By Ben McLannahan for the FINANCIAL TIMES:
Phil Angelides uncovered evidence of widespread fraud and corruption in the US mortgage market as chairman of the commission which produced the government report on the global financial crisis. Five years on, he is asking the Department of Justice why it has yet to call any senior bank executives to account.
Since his report appeared in February 2011, America’s biggest banks have paid tens of billions of dollars in fines for misconduct in the packaging and sale of mortgagebacked securities, while the DoJ has gone after thousands of borrowers, brokers and appraisers for lying on mortgage applications. But no senior bank executive has been charged with wrongdoing. In a letter to Loretta Lynch, US Attorney General, Mr. Angelides has challenged the DoJ to take action before the tenyear statute of limitation expires.
“I ask a simple question: how could the banks have engaged in such massive misconduct and wrongdoing without a single individual being involved? In a sense, it’s the immaculate corruption,” he told the FT. “It defies common sense, and the people of America know this.”
The campaign by Mr. Angelides, a former state treasurer of California, comes as reform of the big banks is occupying centre stage in the US presidential election, with candidates on both sides accusing rivals of having toostrong ties to Wall Street. Hillary Clinton, the Democratic frontrunner under fire for accepting millions of dollars from banks in speaking fees, has said she will push for stronger enforcement, holding individuals — rather than their firms — accountable for misconduct.
Ms Lynch, too, has taken a tougher line since succeeding Eric Holder last April, signaling in September that she wanted to go after individuals, rather than corporate entities. A batch of new rules, issued in a memo to federal prosecutors around the country, were seen as a tacit acknowledgment that the DoJ under President Barack Obama had been too lenient on executives involved in the financial meltdown and other corporate scandals.
On Tuesday, the DoJ confirmed that it had received the letter from Mr. Angelides.
Mr. Angelides said that his Financial Crisis Inquiry Commission had turned over evidence to the DoJ of potential wrongdoing in 2010. According to reports by a Connecticutbased firm called Clayton —which was hired by more than 20 big banks — nearly one in three mortgages it sampled from January 2006 to June 2007 failed to meet the lender’s stated standards. That did not stop the banks bundling the loans into securities then selling them on to investors.
“Someone conducted this behavior, someone approved this behavior, and I think what is required is a bottomtotop inquiry at each of these institutions as to who knew what, and who sanctioned this material representation,” said Mr Angelides.
“Frankly, the small fry, the mice have been prosecuted but not yet one lion. And it breeds a great amount of cynicism and anger about the nature of our judicial system.”