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“Crooks on the Loose? Did Felons Get a Free Pass in the Financial Crisis? “

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I have to confess I have yet to do more than sample this video, but I intend to watch it in full as soon as I have a breather. This is a video of a panel discussion at NYU Law School earlier this month at which former prosecutors Neil Barofsky and Eliot Spitzer took on party-line-defending Lanny Breuer of the Department of Justice, and to a lesser degree, Mary Jo White, former US attorney who now works on the defense side. Various reports on the discussion indicate that sparks flew at several junctures, so I am confident the NC audience will find it engaging as well as informative.

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62 comments

  1. Tom Stone

    Good grief,Yves. There were plenty of Felonies uncovered with a samople audit at the SF Assessor’s office. How many people do you expect to see prosecuted there? I have lost track of the number of felonies that have been discussed here over the years where there was not just a smoking gun but a body on the floor. How many prosecutions?

    1. Kate Johansson

      I agree Tom. This whole thing is the weirdest, most bizarre thing I have ever seen. When did we arrive with Alice in Wonderland? It’s like we can all just shut up now. Because NOTHING is ever going to happen to these crooks. We are never even going to get one crumb of satisfaction.

      1. YankeeFrank

        Oh come on. The president has made clear that what was done was wrong, but not illegal. And since he can assassinate us and throw us in gulags at will, who is to say he cannot repeal fraud statutes at will?

    2. darms

      Short answer: “Yes”. I always think about what would have happened to these assholes had they been caught with drugs, then & only then would they have been looking at serious charges.

  2. Glen

    Mary Jo seems to be extremely concerned about protecting the “rights” of corporations – too bad she’s never seen what we do to actual citizens.

    Niel seems to be speaking about himself when he discuss how the AGs aren’t smart enough to bring cases.

    And Wall St is damn lucky they were able to slime Eliot and knock him out of government service. He seems to be the only one interested in doing anything.

    These guys are all going to look like COMPLETE IDIOTS when the next stage of the crisis throws the US into a full blown depression. It’s not like ANYTHING has been fixed, or stopped or even prevented instead it’s been a massive “transfer of wealth” ie.e robbery of American citizens.. The undertones expressed in this panel discussion is that Wall St and the banksters have a green light to continue the rip off. These law students are going to try and do a Mary Jo, do littloe to nothing as an AG, and then get the cash out with a job on Wall St.

    1. darms

      So WTF was Spitzer doing w/prostitutes? I HAVE NEVER done business with prostitutes and have NEVER felt the urge either. Did Mr. Spitzer feel entitled or some such other rot? Likewise Clinton w/Monica, had that been me (hardly!) I would not have been tempted. I value my mate/partner and temptation has never been an issue in my 55…

      Maybe that’s why I will never be a politician or anyone important (save to my loved ones)…

  3. WeevieL

    I wish someone would edit this video, leaving in only the highlights, where sparks fly. I can only take so much of Lanny Breuer and Mary Jo White.

    1. 2little2late

      I wish someone would edit this video showing the video of Lanny Breuer and Mary Jo White, with the audio of Ren and Stimpy.

    2. ajax

      What was the correct definition of
      prosecutorial zeal again?
      It seems I’m confused on this, or something …

      Then there’s prosecutorial discretion. Doesn’t
      this provide wiggle-room?

      Anyway, I suggest making explicit what appears
      to be implicit Re: prosecutotial zeal,
      prosecutorial discretion.

  4. LD

    My goodness, all is really just all well and good. Our prosecutors and justice system are right on it…uh, wait a minute…or maybe…these people, all lawyers, are just excellent vociferous litigators, willing to disseminate disinformation to quell the outright vulgar peasant voices who are questioning their ability to prosecute financial crime? Naaaawww. Look over there, towards the regulators, please!

    1. nonclassical

      and, when “look at the regulators” isn’t distracting enough, follow lame stream media scapegoating education, teachers, unions, immigrants, state employees,
      local government (emergency managers indeed), social security, medicare…in other words, Naomi Klein’s, “The Shock Doctrine-rise of disaster capitalism”.

