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Should Big-Bank Execs Go to Jail for the Financial Crisis?

Charles Ferguson may have won an Academy Award late Sunday for directing "Inside Job," a documentary on the financial crisis, but he appeared to be channeling another Oscar-winning film when he delivered his acceptance speech: "There Will Be Blood."

When Ferguson took to the stage, he started off by declaring, "Forgive me, but I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that's wrong."

Photo: Reuters

Ferguson is, needless to say, hardly alone in his sentiments, with much of the public still angered by the fallout from the housing crisis and the resulting waves of foreclosures.

But — like it or not — Ferguson is highly unlikely to get his wish.

Angelo R. Mozilo, considered the poster-child by many for the mistakes that led up to the crisis, has agreed to a $67.5 million settlement from the mortgage meltdown, but will probably not see the inside of a prison cell. The Los Angeles Times reported two weeks ago that federal prosecutors had quietly shelved an investigation into Mozilo after concluding there was not enough evidence of criminal wrongdoing.

Writing in the New York Times last week, Joe Nocera concluded that no financial executives are likely to go to jail, but also touched on a tougher matter — whether any really deserve to go to the Big House.

"Two and a half years after the world's financial system nearly collapsed, you're entitled to wonder whether any of the highly paid executives who helped kindle the disaster will ever see jail time — like Michael Milken in the 1980s, or Jeffrey Skilling after the Enron disaster," Nocera wrote. "Increasingly, the answer appears to be no. The harder question, though, is whether anybody should."

Nocera concluded that Countrywide broke the law because mortgage brokers encouraged borrowers to take out loans they could not pay back, and even lie on their loan applications. Although that may make the brokers liable for prosecution, it's unclear if that extends up to Mozilo himself, however.

"The problem is that Mr. Mozilo, though he helped create the culture that made such predatory lending acceptable, never made the fraudulent loans himself," Nocera wrote. "Legally, if not morally, he's off the hook."

(American Banker's sister publication, On Wall Street, spoke with Ferguson before the film came out. The two-part interview can be found here and here.)

But let's put this question to the peanut gallery: Should any bubble-era financial-services executives be sent to jail, and for what, exactly?


(19) Comments



Comments (19)
Posted by Tony C | Wednesday, August 10 2011 at 3:19AM ET
Yes. Every banker who hid the toxicity of MBS and credit analysts who assigned bogus ratings. Go down the line and get the people who wrote the fraudulent mortgages, then follow it up the line to find the orders to lie. Part of the problem is government and its agencies and judiciary looking at corporations as emotionless beings that would not lie rather than entities run by people who DO lie. Too many people profited mightily on both ends of the crisis while the citizens continue to be punished.
Posted by RSE Journal | Friday, March 25 2011 at 11:53PM ET
Enron these guys did enron and enron csuite got litigated. and the lobbying goes to buy the legitimzation to engage in this insidous agency (meaning management) self dealing and looting the kitty that again got enron litigated but got these guys until now, teflon. so yes, and inthe case of failed banks and all the big banks and big financials failed and got bailed out, the FDIC with DOJ litigates the senior execs and guilty actors at the failed institution. we've got to get that moving forward or else it also makes the FDIC complicit in the inflate/collapse wallstreet pulled off for itself AND to be able to walk way with the money without going to the bighouse or having to fake their own death the way Ken Lay did. he probably had facial surgery and will be able to hide out in the states rather than stay out on the lam.
Posted by Psorasam | Wednesday, March 02 2011 at 11:35AM ET
Why is this even a discussion item? Are bank CEO(s) above the law? Aren't we a country of laws? We impeached a US President for high crimes, and he was a crook, and but for the Presidential pardon, that followed, Nixon would have served time. Have we lost it, as a country? Ofcourse, if you commit a crime, you should serve time.
Posted by praveenatDISEL | Tuesday, March 01 2011 at 8:17PM ET
Jail?? How about tried for crimes against humanity and hanged! They pooled together billions worth of garbage mortgage loans, packaged them as AAA in order to defraud investors into purchasing their junk. Knowing what they had sold as AAA was really FFF, they then purchased credit default swaps that would make them insane amounts of cash when the FFF borrowers inevitably defaulted. Their ponzi scheme negatively affected billions of people on Earth. How could anyone with a straight face ask IF they should be in jail?
Posted by beachfunk813 | Monday, February 28 2011 at 3:59PM ET
yes. the bastards should sit in the same cell as bernie madoff.
Posted by Rearl | Monday, February 28 2011 at 1:48PM ET
Yes. They took a job they were not qualified to handle. To jail for lying.
Posted by Robert k | Monday, February 28 2011 at 1:19PM ET
No, unless all the management and the examiners from regulatory agencies and large audit firms go to jail!
Posted by zfredrick | Monday, February 28 2011 at 12:43PM ET
Posted by Jonathan Miller | Monday, February 28 2011 at 12:39PM ET
Yes, absolutely. I also feel that a further investigation be done on the Regulators, agencies and any other participants that created this envrionment. This all started with lawmakers and the penalties for the resulting disaster should also fall on all individuals that helped to create this disaster. Instead, these same lawmakers are allowed to make more stupid laws that will perpetuate the NEXT disaster.
Posted by MAG in BR | Monday, February 28 2011 at 12:33PM ET
Yes, absolutely, they SHOULD go to jail. Will they? --No. The big fish at the banks preserved deniability like mob bosses. Their hands may not be clean, but they are indeterminately dirty as far as any lawyer can prove. Only the little guys who actually wrote the fraud loans will do time.
Posted by j.doe | Monday, February 28 2011 at 12:23PM ET
It is unlikely that you will see any prosecutions because in doing so it will be revealed that the regulators, the ratings agencies, and many involved in the very fabric of the governmental systems designed to keep a check on these institution not only failed to do their job, but were complicit in the activity which caused the collapse. Everyone in the housing and financed business had their hands out and were stuffing their pockets full of cash while looking the other way. In the end if everyone is culpable then no one is held responsible.
Posted by jleopold | Monday, February 28 2011 at 12:18PM ET

Heads, I win a 100 million dollar bonus, tail the government bails me out!!

Posted by jhcoloma | Monday, February 28 2011 at 12:10PM ET
If all the crooks in Congress go to jail for our financial crisis, then the bankers should go too. But first the people who ru(i)n this country.
Posted by searchguy | Monday, February 28 2011 at 12:07PM ET
YES - a 1000 times - YES! Large loan servicers allowed loan brokers, property appraisers, and especially loan underwriters to conduct their business in a manner that totally disregarded honest, transparent, and risk adversive business practices.
Posted by jimjaxfla | Monday, February 28 2011 at 12:07PM ET
Absolutely - but must read 'bank' broadly to include Freddie, Fannie, AIG, etc. Since many have indemnity protections from civil losses, criminal action is the only effective way to proceed. More orange jump-suits and perp walks!
Posted by ricpfi | Monday, February 28 2011 at 12:01PM ET
Posted by kpersaud | Monday, February 28 2011 at 11:56AM ET
Posted by Dorfy | Monday, February 28 2011 at 11:54AM ET
Posted by Dorfy | Monday, February 28 2011 at 11:53AM ET
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