Leaders of financial institutions who took major risks and helped throw the economy into the recent recession have largely avoided prosecution. In contrast, the savings and loan crisis of the late 1980s resulted in more than 800 bank officials going to jail, according to The New York Times.
This time around, however, lax regulation that arguably caused the crisis also means less manpower to pursue fraud.
"This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity," says William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government’s director of litigation during the savings and loan crisis.
"But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here," Black tells the Times.
Merrill Lynch understated its mortgage holdings while Countrywide executives praised their business practices in public while suggesting otherwise in emails and selling shares separately.
|Chris Dodd (L) and Barney Frank (R) (Getty photo)
Lehman Brothers executives told investors in 2008 that the bank's financial position was sound when it wasn't while Bear Stearns executives, a private litigant says, pocketed revenue that should have gone to investors to offset losses.
Lawmakers are debating regulation's role in the financial sector via the Dodd-Frank financial reform bill.
Republicans argue that the bill's regulation hurts economic activity, doing more harm than good.
For example, Republicans want to exempt private equity firms to adhere to U.S. Securities and Exchange Commission regulations as required under Dodd-Frank.
Registration "imposes a burden on them while doing nothing to make the financial system more stable and less risky," says a Republican staff memo obtained by Reuters.
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