Home > Political Economy, The Economics Profession > 10 reasons why not a single financial executive has gone to jail.

10 reasons why not a single financial executive has gone to jail.

from Edward Fullbrook

Last night in Hollywood, Charles Ferguson’s acceptance speech for winning the Oscar for best documentry began:

“Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.”

In a recent Aljazeera  article, Danny Schechter, author of The Crime of Our Time, offers 10 reasons why not a single financial executive has gone to jail.  One of them pertains directly to the economics profession.

First, many of those who might be charged with financial crimes and fraud invested in lobbying and political donations to insure that tough regulations and enforcement were neutered before the housing bubble they promoted took off.

. . . .

Second, the industry invented, advertised and rationalised exotic financial instruments as forward looking “innovation” and “modernisation” to disguise their intent while enhancing their field to maneuver.

. . . .

Third, the industry promulgated economic theories and ideologies that won the backing of the economics profession which largely did not see the crisis coming, making those who favored a crackdown on fraud appear unfashionable and out of date.

. . . .

Fourth, prominent members of the financial services industry were appointed to top positions in the government agencies that should have cracked down on financial crime, but instead looked the other way. The foxes were indeed guarding the chicken coop guiding institutions that tolerated if not enabled an environment of criminality.

. . . .

Fifth, the media has been complicit, seduced, bought off and compromised. The housing bubble mushroomed in the very period that the media was forced to downsize. Dodgy lenders and credit card companies pumped billions into advertising in radio, television and the internet almost insuring that there would no undue media investigations.

. . . .

Sixth, politicians and corporate lawyers fashioned settlements of abuses that were exposed rather than prosecutions. The government benefited by getting large fines while businessmen avoided jail. 

. . . .

Seventh, as the economy changed and industries that were once separated began working together, laws were not updates. Financial institutions worked closely with Insurance companies and real estate firms. Yet law enforcement did not recognised this new reality.

. . . .

Eighth, even as the economy globalises, and US financial firms spread their footprint worldwide, there was little internationalisation of financial rules and regulations. 

. . . .

Ninth, With the exception of softball inquiries by a financial crisis inquiry commission, there has been no intensive investigations in the United States even like the tepid 9/11 Commission.

. . . .

Finally, tenth, a big problem in my countdown, are the progressive critics of the crisis who also largely ignore criminality as a key factor and possible focus for an organizing effort.

Regarding Schecher’s third reason, with its source in the economics profession, James Galbraith testified to Congress:

“…the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft-pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the dot.com bubble. They continue to do so now.”

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  1. BobFred
    February 28, 2011 at 3:17 pm

    11. Wall Street just propagated and commoditized the belief that real estate values would always rise and then left taxpayers holding the bag. There is no law that says expectations must be rational.

  2. Pandora
    February 28, 2011 at 4:17 pm

    So how do we Progressive critics get started on focusing on the criminality involved in the meltdown and use this as the focus of an organizing effort? Especially now with the tea party freshmen congress (and their big financial backers) putting focus on the national debt and cutbacks, etc. Our anger needs to be refocused on the dirty deeds and criminal nature of the actions of Wall St. I need a play book!

    • Stephen
      February 28, 2011 at 4:49 pm

      Money Laundering legislation and regulations, which nearly every country in the world should now have, make requirements on banks, lawyers, accountants, etc to check that any transactions they facilitate or deal with are dome with clean money. It is a criminal offence if those checks were not made or if a Suspicious Activity Report was not filed with the authorities. Many banks etc may well have been guilty of the criminal offence of money laundering if they assisted dirty money to be washed. For example Mubarak and Gadaffi have assets washing around in London. It is doubtful whether these assets were legitimately obtained and so should have been reported and confiscated. Why weren’t they? Because the financial institutions facilitating these transactions did not make the proper checks. This is criminal behaviour.

  3. John B.
    February 28, 2011 at 5:06 pm

    The principal reason why finance industry CEOs haven’t gone to jail is that greed and stupidity are not illegal. By suggesting that they understood the complicated derivatives in which their dealers were dealing, Mr. Fullbrook gives them too much credit. The people that belong in prison are the small-time residential mortgage brokers who lent money to people who they knew couldn’t pay it back. They didn’t care – didn’t have to care – because they pushed those loans out the door before the ink was dry.

  4. February 28, 2011 at 8:45 pm

    The bone of greed was deliberately thrown out for the dogs to chew on.
    Only thing is, the dogs didn’t know that the bone was poisoned.

  5. Jeff Zink
    February 28, 2011 at 9:01 pm

    With respect to criminality and fraud, a good place to begin one’s study is the writings of William K. Black, now at the University of Missouri-Kansas City. He has a couple of articles (at least) in “Dollars and Sense” as well as a book, “The Best Way to Rob a Bank is to Own One.”

    Here he details this signs of financial fraud. That is, he tells you what to look for.

  6. Alice
    March 1, 2011 at 11:18 am

    They may not go to jail but they will lose………we are in a bear market rally and half these bastards wont exist with a job in a few years time.
    Id prefer to see them in jail now though.

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