Prosecuting Lawless Bankers

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Summary

Recent history offers a number of cases in which the government responded adequately and appropriately when there was evidence of major, systemic financial fraud, including the Savings and Loan scandal of the 1980s and the Enron scandal of more recent years.

In responding to the fraud leading up to the Great Recession, however, the federal government has not followed the precedent set by these and other cases. Investigations are hampered by a lack of adequate resources, weak oversight and poor coordination of interagency efforts, creating the appearance of an unwillingness to follow the chain of evidence wherever it may lead.

The Federal government's efforts also appear to lack a sense of urgency, despite the fact that the statute of limitations is expiring in many instances where there was apparent fraud. The implications for failing to respond adequately to this crisis are enormous, both in ensuring that justice is done and in preventing future crimes and future crises of this kind.

Recommendations

This report offers the following urgent recommendations:

• Additional resources must immediately be provided to the RMBS Task Force.
• Agencies such as FDIC and the Federal Reserve Bank of NY must be asked to provide additional resources to the investigative effort.
• Legislation should expand the scope and penalties of FIRREA and other relevant statutes.