We are on the brink of the expiration of the statute of limitations for criminal prosecution for those involved in precipitating the “too big to fail” collapse – led by the fall of Lehman Brothers – of Western world’s financial institutions in the fall of 2008. Perpetrators included those who configured sub-prime derivatives rated as solid with knowledge that values were based on false assumptions and absurdly-issued credit ratings, banks that borrowed to the hilt – at debt-to-equity ratios of over 30-to-1 – so that they could ride the remaining days of what they thought was a profit wave, and those who traded on insider knowledge and played both sides of the street with questionable disclosures to prospective investors. Not one single senior member of any American financial institution has been criminally prosecuted in connection with these pre-fall-2008 activities. NOT ONE!
“The Securities and Exchange Commission’s eight-member Lehman Brothers team, having hit one dead end after another over the previous two years, concluded that suing the bank’s executives would be legally unjustified. The group, noting that prosecutors and F.B.I. agents had already walked away from a parallel criminal case, reached unanimous agreement to close its most prominent investigation stemming from the financial crisis, according to officials who attended the meeting, which has not been reported previously.” New York Times, September 8th. You’ve got to be kidding! Large sections of Wall Street should have been roped off and turned into a massive prison years ago.
“But Mary L. Schapiro, the S.E.C. chairwoman, disagreed. She pushed George S. Canellos, who supervised the Lehman investigation as head of the S.E.C.’s New York office, to explain how executives who presided over the biggest bankruptcy in United States history could escape without a single civil charge.
“‘I don’t get it,’ she said during a tense exchange with Mr. Canellos in her private conference room in Washington, according to the officials, who were not authorized to speak publicly. ‘Why is there no case?’ she continued, staring at Mr. Canellos, instructing him to continue investigating whether Lehman misled investors. ‘The world won’t understand.’... She was right. Five years after Lehman’s collapse hastened a worldwide economic panic, the government faces lingering questions about the decision to spare executives like Richard S. Fuld Jr., who ran Lehman for 14 years until its demise… Federal prosecutors and the S.E.C. have never officially announced their decision to close the Lehman investigation.” NY Times.
Lying, playing fast and loose with numbers and fomenting the obvious conflicts of interest in allowing debt issuers to pick the credit rating agencies (who know that the referral trough would dry up unless they issued favorable ratings no matter what the truth might be), disguising unpleasant financial realities by shifting liabilities to “other entities” so they wouldn’t show up on internal books, carrying known failed debt instruments as valuable to investors seeking truth… and the list goes on and on and on.
Don’t tell me that those at the top had no idea… the captains of those malevolent ships were either terminally stupid (unlikely given the intense screening process to get into America’s rarified air of financial power) or terminally devious. The excuse that “everybody else is doing it” was the most commonly heard answer, sounding more like a Mafioso explaining why he was involved in serial mob-ordered murders.
And here’s a big question for you. Do you think Wall Street would currently be more ethical, more responsible and more honest if a dozen of its most senior executives were serving serious time in federal penitentiaries? Oh, and let me ask the reverse question: Do you think Wall Street is currently less ethical, less responsible and less honest because a dozen of its most senior executives are not serving serious time in federal penitentiaries for their pre-fall-2008 actions? And exactly when is the regulatory process going to make this a more stable economy less prone to sudden falls… as it still is today!
I’m Peter Dekom, and are you as outraged as I am?
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