Nearly a decade after the fraud and irresponsible actions at Wall Street banks, Countrywide Financial, and other companies brought the nation to the brink of total economic collapse, there have been no prosecutions against their key executives.
Is our justice system incapable of pressing these cases to their rightful conclusion? Or just unwilling? None of the chief executives at the companies that caused the 2008 global financial crisis has been held fully accountable. Nobody from Lehman Brothers or Citigroup has been criminally charged. No top executives at Bear Stearns have been indicted.
All former American International Group executives are free. Not one of any of the top executives of the big mortgage companies involved—Washington Mutual, IndyMac and Countrywide—had to face the law.
This is not only a travesty of justice, but it is also unique in our history. The savings and loan crisis and the insider trading scandals of the 1980s, and the accounting scandals at Enron, WorldCom and Arthur Andersen in the 2000s, all had their criminal prosecutions.
But where are the Charles Keatings, the Michael Milkens, the Kenneth Lays of the 2008 financial crisis? The biggest banks—JPMorgan Chase, Bank of America, Citibank, Deutsche Bank and recently, Wells Fargo—were accused of fraud and contributing to financial decline not seen since the great depression, but hold no accountability.
Is it not a crime to defraud customers and shareholders? Enormous sums of money are set aside by these companies as “reserves” to cover litigation and settlements. Financial payoffs are thought to be a cost of doing business.
After the 1980s savings and loans debacle, more than 1,100 individuals were prosecuted, including many top executives at the largest banks. Enron, WorldCom and Arthur Andersen all brought criminal prosecutions and jail time for people at the top.
The 2008 crisis was nearly 200 times greater in scope and pain than the savings and loan crisis. In the U.S. alone, experts estimate $23 trillion to $25 trillion was heisted from gross domestic product. Yet, no prosecutions of individuals.
Punishment is not the only way to modify behavior, but it works. Instead, executives now realize that they face virtually no consequences for reckless lending, exotic investments and fraud. There is nothing to deter these miscreants from breaking the law. Thus, these actions continue to this day. Wells Fargo is paying a $185 million settlement for defrauding customers by opening millions of unauthorized accounts.
The last decade has been called the most criminogenic in U.S. history. Copious evidence surfaced of apparent criminal violations in foreclosure cases. The evidence, including records from federal and state courts and local clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice and illegal foreclosures on the homes of thousands of active-duty military personnel.
Yet prosecutions against individuals for financial fraud hit a 20-year low during the Obama administration. While talking about the evils of bankers, President Obama pushed billions to them. Likewise, while talking about the evils of the big insurance companies, he doled out billions to them. The Obama administration does not really want to prosecute fraudsters. They just want to say they do.
Trillions of dollars have been lost by investors while tens of millions of borrowers have lost their homes and jobs. The current settlement posture and practice is not and will not deter this white-collar crime. However, one well-deserved “public hanging” will send a signal around the world that will dramatically reduce wrongdoing. I am for it.
What gets rewarded gets repeated. What gets punished gets extinguished. White-collar criminality has been rewarded. Integrity, honesty and transparency were punished. No matter their political party, people know this to be true.
As a result of these failures to prosecute, the banks are unafraid, unpunished and unapologetic. They no longer hope for support of their corrupt behavior. They expect it.
One of the reasons President-elect Trump prevailed was people’s belief he would be the “law and order” president. When he is inaugurated in January, millions of people around the world will be hoping he is resolute on this issue and ensures the law is enforced.
Polls show that voters believe tougher sanctions on Wall Street will help prevent future crises. This is true of Democratic, Independent and Republican voters alike. Trump’s victory confirms that a large number of people agree that the system is broken. But only if the public gets engaged (and enraged) will something be done.
U.S. District Judge Jed Rakoff suggests “that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing.”
The world was brought to the brink by the American financial system. Thus far, no one has been held accountable. The Securities and Exchange Commission’s (SEC) decades-long “sweep it under the carpet attitude” ignored industry whistleblowers like Harry Markopoulos who identified the Bernie Madoff Ponzi scheme. Markopoulos spent nine years trying to get the SEC to listen to him. Nine years is unacceptable.
Millions of Americans believe we cannot effectively move forward as a nation without a criminal prosecution of at least one of the top executives involved in this debacle. The term “closure” seems barely adequate to cover events of such catastrophic dimensions as a global financial crisis, yet closure is exactly what is needed.
People need to know that the game is not fully rigged, that the rule of law does still exist, and that even when committed by powerful people in the highest places, crimes of magnitude will not go unpunished.
The malfeasance committed by those at the helm of companies like Countrywide has greatly harmed the global economy and population. Yet there may be a Goliath that looms still larger than what was prompted by Countrywide and its former chief executive Angelo Mozilo.
If the American political structure and justice system persist in refusing to prosecute the wrongdoers and turn a blind eye to the architects of this disaster, who is the greater giant? Which is the worse crime? Let’s put forward an agenda that promotes vision-driven, values-based companies and rid the world of companies the abuse shareholders, customers, employees and society.
Michael Winston, author of World-Class Performance, spent more than 30 years in executive positions at major companies including Merrill Lynch, Lockheed Martin, and Countrywide Financial, where he was a whistleblower on fraud and brought the mortgage giant to its knees. He is a founding member of Bank Whistleblowers United.
The views of Contributors are their own and are not the views of The Hill.