When the Fed announced the details of its huge crackdown on Wall Street on Monday we cringed.
What we got was a bunch of ponzi schemes, the largest of which was $880 million – nothing compared to the multi-billion scam Bernie Madoff pulled off for years under the their nose.
Even more embarrassing, the DOJ said the crackdown sent a powerful message.
Uh, no it didn’t.
Dealbook’s Andrew Ross Sorkin called a few people on Wall Street after Eric Holder took the stage and said “Operation Broken Trust” sent a message to anyone operating or attempting to operate an investment scam.
Turns out Holder’s warning, “We will use every tool at our disposal to find you, to stop you, and to bring you to justice. Cheating investors out of their earnings and savings is no longer a safe business plan,” didn’t reach anyone notable.
No one Sorkin spoke to had even heard of “Operation Broken Trust.”
He explains why in a recent column:
That’s because in the two years since the peak of the financial crisis, the government has not brought one criminal case against a big-time corporate official of any sort.
Instead, inexplicably, prosecutors are busy chasing small-timers: penny-stock frauds, a husband-and-wife team charged in an insider trading case and mini-Ponzi schemes.
Embarrassing. Instead of trying to catch the big guys, the Fed is going after little minnows. Sorkin diplomatically says it’s inexplicable. But it’s got to be because they don’t know how. The SEC practically shot its load when it charged Goldman. The government has got to be dying for more big cases.
But fraud at big corporations surely dwarfs by orders of magnitude the shareholders’ losses of $8 billion that Mr. Holder highlighted. If the government spent half the time trying to ferret out fraud at major companies that it does tracking pump-and-dump schemes, we might have been able to stop the financial crisis, or at least we’d have a fighting chance at stopping the next one.
So by wasting its time with the little guys, says Sorkin, the Fed could be setting us up for another financial crisis. Great.
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