Sunday, December 22, 2013

The Financial Crisis: Why Have No High-Level Executives Been Prosecuted? by Jed S. Rakoff | The New York Review of Books

I have not been pitching for indictments for the bankers who led us over a cliff, just accepting that proof of criminal intent is hard to come by, and blaming it all on the Fed, the GOP, and all who drank the deregulation kool-aid.  But now federal District Judge Jed S. Rakoff has taken the government to task on it.  A former federal prosecutor who once called the mail fraud statute "our stradivarius" is less impressed by the difficulty of proving fraud against the top guys at our major fraudsters financial institutions - you know the names (Chase, Citi, BOA, Merrill, Goldman, Bear, Lehman, Wells, Countrywide, etc.) This is, I suppose the `last call' as the statute of limitations is about to run.  - gwc
The Financial Crisis: Why Have No High-Level Executives Been Prosecuted? by Jed S. Rakoff | The New York Review of Books:
Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans leading lives of quiet desperation: without jobs, without resources, without hope.
Who was to blame? Was it simply a result of negligence, of the kind of inordinate risk-taking commonly called a “bubble,” of an imprudent but innocent failure to maintain adequate reserves for a rainy day? Or was it the result, at least in part, of fraudulent practices, of dubious mortgages portrayed as sound risks and packaged into ever more esoteric financial instruments, the fundamental weaknesses of which were intentionally obscured?
If it was the former—if the recession was due, at worst, to a lack of caution—then the criminal law has no role to play in the aftermath. For in all but a few circumstances (not here relevant), the fierce and fiery weapon called criminal prosecution is directed at intentional misconduct, and nothing less. If the Great Recession was in no part the handiwork of intentionally fraudulent practices by high-level executives, then to prosecute such executives criminally would be “scapegoating” of the most shallow and despicable kind.
But if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years. Indeed, it would stand in striking contrast to the increased success that federal prosecutors have had over the past fifty years or so in bringing to justice even the highest-level figures who orchestrated mammoth frauds. Thus, in the 1970s, in the aftermath of the “junk bond” bubble that, in many ways, was a precursor of the more recent bubble in mortgage-backed securities, the progenitors of the fraud were all successfully prosecuted, right up to Michael Milken....
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