News Journal:Still no criminal charges for sellers of toxic mortgages?

Did you ever play Monopoly?
It was a board game we all played when I was a kid, and one of the best cards to draw was called “Get Out of Jail Free.” Of course I didn’t make the connection back then, but how appropriate that card now seems in a game about making money in real estate transactions.
Over the past decade or so, it seems we have given banking executives who knowingly sold toxic mortgage-backed securities an even better card – a “Don’t Ever Go To Jail” card. How else do you explain the headlines in the financial pages over the past few months? Put them together, and it looks like a crime wave on Wall Street – but amazingly one without any criminals being held responsible.
“Bank of America pays record $16.65 billion penalty,” said the headline last week in USA Today, which went on to report that Attorney General Holder said, “Bank of America has acknowledged that, in the years leading up to the financial crisis that devastated our economy in 2008, it, Merrill Lynch, and Countrywide sold billions of dollars of RMBS [residential mortgage-backed securities] backed by toxic loans whose quality, and level of risk, they knowingly misrepresented to investors and the U.S. government.These loans contained material underwriting defects; they were secured by properties with inflated appraisals; they failed to comply with federal, state, and local laws; and they were insufficiently collateralized. Yet these financial institutions knowingly, routinely, falsely, and fraudulently marked and sold these loans as sound and reliable investments.”
“Citi to pay $7 billion in Justice settlement,” USA Today reported last month, quoting Mr. Holder: “Because of the bank’s assertions that its toxic financial products were sound, Citi was able to pad its own financial position. They did so at the expense of millions of ordinary Americans and investors of all types, including other financial institutions, universities and pension funds, cities and towns and even hospitals and charities. Ultimately, these investors suffered billions of dollars in losses when Citi’s false and fraudulent claims came crashing down.”
“JPMorgan, Justice Department reach $13 billion settlement,” was the headline in the same newspaper late last year. “The agreement,” USA Today reported, “includes a statement of facts in which the nation’s largest bank admitted that it knew that residential mortgage-backed securities that it marketed did not comply with underwriting guidelines and weren’t fit for sale.”
I could cite a few more, but you get the idea. According to the latest compilation by the Wall Street Journal, “the world’s biggest banks have now paid more than $142 billion in fines for wrongdoing tied to the financial crisis.”
That’s a lot of money, although not so much after all the allowable tax deductions the banks will take. The shareholders will pay whatever is owed. Even they won’t really suffer; the stock prices of the banks have been affected hardly at all by any of the settlements.
I really wonder why there hasn’t been more popular outrage over the fact that bank executives have admitted they committed fraud. They have admitted they failed to comply with federal, state, and local laws. And yet not one of them has been criminally charged. Not one of them has had to return a penny of the bonuses paid from the profits of fraudulent activity.
Can we really talk about equal justice under the law when someone who steals from a convenience story goes to jail for five years and powerful people who made millions committing admitted fraud get away scott-free?
This isn’t a blanket indictment of Wall Street executives. The vast majority of them are honest. But we know that the threat of imprisonment is a huge deterrent to white-collar crime. But without that deterrent, you can bet there will be future meetings where someone raises objections to illegal behavior and his or her argument is dismissed as something not to worry about.
The Justice Department reserved the right in some of the settlements to bring criminal charges against major players in the banks. I haven’t seen any signs they’ll do so, but we can still hope. A “Don’t Go to Jail” card issued only to the rich and powerful is not something we can tolerate in our democracy.
Read all of former U.S. Sen. Ted Kaufman’s columns at tedkaufman.com.