A recent article in the Daily Ticker on the Yahoo Finance page discussed the fact that the Obama administration has not succeeded in prosecuting Wall Street executives for criminal conduct that occurred during the 2008 meltdown. The article contrasts Obama’s rhetoric against the wealthiest 1% of the population with his lack of action on bringing the criminal abuses by Wall Street executives to trial. “Despite his populist posturing, the president has failed to pin a single top finance exec on criminal charges since the economic collapse. Are the banks too big to jail—or is Washington’s revolving door to blame?” write Peter Boyer and Peter Schweizer in a new Newsweek article.
The case against Angelo Mozilo of Countrywide Mortgage is a prime example, and a Wall Street Journal article sums it up best: “News that Angelo Mozilo is being allowed to walk away unprosecuted for the housing bubble” can be considered conspiratorial in that “’friends of Angelo’ have intervened to save the great subprime malefactor from justice.” The article further states that “He {Angelo Mozilo} paid $67.5 million to the SEC last year to make securities-fraud charges go away, though in usual fashion without admitting or denying the charges.” Of course, Mozilo paid himself almost $200 million the year before so he came out pretty well financially. According to a New York Times article, Bank of America, which bought Countrywide at the beginning of the financial collapse in 2008, paid $600 million to settle shareholder disputes, $8.4 billion in loan relief in October 2011, $108 million to settle charges that Countrywide overcharged borrowers, and $335 million to the Justice Department to settle claims that Countrywide discriminated against certain minorities. With all of this wrongdoing, you would think that criminal charges against Mozilo should have been a sure thing, just like the criminal charges that came out of the Drexel Lambert wrongdoing in the late 1980s (junk bonds), the Lincoln National wrongdoing in the early 1990s (savings & loan) and the Enron and Worldcom wrongdoing in the early to mid 200s (dot.com bubble). None of these events were as damaging to the economy as the subprime disaster.
In the Newsweek article, Boyer and Schweizer highlight findings from the Transactional Records Access Clearinghouse, which show that financial-fraud prosecutions are at a 20-year low and down 39% since the Enron and Worldcom scandals of 2003. That is in sharp contrast to the S&L crisis in the 1980s which led to a conviction rate of 90% in the 1990s per the Daily Ticker. The article also noted, “In 2009 Obama reportedly told Wall Street executives during a White House summit, ‘My administration is the only thing between you and the pitchforks.’” Maybe the President made a deal for all the Wall Street support he received in his 2008 campaign and because of that, Wall Street has not seen criminal prosecutions for the acknowledged misdeeds. As Schweizer states, the statute of limitations is coming up for many of these crimes so the likelihood of prosecution is diminishing with time.
The Daily Tickker notes that the President, although he has not raised as much as Mitt Romney, still received significant funds from Wall Street: (Romney outraised) “…Obama among hedge funds and private equity firms by a four-to-one margin ($2.48 million vs. $625,000) and three-to-one among donors at securities and investment firms ($8.1 million vs. $2.8 million).” We contend that the money still speaks volumes and maybe this fundraising explains why there has been so little prosecution of Wall Street criminal abuse.
References
http://online.wsj.com/article/SB10001424052748703529004576160281616652342.html
