekeeper for whats going on in NYC Wall Street, states the case again for no criminal prosecution of the Financial Metdown Executives.

As has been noted many times, the lack of criminal prosecutions arising out of the financial crisis has been painfully obvious. And two items in the news last week underscores that the prospect for a signature case is growing even more distant.

First, Reuters reported on Thursday that Securities and Exchange Commission staff members wrote in a memo that fraud charges “will likely not be recommended” against Lehman Brothers executives.

Then, the New York attorney general, Eric T. Schneiderman, said that the federal-state mortgage fraud working group announced in President Obama’sState of the Union address in January needed more resources — an indication that the group was still trying to digest evidence from transactions made more than four years ago.

The collapse of Lehman seemed to be the most likely source of criminal prosecutions, or at least civil enforcement actions. The firm’s examiner, Anton R. Valukas, issued a report in 2010 castigating senior management for shifting up to $50 billion off the balance sheet through the so-called Repo 105 transactions.

Yet the Dealbook goes onto describe how the criminal division at the SEC appears to be reluctant to take on the criminal case. They describe President Obama’s pledge in this years State of the Union Speech as equivalent to “hurry up to do nothing”.

Summary for John Q. Public

The JPMorgan CEO Jamie Dimon might say to John Q. , to paraphrase Michael Jackson, “Just Eat It”. The Financial industry rarely spends a half billion dollars on anything and expects  no return. So if you ask yor Democatic Congressional candiddate why no criminal prosecutions, you will get a well-oiled response citing the record breaking number of fines and convictions against financial corporations by the SEC omitting the facts that all have been obtained with careful cluases “admitting no wrong doing or criminal guilt”. Your Republican Congressional candidate might be inclined to say- see Obama is a failure because he has gotten no Financial Executive convictions [and you GOP man would be closer to right on then ever before]. However, the GOP candidates advisers would be advising strongly against that because right now GOP candidates are getting fat chunks of Financial funding from the Financial Industry.

Finally President Obama has taken a daring stand – saying that Mitt Romney’s Bain Capital record is open to question. This in turn might free Romney to ask why no criminal cases against the fraudster Financial  Executives from the Financial meltdown.  But Mitt is getting waves of Financial Industry campaign contributions – so he may very well demur.

Of course there are major consequence for this failure of justice. Because no one goes to jail there appears a)to be higher rate repeat financial fraud [conside John Corzine and JPMorgan under CEO Dimon and the continuing robo-signing foreclosure fiasco] and b)previous suspects of bad behavior are being rehired back into senior financial positions. The consensus is that despite the Dodd Frank Law, if a big bank teetered near failure it would be rescued again at public expense, shareholders/bondholders might escape total ruin  and the Board of Directors/Top Executives would be off Scott Free once again[this time they would do a rats-deserting-the ship tactic just before the end to escape any civil or crimnal actions]. So it looks like both political parties are saying to the public – until you demand much better – “Just Eat It.”

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