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By Sandbagger
#339042
Why Isn't Wall Street in Jail?
Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them
By Matt Taibbi
FEBRUARY 16, 2011 9:00 AM ET


Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's --censor-- up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

I put down my notebook. "Just that?"

"That's right," he said, signaling to the waitress for the check. "Everything's --censor-- up, and nobody goes to jail. You can end the piece right there."

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.

The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.

Invasion of the Home Snatchers

Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. "If the allegations in these settlements are true," says Jed Rakoff, a federal judge in the Southern District of New York, "it's management buying its way off cheap, from the pockets of their victims."

Taibblog: Commentary on politics and the economy by Matt Taibbi

To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. "You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this --censor-- would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

But that hasn't happened. Because the entire system set up to monitor and regulate Wall Street is --censor-- up.

Just ask the people who tried to do the right thing.

Why Isn't Wall Street in Jail?
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By JuneCarter
#339046
I think Rolling Stone, in general, is completely underrated as far as their serious news coverage. I think people are under the assumption that it's all Annie Liebovitz photos and music articles. I recall back in the day they did an article about a potential strain of possible "simian" auto-immune deficiency virus that would turn into an epidemic. No one paid much attention at the time.

They did the global land grab story back in the Spring of 2010, I believe, and predicted there would be food shortages and particularly mentioned the Middle East buying up as much "farmable" land in Africa as possible. Pretty good prognosticating as to what started the domino effect going on right now.
By Jason747
#339047
I must have said this same thing 1000 times over the past 5 years. I expected many perp walks of these guys and there have been none.

I just finished a book on the subject called "All the devils are here". No one went to jail because every top politician had a hand in it. Starting with Reagan, through Bush, Clinton, Bush 2, and Obama hired the guys who helped create the mess to unravel it.

They did a nice job of insuring politicians from both parties would take the fall with them....a great way to make sure you will never be charged.
By Phaedrus
#339048
JuneCarter wrote:I think Rolling Stone, in general, is completely underrated as far as their serious news coverage. I think people are under the assumption that it's all Annie Liebovitz photos and music articles. I recall back in the day they did an article about a potential strain of possible "simian" auto-immune deficiency virus that would turn into an epidemic. No one paid much attention at the time.

They did the global land grab story back in the Spring of 2010, I believe, and predicted there would be food shortages and particularly mentioned the Middle East buying up as much "farmable" land in Africa as possible. Pretty good prognosticating as to what started the domino effect going on right now.


I remember the HIV story. Notably they had some comment from gays who denied it was happening and suggested it was a scare story put out by the authorities to curb their behavior.

William Grieder was my favorite. Good investigative journalist. On the other hand there was P.J. O'Rourke writing from Afghanistan about how the Mujahadeen were a rag-tag joke. Good writer. Awful journalist.
By Phaedrus
#339049
On topic, they are not in jail because Obama made a decision not to go after them. Congress wanted to investigate but Obama convinced them that the stakes were too high and the crisis too serious to spend time arresting people. It was an all-hands-on-deck moment. At least that is how he sold it and maybe he believed it, but the decision should be revisted.

Beyond this, there are issues about executive compensation; merging bank, investment and insurance businesses; taxation of dividends and capital gains; and regulation.

Jail is not going to cure any of this. Plenty of people have gone to jail in the past without any effect on the markets. Policy changes are what we need and I personally don't think the new regulations are enough.
By Jason747
#339050
Obama and Bush both choose not to go after them for a very simple reason, the entire truth would have tied both parties and their policies to the crisis.

A few people in Congress may have wanted to investigate but not the majority. The majority of politicians would have had to explain all the contributions they got from the very people they were having prosecuted.