Why aren’t some bankers in jail? (Update)

If I sell you a disk that I tell you has Windows 7 on it and you get that disk home and find out that it only has the Windows 7 logo, that’s a problem. Bankers sold the American public mortgages that they knew would blow up in a couple of years. Why isn’t that fraud?


The Great Recession showed the world that the crimes that create the most victims are not committed by terrorists, gangbangers or drug traffickers, but by well-heeled crooks in Wall Street’s executive suites. Tens of millions of people have seen their jobs disappear and their pension funds fleeced, and had their homes taken out from under their feet as a result of the crash of Wall Street’s Great Casino. Yet so far, the culprits have been given little more than a slap on the wrist.

Failing to prosecute Wall Street’s high-flying crooks doesn’t only represent a great miscarriage of justice. Powerful voices within the economic establishment are now making the case that holding the bankers criminally culpable is necessary if we ever hope to stop our national economy from moving from one speculation-driven bubble to the next.

Nobel-prize winner Joe Stiglitz recently told AOL’s Daily Finance that major damage resulting from the financial disaster “has not really been taken on board, and that is confidence in our legal system, in our rule of law, in our system of justice.” His prescription? “I think we ought to go do what we did” in the wake of similar financial crises in the past, and “actually put many of these guys in prison.”


17 Responses

  1. Banks were required by the government to sell subprime mortgages. You can thank Bill Clinton for the big push in the 90s to make homeownership figures rise. It was a neat way of buying votes. Worked great for him, but not so great for the rest of us.

  2. There goes that broken record skipping again. We know you blame Clinton for everything and you know the argument has been refuted. But the beat goes on.

  3. here’s the funny thing, there are some banks, that followed regulations and yet did not sell these subprime giveaways. How do you explain that? These are several regional banks which have millions of dollars in assets which have helped the inner-city and yet they did not feel compelled to sell these subprime mortgages. They remained in compliance with federal regulations and still did not feel compelled to rip off their customers. Banks like Regions Bank and BB&T. How do you explain this?

  4. Jeff – you’re exactly right. Joe is a broken record. He has produced no evidence to support his allegations but he continues to assert that he is right. On the other hand, I have approached this issue from multiple different angles, using multiple different sources and I think that I have proved conclusively that many banks and lenders acted fraudulently and outside of the law.

    As usual, thanks for your comments.

  5. If it was just a matter of greed, bankers would’ve thrown out the idea of creditworthiness decades ago and given mortgages to whosoever will.

    But they didnt.

    The feds puts quotas on the banks. Do you have any idea what that means when a government agency has the power to squash your business if they don’t like you? (Ask IndyMac about Chuck Shumer. http://latimesblogs.latimes.com/money_co/2008/07/sen-charles-e-s.html )

    Bankers lent money to people who didnt qualify because they were required to. Most of them were bright enough to know what that kind of toxic paper would eventually do to the financial system, but they had little choice.

  6. Joe – I’m a banker. Your comments are not correct. While regulation and things like the CRA (Community Reinvestment Act) are real, bankers do not like to make loans that do not get paid back. And solid banks did not do this. Most of the nasty was done by Countrywide and other mortgage companies.

  7. I’m foolishly thinking you can take a lesson in this. Don’t spout political nonsense about an industry while acting like an expert when you are not. A real expert may be reading the comments and will call you out. I’ve audited banks around the country and participated in many loan discusssions. None of what you say has ever happened.

  8. Jeff wrote:

    “None of what you say has ever happened. ”

    I didnt write the articles in the Washington Post or in Investors Business Daily, Jeff.

    I guess when they talk about quotas, they are simply lying. Is that what you are saying?

  9. Your stated view is that everything is Clinton’s fault. Not all banks took on subprime loans. There were other ways to satisfy CRA requirements. Dr. Thompson pointed that out to you also.

    There was a subprime problem that contributed to the collapse. I’m saying your view that ALL banks were FORCED into subprime loans (at Clinton’s direction) is not true.

    Read my earlier post. Most of the collapse was caused by greed in the secondary markets. That was capitalism at its best. You should have loved it. No regulation, free market, tremendous profits for a few. Certain bankers (not from my company) engaged heavily into very risky packages. It unravelled and they lost billions. Nothing to do with Clinton, and really not much to do with front line lenders (except ones that exploited like Countrywide).

    Can you ever admit you have overstated your position?

  10. Jeff wrote:

    “Your stated view is that everything is Clinton’s fault…….I’m saying your view that ALL banks were FORCED into subprime loans (at Clinton’s direction) is not true.”

    Talk about overstating. Show where I’ve ever said this.

  11. Your exact statement: Banks were required by the government to sell subprime mortgages. You can thank Bill Clinton for the big push in the 90s to make homeownership figures rise. It was a neat way of buying votes. Worked great for him, but not so great for the rest of us.

    Looks like what I said you said.

  12. And where in my quote are the words “all” or “everything” that you attributed to me?

    btw, since you admit that you work for a bank, I think we can agree that you can hardly be considered an unbiased source of information.

  13. Jeff wrote:

    “Right. Better to talk to someone who doesn’t know anything about it.”

    I think the folks at Investors Business Daily probably know more than you seem willing to give them credit for.

    And probably the folks who researched the article for the Washington Post do too.

    And at this point, since you’ve demonstrated a propensity to misquote what I’ve said, I would have to place more trust in them.

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Errington C. Thompson, MD

Dr. Thompson is a surgeon, scholar, full-time sports fan and part-time political activist. He is active in a number of community projects and initiatives. Through medicine, he strives to improve the physical health of all he treats.


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