Friday, November 19, 2010

A Wave of Bank Prosecutions Is Unlikely

Great read via Peter Henning @ White Collar Watch. 
The inspector general of the Federal Deposit Insurance Corporation told The Wall Street Journal recently that the agency had opened criminal investigations into about 50 banks that had failed since the financial collapse in 2008. While that makes it sound like prosecutors will soon be filing charges against a number of bank executives, do not hold your breath waiting for a flood of prosecutions.
The last time there was a surge in bank fraud prosecutions was in the early 1990s during the savings and loan crisis that led to the collapse of nearly 1,800 financial institutions. Unlike that era, the number of bank failures has totaled 311 since 2008, and most of those were smaller institutions that got caught up in construction lending.
Although some larger banks did collapse in 2008, like Washington Mutual and IndyMac Bancorp, those failures appeared to be more related to aggressive mortgage operations that fell apart during the collapse of the housing market rather than misconduct by executives. And banks were hardly the most prominent contributors to the financial crisis, with the mortgage lender Countrywide Financial playing a significant role, while the collapse of Bear Stearns and Lehman Brothers triggered much of the upheaval in the bond market.
Click Here To Read: A Wave of Bank Prosecutions Is Unlikely 

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