The U.S. Attorney’s office in Sacramento announced with considerable fanfare last week that it has extracted a $5 billion fine from Goldman Sachs for misconduct related to the sale of mortgage securities that helped precipitate the 2008 financial crisis.
Goldman was accused of bundling clearly defective loans into mortgage securities that were then sold to investors after lying about the quality of loans in those securities.
Goldman’s fine sounds like a lot of money until you start reading the small print. The amount the firm actually pays will be less than $5 billion due to special credits included in the deal. Not only that, some of the fine will be tax deductible. One more thing: Nobody will be prosecuted for the crimes that were committed.
That has been par for the course as the government has sought to “punish” companies that were major players in the financial calamity that hit the country in 2008. The government has obtained more than $40 billion in fines from 18 major financial institutions, but has not charged one single executive with a civil or criminal crime.
The Goldman investigation was led by attorneys from the Sacramento office, which has prosecuted more than 300 mortgage fraud cases. U.S. Attorney Benjamin Wagner indicated his office isn’t conducting a criminal probe of Goldman Sachs.
“Apparently, if someone lies about 10 mortgage loans they will face the full force of the law,” Phil Angelides, who served as chair of the Financial Crisis Inquiry Commission, wrote in The Sacramento Bee. “If someone lies about hundreds of thousands of loans, then they can count on the shareholders of their company to pay their way to exoneration.”
There’s no lack of candidates for incarceration in a Club Fed near their homes, just the unwillingness of the Feds to go after them. That may be because some very prominent politicians will be embarrassed if investigators dig too deep for criminal evidence.
Take, for example, Angelo Mozilo, the top guy at Countrywide Financial. Mozilo collected $470 million in compensation for 2001-2006 while Countrywide was handing out billions in bad loans to people who had no business buying a house. He was also signing off on low-cost mortgages to people known within the company as “Friends of Angelo.”
Among his friends were Sen. Chris Dodd (of Dodd-Frank fame), who was chair of the Senate Banking Committee; the chair of the Senate Budget Committee, and the ranking Republican on the House Financial Services Committee. Then there was the son of House Speaker Nancy Pelosi, Sen. Barbara Boxer, and members of the Obama Administration.
When Countrywide collapsed, Mozilo escaped relatively unscathed. He was accused by the SEC of insider trading and eventually resolved the issue by paying a $67.5 million fine, but otherwise he was home free.
Lloyd Blankfein, the chair of Goldman Sachs, was ridiculed a couple of years ago for saying the Wall Street investment banker is “doing God’s work.” The boys on Wall Street aren’t doing God’s work, but a higher power is looking out for them.