  5. Cap'n Magic

    Barry Ritholtz asked his question between the 50-60 minute mark. And I don’t think he liked what he heard.

  6. XRayD

    Makes one yearn for the Clinton Whitewater days when the might of the Republican machine was dedicated to exposing his 2nd rate “real estate” deal in Arkansas as a part of the S&L “crisis” (which was chicken feed compared to the current one)!

    And the the Monica Lewinski affair!

    We are no longer a country, we are a two party perpetual football match. Clint Eastwood was wrong. It is not half time in America.

    It is the 2 minute warning!

  7. papicek

    Excepting Spitzer, I’m hearing a lot of “reasons for doing nothing” and not a lot of desire for this to change. Corporate advocate Mary Jo White I expect this from. Lanny Breuer, however, is a perfect demonstration of what’s wrong with the legal apparatus opposing Wall Street banks.

    1. PL

      When Lanny Breuer says “over the last three years we have indicted thousands of people for mortgage related fraud” who is he talking about?

      1. YankeeFrank

        The only one I know of was a dude who allegedly fibbed on his loan application. They really got that guy good!

      2. 2little2late

        What I believe Lanny Breuer said was that over the last three years, he’s talked thousands of times about the guy they busted for mortgage fraud.

        1. PL

          So Breuer is blatantly misleading us with his comment about “thousands of indictments.” That’s what I thought, Yankee Frank and 2little2late, but I couldn’t quite believe he would be so disingenuous. The entire forum was a sham if Breuer got away with saying it. Shame on the moderater and other participants for not calling him out on it.

  8. Susan the other

    I could only take it for 30 minutes. With Breuer whining about how difficult it is to prove material facts for each of the elements of a crime, including the ever elusive element of intent, especially when the smartest lawyers in the world have written contracts that protect the originators and securitizers and their deals like Abacus. Unbelievable. I felt a cold chill when he said he had spent two days with Schneiderman as a member of the new task force on origination and securitization fraud. Spitzer is right. Without laws to match the wrongful behavior, nobody can do very much. One loophole is all they need. The most powerful force against this stuff will eventually be a smarter public that rejects it.
    I wonder what the next big securitization bubble will target. What’s left to loot? Mattress caches?

    1. prostratedragon

      What’s left to loot? Mattress caches?

      Years ago I got a flash of a futuristic satire in which a shelf tax was collected as a means of maintaining the “correct” pricing of household inventory. As you might imagine, a fair amount of the social setting of the story would have concerned the arrangements necessary for assessments to be made.

      I could hardly get through the next day, let alone manage to write the story. But now I’m thinking it time to dust off the idea, not for a work of fiction, but as a vital thought experiment whose implications should be tucked into one’s survival kit.

  9. Middle Seaman

    One wonders why these highly qualified lawyers bother to ruminate the run of the mill propaganda we have been exposed to the last three years.

  10. chuck roast

    Remember the Debating Club in high school? This is what happened to them – and why the normal high schooler couldn’t wait for the bell to go goof-off.

    Eliot laughs his ass off while Lanny bloviates about how through extreme circumspection he may (or may not) be required to focus the on the actual she who must not be mentioned (fraud). The new Task Force will be excellent at promoting further dialogue about these issues. And of course Lanny agrees with Eliot but he can’t comment on the specific case – there are many complicated and labor intensive issues to be looked at. But, as he mentions on a number of occasions, he is very “nimble”, however, again, he really can’t answer any questions because he has to be careful what he says.

    Mary Jo is good enough to put any prospective juror into a deep and prolonged sleep – how could such a juror ever convict one of her clients.

    When Eliot says that TARP elites were a representation of The Peter Principle on steroids, Neil who had to battle Timmy and the other arsonists on a daily basis, gets off the best line of the day…”You have no idea!”

    On the whole, not enough sparks to jump a battery.

  11. vicki

    OMG! Watching that hacking hack Lanny Breuer twitch, squirm and flail about while defending his lack of criminal prosecutions was very telling. IT’S SOOOOO HARD PROVING INTENT! Puleaze. He is right to be mortified over his role in letting Too Big To Fail off the hook all together.

