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Seems like a PR coup paid for by major banks who are majorly scared. It's all about sidestepping crime by saying "There may have been SOME crime, but it wasn't the ROOT cause of the crisis".

Therefore what? No prosecutions whatsoever? Does the author really think that the law on Wall Street is this relative? That criminal acts only attract prosecutorial attention in those rare (read 'nonexistent') cases where they are the clear and singular causes of global economic meltdowns?

The author goes on to "point out" that "prosecuting these crimes is HARD." Maybe that's what a hack being paid to lie might say, but actual prosecutors know better. Elliot Spitzer (who REALLY know this game, having seen it from both sides) noted in 'Inside Job' (a) how popular cocaine and hookers were (and still are) among Wall St. types (b) how simple it is to prosecute vice cases and (c) how easily they can ruin the careers, lives, and families of those who get busted. After all, the further up the status ladder you go, the harder these things are to live down.

Sure, prosecuting white collar crime by auditing paperwork is tricky, and that's what makes the approach a rookie move. The real pros (like Spitzer) don't bother. Instead, they run a dragnet that catches a number of bank employees with their pants down (often literally). They threaten them with the end of their jobs, marriages, and dignity over a bunch of petty crap that they can make go away IF the poor bastards dig up the kind of dirt on their bosses that the prosecutors could never find on their own. Magically, dirt appears.

Spitzer's big point, however, is that nobody works like this without their boss's approval. If there's strong pressure NOT to do their jobs, those jobs don't get done. And they're not going to get done if the White House is loudly signaling DO NOT investigate or prosecute.

Bill Black had some interesting commentary on this point exactly, including remarks by Gretchen Morgenson and Louise Story, who reported that "in 2008, the FBI, belatedly, realized that it had improperly targeted relatively trivial mortgage frauds while ignoring the massive lenders that specialized in making fraudulent mortgages. The FBI developed a plan to reorient its resources towards the “accounting control frauds” that always should have been its priority. We now know that the Department of Justice (DoJ) deliberately, and successfully, sabotaged this effort to investigate the major frauds.

The second underlying scandal that their column disclosed is that two key members of what Tom Frank aptly termed Bush’s “Wrecking Crew” – Geithner and Bernanke – who President Obama chose to promote and reappoint and make his anti-regulatory leaders sought to discourage or limit federal and state prosecutions, enforcement actions, and suits. Geithner’s express rationale was that the financial system extreme fragility made vigorous investigations of the elite frauds too dangerous."

http://www.creditwritedowns.com/2011/04/fiat-justitia-ruat-c...

In any case, we seem to be moving from "yes, there was crime, but don't prosecute" to "yes, there MAY have been crime, but we CAN'T prosecute" to "yes, the crisis was bad, but it wasn't CAUSED by crime, so we're not about to prosecute."

Matt Taibai summed it up best in his February RS column "Why Isn't Wall Street In Jail?"

"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 fucked 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 fucked 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"

http://www.rollingstone.com/politics/news/why-isnt-wall-stre...

This is not much more than a poorly titled straw man argument. The argument is not that fraud caused the collapse, but that fraud was discovered during and after the collapse, and that fraud should be prosecuted. Ultimately it doesn't matter if the cause of the collapse was legal or not, though it is hard to ignore the fact that it was (at least) exacerbated by fraud.

A more accurate title might be: "Wall Street caused the crash (though not necessarily by illegal means) and was shown, in the process, to have committed numerous acts of fraud which should be prosecuted."

Yep, or "Wall Street: Guilty" would also do the trick.

But, this is Bloomberg. Just enjoy the irony.

No conviction does not necessarily mean no guilt. And you may want to take a look at a counterpoint, because convictions may finally be on their way:

Matt Taibi - The People vs Goldman Sachs http://www.rollingstone.com/politics/news/the-people-vs-gold...

Taken from the top, these sentiments imply that the financial crisis was caused by fraud; that people who take big risks should be subject to a criminal investigation; that executives of large financial firms should be criminal suspects after a crash; that public revulsion indicates likely culpability; that it is inconceivable (to Madoff, anyway) that people could lose so much money absent a conspiracy; and that Wall Street bears collective guilt for which a large part of it should be incarcerated.

TLDR: set up a straw man unobvious only to people who haven't read or watched the referenced accuse's (Inside Job, Rolling Stone, etc) then spend 5 pages knocking it down.

The article makes a good point. There have been no trials (let alone convictions) of bank executives because they probably did not violate any actual laws. Reckless financial risk-taking on the part of private firms is not illegal. Sure, there were clear instances of fraud and predatory loaning by more minor players, but the guys at the top of the food chain are most likely not guilty of any specifiable crimes.

But if the overwhelming majority of US citizens do in fact believe that the actions of the bank executives should be illegal, the logical thing to do would be to change the laws. (Of course, this solution is a bit unsatisfying, since no one can accurately predict these major market collapses and the next major crisis will likely be different enough that it could very well fall outside scope of any new laws.)

Sidenote: Unfortunately, the recent conviction of Raj Rajaratnam will probably assuage public anger while not at all addressing this issue. From what I understand, he was found guilty of insider trading, which is more or less unrelated to the mortgage-bubble/financial-crisis.

The article confuses two related but separate questions. The first is who caused the collapse. The second is whether or not they did something illegal. On the first point, the article claims the banks are "not guilty", which isn't really true. They're excessive risk-taking did cause the collapse. That doesn't mean it was necessarily illegal, just that they are "guilty" of causing the collapse. But just because the causes weren't illegal doesn't mean that they didn't commit fraud along the way. The collapse revealed the fraud that had been going on, and while it didn't cause the collapse, it made it worse.

Ultimately, it doesn't even matter whether there was a collapse or not. The fundamental point of people like Ferguson is that we now know of a number of illegal acts which took place before and during the collapse, yet those have not been properly prosecuted, and that's a problem.

Thanks for highlighting that distinction. I guess we can chalk up the lack of prosecution for actual fraud to the incredible power the investment banks have over the political process (i.e. lobbyists, campaign funding, regulatory capture, etc). I watched Inside Job a while ago and details are starting to blur together. (I just remember everyone looking really bad.) Perhaps it's time for a second watch.
Fraud, in the shape of "liars' loans", aka Alt-A, was the major driver of the housing bubble: see http://www.pbs.org/moyers/journal/04232010/profile.html where William Black discusses the frauds. See Wikipedia on William K. Black for more.
Of course the finance industry will tend not to break the law. They lobby to have the laws changed instead to allow them to take the risks they want, at little actual risk to themselves personally.
What's remarkable is that in spite of being able to rewrite laws in their favor, these bastards manage to break them anyway. I suppose it's simply because they can.
Business Week defending outright fraud by the banking sector?

Shut UP!