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Goldman Sachs dodges criminal prosecution
Lloyd Blankfein, chairman and CEO of the Goldman Sachs Group. The Justice Department drops probe into Goldman mortgage deal. Four years after the financial crisis, there’s still no criminal conviction on Wall Street.
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Kai Ryssdal: OK, so the Justice Department didn't actually say the financial crisis was nobody's fault. But that's what you get if you read between the lines of an announcement the feds made last night.
The government's not going to prosecute Goldman Sachs in the last big case left over from the crisis -- a subprime mortgage deal in which the investment bank didn't tell investors the whole truth. Goldman did pay a $550 million fine to settle civil charges over the deal, but the DOJ says it can't prove criminal intent.
Which leaves consumers four years on wondering who -- if anyone -- gets the blame. Our New York bureau chief Heidi Moore starts us off.
Heidi Moore: If the financial crisis were being hashed out on TV, a lot of people would be in jail right now.
"Law & Order" clip: By the time I'm done with you, you'll be finished!
Frank Partnoy wishes it could be that easy. He's a University of San Diego law professor who used to sell complex financial products on Wall Street.
Frank Partnoy: Unfortunately, life is not like "Law & Order." We apply very different standards to Main Street and Wall Street. It's relatively straightforward to go after street crime, but it's awfully, awfully hard to go after Wall Street.
Some recent cases prove that. The Justice Department just dropped its potentially landmark investigation against Goldman Sachs. Last month, a Citigroup manager was acquitted of fraud fraud involving mortgage securities. But the jury encouraged the government to keep hunting for financial crimes.
Neil Barofsky: I think that it's unlikely that we're going to see any meaningful cases arising out of the financial crisis. I think that unfortunately, that horse has already left the barn.
That's Neil Barofsky. He's the former watchdog of the bank bailout program. He says after five years, the government is running out of time to bring these cases. And that leaves a baffling paradox, according to Frank Partnoy.
Partnoy: We'll end up with epic financial crisis where at least Senate investigators suggested that crimes were committed, and yet no one goes to jail.
Carl Levin, the senator whose investigation triggered the case against Goldman, attributed the outcome to either weak laws or weak enforcement.
It seems that the worst economic meltdown since the Great Depression is just nobody's fault.
In New York, I'm Heidi Moore for Marketplace.
It's not surprising given how much time has passed, the relatively short memories people have regarding this matter that no one has went to jail. The argument always is that the actors did not break the law and the laws that might have been broken are not worth bringing to trial. The only thing left is for people, investors, shareholders who feel like they have a good case to file a lawsuit against the banks and hope the case is good enough to win.
Re: this report and the discussion with Felix Salmon and Leigh Gallagher about whether the financial crisis was nobody's fault.
Kai is right - it is clear that that the DOJ, the SEC, the Treasury Secretary, the POTUS, the Senate, the House, the Federal Reserve Chairman, etc., will not punish Wall Street for the frauds they committed against investors, and enabled/encouraged against borrowers.
Nor will regulators be held accountable (or even lose their jobs) for allowing the fraud.
When the lenders' goal is to maximize the volume of loans rather than underwrite prudently to borrower income, it is no longer lending or capital allocation, it is fraud and theft.
The Federal Reserve and US Treasury shield most lenders (banks, bondholders, etc.) from the actual losses these activities generate.
Mistaken borrowers are collateral damage and asked to take losses and keep paying their interest.
Derivatives magnify the megatonnage of the bad loans.
When regulators decline to curb fraud and excessive risk by Wall Street, the public is endangered, people are harmed, and the economy suffers.
Speculative bubbles are what our current system is programmed to produce. Financial bombs will continue to explode since the banks and regulators keep getting do-overs.
How many consecutive bubbles can we blow? Wheeeeeeee, let's seeeeeeeeeee!
This story is misleading. The end of one case against Goldman Sachs does not mean the financial crisis was "nobody's fault." Those are Kai Ryssdal's words, and I extremely doubt whether the Feds would have meant to say that, because even if you accept the proposition that nothing illegal was done, that does not mean that nothing stupid or immoral was done which caused the financial crisis. And no, it doesn't mean we just go on as before-- it means we open our eyes to the need to regulate the banks. Dodd-Frank was a beginning but we need more. Nowhere is the CFPA, the CARD Act, or Dodd-Frank mentioned in the story, nor the need to break up the big banks.
Also, several executive as Fannie Mae are facing SEC prosecution, which was conveniently ignored in this story: http://www.smh.com.au/business/world-business/former-fannie-mae-chief-to...
See how these crooked bankers choose to spend their ill-gotten loot; it's like a bad R-rated movie--it just never gets better until all is anguish, sorrow, cocaine, and illicit sex. Warning: this book is the real deal!
https://www.smashwords.com/books/view/85207
The story argues that the fault was collective. In that case, the punishment should be collective also. I think we can agree that the people who obtained the mortgages have already been punished. To punish the financial industry, I suggest that we retroactively tax all personal income in the financial services industry from 2002-2008 at a rate sufficient to pay for the stimulus that was needed to rescue the economy. To punish the regulators, I suggest that they all be fired.
When someone robs the corner store, or a bank, for example, they go to jail and 1,000's of people are there now. Whenthe world has been brouight to its knees by the machinations of wall street financial firms (and others), with millions of retirement programs decimated (and a lot of other things too), it appears no one will go to jail for it.
OK. We don't have good enough laws. So then we swallow our lumps and call our senators and representatives. In the best of times, that would probably not work. It has to be believed that no matter what your poklitical persuasion, all would agree that won't happen now. Again, in the best of tiems, if there was a threat of new laws, those firms, banks etc would be in Washington making sure they got their 2 cents (and much more) in.
Does that not leave us at the mercy of those who sit at the top of our financial universe. With no recourse but to hope it won't happen again. Does that make sense, or rather, what is this country worth, to push the issue a bit, if we are reduced to this. Nothing can be done to protect us.
As a practical problem, my Dad told me i wiould never go wrong buying stocks for the long haul. SO what do i do with my money. I seems to me, one could make a decent argument that under your mattess would be the best place.
Lastly, to the excellent reporters here, is there anyway u can ask these questioins, with followups,to candidates. Is there an alternative to jail, new laws or waiting for it to happen again. The problems of social security seem minimal compared to this.
It is such a relief that nothing illegal happened. Of course it was despicable, dishonest, immoral, unethical, greedy, selfish, contemptible, vile, disgraceful, loathsome, disreputable, sordid, slimy, incredible. This is a sad commentary on an incompetent legislature who should make laws to check these flattering adjectives. Tony Soprano is in heaven with the financial industry. Maybe we should tar and feather Mr. Blankfein, I forgot shameless!