    1. CaitlinO

      If doing his job is too dang hard for Lanny, send him to the showers and bring in the guy who has shown us all that it can be done successfully – William K. Black.

      1. travizm

        im pretty much a layman but i’ve got a pretty good sense of direction……and I just don’t think the legal system is working…..it seems too silo’ed, too unregulated, too conflicted, too maleable.

        If it was fixed wouldn’t you be getting justice?….and regulation towards preventing this happening again?

  12. vicki

    Jeepes H. Christmas! Lanny made a total ass of himself. He is representitive of everything wrong with the Bu$h Admin Obama admin. It’s really HARD to prosecute corporate crooks. Let’s go after medical pot and leave the big guys alone. Spare me! What a hacking ass. You can judge Obama by the company he keeps: Hacks and spinless mushy middlers.

  13. Hugh

    I can’t access the video unfortunately due to my slow connection, but the initial comments remind me of this:

    a long habit of not thinking a thing WRONG, gives it a superficial appearance of being RIGHT

    from the beginning of Thomas Paine’s Common Sense. But as history has shown us, this kind of thinking gives no immunization to revolution, something for both us and our elites to keep in mind.

    As for Mary Jo White, here are some of the items I have about her from an old Bush scandals list I kept:

    (1). On October 24, 2006, the night before John Brownlee the US Attorney for the Western District of Virginia completed a plea bargain with Oxycontin manufacturer Purdue Pharma, he received a phone call from Michael Elston Chief of Staff to Deputy Attorney General Paul McNulty who urged him to go slow. Elston was acting on behalf of a Purdue Pharma executive and was contacted by Mary Jo White a former US Attorney representing Purdue Pharma. It is unlikely that Elston acted without McNulty’s knowledge.

    The Oxycontin case had been brought because Purdue Pharma had downplayed the dangers and addictive nature of the painkiller. Between 2000 and 2001, it was blamed for 146 deaths and may have been responsible for as many as 318 others. Despite Elston’s call, Brownlee went through with the plea deal which included the company pleading guilty to one felony and being fined $635 million. Three former executives also pled guilty to misdemeanors. This was actually a fairly light punishment seeing as the company had made billions off Oxycontin and none of the executives pled to felonies. 8 days after the settlement, Brownlee’s name appeared on a list kept by Elston of US Attorneys to be fired. In the event, Brownlee kept his job.

    (2) As part of the scandal involving the crooked Pequot fund in which Aguirre an investigator at the SEC tried to do his job and got fired for it.

    In mid-June 2005, Aguirre sought to subpoena John Mack, chief investment executive at Morgan Stanley, an investor in Pequot, and friend of Samberg, together with emails exchanged between the two. In this he was initially backed by his boss Robert Hanson but Hanson soon backtracked warning that Mack had powerful political connections. He wasn’t kidding. Mack was a 2004 Bush Ranger, an elite group of political fundraisers who collected $200,000 or more in bundled donations. Enter at this point Mary Jo White a corporate fixer at the law firm of Debevoise & Plimpton representing Morgan Stanley. She went over Aguirre’s head directly to the Enforcement Director at the SEC Linda Thomsen and the subpoenas that Aguirre had sought were blocked.

  14. lark

    What made me ill was to hear Mary Jo White and Lanny Breuer go into ecstasies over the revolving door between the corporate lawyers and the government prosecutors. Ms. White said our system was so much more ‘innovative’ than the systems of countries that prohibit this sort of thing. Where have we heard that word before?

    My overall sense is that the indignation in the country is thousands of miles away from the self-satisfied club these two inhabit. They had better wake up.

  15. Lloyd C. Bankster

    I haven’t watched the video. Everyone on Wall Street knows multiple crimes were being committed. Lanny Breur and Mary Jo White might be the only ones who don’t get it. But that’s their job, they’re paid not to get it.

    I can even mention some of the crimes I participated in, and be certain nothing will happen to me. As a banker, I’m above the law. Reporters on the other hand are not allowed to report on financial crimes, their job is to cover them up.

