Bank Execs Roam Free: Will They Loot Again?
The beginning this week of the federal trial of Raj Rajaratnam, co-founder of the Galleon Group, for insider trading makes us pine for criminal charges against the bank executives who ran the economy into the ground. The lack of criminal charges against the likes of Dick Fuld is dumbfounding, disturbing and sad. With all of the accusations of fraud leveled against the “too big to fail” banks’ conduct during the financial crisis, one wonders, why are no bank executives behind bars?
Time will tell whether Rajaratnam, who could face more than 20 years of hard time if he is convicted of all 14 charges of criminal securities fraud and conspiracy, is found innocent or guilty. A jury was selected this week and opening statements were presented yesterday. Regardless of his fate, it looks like we can only fantasize about criminal prosecution for top executives of the big banks.
Why have the federal authorities not prosecuted Fuld, who presided over the collapse of Lehman Brothers, and almost took down the global economy to boot?
Why no charges against Joe Cassano of AIG, who sold hundreds of billions of credit protection in the form of credit default swaps without having to put up any real money as collateral, made his millions and ran AIG into the ground? And Angelo Mozilo, who made a fortune at Countrywide and left others to pick up the pieces of the subprime mess he created, walks free.
Why was no high-level government task force assembled to hold criminals to account like we saw with the Enron task force? A plausible answer came from a former fraud investigator who told the Financial Crisis Inquiry Commission (FCIC) that “the FBI got virtually no assistance from” the bank regulators who had all the evidence.
A recent column in the New York Times tackles the question. In it, columnist Joe Nocera cites the lack of Government resources and formidable defense lawyers as two reasons for the lack of prosecution. He also notes that the failure of the feds to convict the Bears Stearns hedge fund managers has made them gun shy. It sends a bad message if the feds’ strategy is to cut and run from these fat cats who almost ruined our economy and have destroyed investor confidence in the integrity of the marketplace.
One glimmer of hope for those of us who want to see justice done may come from an unlikely source: the Manhattan District Attorney’s office, which usually is focused on street crime not Wall Street. This winter, the new DA, Cyrus Vance, created a Major Economic Crimes Bureau in an effort to fight financial fraud.
Still, that’s little solace for the fact that the big bank executives who created the financial disaster roam free. We only hope they don’t rob again.