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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 Avery Kleinman is 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

Submitted by Eb at: September 15, 2013
Dear Ms. kleiman, can you elucidate 'incentivize(d) customer service' and how that would 'return power to customers'? I look forward to your response, and while I wait, may I suggest that, perhaps restoring the Glas-Steigle Act would be a more effective course of action in restoring some financial security to us all.
Submitted by Flinch at: September 15, 2013
As in any other crime story, there is the micro and the macro. We arrest, charge, convict, and jail lawbreakers while at the same time trying to look at the system and how it might be made better. As the case has repeatedly been made, to send someone to jail for a long time for some minor offense, while white collar crime goes under investigated and with few actual charges. I would like to see Dick Lehman in an orange jump suit, while at the same time laws are passed that better protect the economy and the public.
Submitted by janel at: September 14, 2013
Bad business decisions??? Oh, please. These criminals knew exactly what they were doing. They were gambling globally with other people's money. We need regulations and perps walking.
Submitted by makaainana at: September 14, 2013
The problem is our present legal system (I don't call it a justice system anymore) is tempered with political considerations. The present Statue of Justice is a tattered, tired old lady whose blindfold has slipped allowing her to see the defendants. Behind her is a shadowy figure holding his finger on one side of the scales. The figure wears a sign around his neck that says "the rich and powerful". The lady's other hand holds a double edged sword. One edge labeled the "Average man" is bright and sharp, the other side labeled the rich and powerful is dull and rusty. A two tiered "justice" system is not justice. We became a nation with a two tiered justice system when Obama said he wanted to look forward not backwards when the question of prosecuting the torturers was posed to him. THESE are the times that try men's souls...
Submitted by NS at: September 14, 2013
We have the RICO statute for seizing ill-gotten gains from criminals; we should have something similar for C-Suite guys who wreak financial disaster on their companies and the economy.
Submitted by Dockrat13 at: September 14, 2013
As long as our officials are elected with such huge funds from corporations and wealthy "buyers" not much is going to change. When "our officials" answer to the people who put them there. No party likes corruption, and the system is corrupted.
Submitted by Tigermac at: September 14, 2013
The problem is this, not only was 2008 a time where the theft of Trillions of taxpayer dollars occurred, but it was a Coup by the financial industry. The people voiced their objections for the bailout to the Senate and Congress and the bailout of Wall Street was voted down. The financial industry basically said well we will show them who is in charge, then proceeded to do a back door deal with corrupt politicians and Wall Street and over turned the bailout no vote and passed it. At that point we became a plutocracy, Wall Street has used bribes to buy our politicians and that is also why they are not in jail. The President could put knowledgeable financial people to break up the too big to fail banks and stop giving them billions of dollars in taxpayers money. The Banks alone get 83 billion taxpayer dollars each year. We have to get people in the Senate and Congress who will fight for the people, to do this first we have to get money out of politics and then the criminals have to be voted out of office. The taxpayers need to get the facts about what is going on and hear the truth. So we also need to dismantle the propaganda and disinformation fear factories in this country to stop the brain washing of the voters who are needed to bring back and save democracy. How many taxpayers know that the bought and paid for politicians have been for decades stealing more money out of Social Security then we owe China? Then they started a campaign to lie to the public about Social Security going bankrupt and running out of money. They said it was because too many baby boomers were retiring and putting a huge burden on Social Security. The knowledgeable people know that this is impossible because each of the baby boomers paid into Social Security. The objective of the criminal culture in the government is to steal every last dollar of Social Security money or at least privatize it so that corporations can take it over and make money off of Social Security.
Submitted by hippy572 at: September 14, 2013
Although I agree that increased capital requirements and stricter regulation would be more beneficial to the economy, I notice neither is happening. Could it be that the same money that has kept the CEO's out of jail is buying a pass on any curtailment of the banks absolute power?
Submitted by MB at: September 13, 2013
If they've broken the law they should have their day in court just as any law breaker does. No one is above the law. Yet it would appear that is not the case in the very upper levels of management. I agree, there needs to be much higher levels of standards, that are enforced. Many were wiped away during the 80s.
Submitted by tigerlily78 at: September 13, 2013
What I find really troubling is that even now we are continually finding that some of these came CEOs who were complicit in the financial collapse are overseeing even more dastardly schemes and frauds and we continue to keep settling and giving them slaps on the wrist in the form of fines. Fool me one, shame on you. Fool me twice, shame on me. Fool us 4 or 5 times? These banks should be broken up, the wall between investment and commercial banking should be full restored, derivatives should be simplified and policed better or done away with nearly entirely, and these repeat offender should absolutely be in prison.
Submitted by Alex at: September 13, 2013
Addressing the cronyism and so-called "revolving door" with stricter regulation is akin to extinguishing a fire with more gasoline. It is literally insane to imagine the drafting of any regulatory legislation without the influence of partisan interests. The system needs a reboot. Break up the 2B2F banks, eliminate all government protections and regulations, and return to a competitive financial market that incentivizes customer service by returning power to customers over politicians.

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