    Anyways, the Wall Street of 2005 – 2007 was about much more than mortgage bonds. It was about Synthetic CDOs, which were made from Credit Default Swaps. These were not created from “mortgage payments”, they were created out of thin air.

    CDS was a zero-sum game, like gambling. It’s not accurate to say it was “similar to” a Ponzi scheme. It *was* a Ponzi, including assets that did not really exist and that were marketed through fraud.

    At one point, Justice looked into crimes at Deutsche Bank. But claimed there was no way to prove intent. Had they investigated DB’s involvement in the Synthetic CDO market they could have found that DB management authorized their head CDO trader, Greg Lippman, to make huge short positions against the same kind of products they were selling.

    But like I said, it’s their job not to find any crimes, like it’s the reporters job to cover them up.

    Management knew that DB was selling garbage, then turning around and shorting the same garbage, just like I knew Goldman was selling garbage and shorting the same garbage.

    When they bought “shorts”, they were really buying Credit Default Swaps. Those swaps went into Synthetic CDOs. Those Synthetic CDOs were then sold as investments to pension funds and retirement funds, widows and orphans, helped by Triple A ratings from the ratings agencies.

    During this same time, there was rampant drug use and prostitution amongst the Wall Street Elite. Many Wall Street firms raised funds for charity and then kept all the money for themselves. Many CEOs were smoking pot and snorting cocaine; meanwhile ordinary people are sentenced to many years in prison for having marijuana or other drugs on their person.

    If the ordinary person gets stopped without car insurance, they can go to jail. And yet, AIG executives got away scott free. Reinsurance is almost completely unregulated. And hedge funds are now able to take out “longevity swaps”, profiting from the early demise of people whose life insurance policies they have “bet” on. If ordinary people did this, they would be indicted under RICO laws.

    And what of the ratings agencies?

    How is it legal for one group to pay another group to influence their ratings, which they have been authorized specifically by the Congress to produce? How is it legal for Warren Buffet, who had a stake in Moody’s, to call products his own companies enabled and profited from, “financial weapons of mass destruction”?

    What about all the Super Senior Tranches, which were not even technically rated, that people were selling as “better than AAA”? This is something almost nobody mentions. The top tranche, the vast majority of the CDO, was not rated by any ratings agency. People simply assumed it was ‘better than AAA’ because ratings agencies had been involved in deciding to rate the other parts of the CDO. If dozens of authors missed this point, then how could you expect the funds buying this stuff to get it?

    What about the Collateralized Loan Obligation market, pumped to the brim with garbage from leveraged buyouts and shady private equity deals? What about the Monoline insurance companies – it was actually illegal for them to sell CDS against CDOs a couple of years back, and then magically that changed?

    What about selling all of this to “non-sophisticated” investors, a clear violation of law?

    Bribery is illegal. Fraud is illegal. Aiding and abetting and conspiracy are illegal. Lying under oath is illegal. Prostitution is illegal. Drugs are illegal.

    When dozens of experts from the industry, including bond traders, hedge fund managers, CDO experts, academics, financial journalists, and a former District Attorney and Governor all say that crimes have been committed, how can you blame John Q. Public for thinking that crimes have been committed?

    Crimes *were* committed but they were committed by Wall Street bankers and what you have to understand is that the law does not apply to us. It only applies to 99 percenters who steal a loaf of bread or $50 from the local convenience store.

    As a banker, I am above the law. And one last thing. I borrowed from other sources to refresh my memory while writing this comment, however my sources are not Wall Street execs but 99 percenters, therefore I see no reason to give them credit for anything.

    So let them sue me.

  16. Dwight

    Lots of talk of prosecutors’ need to avoid political pressure to prosecute, as if there was no political pressure not to prosecute.

  17. Mr

    Would some kind souls note, with specific time markings, which parts are particularly noteworthy from this 80 min. video? Thanks.

    1. psychohistorian

      For someone to do that they would have to go back through and identify the specific tidbits and their times. As someone who watched the whole thing, I don’t think that there was any phrase of lawyer speak you couldn’t live without.

