It is now mainstream news that none of the big financial criminals have been prosecuted.
The New York Times is running an article today entitled “In financial crisis, no prosecutions of top figures”, which has been picked up as the leading front-page story by MSNBC. The story even quotes Bill Black:
But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.
And the chair of the Financial Crisis Commission, Phil Angelides, said today:
I think there’s a great concern in this country on two fronts. One is there’s a question here, do we have a dual justice system? One for ordinary people and then one for people with money and enormous wealth and power. Secondly, we need deterrents. To the extent laws were broken, we need deterrents. If someone robs a 7-11, they took $500 and they were able to settle the next day for $50 and no admission of wrongdoing, they’d knock over that 7-11 again. And we’ve seen time after time where people and firms have made tens, one hundreds, billions of dollars. They’ve settled charges for pennies on the dollar. At Citigroup for example they represented that they had $13 billion of subprime mortgage exposure when they really had $55 billion. The penalty to the chief financial officer who made $19 million that year, 2007, was $100,000. Goldman was fined $500 million but the date they settled their stock moved up $2 billion. There’s been no real consequence.
Well I think there’s two things here. Number one is it’s up to the prosecutors to do thorough investigations. That’s what we should expect. We don’t want hangmen justice. We don’t want vengeance, but we want thorough investigations. And if people crossed a line they ought to be prosecuted. But there were a lot of people who bellied up to the line and conducted themselves in a way without the highest standards of ethics or moral conduct that hurt the economy badly.
And I think one of the things that’s most troubling to people is there seems to be very little relationship between who drove this crisis, the big financial institutions, the CEOs, regulators who didn’t do their job, and the people who are paying the price, which are millions of people who have lost their jobs, lost their homes, lost their life savings.
As I’ve previously noted, Nobel prize winning economist Joseph Stiglitz, former Fed chairman Alan Greenspan and a host of other well-known financial names have called for prosecution, because the economy cannot recover until fraud is prosecuted.
No wonder Marc Faber calls the U.S. a failed state, Kenneth Rogoff says our tax systems are “Byzantine labyrinths funneling money to powerful interests”, and experts on third world banana republics from the IMF and the Federal Reserve say the U.S. has become a third world banana republic.
Barry Ritholtz argues that – if the prosecutors won’t do their job – we should prosecute them for nonfeasance.
Max Keiser is a tad more radical, saying that – if the criminals aren’t prosecuted – we should hang the bankers. I’m not sure if it is a sign of public sentiment, but he got a big round of applause for saying that.