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Will Those Who Led the Financial System Into Crisis Ever Face Charges?
The American Bar Association (ABA) Journal has just published an article that asks the question whether any of the individuals that crashed the housing market and engaged in fraudulent behavior leading up to the financial market crisis, will ever face charges? This is particularly timely as the statute of limitations for securities fraud in many of those cases will run in 2016. Corporate Justice Blog contributor Dean Steven Ramirez asks this question pointedly in his upcoming book with the NYU Press entitled “Corrupted Justice” where he along with his co-author Mary Kreiner Ramirez describe the behavior of corporate executives at Countrywide, Lehman Brothers, Bear Stearns, and AIG, amongst others, and conclude that fraud was one of the primary causes of the Great Recession of 2008.
According to the ABA Journal, quoting law professor William Black, big banks handed out lousy loans while selling to outsiders that the loans were quality products suitable for packaging into investment offerings. From the article:
“[Professor] Black has been a constant critic of the Justice Department’s failure to prosecute lenders with the same verve they’ve gone after borrowers, and his testimony reflected that concern. The lenders didn’t care about misstatements on loan documents, Black testified and the defense argued, because they intended to make the loans no matter what. They wanted to push through as many mortgages as possible and collect their fees and bonuses, and then claim the loans met rigorous underwriting standards, selling them in large lots to other financial institutions and investors.”
The article continues: “In the years since the crash, federal prosecutors have used splashy press conferences to announce top banks’ multibillion-dollar settlements (typically paid by shareholders) in cases arising from the subprime mortgage mess. But criminal prosecutions have been reserved almost exclusively for the borrowers. . . . ‘Not to excuse wrongdoing by some borrowers, but clearly these were the business plans of large financial institutions, undertaken by human beings within them and, I presume, at the direction of senior executives in furthering the business plan,’ says Phil Angelides, a former California state treasurer who chaired the federal Financial Crisis Inquiry Commission’s probe of the causes of the meltdown of 2007-2010. The Financial Crisis Inquiry Report, released in 2011, was particularly pointed in its criticism of Wall Street, which it found had taken advantage of unprepared regulatory agencies that had been methodically defanged through deregulation over several years. The report noted a term coined on Wall Street that captured the carefree wheeling and dealing in the run-up to the meltdown: “IBGYBG”—”I’ll be gone, you’ll be gone.” The term, the report states, “referred to deals that brought in big fees up front while risking much larger losses in the future.”
Whether any corporate leaders that engaged in loan writing while being influenced by IBGYBG thinking will be prosecuted may be one of the important questions of 2016.
Source: http://corporatejusticeblog.blogspot.com/2016/01/will-those-who-led-financial-system.html