      Lanny and Mary Jo are clearly part of the problem and the overall defense of the revolving door was pathetic. The only other observation is that these folks cannot see their hypocrisy and delusions about what is socially important criminal behavior to pursue.

    2. Lambert Strether

      Barry R harpoons the whale at a little after 55:00. The rest of it, however, is fascinating much as the conversation of courtiers at Versailles must have been fascinating. A lot of “we’re all friends, really” laughter. You’ll also enjoy getting a feel for Breuer, at least if you wear latex gloves. He’s on Obama’s task force, so you can have complete confidence in the outcome.

    3. bmeisen

      Having watched the whole thing I report that there are few if any sparky conflicts, few if any remarkable moments. I found it worthwhile primarily for the chance it offers to hear prominent American legal minds think. Ritholz’ question was a potential moment, Breuer made interesting efforts to avoid saying anything, and Spitzer refused the invitation to get on a high horse. Most unusual were White’s asides that seem to have been intended to uphold prerogatives for the very wealthy, that seem to reveal a disregard for notions that limits on wealth may be relevant at certain levels.

  18. Maximilien

    “Crooks on the loose? Did felons get a free pass in the financial crisis?”

    Is Jon Corzine in prison yet? No, of course not. Instead he is living in the penthouse of the financial world, whose exclusive residents have perfected the art of the steal. Except, of course, it’s no longer called “stealing”, it’s called “business”. (“Sorry to hear about the bankruptcy, Mr. Corzine.” “Thank you. A billion of customer accounts has vanished.” “Well played, sir!”).

    Corzine saw the possibilities because he was standing on the shoulders of
    giants: a decade’s worth of crooks-on-the-loose and felons-with-free-passes; who constantly baited the dogs of justice and found them to be toothless, asleep, or easily quieted with a piece of meat. Their shoulders raised him to what is the pinnacle of financial success today—massive theft with total impunity.

    Except, of course, it’s not called “theft”. It’s called “business”.

  19. Conscience of a Conservative

    Lanny Breuer needs to find religion. Hearing him defend the DOJ record it becomes abundantly clear he’s not about to start going after Wall Street for mortgage fraud. Spitzer brings up a very good point about Clayton.

  20. Lawyer

    Funny how prosecutors have no problem bringing a case of “conspiracy” or “possession with intent to distribute” when you’re talking about five dime bags of marijuana or crack. When you’re not talking about some poor teenager, but a rich Wall Street guy structuring deals to defraud, “intent” becomes impossible to prove.

    They will arrest you for illegal peddling, trespassing, driving with an expired license, or scalping tickets. They will handcuff you and take you to jail, at least for a few hours. That is for your lower and middle classes. When it comes to the top, all rights must be carefully considered before making a decision to charge.

  21. Cheyenne

    William Black put more than 1000 execs in jail for a crisis 1/80th the size of this one.

    Lanny Breuer gives 100 reasons for not even going after false notarizations.

    Lanny and Mary Jo are hired precisely because they neither soul nor balls.

  22. JTFaraday

    I do agree with MJ White’s repetitive pontificating to these law students about not succumbing to the mob desire for bank CEO scalps in one respect.

    It is not reasonable to seek CEO scalps when we are witnessing a massive failure of professional responsibility in *every* profession that this scandal touched in any way.

    Every single one of these professions, not just bank CEOs, is IN NEED of a thorough purge. Like, if we could just purge this panel of Brueuer and White and its host, John Sexton, we might start to get somewhere.

    http://en.wikipedia.org/wiki/John_Sexton

    Thank goodness Lanny Breuer says he “understands” the strategy of indicting lower level people and then flipping them.

    1. JTFaraday

      And whatever they might be thinking (if they’re thinking), the students strike me as distressingly passive during the questioning period.

      Therein lies the whole key to this process of de-skilling and de-professionalizing that is ubiquitous amongst the credentialed and institutionally connected classes today. This rotted out culture of passive obedience will continue to lead to mass criminal enabling.

      At least Bartofsky had the good sense to call on an obstreperous blogger to try to inject some new blood in this corpse.

