Financial executives unquestionably played a major role in causing the collapse of both the stock market and the real estate market that perpetuated the 2008 financial crisis in the United States. Yet, the Securities and Exchange Commission and the Department of Justice have taken little action to hold top executives accountable for the untold damage they caused to people’s lives.
Foreclosure lawyers in Miami know that many have spoken out to express dismay that big banks and financial executives have escaped consequences for misleading investors, bundling bad mortgage debt and facilitating the explosion of subprime loans that destroyed so many lives. Now, a U.S. District Court judge who is at the heart of some of the most significant cases arising from the crisis has spoken out in a New York Bar Association speech, criticizing the SEC and the DOJ for failing to prosecute individuals for their wrongdoing.
Judge Speaks Out About Failures in Holding Financiers Accountable
Jed Rakoff has been vocal in the past about the SEC and DOJ’s failures in taking aggressive action to punish those responsible for the financial crisis. He criticized the SEC in two separate cases for failing to get admissions of misconduct in civil cases that settled. Banks were simply allowed to pay money to resolve the claims, without acknowledging what they had done wrong. Some believe that this criticism from Rakoff has led regulators to take a tougher stance, for example insisting on a confession of wrongdoing as part of a pending settlement with JP Morgan for business abuses.
Rakoff’s latest comments have now expanded to the issue of the failure to prosecute individuals who engaged in fraud. Rakoff said if “the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.”
Rackoff doesn’t just make accusations; he also goes point by point to undermine many of the excuses that the DOJ and SEC have made, including the difficulty of proving fraud in connection with the crisis and the claim that investors who were duped into buying mortgage backed securities were sophisticated investors and thus did not rely on fraud and misrepresentation.
His opinion is that it should not be difficult to show that fraud occurred because any reasonable banker would have asked why his own bank’s mortgage-backed securities continued to receive triple-A credit ratings even as evidence mounted that mortgage fraud was increasing. A failure to ask about why this was occurring is “willful blindness,” and there is precedent to use willful blindness to prove intentional fraud.
Further, mortgage backed securities were bought and sold very quickly, making it impossible to believe that investors would have been able to identify problems with the securities. Even if the investors were sophisticated, though, there is no requirement in a criminal fraud case for the Government to prove that the fraud was relied upon.
Finally, he responds to a third objection related to a fear that prosecutions would harm the economy by arguing that the prosecution of an executive should not cause the end of the financial institution.
His statements are a clear denunciation of the lack of prosecution and a strong rebuttal to excuses that the DOJ and SEC have offered over the years for their failure to take action against people who harmed so many through their dishonest actions.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
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