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Why Zero Wall Street CEOs Are in Jail

The Wall Street Journal made a startling point in its Wonkblog yesterday: five years after Lehman Brothers fell and the U.S. economy collapsed in on itself, not a single Wall Street C.E.O. is in jail. In fact, none of them have even faced criminal charges.

Those men in charge, whose shady practices landed the United States’ economy in the worst shape it’s been in in decades, include Richard Fuld of Lehman, Jimmy Cayne of Bear Stearns, Stan O’Neal of Merrill Lynch, and Chuck Prince of Citigroup. They’re all out there, walking the streets, hopefully with their hands nowhere near anyone else’s finances.

Some of the higher-ups have gotten in trouble. Angelo Mozilo was formerly the chief executive of Countrywide, an aggressive mortgage lender owned by Bank of America. The Securities and Exchange Commission (SEC) charged him with insider trading and securities fraud, but that was a civil case, and he settled out of court. Two Bear Stearns hedge fund managers were charged with fraud, but found innocent by a jury.

So why has nobody gone down for the economic crisis that lend to endless foreclosures, substantial job loss and, not to mention, a multi-trillion taxpayer bailout? It may be that prosecutors are fearful of the powerful former CEOs and the effect prosecuting them may have on the economy. Neil Irwin, of Wonkblog, has an additional answer: “America doesn’t criminalize bad business decisions, even when they lead to business failure.”

But he also has a solution:

That means that our system needs to address the risks financial firms can create for the whole economy through other means. Higher capital requirements and stricter limits on the kinds of risky activities banks can take on will do a lot more to create a stable economy and financial system in the decades ahead than marching Lehman's Dick Fuld to a Lower Manhattan courthouse in an orange jump suit…Higher capital requirements may not satisfy blood lust the way a CEO in chains would, but they're are going to do a lot more to keep what happened five years ago this fall from happening again.

Accountability in the financial sector is one of POGO’s main missions. In March, we released a report detailing the troubling revolving door between the SEC and the private companies it regulates.

By: Avery Kleinman
Beth Daley Impact Fellow, POGO

Avery Kleinman At the time of publication Avery Kleinman was the Beth Daley Impact Fellow for the Project On Government Oversight.

Topics: Financial Sector

Related Content: Bailout, Financial Oversight, Securities and Exchange Commission

Authors: Avery Kleinman

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