On the anniversary of the fall of Lehman, Barry Ritholtz says that criminal prosecution is still merited.
Why were there were no prosecutions of major executives?
It’s a fair question. I believe, as discussed previously, there were 10 areas where fraud and abuse took place. These were the Mortgage Electronic Registration Systems; mortgage pools; securitization; “misplaced” mortgage notes; force-placed insurance; servicing fees; fake documents; false affidavits, perjury and robo-signing; foreclosure mills; and active military members losing homes while on duty.
I am convinced that these cases were easy to prosecute, that a first-year law student would have a 90 percent conviction rate, that the documentary evidence was overwhelming, especially of mortgage and foreclosure fraud. As we know, there were no prosecutions of any significance — not at the state level, not at a federal level.
After much research, I have come to believe that at the highest levels of government, the financial industry managed to convince prosecutors that it was against societal interests to bust bankers. The revolving door between government and the private sector, between regulators and regulated, figures in this. If you’re a prosecutor, but you might like a big payday from business, do you really want to go hard on the companies that might offer you a job one day?
The bigger problem has been the normalization of fraud. We found out in 2008 that Department of Justice prosecutions and Securities and Exchange Commission enforcement actions against Wall Street had fallen 87 percent. Before you blame the George W. Bush administration, that same lack of prosecutorial zeal continued under the administration of Barack Obama.