Phil Angelides pointed the finger at some of the world’s most powerful men leaders of an industry that crashed the global economy and drove untold millions into despair, unleashing the raw emotions now dominating American politics. The targets of Failure of justice are included a former Secretary of the Treasury and key Citigroup executive, top brass at the century-old investment house Merrill Lynch, and the former chiefs of the globe-spanning insurance giant AIG.
All of them, according to the Financial Crisis Inquiry Commission, which Angelides led, should have been investigated. Evidence suggested they had misled investors about their exposure to the toxic investments at the heart of the meltdown on Wall Street. The commission confidentially passed the evidence to the US Department of Justice in 2010, according to records released years later, expecting prosecutors to pick up the ball and run with it.
“The Justice Department has investigated and held accountable those responsible for financial fraud,” a department spokesperson said in a statement.
But they did not. No big fish were held responsible. “Not one person who drove the conduct condoned the conduct, oversaw the conduct, was held criminally or civilly liable for that conduct,” Angelides, a former California state treasurer, told AFP.
Indeed, after 10 years and hundreds of billions in corporate penalties imposed on bank shareholders, perhaps the most enduring legacy of the financial crisis is unlike the scandals of prior decades no one of consequence was arrested, tried or convicted. It was as if the banks “engaged in systemic, massive wrongdoing but apparently no bankers were involved,” he added, and the consequences of that reverberate today.
“I don’t think there’s any question that the lack of accountability in the wake of the financial crisis has roiled the politics of our country.” A Wall Street Journal review in 2016 found that of 156 civil and criminal cases against 10 of the largest Wall Street banks in the aftermath of the crisis, responsible individuals were identified only 19 percent of the time and of those only ones of 47 was even boardroom level.
Eroding Public Trust
Investigators identified former Treasury Secretary Robert Rubin, who served on the board of Citigroup for 10 years, briefly taking over as acting chairman. But a representative for Rubin told AFP the Justice Department investigators had never contacted him. “Mr. Rubin acted appropriately at all times. Any suggestion to the contrary is false,” the spokesperson said. Former top AIG executives Martin Sullivan and Steven Bensinger, as well as Merrill Lynch leaders Stanley O’Neal and Jeffrey Edwards, did not respond to requests for comment.
President Donald Trump capitalized on those feelings in the 2016 presidential campaign, vowing to wrest control away from Democratic elites to help working Americans, often using xenophobic and racist language.
Angelides said investigators found “hard evidence” on the officials identified in millions of pages of documents and hundreds of interviews. But the commission did not take a position on whether these men were in fact guilty. “The Justice Department has investigated and held accountable those responsible for financial fraud,” a department spokesperson said in a statement.
The spokesperson pointed to a string of smaller cases tied to interest rate rigging, accounting fraud and other cases unrelated to the largest financial crisis-era cases. Pollsters say the crisis, the bailout and lack of individual prosecutions scarred the national psyche, eroding public trust in government and leaving voters polarized and enraged.
Washington mobilized trillions of dollars to rescue the very industry that had caused the crisis. But outside Wall Street, the rest of America was riven by economic pain. Suicide rates mounted as foreclosures blanketed the nation. About 10 million Americans lost their jobs. The size of the labor force as a share of the population fell sharply, as many workers simply gave up, and it still has not recovered.
In recent election cycles, candidates on the right and left have lampooned each other for ties to investment banking and Goldman Sachs in particular. President Donald Trump capitalized on those feelings in the 2016 presidential campaign, vowing to wrest control away from Democratic elites to help working Americans, often using xenophobic and racist language. “The American public just does not trust in any way the establishment,” said Chris Jackson, head of US polling at Ipsos.
America Needs a ‘Strong Leader’
Two-thirds of Americans now believe the United States needs “a strong leader” to “take the country back” from the rich and the powerful, Jackson said. Paul Pelletier, a former top white-collar prosecutor at the Justice Department who pursued AIG executives for years, said Washington suffered a collapse of political will to prosecute tough fraud cases. “What went wrong is 100 percent a question of competence and courage,” he told AFP.
Prosecutors learned courtroom mistakes could end their careers, Pelletier said. In the years after the crisis, probes targeting executives from Goldman Sachs and Lehman Brothers whose collapse remains the symbol of the crisis and others fizzled out and died.
In the savings-and-loan crisis of the late 1980s and the Enron-era securities fraud scandals of the early 2000s, prosecutors were empowered and given resources nationwide to take risks and pursue hundreds of powerful defendants, come what may. But a change of leadership early in President Barack Obama’s tenure, combined with some high-profile courtroom failures, left officials more concerned with avoiding losses and opting instead for huge settlements.
Prosecutors learned courtroom mistakes could end their careers, Pelletier said. In the years after the crisis, probes targeting executives from Goldman Sachs and Lehman Brothers whose collapse remains the symbol of the crisis and others fizzled out and died. Pelletier said Assistant Attorney General Lanny Breuer felt a conviction was not guaranteed in a case against AIG executive Joseph Cassano and dropped it.
Breuer did not respond to a request for comment. But Pelletier, who recently made an unsuccessful run for Congress as a Virginia Democrat, said the public was understandably angry and disillusioned. “One righteous prosecution would have gone a long way to ameliorating some of that,” he said.
© Agence France-Presse