Non-Partisan Group Asks: Where are the Financial Indictments?


A non-partisan group investigating the nation’s housing crisis says the Federal government’s efforts to prosecute wrongdoers—particularly on Wall Street—has fallen short and is asking for new, tougher laws on white collar crime.

Among other things, the group—The Institute for America’s Future—wants the statute of limitations on financial crimes increased and the definition of ‘financial institution’ broadened to include investment bankers and what it calls “other shadow banking enterprises.”

The IAF also takes to task President Obama’s Residential Mortgage-Backed Securities Working Group. Formed earlier this year and comprising attorney generals and trained investigators, the group’s results “are hard to discern,” IAF author Bart Dzivi writes in a new report entitled ‘Rhetoric or Resources: It is Time to get Serious.’

The government’s Financial Fraud Enforcement Task Force has brought charges against 2,100 individuals to date, but Dzivi argues that those charged are “small fry” including “rogue real estate agents, appraisers, mortgage brokers, and home buyers.”

Overall, the IAF report is critical of the lack of indictments against Wall Street figures and CEOs of mortgage lenders.  

“If a subpoena of relevant contemporaneous messages by such traders at the major investment firms showed that none of the officers in their mortgage securities units knew they were in fact selling stunningly bad products that fell woefully short of their own stated underwriting criteria, we might conclude that those officers, who often sport advanced degrees from prestigious universities, were conveniently stupid enough not to realize that they were making millions in bonuses from selling unsafe products and were not intent on bending the rules in order to line their own pockets. But that would be a stunning reversal of form,” writes Dzivi.

Some analysts blame Wall Street for the housing crisis because investment banking firms the likes of Bear Stearns, Merrill Lynch, Deutsche Bank, Citigroup Securities, Lehman Brothers, and others provided warehouse lines of credit to nonbank subprime funders and then bought the underlying loans so they could package them into securities.

Critics say Wall Street firms creating subprime MBS ignored or flaunted underwriting rules and were more concerned about profits over quality.

Dzivi has served of counsel to the Federal Home Loan Bank system and was counsel to the Senate Banking Committee during the SL crisis. The IAF bills itself as a nonpartisan center for research and education.

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