“Too Big to Jail”: Wall Street Accountability Promises Fall Flat

In May, Attorney General Eric Holder insisted that no bank – or bank executive – was too large or too powerful to be prosecuted if they engaged in criminal activity. No individual or company, he said, no matter how profitable, would be able to skirt the law.
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However, the announcement of Holder’s resignation brings to light the fact that to date, no bank executive has been prosecuted in criminal court for the role played in the most cataclysmic financial disaster since the 1929 stock market crash and Great Depression.

Former bank regulator William Black, interviewed recently by Bill Moyers, offered extensive commentary on how the approach of prosecuting banks – as opposed to bankers – ensures that nothing will change. In fact, Black claims that no one could say with a straight face that prosecuting bankers would be a negative.

By-and-large, Holder and his administration allowed individual bankers to skirt the consequences of their actions. While the financial institutions for which these people worked were slapped with substantial civil fines and sometimes even criminal penalties, those costs will largely burden shareholders and taxpayers. Banks will write off the loss as a cost of doing business.

But executives? The ones who directed the issuance of those millions of subprime loans bundled into mortgage-backed securities? The ones who profited by churning out false documents in the wake of the foreclosure crisis? Not one has been sent to jail.

In fact, our Miami foreclosure defense attorneys recognize that while millions of Americans lost their homes, these executives continued to make money, kept their huge bonuses and severance packages and successfully evaded any liability for their actions.

There have since been a few instances of homeowners fighting back. For example, recently in California, a federal jury acquitted four homeowners of fraud after reviewing mountains of evidence revealed the extent to which bank executives baited them into taking out toxic loans.

Black had helped to prosecute and convict some 1,000 bankers during the savings and loan scandals in the 1980s and 1990s. He also is responsible for lifting the veil on the “Keating Five,” where defendants accepted huge campaign contributions from a bank executive, who then convinced them to help him conceal financial crimes from banking regulators.

The decision in California, he said, was significant for the fact that it was the first time the public really got a peek into the role banks played in perpetuating the housing crisis. So often, homeowners receive a lion’s share of the blame for taking on loans they could not afford. What is less reported is the lengths to which bankers went to push these risky and often fraudulent deals.

When the government went after the homeowners for fraud, clear and convincing evidence proved lenders deliberately sent huge numbers of fraudulent loans and then sold those loans through additional fraudulent representations, and this was what ultimately brought down the housing market.

Black likened the homeowners to “the mice” and the CEOs and bank executives as “the lions.” U.S. regulators today, he said, have been busy chasing the mice while the lions continued to prowl the campsite. Here, the jury found the “lions” were the ones responsible. That’s a huge shift.

The prosecutor in that case was later quoted as saying he wouldn’t allow the acquittal to deter them from prosecuting mortgage fraud. Black said that’s not the point. Mortgage fraud should be prosecuted. “But prosecute the lions and stop this nonsense,” he said.

Holder, for his part, has in countless interviewed seemed to understand the role that bank executives played. He told NBC Nightly News Correspondent Pete Williams that there was firm evidence executives at JP Morgan, for example, knew mortgage-backed securities they were selling were toxic, even as held them out to investors as solid.

Yet, no prosecutions against banking executives were ever initiated. In Black’s view, “They didn’t even try.” He further countered President Barack Obama’s statement that much of the damaging behavior that preceded the crisis wasn’t illegal. In fact, he said, the activity was not only clearly illegal, these bankers committed obvious felonies.

In the savings and loan scandal, the U.S. Justice Department made 30,000 criminal referrals for investigation. In the housing crisis? None that have been released to the public.

While Black conceded that bankers and banking institutions have become far more sophisticated, there was no reason regulators shouldn’t have risen to that level of sophistication to root out the wrongdoers – especially given the severe consequences of a failure to do so.

Bank settlements Holder helped to negotiate – some $125 billion or so – Black says are deals that banks would have cut anyway, regardless of the threat of criminal or civil action. What’s more, that money essentially granted those firms immunity, even if the agreement was an informal one.

Black speculates that absent any real accountability, we are on track for another financial crisis – one of equal or greater measure – in the near future.

If you’re battling foreclosure in Miami or the surrounding areas contact Bruce Jacobs & Associates 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 “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Holder: No banks ‘too big to jail’, May 5, 2014, By Josh Gerstein, Politico
Full Show: Too Big to Jail? Oct. 3, 2014, Bill Moyers & Company
More Blog Entries:
Florida Foreclosure Decisions Skewed Toward Banks, Sept. 24, 2014, Miami Foreclosure Defense Lawyer