Bill Black deplores the fact the elite frauds who drove the economy
into the ditch have de facto immunity from prosecution.
The apologists are out in force explaining away the reality that not a single Wall Street executive has been convicted of charges related to the 2008 financial crisis whose fifth anniversary is upon us.
Reuters reporter Sarah White reminds us:
Five years on from the bankruptcy of Lehman Brothers, the debate over how to hold senior bank bosses to account for failures is far from over, but legal sanctions for top executives remain a largely remote threat.
Even as laws evolve—in Britain, the government wants to criminalise recklessness in banking—a repeat of the global financial crisis and near-collapses of 2008 would not necessarily result in many more prosecutions today, lawyers say.
At issue is the difficulty in pinning the blame on any one person for risks and decisions taken throughout a firm—one of the main obstacles to building such cases so far.
One of the main obstacles in that "difficulty" is that those in charge of pinning the blame have failed to try hard enough.
Given that the risk of future collapses remain high, you would think the apologists would be shamed into shutting their yaps. But no.
Three fundamental flaws stand out. Regulators stripped of power allowed banks to embrace too much risk and load up on toxic debt with short-term funds. Insufficient capital left them little margin for error when those assets plunged in value. A system too large, opaque and interconnected meant they couldn’t fail without catastrophic consequences for the economy. [...]
“The basic model hasn’t changed much, and it’s still fragile,” said Anil Kashyap, an economics professor at the University of Chicago Booth School of Business. “The banks need much more capital and liquidity. They’re still way short of being safe.”
One reason is the intensity of Wall Street’s pushback. Bank executives, lobbyists and lawyers logged more than 700 meetings with regulators on a section of Dodd-Frank that seeks to curb banks’ trading for their own account, according to data compiled by Kimberly Krawiec, a Duke University law professor. An October 2011 proposal for implementing the rule, named after former Fed Chairman Paul A. Volcker, generated more than 18,000 letters, many from banks complaining it was too complex and could hurt economic growth.
Drop below the fold to read more about the failure to hold the financial wizards of Wall Street accountable for crashing the economy with malice.
Bill Black is not one of the apologists. Rather far from it, indeed. A former bank regulator who is now an associate professor of Law and Economics at the University of Missouri-Kansas City, he has published Part One and Part Two of a three-part series smacking down what he calls a propaganda puff piece by the New York Times that "pictures the SEC as an ultra-aggressive enforcer that virtually never fails to take on the elite CEOs leading the control frauds."
You have to read all of Black's analysis to get the full blast, but here's just a bit to whet your appetite:
In the NYT’s account a pathetic failure of competence, integrity, and courage at the SEC is reimagined as a fantastic triumph of vigor and ethics on the part of the SEC enforcement attorney who refused to seek to hold Lehman’s senior officers accountable for their violations but otherwise became the scourge of elite frauds. In the end, he is promoted for his dedication to “justice” and is now the anti-enforcement leader of the SEC’s enforcement group.
“Justice” became an oxymoron in the Bush and Obama administration. It now means that the elite frauds that became wealthy through their crimes that drove our financial crisis should enjoy de facto immunity from prosecution.
The
Times says the SEC "has brought civil cases against 66 senior officers in cases linked to the financial crisis." Black calls that a phantom number and points out that, in fact, of the big guys only officers at Countrywide, Credit Suisse, Fannie Mae and Freddie Mac and IndyMac officers were sued. One example:
“SEC charged three executives with misleading investors about the mortgage lender’s deteriorating financial condition. (2/11/11) - IndyMac’s former CEO and chairman of the board Michael Perry agreed to pay an $80,000 penalty.” [WKB: The penalty figure is not a misprint. IndyMac made hundreds of thousands of fraudulent “liar’s” loans and sold them to the secondary market through fraudulent “reps and warranties.” It was the largest “vector” spreading mortgage fraud through the system. The three executives sued were C-suite level.]
C-level, as in CEO, COO, CFO. The top fellas.
And the other big players? Perhaps you recognize some of the names:
Bank of America: No officers sued. Bear Stearns: No senior officers sued. Citigroup: No officers sued. Goldman Sachs: No senior officers sued. J.P. Morgan Securities: No officers sued. UBS Securities: No officers sued. Wachovia Capital Markets: No officers sued. Wells Fargo: No senior officers sued.
Black points to another distortion in the Times's coverage, which states that, since 2000, according to "Stanford University’s Securities Litigation Analytics, the S.E.C. has declined to charge individual employees in only 7 percent of its securities fraud cases” that it closed.
The reality, says Black: In the case of the banks the SEC says contributed to the crisis the percentage of declined to charge "is 42 percent—six times the normal rate."
The Times and all the other apologists are adding insult to injury with their revisionist evaluation of supposed SEC aggressiveness. Meanwhile, the executive bonuses are back in full force and the top 10 percent of earners in the U.S. economy are taking home record percentages of total household income, with the top one percent taking home a record 19.3 percent of the total.
The lower tiers are still struggling with the financial damage done by the crash—lost jobs, lost homes, lost savings, lost futures—while its chief progenitors yuk it up in the boardrooms and work assiduously to do as much as possible to keep regulations and regulators from stopping the next crash.
Whitewash. Rinse. Repeat.