From an editorial in the (Raleigh) News & Observer last week:
There was a stunning contrast in two big events in Charlotte on Wednesday. The mayor was arrested in an FBI sting operation on charges that he took tens of thousands of dollars in bribes. Meanwhile, the real power in Charlotte – Bank of America – was paying the federal government $6.3 billion to settle a case involving more than $57 billion in shoddy mortgage-backed securities that the bank and its subsidiaries sold to Fannie Mae and Freddie Mac. There were no criminal charges, and the bank admitted no wrongdoing.
The legal process will determine the fate of former Mayor Patrick Cannon. But in the case of bank executives who were involved in cases of deception that cost the federal government billions of dollars and created a crisis that threw millions of Americans out of their jobs and their homes, the legal process has failed to properly punish wrongdoing. Major bank executives have escaped criminal prosecution. Reforms of financial industry regulations have been stopped or stymied. And the big banks and firms bailed out by taxpayers are back to generating huge profits.
Economist Dean Baker says President Obama and Congress failed to use the crisis as an opportunity to fix an industry that consumes a big share of the nation’s income without producing much of value. As a result, the message sent to industry executives is that they can act with impunity.
Eric Schneiderman, the New York attorney general, said of Wednesday’s settlement: “I would hope this closes one chapter of our ongoing efforts to ensure the frauds that occurred in and around the financial crisis are not forgotten.”
To the contrary, settlements without criminal penalties show that the misdeeds of financial executives will be overlooked and that the lessons of the financial crisis will go unlearned.
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