This week we will reach the fifth anniversary of the Fall of Lehman Brothers and the near collapse of the financial system.
Unfortunately, despite being on the brink of catastrophe and the destruction of the retirement savings of millions of American workers, its business as usual on Wall Street. At the Big Banks responsible for the crisis, bonuses are up, stock prices are soaring and pinstripe suits – rather than orange prison jumpers – remain the rage.
Following the collapse of the 2000 tech bubble and Enron, the Justice Department’s Corporate Task Force rang up 1,300 corporate fraud convictions, including the conviction of almost 400 CEOs and other high level executives.
What does the current DOJ and Securities and Exchange Commission have to show for their enforcement efforts following the financial crisis?
A few big fines against some of the banks, conveniently charged back to shareholders, a civil not criminal win against 28 year old Fabulous Fab, and a shiny new financial reform law called Dodd-Frank which has yet to be implemented.
Yes, the DOJ has brought charges against Ponzi schemers like Bernie Madoff and many relatively low level mortgage fraudsters. But “criminal cases brought by the department are widely seen as missing the heart of what caused the financial crisis,” noted Elkan Abramowitz and Jonathan Sack in a recent New York Law Journal Article.
The DOJ is certainly aware of its failure to bring cases that address in criminal charges the financial transactions that contributed to the crisis. Attorney General Eric Holder recently told the Wall Street Journal he would soon announce significant cases arising from the 2008 financial crisis.
Five years after the collapse of Lehman Brothers would seem the right time to announce such criminal cases. We certainly hope Attorney General Holder carries through on his promises.
The bankers, it seems, have gotten away with murder and mayhem. And as Abramowitz and Sack note, the way the bankers have built the financial system means they could get away with it again.
“The financial instruments and transactions underlying the recent crisis are immensely complex and involve many individuals performing highly technical tasks with large volumes of data,” they write. “These circumstances present substantial challenges to prosecutors not only in understanding the relevant facts but also in explaining the transactions to a jury.”
“Second, the very depth and breadth of the recent financial crisis makes it difficult to separate criminal behavior from business misjudgment and mistake,” they add.
Wall Street, in other words, through creating increasingly complex transactions that few understand but all firms deal and participate in, has created an enterprise that can make criminal behavior practically impossible to detail and discern.
That’s why Attorney General Holder must live up to his recent statement about bringing significant cases stemming from the financial crisis. The Feds must find a way to penetrate the opaque system of Wall Street trading and transactions and hold the executives and bankers criminally responsible for financial disasters and frauds. If the DOJ continues to fail to protect American investors, it will remain – quite dangerously so – business as usual on Wall Street.