Much attention has been paid in recent months to the fact that few big-time bankers have been prosecuted for wrongdoing related to the financial crisis of 2008-09.
It turns out there’s a good reason for that. In the summer of 2008, federal prosecutors officially implemented new guidelines for charging corporations with crimes. The new rules amount to a less vigilant approach.
The result: few criminal cases, despite numerous investigations into the financial meltdown, veteran white-collar lawyers and former federal prosecutors tell The New York Times.
The new regulations allow leniency for companies that investigate and report their own transgressions. In return, the government can delay or shun prosecution if the companies pledge to improve their behavior.
The results of such leniency are fairly obvious. “If you do not punish crimes, there’s really no reason they won’t happen again,” Mary Ramirez, a professor at Washburn University law school and a former assistant U.S. attorney, told The Times.
“I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.”
What the government has been doing is prosecuting small fry from the financial crisis.
“Going after the little guys is the equivalent of going to the beach in San Diego, throwing handfuls of sand into the Pacific Ocean, and wondering when you’re going to be able to walk to Hawaii,” former regulator William Black tells The (Toronto) Globe & Mail.
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