Manhattan district judge Jed Rakoff is no stranger to financial cases. The former prosecutor with the U.S. Attorney’s office has prosecuted against, judged on, and written about white collar crime before.
But in a new essay for the New York Review of Books, Rakoff delivers his most blistering critique of the post-financial crisis legal paradigm.
In “The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?” Rakoff writes how the Justice Department has failed in its basic duties.
Gone are the days when the government would actually go after a firm’s top brass. Remember the savings and loans kingpins? Even Enron wasn’t that long ago. In terms of retribution for the financial crisis, we’re basically seeing drawn out slap-on-the-wrist fines with very little admission of wrongdoing (if any) and no real top executives implicated.
For its part, the Justice Department has argued it is difficult to prove intent in these financial crisis cases. But Rakoff pooh-poohs that, writing that there are things called “willful blindness” or “conscious disregard” — upon which federal prosecutors have asked juries to infer intent before.
Perhaps there’s a more complex reason. Perhaps the government actually engendered the conditions that made the financial crisis even possible in the first place. From the New York Review of Books:
One does not necessarily have to adopt the view of Neil Barofsky, former special inspector general in charge of oversight of TARP, that regulators made almost no effort to hold accountable the financial institutions they were bailing out, to wonder whether the government, having helped create the conditions that led to the seeming widespread fraud in the mortgage-backed securities market, was all too ready to forgive its alleged perpetrators.
Please do not misunderstand me. I am not suggesting that the government knowingly participated in any of the fraudulent practices alleged by the Financial Inquiry Crisis Commission and others. But what I am suggesting is that the government was deeply involved, from beginning to end, in helping create the conditions that could lead to such fraud, and that this would give a prudent prosecutor pause in deciding whether to indict a CEO who might, with some justice, claim that he was only doing what he fairly believed the government wanted him to do.
It’s a pretty damning account of the the Justice Department’s many excuses.