

Wall Street: Not Guilty - petethomas
http://www.businessweek.com/magazine/content/11_21/b4229060222515.htm

======
alexqgb
Seems like a PR coup paid for by major banks who are majorly scared. It's all
about sidestepping crime by saying "There may have been SOME crime, but it
wasn't the ROOT cause of the crisis".

Therefore what? No prosecutions whatsoever? Does the author really think that
the law on Wall Street is this relative? That criminal acts only attract
prosecutorial attention in those rare (read 'nonexistent') cases where they
are the clear and singular causes of global economic meltdowns?

The author goes on to "point out" that "prosecuting these crimes is HARD."
Maybe that's what a hack being paid to lie might say, but actual prosecutors
know better. Elliot Spitzer (who REALLY know this game, having seen it from
both sides) noted in 'Inside Job' (a) how popular cocaine and hookers were
(and still are) among Wall St. types (b) how simple it is to prosecute vice
cases and (c) how easily they can ruin the careers, lives, and families of
those who get busted. After all, the further up the status ladder you go, the
harder these things are to live down.

Sure, prosecuting white collar crime by auditing paperwork is tricky, and
that's what makes the approach a rookie move. The real pros (like Spitzer)
don't bother. Instead, they run a dragnet that catches a number of bank
employees with their pants down (often literally). They threaten them with the
end of their jobs, marriages, and dignity over a bunch of petty crap that they
can make go away IF the poor bastards dig up the kind of dirt on their bosses
that the prosecutors could never find on their own. Magically, dirt appears.

Spitzer's big point, however, is that nobody works like this without their
boss's approval. If there's strong pressure NOT to do their jobs, those jobs
don't get done. And they're not going to get done if the White House is loudly
signaling DO NOT investigate or prosecute.

Bill Black had some interesting commentary on this point exactly, including
remarks by Gretchen Morgenson and Louise Story, who reported that "in 2008,
the FBI, belatedly, realized that it had improperly targeted relatively
trivial mortgage frauds while ignoring the massive lenders that specialized in
making fraudulent mortgages. The FBI developed a plan to reorient its
resources towards the “accounting control frauds” that always should have been
its priority. We now know that the Department of Justice (DoJ) deliberately,
and successfully, sabotaged this effort to investigate the major frauds.

The second underlying scandal that their column disclosed is that two key
members of what Tom Frank aptly termed Bush’s “Wrecking Crew” – Geithner and
Bernanke – who President Obama chose to promote and reappoint and make his
anti-regulatory leaders sought to discourage or limit federal and state
prosecutions, enforcement actions, and suits. Geithner’s express rationale was
that the financial system extreme fragility made vigorous investigations of
the elite frauds too dangerous."

[http://www.creditwritedowns.com/2011/04/fiat-justitia-
ruat-c...](http://www.creditwritedowns.com/2011/04/fiat-justitia-ruat-
caelum.html)

In any case, we seem to be moving from "yes, there was crime, but don't
prosecute" to "yes, there MAY have been crime, but we CAN'T prosecute" to
"yes, the crisis was bad, but it wasn't CAUSED by crime, so we're not about to
prosecute."

Matt Taibai summed it up best in his February RS column "Why Isn't Wall Street
In Jail?"

"Over drinks at a bar on a dreary, snowy night in Washington this past month,
a former Senate investigator laughed as he polished off his beer.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole
story right there. Hell, you don't even have to write the rest of it. Just
write that." I put down my notebook. "Just that?" "That's right," he said,
signaling to the waitress for the check. "Everything's fucked up, and nobody
goes to jail. You can end the piece right there."

Nobody goes to jail. This is the mantra of the financial-crisis era"

[http://www.rollingstone.com/politics/news/why-isnt-wall-
stre...](http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-
jail-20110216)

------
tghw
This is not much more than a poorly titled straw man argument. The argument is
not that fraud caused the collapse, but that fraud was discovered during and
after the collapse, and that fraud should be prosecuted. Ultimately it doesn't
matter if the cause of the collapse was legal or not, though it is hard to
ignore the fact that it was (at least) exacerbated by fraud.

