The FBI is launching a criminal investigation into J.P. Morgan Chase and Co’s $2 billion-plus trading loss, according to the May 16 edition of the Boston Globe. I wonder if anything will come of it, especially in light of the fact that Countrywide Mortgage’s Angelo Mozilo was never convicted as a criminal. The SEC found that Countrywide committed civil fraud. The results took down Merrill Lynch, contributed to the fact that Bank of America required a bail-out, and caused hundreds of thousands of individuals to lose their homes through the sale of fraudulent subprime mortgages. Couldn’t the FBI have found criminal wrongdoing in that whole debacle?
What about all the big players on Wall Street who made the decisions that wrecked the global economy? Rolling Stone magazine, in an April 25 interview with Barak Obama, put him on the spot and asked him that very question. Obama responded that in some cases no laws were broken, but reforms have now been put in place that would make it easier to prosecute this type of wrongdoing. This argument holds very little water because the Sarbanes Oxley Act of 2002 made it a criminal offense to sign off on an annual report if it’s fraudulent and was supposed to eliminate the very meltdown that occurred. The civil fraud findings from the SEC against Mozilo and Bank of America’s Countrywide unit stated that the annual report was fraudulent in that it created an illusion of solvency when the company was insolvent. Either the government doesn’t know how to enforce Sarbanes-Oxley because it’s too complex (which means we will have even more problems with Obamacare and Dodd-Frank because they are much more complex than Sarbanes Oxley) or there’s some political maneuvering going on to curry favor on Wall Street. Remember, President Obama received many millions in campaign contributions from the same Wall Street executives who are now supposedly being investigated.
Obama also responded in the Rolling Stone article that there is still a possibility of criminal prosecution in the foreclosure arena. We certainly hope that proves true but the statute of limitations is about to toll and a Wall Street Journal article from last week brought up the very issue and noted that many of the very people who would prosecute such cases have been leaving the justice department in droves. As a consequence, the Journal doubted any criminal charges would be brought against the wrongdoers. It seems that our country is being run as well as a Mack Sennett comedy (i.e. good old-fashioned slapstick)! Unfortunately, you and I will pay for this incompetence.
