Americans are understandably frustrated that there have been so few criminal prosecutions connected to the financial failures of Wall Street — the problem has been dubbed "too big to jail." Despite what seem to be clear cases of financial fraud, no one at the top of the major banking institutions has seen the inside of a jail cell. Now it appears no criminal charges will be brought against Jon Corzine, who headed the firm MF Global that raided customer accounts to pay for its own losses. The decision suggests that tougher laws, not less regulation, are needed to hold the financial world accountable.
Even after all the reckless and unethical conduct by major investment banks that helped melt down the financial system in 2008, the malfeasance of MF Global stands out. The firm collapsed after making a $6.3 billion bet on European sovereign debt, a bet so large that it easily could have bankrupted the firm many times over. When MF Global's financial situation soured, it used its customers' money to stay afloat. The result wiped out nearly $1 billion from accounts of customers who thought their money was protected from this kind of gambit.
But prosecutors are reportedly not prepared to bring criminal charges against Corzine, the former Democratic U.S. senator and governor of New Jersey, or other top executives. While Corzine is known to have approved reckless trades, he apparently didn't know that customer money was being used or in jeopardy. The problem is being blamed on the firm's general chaos and lack of risk management.
Incompetence is not a crime, but someone should be held criminally accountable for financial abuse that devastated so many Americans. If there is not a crime in here somewhere, then the real crime is that it was legal — and that should be corrected.
The MF Global decision came soon after the Justice Department announced that no charges would be filed against Goldman Sachs for concealing that it bet against more than $1 billion of toxic mortgage-related securities that it sold to unwitting investors. Consider too, the recent acquittal of Brian Stoker, a former Citigroup executive, who prepared marketing materials that misled clients about a similar situation. Citigroup had picked the underlying mortgage bonds in securities it sold and then bet the value would fall. It made money as its clients' investments went south.
In finding Stoker not guilty the jury still spoke to the frustration of people over Wall Street's impunity. It wrote a note urging the Securities and Exchange Commission to continue investigating the financial industry. The jury's foreman said later in an interview, "I wanted to know why the bank's CEO wasn't on trial." Good question.
The excuse heard most from the Obama administration is that Wall Street is immoral and greedy when it cheats its customers, but those acts don't rise to criminality under current law. Well, then the laws need to be rewritten. During the savings and loan crisis of the 1980s, there were more than 1,000 felony convictions. Today, after billions of dollars in wealth was plundered by Wall Street trickery, there have been hardly a one.