Why no mega-bankers were charged with a felony
Last year during a hearing probing the causes of the Great Recession, Elizabeth Warren, the liberal senator from Massachusetts, quizzed the suits from the Federal Reserve on why no mega-bankers had been charged with a felony.
The regulators duly replied that such a focus on prosecution would be counterproductive in working towards the larger goal of getting the financial markets and economy back on their feet. Probably an honest enough answer, but not the primary reason uppermost in their thinking.
Quite simply, they didn’t figure they could get meaningful convictions. Federal prosecutors are never reluctant to orchestrate a perp walk, but they do it only when they think they have a good chance of getting a conviction. Prosecutorial careers aren’t made by acquittals.
When it comes to business activity, it’s grindingly frustrating to the Department of Justice that greed and stupidity aren’t illegal.
When uber-regulators like Alan Greenspan and Tim Geithner say, “We didn’t see it coming,” then you’ve got a defense made in heaven for the lowly account manager who avers, “Hey, how could a dumb guy like me know what was happening?”
Over the past several years I’ve personally known four guys who took investors’ money and funneled it into loans. They also took the investors for a ride. One was convicted, and got probation. One, also convicted, served 18 months in a federal lock-up and subsequently committed suicide, and the third is serving a long prison sentence. The fourth guy was never charged, even though many would believe that his activity was as egregiously culpable as the other three. In his instance, the U.S. Attorney just didn’t feel that there was enough evidence to get a conviction.
Also, a crash of the magnitude of the one that we saw in 2008 isn’t caused by just a few people, or a few hundred, or even a few thousand. To achieve the wreckage that we saw on New Year’s Day 2009 required the help of millions. Home owners who lied about their income, or their intent to occupy the property they were buying, appraisers who made appraisals “as instructed” by lenders; loan originators who coached borrowers on how to complete bogus applications — all were breaking the law.
If all those responsible for the Great Meltdown were to be prosecuted and convicted, we’d probably have to outsource prison administration to Vladmir Putin; there wouldn’t be enough of us left to act as guards.
But most of us probably have a hint of Sen. Warren’s frustration. Comes to mind, for example, the gentleman who was a top executive in Bear-Stearns mortgage backed securities operation. The securities that took the firm, and almost the whole country, down were backed by the infamous toxic mortgages.
However, this executive apparently got out unscathed: He was able to rent the entire Jerome Hotel in Aspen for his daughter’s Bat Mitzvah.
Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His e-mail is email@example.com.
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Earlier this week, three different development partnerships gave presentations to and were interviewed by Glenwood Springs City Council regarding their conceptual proposals to redevelop the river confluence area west of downtown.