06 March 2011

Why does no one from Wall Street go to jail ?

Excerpts from Matt Taibbi's Rolling Stone most excellent essay Why Isn't Wall Street in Jail?  Very thought-provoking and well-written.
"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people...

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted...

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice...

Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is fucked up...

...But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals. This institutional reality has absolutely nothing to do with politics or ideology — it takes place no matter who's in office or which party's in power...

Over and over, even the most obvious cases of fraud and insider dealing got gummed up in the works, and high-ranking executives were almost never prosecuted for their crimes. In 2003, Freddie Mac coughed up $125 million after it was caught misreporting its earnings by $5 billion; nobody went to jail. In 2006, Fannie Mae was fined $400 million, but executives who had overseen phony accounting techniques to jack up their bonuses faced no criminal charges. That same year, AIG paid $1.6 billion after it was caught in a major accounting scandal that would indirectly lead to its collapse two years later, but no executives at the insurance giant were prosecuted...

In the end, of course, it wasn't just the executives of Lehman and AIGFP who got passes. Virtually every one of the major players on Wall Street was similarly embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed...

Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it's a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats... The Revolving Door isn't just a footnote in financial law enforcement; over the past decade, more than a dozen high-ranking SEC officials have gone on to lucrative jobs at Wall Street banks or white-shoe law firms, where partnerships are worth millions...

As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff...

Which is not to say that the Obama era has meant an end to law enforcement. On the contrary: In the past few years, the administration has allocated massive amounts of federal resources to catching wrongdoers — of a certain type. Last year, the government deported 393,000 people, at a cost of $5 billion. Since 2007, felony immigration prosecutions along the Mexican border have surged 77 percent; nonfelony prosecutions by 259 percent. In Ohio last month, a single mother was caught lying about where she lived to put her kids into a better school district; the judge in the case tried to sentence her to 10 days in jail for fraud, declaring that letting her go free would "demean the seriousness" of the offenses.

So there you have it. Illegal immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense only because the politics are so obvious. You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime. Prison is too harsh. Get them to say they're sorry, and move on. Oh, wait — let's not even make them say they're sorry...

They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can...
Much more at the link.


  1. All the same, at least the wal street guys helped us all get houses there for a while. The cd player thieves never did that. All they did was jimmy the locks to our cars and sell our old scratched up cds to pawn shops.

  2. Follow the money. Works every time.

    And thanks to corporations having 'freedom of speech' that will let them buy politicians without even having to try and keep it hidden, they're only going to get more powerful.

    Time for another round of trust breaking. Where's Taft and Roosevelt when you need them?

  3. I am disgusted with the situation. Poor people get shafted, the middle class is shrinking, and the rich get richer. John Boehner talks about Americans making sacrifices--how about some of the super rich sacrificing a bit more in taxes? But no, we have to take it away from teachers, and demonize them at the same time.

    How fitting that the captcha contains "sin".

  4. Jon Stewart, the Mark Twain of our time, had an amazing take on the Wisconsin teachers vs. Wall Street: http://bit.ly/eBxmzS

    Really excellent reporting for a comedian.

  5. What Barbwire said.

  6. I thought at the time this whole mess started, and still think, that until the fat cats who started this mess feel some pain, we will not get out of the woods, so to speak.

  7. It's things like this that make me feel hopeless.

  8. Bernie Madoff went to jail.

    But only because he stole from other rich people.

  9. Matt Taibbi

    Why is he writing for the rolling stone.
    Where is WSJ etc. writing on this.

    Why is Matt Taibbi not writing for news source and not a pop magazine?

    Does that not show there is something wrong?

    That the main stream press is complicit?

    Look out for the freakonomics film if you are interested....

    Bernie Madoff went to jail.

    But only because he stole from other rich people.

    He only stole of millionaires!!!
    Not the rich.

  10. Mr Hurtgen,

    Please go to an encyclopedia and search for the word "plutocracy". Then chain your feet to your working table.

  11. At least the oppressed citizens of the middle east now have the gumption to spit back at the greedy oligarchy in there worlds. When do the pissants of the US level the playing field??


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