Many Canadians (and many more Americans) ask the eminently reasonable question, Why aren't the bankers who precipitated the financial collapse of 2008 in jail? The damage they inflicted on the U.S. alone was immense: a loss of $11-trillion of personal wealth and 5.5 million jobs, and the foreclosure of over 10 million homes.
And there certainly seemed to be criminal behaviour. Two government bodies investigated the meltdown—the
Financial Crisis Inquiry Commission and the U.S. Senate's Permanent
Subcommittee on Investigations—and both made criminal referrals to the
Department of Justice. When the FBI issued a warning in 2004 that there was an epidemic of mortgage fraud in the country that could lead to economic calamity, the bankers bundling up high-risk loans and peddling them on Wall Street paid no attention.
Following the Savings and Loan scandal of the late 1980s and 1990s, 800 people went to jail. The collapse of 2008 has been described as "roughly 70 times larger." So why aren't the perpetrators being prosecuted, a failure that Byron Georgiou, who served on the Financial Crisis Inquiry Commission, calls "a lack of accountability that is really
quite unique in American history"?
Some possible reasons, loosely extracted from a recent article in Al Jazeera, include the following:
• According to Chris Swecker, a former assistant FBI director, the agencies responsible for investigating the excesses aren't adequately funded.
• Swecker also believes that the Justice Department is reluctant to pursue a
criminal prosecution unless it is a "slam-dunk" after losing a case in
which two Bear Stearns hedge fund managers were acquitted of
charges that they misled investors.
• The bankers' lawyers are the top graduates of the top law schools in the U.S. and completely outgun the government prosecutors. In short, they intimidate the regulators. Furthermore, the top lawyers with the government may be hoping to get a job with the very banking firms they regulate and start making a multi-million dollar salary, many times what they make with the government.
• U.S. Attorney General Eric Holder and Criminal Division Chief Lanny Breuer
were once white-collar defence attorneys and as a result may have a "defence mindset" that
• William Black, an expert in white collar crime who was involved
in prosecuting bank executives during the Savings and Loan
crisis, says prosecutors don't understand the connection between the 2008 collapse
and a crime called "accounting control fraud" in which executives who
control a company loot it and become rich.
• The revolving door of bankers moving into government agencies and regulators moving into banking firms creates close relationships in which nobody wants to call a friend a crook.
• The immense lobbying clout of Wall Street overwhelms politicians and regulators alike.
• The financial industry is a major contributor to election campaigns. Goldman Sachs was a top donor to Barack Obama in 2008.
• The banking industry is so critical to the health of the American economy the government may be afraid that tough regulation could be "bad for business."
Summing it all up, one might say the banks are just too damn rich and powerful. Meanwhile, time is ticking away on the statute of limitations. The bastards may walk.