The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.If you want more, try reading:
We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
Unlike the S&L debacle, there was no national task force and no comprehensive prioritization. This made it difficult to investigate the huge, fraudulent subprime lenders. And since there were no criminal referrals of these firms, the FBI wasn’t even attempting to pursue them.
The two great lessons to draw from this epidemic of fraud is that if you don’t look for it, you don’t find it and that wherever you do look, you do find fraud. The FBI was concentrating on retail banking, or individual borrowers and smaller lenders. But the big problems were being created in the wholesale end of the business, where loans were pooled, packaged, sold and securitized. Because the FBI only looked at relatively small cases, it found only relatively small frauds.
The FBI has been processing no more than 2,000 mortgage- fraud cases a year. There are two things to consider though: Not only were they the wrong cases to focus on, but they amounted to nothing in light of the estimated 1 million fraudulent mortgage loans made annually during the housing bubble years.
The FBI -- deserted by the banking regulators and undercut by the Justice Department -- was so desperate that it formed a partnership with the Mortgage Bankers Association in 2007. The trade association had created an absurd definition of mortgage fraud under which accounting frauds by a lender were impossible and bankers were the victims. By 2009 the financial crisis had become so acute that Treasury Secretary Timothy Geithner discouraged criminal investigations of the large nonprime lenders.
Friday, May 13, 2011
William Black on the Wall Street Crime Spree
Here are some bits from a good article by William Black in Bloomberg's Businessweek entitled "Why CEOs Avoided Getting Busted in Meltdown":