  23. BDog

    check out lanny’s background on wikipedia and let me know if you are still wondering why this guy does nothing to put the big criminals behind bars

  24. DWoolley

    If you only have time to sample the video, fast forward to the point the panel solicits questions from the audience, the first question is by Mr. Barry Ritzholtz directed toward Mr. Lanny Breuer. Ritzholtz asked about the robosigning fraud and Breuer sidesteps the question but uses the servicers tell all term “process/processing errors”. Rather disappointing perspective coming for a prosecutor.

    1. JTFaraday

      He is EXACTLY what Spitzer is describing when he says the revolving door causes some people to so inhale the corporate ethos that they can no longer be effective prosecutors, regulators, or work as public servants within the government in any capacity.

      He went on to mention the “Peter Principle” whereby those who created the problem failed up and were put in place to “solve the problem.”

      In response, Bartofsky said under his breath, “You have no idea.”

      Breuer should be removed. Period. And I’m certain there is a long line of legal perps who need to follow him out.

  25. glassline

    I think all the commenters on the panel had some good points. I know the NC crowed can get riled up about why aren’t more people in jail. Barry Rhirholtz’s question in particular was sidestepped by Lanny Breuer. But it probably is the case that the many if the high level people have enough plausible deniability to avoid prosecution (someone like Joe Cassano)
    There is a lack of nuance in the discussion here which devolves into cynical “they’re all a bunch of crooks.” The power to prosecute us huge, it always has a political element, and it is abused appallingly way too often.
    A good example is the current prosecution of Dharun Ravi in the Tyler Clementi (gay teen at Rutgers) suicide case. It’s a travesty and a crime in itself. en.m.wikipedia.org/wiki/Suicide_of_Tyler_Clementi

  26. john c

    around minute 70…breueer going on about whistlblowers…may white sitting on the end of the panel…anyone remember bernie madoff and harry markopols? the SEC had numerous opportunities to hear…i’m guessing its attorneys too concerned about that job on WSJ

  27. aletheia33

    i listened up to minute 54. i didn’t see/hear anything i’d call a flying spark. all quite chummy. this was engaging and informative for this reader as a demonstration of how far the privileged are from being able to see that it is suffering of human beings–actually somewhat like themselves, and many just as intelligent as they are–that props up the pleasant lifestyle and workstyle they enjoy. and these are the people our society holds up as the best and brightest of the law profession.

    15 minutes of this is more than enough. i’d much rather listen to a one-hour panel of the lawyers who are fighting in the trenches to protect and defend actual human beings from abusive foreclosures. i’d like to hear them speak about how they manage to win through to anything, what motivates them, how do they keep going with full cognizance of the desperation of their efforts and the pathetic, sickening, pervasive failure of ethics that prevails in our society now: the cesspit in which they must muck about every day, to which they willingly return every morning. because at least they know that it is a cesspit that they are in.

    such would be a far better forum for these young law students than this spectacle of elites stroking one another.

    who shall police the police?
    who shall take back what thieves have stolen?
    who shall prosecute the prosecutors?
    who shall judge the judges?

    who shall retrieve the prizes, the money, the tenures, the official positions disingenuously awarded?

  28. John Lenihan

    I quit after the declarations by the DOJ guy:

    1. We can’t put people in handcuffs just because it looks good (quite true, but handcuffs magically appear on many offenders in the same category who did relatively minor things compared to toppling the financial system of the world; never forget that Bernie would be free and happy today, and not destined to die in prison, if he had not tearfully confessed and regretted his crimes to his family);
    2. We must prove all our allegations beyond a reasonable doubt (Of course, absolutely; nobody is calling for kangaroo courts, but somehow, the standard of proof is always very much higher for the “big bazoo” financiers with the most expensive and well-prepared lawyers);
    3. We are prosecuting X, Y, and Z for this, that and the other; largely true, but in no case did those low level, almost routine examples of misbehavior, giving in to greed and temptation, rise to the level of tilting the financial world on its axis, a story which has not yet finished, or really even begun.

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