A more accurate title might be: "Wall Street caused the crash (though not
necessarily by illegal means) and was shown, in the process, to have committed
numerous acts of fraud which should be prosecuted."

~~~
D_Alex
Yep, or "Wall Street: Guilty" would also do the trick.

But, this is Bloomberg. Just enjoy the irony.

------
theoj
No conviction does not necessarily mean no guilt. And you may want to take a
look at a counterpoint, because convictions may finally be on their way:

Matt Taibi - The People vs Goldman Sachs
[http://www.rollingstone.com/politics/news/the-people-vs-
gold...](http://www.rollingstone.com/politics/news/the-people-vs-goldman-
sachs-20110511?page=1)

------
SkyMarshal
_Taken from the top, these sentiments imply that the financial crisis was
caused by fraud; that people who take big risks should be subject to a
criminal investigation; that executives of large financial firms should be
criminal suspects after a crash; that public revulsion indicates likely
culpability; that it is inconceivable (to Madoff, anyway) that people could
lose so much money absent a conspiracy; and that Wall Street bears collective
guilt for which a large part of it should be incarcerated._

TLDR: set up a straw man unobvious only to people who haven't read or watched
the referenced accuse's (Inside Job, Rolling Stone, etc) then spend 5 pages
knocking it down.

------
wattsbaat
The article makes a good point. There have been no trials (let alone
convictions) of bank executives because they probably did not violate any
actual laws. Reckless financial risk-taking on the part of private firms is
not illegal. Sure, there were clear instances of fraud and predatory loaning
by more minor players, but the guys at the top of the food chain are most
likely not guilty of any specifiable crimes.

But if the overwhelming majority of US citizens do in fact believe that the
actions of the bank executives should be illegal, the logical thing to do
would be to change the laws. (Of course, this solution is a bit unsatisfying,
since no one can accurately predict these major market collapses and the next
major crisis will likely be different enough that it could very well fall
outside scope of any new laws.)

Sidenote: Unfortunately, the recent conviction of Raj Rajaratnam will probably
assuage public anger while not at all addressing this issue. From what I
understand, he was found guilty of insider trading, which is more or less
unrelated to the mortgage-bubble/financial-crisis.

~~~
tghw
The article confuses two related but separate questions. The first is who
caused the collapse. The second is whether or not they did something illegal.
On the first point, the article claims the banks are "not guilty", which isn't
really true. They're excessive risk-taking _did_ cause the collapse. That
doesn't mean it was necessarily illegal, just that they are "guilty" of
causing the collapse. But just because the causes weren't illegal doesn't mean
that they didn't commit fraud along the way. The collapse revealed the fraud
that had been going on, and while it didn't _cause_ the collapse, it made it
worse.

Ultimately, it doesn't even matter whether there was a collapse or not. The
fundamental point of people like Ferguson is that we now know of a number of
illegal acts which took place before and during the collapse, yet those have
not been properly prosecuted, and that's a problem.

~~~
wattsbaat
Thanks for highlighting that distinction. I guess we can chalk up the lack of
prosecution for actual fraud to the incredible power the investment banks have
over the political process (i.e. lobbyists, campaign funding, regulatory
capture, etc). I watched Inside Job a while ago and details are starting to
blur together. (I just remember everyone looking really bad.) Perhaps it's
time for a second watch.

------
MaysonL
Fraud, in the shape of "liars' loans", aka Alt-A, was the major driver of the
housing bubble: see <http://www.pbs.org/moyers/journal/04232010/profile.html>
where William Black discusses the frauds. See Wikipedia on William K. Black
for more.

------
afterburner
Of course the finance industry will tend not to break the law. They lobby to
have the laws changed instead to allow them to take the risks they want, at
little actual risk to themselves personally.

~~~
alexqgb
What's remarkable is that in spite of being able to rewrite laws in their
favor, these bastards manage to break them anyway. I suppose it's simply
because they can.

------
carsongross
Business Week defending outright fraud by the banking sector?

Shut UP!

