Few individuals more personified the mortgage bubble than Angelo Mozilo, chief executive of Countrywide Financial. At the lender’s peak in 2006, it was taking in revenue of $11.4 billion, much of it built on subprime and liar loans that were the bundled and sold to investors on Wall Street for huge profits. Last week, three years after the subprime fraud collapse started the economy into the biggest collapse since the Great Depression, Mozilo copped a plea. He would pay $67.5 million to settle a civil fraud suit by the Securities and Exchange Commission.
That was the quick news, and people could be forgiven for thinking that the Obama SEC and Justice Department, led by white-shoe corporate lawyer Eric Holder, had finally begun to bring the figures behind the costliest swindles in history to a reckoning. Hardly. For one thing, this is chump change to Mozilo, whose compensation from 2000 to 2008 totaled more than half a billion dollars. Further, as Gretchen Morgenson of the New York Times reported, $20 million of the fine will be paid by Bank of America. BofA acquired Countrywide and picked up the indemnification of Mozilo against lawsuits.
Mozilo remains the only major figure behind the financial collapse who has faced prosecution. The Obama team makes the Bush administration’s treatment of the kingpins of the 2001-1002 fraud-fest look like the Untouchables. Oh, there was that $550 million settlement by Goldman Sachs, the Jabba the Hutt of the Great Panic. Goldman’s annual net income after taxes: $13.4 billion and CEO Lloyd Blankfein remains in charge. Obama anti-business? Give me a break.
As if most Americans need reminding, the Great Recession and financial panic were not acts of nature and they were not victimless crimes. The consequences of these massive frauds and acts of corporate malpractice included billions in taxpayer bailouts, trillions in calls on the American economy through the Federal Reserve and a huge gash in the living standards of everyone who isn’t among the richest. Where’s the justice? Where’s the punishment that will make the smart young things in business school think twice?
Every time a great corporate fraud happens, we’re told “how difficult it is to prosecute and win white-collar criminal or civil cases.” Why is that allowed to continue? America is very good at criminalizing things and having the world’s largest prison population. Why not here? Apparently because well-funded interests want it that way. So throw out Sarbanes-Oxley and Dodd-Frank as chaff. It won’t make any difference for the bigshots. If a kid robs a liquor store of $25, he’s be off to prison toot sweet. The toffs from Wall Street are still enjoying their estates, yachts, private planes. Equal justice under law?
Today’s Econ Haiku:
Citi’s profit’s soar
So what if your job is gone
Now you’ll never sleep