Wall Street admits its guilt in billions of ways

http://www.ajc.com/weblogs/jay-bookman/2014/jul/31/wall-street-admits-its-guilt-billions-ways/

By Jay Bookman
July 31, 2014

A federal judge in Manhattan Wednesday ordered Bank of America to pay almost $1.3 billion in penalties for knowingly selling bad mortgages to Fannie Mae and Freddie Mac during the runup to the Great Recession.

The bad mortgages were originated through a program called "High Speed Swim Lane," known internally by its acronym "HSSL", or Hustle. The goal of the program was to get as many loans pushed through the approval process as quickly as possible, without regard to the borrower's ability to pay, so that executives and managers could collect big bonuses.

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And of course, that is just the most recent of such cases. Back in March, Bank of America settled another fraud case by agreeing to pay $9.5 billion to the federal government. As The New York Times reports, Bank of America lawyers are also negotiating today with federal prosecutors to settle yet another case, this one with an even bigger price tag:

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The list goes on and on: Two weeks ago, Citigroup agreed to pay $7 billion to settle charges that it knowingly packaged bad mortgages into securities that it then sold to investors. Citi had initially offered federal officials $363 million to settle the case, but that offer was refused.

In November, JP Morgan Chase settled a similar federal case by agreeing to pay $13 billion. So far, JP Morgan Chase has agreed to pay some $27 billion in penalties over the last two years. Other banks, such as Royal Bank of Scotland, are also trying to negotiate their way out of trouble.

As critics appropriately point out, none of these settlements has included criminal prosecutions of those who planned and profited from such massive fraud. And as large as the numbers might appear to us mere mortals, the banks involved are so large and are reaping such huge profits that the penalties and fines are more of a temporary annoyance. In fact, a bank's stock often rises, rather than falls, when such settlements are announced.

However, this long, continuing string of multi-billion-dollar settlements are useful because they establish beyond a shadow of a doubt just how out of control Wall Street had become in the years leading up to the 2008 collapse. As you no doubt recall, that's the point at which they turned to the American people -- the very people whom they had been defrauding -- to demand that we save them -- and ourselves -- from the consequences of their actions.

As these settlements make clear, the government wasn't making these companies lie and cheat and defraud. Greed made them do so. Their own lack of instititional control made them do so. A sense of privilege and immunity to consequence made them do so. And yes, lack of effective government oversight allowed them to do so.

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