Why CEOs weren't prosecuted in housing crisis
Excerpts from a piece for Business Week by William K. Black, a key regulator during the savings & loan meltdown in the 1980s and an eloquent commentator on white-collar crime.
May 11 (Bloomberg) -- The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.
It seems as if we have forgotten this lesson....The two great lessons to draw from this epidemic of fraud is that if you don’t look for it, you don’t find it and that wherever you do look, you do find fraud. The FBI was concentrating on retail banking, or individual borrowers and smaller lenders. But the big problems were being created in the wholesale end of the business, where loans were pooled, packaged, sold and securitized. Because the FBI only looked at relatively small cases, it found only relatively small frauds.
Comments
Guess we'd have to see the whole article to know if it's as awful as the excerpt; perhaps Black makes a case for higher-end fraud beyond asserting that it must have been there because nobody looked for it. Good grief!
Posted by: John | May 13, 2011 10:36 AM
Jay,
This is really not a very good piece. I see no substance in this excerpt that comes close to supporting the title of your Blog.
I have to agree with John. Weak effort.
CEO's (opinion time) aren't prosecuted because it is very diffiuclt to tie them into the specific actions and kowledge of their employee's wrong doings. Believe me, if Angelo Mozillo (former Countrywide Chariman and CEO) can't be tied to things to be put in jail, it would be tough to put anyone in.
Need more substance Jay.
Posted by: BunkMcNulty | May 13, 2011 12:54 PM
Commenters interested in more substance might want to check out Mike Hudson's book, "The Monster."
Black has written a few too. He actually knows what he's talking about.
Posted by: edward ericson jr. | May 13, 2011 4:03 PM
If the investigation looked closely into the pooling and securitization of mortgages the trail would lead directly to Fannie Mae and Freddie Mac which is the last thing anyone in government wanted to happen.
Posted by: CBW | May 14, 2011 4:34 PM
The nost favored elites sit in Congress, Too bad they are never held accountable for the high-end frauds that they create.
Posted by: John20723 | May 15, 2011 6:31 PM
Interesting point, CBW.
Posted by: John J. Walters | May 16, 2011 12:34 PM
IF appears that by 2006 Wall Street knew many of the subprime CDOs were toxic.
Were subrpime CDOs created or resold after that date acts of fraud?
Guess we will never know. Don't look, don't find.
Posted by: save_the_rustbelt | May 16, 2011 1:29 PM
@save_the_rustbelt: The non-profit website ProPublica won a Pulitzer Prize for its investigative reporting on this topic: http://www.propublica.org/series/the-wall-street-money-machine
It is definitely an eye-opener, and hasn't been covered that well in other media.
Posted by: Jason | May 17, 2011 8:48 AM