Will Wall Streeters Finally End Up in Jail?

In a piece earlier this year titled, "Why  Isn't Wall Street in Jail?," Rolling Stone fire-breather Matt Taibbi began with a quote from a former Senate investigator:

"Everything's [bleeped] up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that." [Censoring via The Motley Fool.]

The teddy-bear regulators
Many Americans resent the profound dearth of Wall Streeters sent to jail after the horrific financial crisis. It seems to be a particularly sore spot for Taibbi, particularly when it comes to Goldman Sachs (NYSE: GS  ) , the company he infamously tagged the "great vampire squid."

Last month, my fellow Fool Morgan Housel reviewed a few of the reasons that he believes we haven't seen more high-profile executives end up in jail. In his second point, Morgan noted that banking regulators have referred very few fraud cases to the Justice Department since 2000:

There could be many reasons for this. The two regulators, though, have a long history of coddling the banks they oversee. They have every incentive to do so: Regulators' existence depend on banks -- or "clients," as the OCC refers to them as -- since fees paid by banks fund their operations. In some cases, banks can shop around for the regulator with the lightest touch.

There's a new sheriff in town
Perhaps Sen. Carl Levin and Congress now have the opportunity to flip banking regulators the bird and get done what needs to get done -- at least as it pertains to Goldman. In his typical no-holds-barred style, Taibbi's latest missive reviews some of the damning evidence against Goldman found in the 650-page tome from the Senate Subcommittee on Investigations, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse.

In short (no pun intended), the report suggests that not only was Goldman shamelessly dumping what it had realized were toxic products on clients -- including other Wall Street firms like Morgan Stanley (NYSE: MS  ) -- but that the executives served up a crock of bull ... I mean, highly suspect answers, during hearings with Congress.

Not surprisingly, Taibbi thinks it's high time for Zeus from on high (or at least as high as Capitol Hill) to zap Goldman with a thunderbolt of justice. Of course, it falls to the Justice Department to pick up what Sen. Levin and his crew have put down. And if they don't? At least according to Taibbi:

If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.

It sure sounds to me like there's a case here, but what do you think? Should Goldman executives be brought to trial? Head down to the comments section and weigh in.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (10) | Recommend This Article (8)

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  • Report this Comment On May 16, 2011, at 2:40 PM, Zillionaire22 wrote:

    I would hazard to guess that the reason more financial industry executives have not faced the prospect of prosecution is because then the entire story of how the financial crisis was instigated and promoted by the government might come to the surface.

    Peter Wallison wrote a very compelling argument recently which details exactly how the government was not only in collusion but actually was the root cause of many of the problems associated with the finanacial crisis. Certainly this current administration has shown no grreat genius in providing any coherent strategy toward economic recovery. Quite the contrary, I believe most of their policies have done the exact opposite.

    Sure, go ahead and blame "Wall Street" for the financial collaps, they're always an easy target. At least they make no bones about their quest for profit and who they're out to help. Who should be getting the blame are persons such as Barney Frank, Tim Geitner and their brethren who are "from the government and here to help".

    At the end of the day you'll believe what you want to believe.

    Here's Wallison's article link for those who care. http://spectator.org/archives/2011/05/13/the-true-story-of-t...

  • Report this Comment On May 16, 2011, at 4:14 PM, jimmy4040 wrote:

    Wallision's article is nothing more than an old lie, thoroughly debunked already.

  • Report this Comment On May 16, 2011, at 4:27 PM, koolkrissy wrote:

    If the Senate investigation did indeed find evidence of fraud on the part of Goldman and/or others, then should it not be mandatory that these CEO's and their financial whiz kids be brought to trial? I don't understand how a Congressional investigation would just end when so many obvious breaches of the laws and regulations of our country were perpetrated by these "rich and powerful" thieves.

  • Report this Comment On May 16, 2011, at 4:28 PM, pogicraft wrote:

    So it's now illegal to sell underperforming investments?

    People can whine and scream all they want but at the end of the day, Goldman obviously did nothing wrong as they have only become MORE profitable after the financial crisis. If people really thought they were corrupt, terrible, and so-on, at the very least people would stop doing business there.

  • Report this Comment On May 16, 2011, at 7:50 PM, TMFDiogenes wrote:

    Yeah, here's a debunking of Wallison, complete with links to more debunking.

    http://rortybomb.wordpress.com/2011/01/28/fcic-report-1-the-...

  • Report this Comment On May 16, 2011, at 11:57 PM, TMFKopp wrote:

    @Zillionaire22

    "Sure, go ahead and blame "Wall Street" for the financial collaps, they're always an easy target. At least they make no bones about their quest for profit and who they're out to help."

    Mmhmm....

    Here's your boy Lloyd Blankfein talking about just that:

    "I don’t want people in this firm to think that they have accomplished as much for themselves as they can and go on vacation. As the guardian of the interests of the shareholders and, by the way, for ***the purposes of society***, I’d like them to continue to do what they are doing. I don’t want to put a cap on their ambition. It’s hard for me to argue for a cap on their compensation." (emphasis mine)

    That's from the same article where he was quoted as saying he's "doing God's work."

    A WSJ blog commenting on the same:

    http://blogs.wsj.com/marketbeat/2009/11/09/goldman-sachs-bla...

    And I figure no more needs to be said on why we can set Wallison's argument aside...

    Matt

  • Report this Comment On May 17, 2011, at 11:08 AM, karenbe111 wrote:

    I'm afraid the embarrassing truth about the American justice system Mat Taibbi speaks of has already been confirmed, and reconfirmed ad nauseam!

    Perhaps if we take to the Streets...?

  • Report this Comment On May 17, 2011, at 11:09 AM, wasmick wrote:

    Tiabbi has wrung about as much as one can wring from a one note song and there's nothing really wrong with that, everybody deserves to make a living.

    That said, his understanding of the subject matter is facile and his understanding of the laws governing his subject is even weaker.

    I'm not saying that the issues he writes about are not important, they are....but at no time has Tiabbi ever made a solid case that they are illegal. The fact is that it is very, very difficult to prove criminality in these cases which is something Tiabbi glosses over completely. I realize that means very little to the pitchforks and McDonalds crowd, but it's reality. I'm defending what they did, I'm simply saying that abhorent behavior is not always illegal and proving criminal intent is very difficult.

    Luckily for Tiabbi, he's not required to make a case...he simply needs to play to the baser instincts of the none-too-brights who expect to learn something valuable by reading Rolling Stone. C'mon people, this is a magazine that knows less about politics, finance and the law than it does about rock and roll. And that's really saying something.

  • Report this Comment On May 17, 2011, at 11:10 AM, wasmick wrote:

    ocd: not defending

  • Report this Comment On May 17, 2011, at 4:05 PM, akarren wrote:

    Wall Street did a lot of things that would be hard to prove and throw them in jail.

    Goldman had 700 million dollars in legal fees. I think their lawyers are better then the prosecutors.

    Also, just because it is unethical, doesn't mean it is illegal. Wall Street has proven many times that their ethics can be comprised, more time than anybody wants to admit, so financial deregulation is not very intelligent.

    If you don't believe me look how they have destroyed the physical future market of oil. No longer is just physical oil traded between buyer and seller, now you can bet on it. You can trade paper, which leads to huge swings on the Nymex and other commodity exchanges. Its legal, but it is backwards in my opinion.

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