link here to article
Joe Nocera reports on a SEC settlement with a subsidiary of Deutsch Bank that originated loans to low income home buyers then sold the loans to the FHA that is stuck with them. The bank had to pay a hefty fine, which may or may not pay for the potential loses to the FHA, but no criminal charges were brought agains the bank executives. As long as the SEC does not pursue criminal charges against the executives who engage in that kind of activity it does little to deter the bad behavior. A good example is the former CEO of Countrywide, he was fined over $100 million for the bad loans that Countrywide made that has cost billions and brought grief and hardship to his clients. It only cost him $26 million of his own money because most CEO's have contracts that require their firms to pay for legal fees and fines incurred in the line of duty. The cost to Mozzila was a fraction of the hundreds of millions that he made operating Countrywide illegally. No criminal charges were brought against Mozilla or against executives of Washington Mutual who were doing similar things.
Ronald Reagan was once asked about some of his associates who were convicted of white collar crimes. He said that he knows what a criminal is and that his associates are not criminals. His message was clear. Crimes committed by those who wear expensive suits and live in nice homes are not really criminal. The SEC seems to be better at pursuing insider trading than they are at fraud. Perhaps the laws need to be changed to make it easier to get fraud convictions.
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