In “Untouchables,” Frontline of PBS investigates why no Wall Street executive had been criminally charged with fraud after the financial crisis of 2008. The U.S. Justice Department did not go after the bankers for their lack of due diligence regarding their banks’ purchases of sub-prime mortgages from mortgage originators. At Citibank, for example, a manager in the bank’s due diligence department estimated that 50% to 80% of the mortgages did not meet the bank’s credit policy. His urgent memo to Robert Rubin, then CEO of the bank, went unanswered. Rubin would later be rather vague on the point in Congressional testimony. Considering the extent of potential risk facing the bank, Rubin’s claim that he forwarded the email “to the appropriate person.” It is difficult to see how he could have been too busy to deal with something that nearly brought Wall Street to a complete credit-freeze.
Although Frontline focused its investigation on whether criminal intent could be shown beyond a reasonable doubt, it is worth asking whether the F.B.I. officials were really so cautious. For example, one F.B.I. official indicated that the ability of the banks to withstand criminal prosecutions was a relevant factor in the justice officials deciding not to prosecute even executives at banks with whistle-blower testimony on the fraud. As Senator Kaufman observed, it should not be the F.B.I.’s concern whether the Wall Street banks continue as viable concerns. Frontline did not take the next step to ask whether officials at the F.B.I. had succumbed to political pressure at the behest of the banks. Was a U.S. senator, or even the Secretary of the Treasury or even the U.S. President unduly influenced by the banking lobby (and campaign contributions)? Was there a deal wherein no Wall Street executives would be prosecuted for criminal fraud in exchange for something else?
The F.B.I.’s “concern” for the banks’ well-being implies an inappropriate “interest,” whether sourced in the F.B.I. or from external political pressure. Frontline missed this point because the journalists were too focused on the legalese of what is sufficient to show criminal intent beyond a reasonable doubt. I suspect that both the journalists and the F.B.I. officials were too attached to technicalities and the related false-notion of “professionalism.” One F.B.I. official distinguished his “personal” view from his “professional” decision, as if the latter were limited to a technical application of law. In actuality, he or his boss could have been influenced by political pressure sourced in Wall Street’s power and political connections. In other words, “beyond a reasonable doubt” assessments could have been a front for quite another motive—one that would not typically be labeled as “professional.” My question is this: Was there a deal made between senior public officials in Congress or the White House and Wall Street bankers guaranteeing that the latter would not be prosecuted? If so, what did the government get, or what did the officials get?
“The Untouchables,” Frontline, January 22, 2013.