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Only one executive is in jail over financial crisis.


Of course numerous politicians did not just enable the banks, they were demanding high risk mortgage schemes. Jimmy Carter, Bill Clinton, George W. Bush, Barack Obama, Barney Frank, and much of the congressional black caucus were on the forefront of demanding banks make high risk mortgages in the name of “increasing minority home-ownership.” When a group of House Republicans banded together and tried to rein in the banks, the black caucus screamed “racism” from the floor of the US House of Representatives.

From Montley Fool…

That few execs have been charged doesn’t mean they’re all innocent, of course.

High-level fraud cases are typically referred to the Justice Department by industry regulators. The Department of Health and Human Services, for example, works in tandem with the Justice Department to reel in medical fraud. Same for the Department of Agriculture. And the National Association of Insurance Commissioners.

Bank regulators are different. Since 2000, the Office of Thrift Supervision has not referred a single case of fraud to the Justice Department, according to The New York Times. The Office of the Comptroller of the Currency has referred just three cases.

There could be many reasons for this. The two regulators, though, have a long history of coddling the banks they oversee. They have every incentive to do so: Regulators’ existence depend on banks — or “clients,” as the OCC refers to them as — since fees paid by banks fund their operations. In some cases, banks can shop around for the regulator with the lightest touch.

That’s what Countrywide did in 2007. Then-CEO Angelo Mozilo was frustrated with the demands of the OCC. Regulators were getting in his hair. Easy solution: Countrywide changed charters to fall under the purview of a gentler regulator, the OTS. As Connie Bruck of The New Yorker pointed out, the OTS actually lobbied Countrywide to make the switch.

Not that the OCC was a regulatory pit bull itself. When West Virginia tried to sue Capital One (NYSE: COF ) for credit card abuse in 2005, the company applied for a national charter with the OCC. By doing so, Capital One escaped West Virginia’s jurisdiction, and the state lost authority to pursue its case. This wasn’t an isolated incident. The OCC stopped Georgia when it attempted to enforce predatory lending laws. New York regulators were intervened while pursuing discriminatory lending investigations. The head of the Financial Crisis Inquiry Commission told former OCC head John Dugan, “You tied the hands of the states and then sat on your hands.”

If regulators didn’t make it hard enough, the FBI has seen a radical cut in the number of agents available to investigate financial crime. Law enforcement’s focus began shifting to health care fraud in the ’90s, and to terrorism after 9/11. During the savings and loan crisis, 1,000 FBI agents worked the financial-crimes scene. Today, just 240 do.