Millions of Americans lost their jobs, houses, savings, and more when the housing market collapsed under the weight of mortgages that should never have been approved, let alone bundled and converted into worthless, toxic securities. And yet, no senior Wall Street bank executives were ever charged with a crime. Now one U.S. congressman is asking to look at the FBI files to find out why.
In a letter [PDF] sent yesterday to FBI Director James Comey, Rep. Bill Pascrell (NJ) points out that in 2004 — four years before the collapse — the FBI had already expressed concerns about questionable mortgage practices that would ultimately result in the loss of trillions of dollars in household wealth.
By the time the bubble burst in 2008, Pascrell notes that the FBI was investigating potential crimes — accounting fraud, insider trading — at at least 14 different companies.
Since 2009, the government and other civil plaintiffs have received billions through penalties, settlements, and judgments.
“However,” writes the congressman, “several years later, no senior executives have been charged” with any criminal activity, in spite of evidence that these bankers deliberately (and drastically) understated the risk of mortgage-backed securities, misled investors, and hoarded profits.
Unfortunately, as Pascrell writes, the facts of these criminal investigations “remain hidden from the public,” so we have no idea if there was indeed insufficient evidence to prosecute, or if the investigations ceased for other reasons.
So the congressman has requested to see the FBI’s investigative files in these cases, including interview transcripts, investigators’ notes, reports, and memos.
“It is my belief that as much unclassified material as possible from these investigations ought to be made public,” writes Pascrell, who also wrote to Rep. Jason Chaffetz (UT) and Rep. Bob Goodlatte (VA), the Chairs, respectively, of the House Oversight Committee and the House Judiciary Committee, seeking their support in unearthing these FBI files.
“With pronounced public interest in the events surrounding the financial crisis and its aftermath, I imagine your committee[s] would take a particular interest in this topic,” writes Pascrell. “Surely the documents surrounding the investigations into criminal activity on Wall Street would be of high value to the American public.”
In a 2013 Frontline, documentarian Martin Smith talked with then-Assistant Attorney General Lanny Breuer, the prosecutor tasked with leading the Justice Department’s investigation into the banks’ role in the collapse.
Breuer had been criticized for not only failing to bring any charges against individual bank executives, but also for publicly stating in 2012 that he lost sleep over the potential harm such a prosecution might have on the financial industry.
“[I]f I bring the case against Institution A and as a result of that case there’s some huge economic effect — if it creates a ripple effect so that suddenly counter-parties and other financial institutions or other companies that have nothing to do with this are affected badly, it’s a factor we need to know and understand,” he explained to Smith about his previous statement.
Almost immediately after that Frontline aired, Breuer stepped down from his role in not-prosecuting the banks. However, the DOJ has continued to be criticized for being hands-off with banks deemed “too big to jail.”
In 2014, then-U.S. Attorney General Eric Holder denied these allegations, saying that people who claimed “too big to jail” didn’t have the whole story.
“Sometimes a company’s conduct may be wrong, may be hard to defend, but not necessarily in violation of criminal law,” said Holder at the time. “When laws indeed appear to be broken and evidence supports allegations a company’s is size will never be a shield from prosecution or penalty.”
Perhaps making the FBI investigation files public will shed some light on whether or not this is true.