I have said for some time that the recovery we are now seeing is unsustainable. The recession was a result of rot in the system and major inefficiencies in the economy (think parasitic behavior). The economy has been reflated on a wave of freshly printed dollars and debt. Unfortunately very little if anything has been doe to cut out the original rot. Attempts at reform have been limited at best and overall, pretty much totally ineffective.

We now know that there was no desire within the Attorney General's office to actually prosecute those behind the collapse (and yes ... there bloody well was fraud and illegal behavior). The general attitude from the president on down was "let's move on", "nothing to see here". And as a result a sustainable recovery will remain illusive.

Exhibit 1: From the PBS show "The Untouchables"
The Assistant US Attorney General - Lanny Braeuer

But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.
Reread that again. The US Assistant AG implies that EVEN IF there is massive wrongdoing, it will not be prosecuted if it might hurt someone else. This appears to be a fundamental new legal concept.

So by extension, if someone drives drunk and kills someone, but has a big family that depends on his wage, then he would not be prosecuted because of the damage that would be suffered by his family. REALLY????

Ted Kaufman seems to understand - even if the top law enforcement folks don't have a clue.

That is not the job of a prosecutor, to worry about the health of the banks, in my opinion. Job of the prosecutors is to prosecute criminal behavior. It’s not to lie awake at night and kind of decide the future of the banks.
Also note the revolving door of the crooks compromised through government. Breuer worked for Covington and Burling LLP, as did Eric Holder
Why these two levels of justice? Could this disparity simply be a case that the big banks will fight charges more aggressively, thus making criminal prosecutions more difficult?  Maybe.   But it also undoubtedly has something to do with the fact that the top leadership at DOJ is drawn almost exclusively from White Collar Criminal Defense Practices at large firms that represent the very firms that Justice is supposed to be investigating. Covington and Burling,  the firm from which both Attorney General Eric Holder and Associate Attorney General and head of the criminal division Lanny Breuer hail, has as its current clients Goldman Sachs, Bank of America, JP Morgan, Wells Fargo, Citigroup, Deutsche Bank, ING, Morgan Stanley,  UBS,  and MF Global among others. Other top Justice officials have similar connections through their firms.
Beuer's previous position?http://www.justice.gov/...
Mr. Breuer returned to Covington in 1999 as co-chair of the White Collar Defense and Investigations practice group, where he specialized in white collar criminal defense and complex civil litigation and represented individuals and corporations in matters involving high-stakes legal risks. He also vice-chaired the firm’s Public Service Committee. At Covington, Mr. Breuer developed a reputation as one of the top defense lawyers in the country.
Exhibit 2: The housing mess.

The recent settlement with the banks over foreclosure fraud was supposed to provide some form of closure on the housing mess. Unfortunately it now seems that the whole thing was just one big COVERUP of fraud. Quelle Surprise.

Over at Naked Capitalism, Yves Smith and Co have done some investigative work of their own to show how bad the situation is when it came to Bank of America (remember they were particularly bad having previously devoured Countrywide, one of the biggest black holes in the real estate bubble)

The main posts are:

As grim as this sounds, the conduct was worse than the leaks suggested. After extensive debriefing of Bank of America whistleblowers, we found overwhelming evidence that the bank engaged in certain abuses frequently, in some cases pervasively, in its servicing of delinquent mortgages. This is particularly important because Bank of America has been identified in previous settlements as far and away the biggest mortgage miscreant, paying over 40% of last year’s state/federal mortgage settlement among the five biggest servicers.

This settlement, as intended, was yet another significant bailout to predatory servicers. As we will demonstrate over our upcoming series of posts, conservative estimates of damages due to borrowers under the consent order who suffered improper foreclosures from Bank of America exceed $10 billion. That contrasts with the cash portion of the settlement amount for Bank of America of $1.2 billion.** The amount owing for other abusive practices would have increased this total further.

The OCC gave two rationales for shutting down the reviews. The first was that they were costly to Bank of America and other serivcers, potentially diverting funds from borrowers.

Again note the attitude. We can't keep investigating because it is costing the bank too much! There was clear evidence of major wrongdoing and damages in excess of $10 billion ... and BofA skates off with a tiny $1.2 billion fine. Now if you could rob a bank and only get a slap on the wrist, and get to keep 90% of the proceeds, why would you not keep robbing banks.


The system is rotten. Those in positions of power (in the banks and on Wall Street) appear to have suffered little from the entire recession. So why ... would we expect them to behave differently in the future?????

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