Don't the banksters and their fat-cat cronies need to know they're just a prosecution away from the Big House?

There was lots of tough talk from then-NYS AG Andrew Cuomo about wrongdoing in the financial meltdown, but it was hard to spot all that much prosecutorial zeal in the follow-through.

"Several years after the financial crisis, which was caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the failure of many savings and loan institutions in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail."

-- Gretchen Morgenson and Louise Story, in "In Financial
Crisis, No Prosecutions of Top Figures" in today's NYT

"Their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.""

-- William Black, who spearheaded federal government
litigation in the aftermath of the S&L mess

by Ken

Ooh, "an exceptional criminogenic environment"! I love it!

It's true, as the NYT reporters point out that then-NYS AG (now Governor) Andrew Cuomo sued Ernst & Young, the accounting firm, for helping Lehman Brothers "engage in massive accounting fraud."To date, however," they also point out, "no arm of government has sued Lehman or any of its executives on the same accounting tactic."

Let me repeat that link again: "In Financial Crisis, No Prosecutions of Top Figures." I don't know about you, but since the new nytimes.com 20-free-goodies system went into effect, I've been so parsimonious with my click-throughs that before today I hadn't deliberately used up any of my monthly 20. (I did once unthinkingly click through on some routine story or other, and was immediately horror-struck.) For this story, though, I clicked -- and remember, assuming I've got the new nytimes.com system down right, if you click through from my link, it won't count against your monthly 20 free articles.

Here's the jumping-off point:

It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted?

Is this not a question that's been on all our minds?

You don't have to have ESP to guess that the answer, officially declared "anything but simple," is going to be some version of "Ooh, but it's so-o-o h-a-a-a-ard." ("To be sure, Wall Street's role in the crisis is complex, and cases related to mortgage securities are immensely technical. Criminal intent in particular is difficult to prove, and banks defend their actions with documents they say show they operated properly." Ooh, it's so-o-o h-a-a-a-ard!)

Here's a sympathetic but less forgiving perspective, from people who've been there and done that:

Former prosecutors, lawyers, bankers and mortgage employees say that investigators and regulators ignored past lessons about how to crack financial fraud.

As the crisis was starting to deepen in the spring of 2008, the Federal Bureau of Investigation scaled back a plan to assign more field agents to investigate mortgage fraud. That summer, the Justice Department also rejected calls to create a task force devoted to mortgage-related investigations, leaving these complex cases understaffed and poorly funded, and only much later established a more general financial crimes task force.

Leading up to the financial crisis, many officials said in interviews, regulators failed in their crucial duty to compile the information that traditionally has helped build criminal cases. In effect, the same dynamic that helped enable the crisis -- weak regulation -- also made it harder to pursue fraud in its aftermath.

A more aggressive mind-set could have spurred far more prosecutions this time, officials involved in the S.&L. cleanup said.

"This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity," said William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government's director of litigation during the savings and loan crisis. "But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here."

But Professor Black, it's so-o-o h-a-a-a-ard.

And, oh yes:

Even civil actions by the government have been limited. The Securities and Exchange Commission adopted a broad guideline in 2009 -- distributed within the agency but never made public -- to be cautious about pushing for hefty penalties from banks that had received bailout money. The agency was concerned about taxpayer money in effect being used to pay for settlements, according to four people briefed on the policy but who were not authorized to speak publicly about it.

Some of this stuff would be hilarious if it weren't, well, what it is. The breakdown began, the NYT writers suggest, with a breakdown on the regulatory front. It has, of course, become a leading war chant of the Right in its mission to destroy the country as we've known it that one of the chiefest evils of our "socialist" government is regulation. But of course, as with virtually everything that comes out of the mouths of right-wingers, not the slightest microsyllable is true. As so often happens with the morons, pathological liars, and economic predators of the Right, the truth is pretty much the exact opposite. Many of our economic problems begin with the failure to regulate -- even to enforce existing laws, let alone enact new laws that speak to our true regulatory needs. Do we have to specify that the breakdown of even the regulatory system we theoretically have in place wasn't accidental? Yes, I think we do.

There were many players in the astounding saga of the failure to hold anyone of consequence to account for the criminal rampage of Countrywide, the country's largest mortgage lender. Already in the Clinton administration there was a deemphais of financial-system fraud in favor of going after health-care fraud. But at least government official were going after something. (Of course it's no longer necessary to devote regulatory and prosecutorial resources to health-care fraud. Wasn't the intent of the health-care "reform" package to legalize it?)

I hope you're ready for some belly laughs, 'cause here's some really low slapstick comedy:

Historically, Countrywide's bank subsidiary was overseen by the comptroller, while the Federal Reserve supervised its home loans unit. But in March 2007, Countrywide switched oversight of both units to the thrift supervisor. That agency was overseen at the time by John M. Reich, a former banker and Senate staff member appointed in 2005 by President George W. Bush.

Robert Gnaizda, former general counsel at the Greenlining Institute, a nonprofit consumer organization in Oakland, Calif., said he had spoken often with Mr. Reich about Countrywide's reckless lending.

"We saw that people were getting bad loans," Mr. Gnaizda recalled. "We focused on Countrywide because they were the largest originator in California and they were the ones with the most exotic mortgages."

Mr. Gnaizda suggested many times that the thrift supervisor tighten its oversight of the company, he said. He said he advised Mr. Reich to set up a hot line for whistle-blowers inside Countrywide to communicate with regulators.

"I told John, ‘This is what any police chief does if he wants to solve a crime,' " Mr. Gnaizda said in an interview. "John was uninterested. He told me he was a good friend of Mozilo's."

In an e-mail message, Mr. Reich said he did not recall the conversation with Mr. Gnaizda, and his relationships with the chief executives of banks overseen by his agency were strictly professional. "I met with Mr. Mozilo only a few times, always in a business environment, and any insinuation of a personal friendship is simply false," he wrote.

Stop already! I'm laughing so hard, I'm about to cry!

Oh, it goes on and on. You really need to wallow in this yourself. And then in your spare time you can indulge in free speculation. Like for example: Even after reading the claims and alibis of people speaking in their capacity as spokespersons for the NYS AG's office at the time Andrew Cuomo was talking tough and prosecuting touchy-feely, do you wonder if there was any connection between the lame-ass follow-through and the fact that the AG was about to launch a campaign for governor, for which bargefuls of cash would be raised from the state's fat-cat class, which happens to be Wall Street-centered?

If this is all too depressing, or maddening, to contemplate, perhaps you can take comfort from this little paragraph early on in the NYT story:

Whether prosecutors and regulators have been aggressive enough in pursuing wrongdoing is likely to long be a subject of debate. All say they have done the best they could under difficult circumstances.

Is that wonderful or what? Along with maybe that "exceptional criminogenic environment" of Professor Black's, I think this is my favorite quote. All say they have done the best they could under difficult circumstances.

In other words: Ooh, but it's so-o-o h-a-a-a-ard!

You could die laughing.

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