"Obama and the Rule of Law"

[KoKo]

Obama and the Rule of Law

Jeff Connaughton (Chief of Staff to Sen. Ted Kaufman, 111th Congress)


For three important reasons, the President needs to explain why the Justice Department has filed away its investigations of big banks and Wall Street firms without indicting anyone. First, American confidence in the system is deeply shaken. Second, it strains credulity for millions of Americans -- and has impelled thousands of them to occupy public places in protest -- that no banking or insurance executive deserves criminal prosecution for the actions that brought on the financial crisis. Third, by failing to prosecute a single high-profile Wall Street actor today, the Administration is failing to deter financial fraud tomorrow.

The jury is out (alas, only metaphorically) on whether Wall Street practices that accompanied the financial crisis amounted to criminal fraud. Some legal commentators have concluded that the causes of the crisis were systemic and not the result of malfeasance or conspiracy. The debate about whether practices were illegal or simply unethical will never be resolved because only a jury can render a verdict after weighing the evidence, presented by opposing counsel, for each element of an alleged crime. That said, independent fact-finders like the Financial Crisis Inquiry Commission, the Senate Permanent Committee on Investigations, and the bankruptcy examiner for Lehman Brothers have compiled compelling evidence of what, to many, certainly looks like fraud.

But did the Justice Department's senior leadership even make targeting high-level fraud a top priority? Did it plan, staff, fund, and direct a thorough, probing investigation of each of the primary potential defendants? While I was working in the Senate, conversations I had with Justice Department officials led me to believe that it didn't. As the New York Times and New Yorker have reported, the Department's leadership never organized or supported strike-force teams of bank regulators, F.B.I. agents, and federal prosecutors for each of the potential primary defendants and ignored past lessons about how to crack financial fraud. When Senator Ted Kaufman (D-DE) and I met privately with Department officials in September 2009, one of them explained they were dependent on investigators to bring them cases (which typified, I believed, their passive approach). And, for their part, the investigators were receiving no help from bank regulatory agencies (in the 1990s, successful prosecutions after the savings-and-loan scandal hinged on referrals from the responsible supervising agencies, which provided key roadmaps for F.B.I. investigations).
The Justice Department, F.B.I., and bank regulatory agencies failed to design a prosecutorial strategy that would've indicted and perhaps convicted many top executives who knew that their banks were selling fraudulent securities that bundled together thousands of largely bad loans. These loans, known in the industry as stated-income loans and (more glibly and more accurately) as liar loans, were issued without verifying the borrowers' income. A former executive in charge of fraud investigations at mortgage lender Countrywide Financial told 60 Minutes that mortgage fraud at her firm was "systemic," but federal investigators never contacted her. The U.S. attorney in Los Angeles has already declined to prosecute Countrywide executives. The Senate's Permanent Subcommittee on Investigations found that approximately 90 percent of WaMu's home-equity loans were stated-income loans, creating, in the words of Treasury Department Inspector General Eric Thorson, a "target rich environment for fraud." Yet the U.S. Attorney in Seattle decided not to indict anyone at WaMu.

More at.........

http://www.huffingtonpost.com/jeff-connaughton/obama-wall-street-laws_b_1157915.html