During the hearings last week regarding the nomination of Fed Vice Chairman Janet Yellen, the one thing you definitely heard nothing about was why the US government has not pursued fraud prosecutions against the officers and directors of the major US banks. The almost complete lack of prosecutions against the people most responsible for the 2008 subprime crisis is a glaring omission and one that is hurting America’s prospects for a recovery.
US District Judge Jed Rakoff recently commented on “Why Have No High Level Executives Been Prosecuted In Connection With The Financial Crisis?” This senior jurist, who has presided over several large financial litigations stemming from the subprime debt crisis, put the situation in context last week:
“I have no idea whether the financial crisis that is still causing so many of us so much pain and despondency was the product, in whole or in part, of fraudulent misconduct. But if it was — as various governmental authorities have asserted it was –- then, the failure of the government to bring to justice those responsible for such colossal fraud bespeaks weaknesses in our prosecutorial system that need to be addressed.”
Rakoff talks about the tendency of US officials like former Treasury Secretary Timothy Geithner and Attorney General Eric Holder, who recently joined the private equity salon Warburg Pincus, to protect the officers and directors of large banks from prosecution under the rubrick of “too big to fail.” Geithner’s facile arguments were used to protect his political mentor, former Goldman Sachs CEO and Treasury Secretary Robert Rubin, from prosecution for malfeasance with respect to the failure of Citigroup. Rakoff makes no bones about how he feels regarding Attorney General Eric Holder:
“Attorney General Holder himself told Congress that ‘it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.’ To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse — sometimes labeled the “too big to jail” excuse – is disturbing, frankly, in what it says about the Department’s apparent disregard for equality under the law.”
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