It’s Not the Banks – It’s the Bankers


The Washington Post reports that authorities at the Justice Department will not seek indictments of banks and insurers for inflating the value of mortgage-related investments. They plan to seek criminal charges focused on false statements and insider trading of individuals instead. This is in stark contrast to six years ago when we saw the rapid demise of Enron and Arthur Andersen.

Officials from the Justice Department have vowed to figure out the details of the current market crisis. They promise not to go easy on the bad guys:

Deputy Attorney General Mark R. Filip vowed that prosecutors would press ahead to decode the obscure financial products at the heart of the market’s troubles. He said there would be “no unwillingness to take the facts and the law where they lead.”

How will this change of tactic affect our collective confidence?

I for one would be glad to see the bad guys get their due. The buck has to stop somewhere. I hope the Justice Department has the resources to track the financial breakdown in a way that makes mistakes clear. At least those that are knowable. How else can we hope to avoid a repeat?

We’ve all tried to struggle these past weeks with the vast complexity of our economic system. However, some things are easy to understand – like bankers breaking rules. (And politicians making bad rules, or taking the good ones away.)

I’m happy we’re going after individuals. Concrete charges against a handful of Wall Streeters may not show us the whole picture, but it gives us a place to start. The Post reports two former Bear Stearns fund managers face charges for allegedly misleading (lying to) investors about the financial health of their product.

“It’s always fraudulent when you have a material misrepresentation, deliberately made, with the intent to deceive and for personal gain,” said Gil M. Soffer, who oversees corporate fraud prosecutions at the Justice Department.

What do you think? Is this the right thing to do or just another spin on the same old story?