Why CEOs Avoided Getting Busted in Meltdown - William Black/Bloomberg

[WillyT]

Why CEOs Avoided Getting Busted in Meltdown
By William K. Black - Bloomberg
(William K. Black is an associate professor of economics and law at the University of Missouri-Kansas City and the author of “The Best Way to Rob a Bank Is to Own One.” The opinions expressed are his own.)
May 10, 2011 4:00 PM PT

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The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.

We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.

In the Texas “Rent-a-Bank” scandal of the 1970s, for example, two ringleaders created a fraud network of 50 lenders that caused billions of dollars in losses. The watchdogs removed and sanctioned one of the main culprits, but because the crimes weren’t prosecuted, the same crooks reappeared in the 1980s to do it all over again, only on a bigger scale. Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.

It seems as if we have forgotten this lesson.

Take the seven senior officials convicted in the failure of one of the lenders that drove the 2008 credit crunch. All of the cases arose from an investigation of Taylor Bean & Whitaker Mortgage Corp. The first trial occurred last month -- 6 1/2 years after the Federal Bureau of Investigation warned publicly that there was an “epidemic” of mortgage fraud and predicted that it would cause a financial crisis if it weren’t contained. The trial and conviction of Taylor Bean’s former chairman, Lee Farkas, occurred nine years after his crimes were suspected.

Taylor Bean was a small Florida mortgage broker before the fraud began as the housing boom took off. Fannie Mae had cited Farkas for multiple violations, but never filed a criminal referral, which would have triggered an investigation. Had it done so, Farkas might have been prosecuted and Taylor Bean shut long before it caused so much damage. Instead, it expanded, then failed, pulling down a bank with it at a cost of $2.8 billion to the Federal Deposit Insurance Corp. Farkas plans to appeal the verdict...

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More: http://www.bloomberg.com/news/2011-05-10/why-ceos-avoided-getting-busted-in-meltdown-commentary-by-william-black.html

:kick:

[bluerum]

1. Black is gold

[WillyT]

2. Yes He Is...

:hi:

[Octafish]

3. He coined the term, ''Control Fraud'' to describe the gangsters running the show.

He wrote "The Best Way to Rob a Bank Is to Own One."

He helped investigate the crooked Savings & Loan bastards.

And he warned us about the Great Wall Street Bailout of '08.

He is The Man.