Justice Department running out of excuses about Wall Street

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COMMENTARY The Justice Department has shuttered investigations into Countrywide Financial, IndyMac, New Century Financial and Washington Mutual without filing a single criminal charge. This raises a key question: Is the Justice Department corrupt or incompetent?

These four banks -- and there are many others -- systematically forged mortgage documents and then swore they were telling the truth before selling those mortgages to other companies. That is a fact, not an allegation. The proof can be found by looking, pretty much randomly, at a few of the mortgages issued by these companies between 2005 and 2007. In most cases they're not even good forgeries. Names are photocopied from one document to another, handwriting doesn't match. Finding evidence of the fraud is about as tough as finding a millionaire in the U.S. Senate.

And yet the Justice Department has not put together a case against anyone at any of these banks. Instead, the department's leaders say they are investigating diligently and hope no one will notice the mountain of facts to the contrary.

Here's what Lanny Breuer, the head of the criminal division at the Justice Department,told "60 Minutes" correspondent Steve Kroft about investigations against the companies responsible for gutting the American economy.

Breuer: If a company is intentionally misrepresenting on its financial statements what it understands to be the financial condition of its company and makes very real representations that are false, we want to know about it. And we're gonna prosecute it.

Kroft: Do you have cases now that you think that will result in prosecution against Wall Street banks?

Breuer: We have investigations going on. I won't predict how they're gonna turn out.

Video: Part 1 of Steve Kroft's report
Video: Part 2 of Steve Kroft's report

While the folks on Wall Street always like to say past performance doesn't guarantee future results, in this case it does. The number of federal prosecutions for bank fraud has decreased every year since 2000 and is now at a 20-year low. That's the kind of track record you can bet on.

Instead, what we now have is the privatization of white collar crime, where the only punishments handed out come as a result of private civil actions. Unfortunately, as New York Times reporters Louise Story and Gretchen Morgenson wrote, "The lack of criminal inquiries by the government means that restitution is often paid by innocent parties -- shareholders -- who have already been hurt by the questionable conduct."

Despite this Breuer keeps insisting the public is being well served by his department:

Sometimes it takes a number of years to bring these cases. So I'd say to the American people, they should have confidence that this is a department that's working hard and we're gonna keep working hard, so stay tuned.

Pull the other one, Lanny. It's made out of wood.

  • Constantine von Hoffman On Twitter»

    Constantine von Hoffman is a freelance writer and writing coach. His work has appeared in outlets such as Harvard Business Review, NPR, Sierra magazine, Brandweek, CIO, The Boston Herald, TheStreet.com, CSO, and Boston Magazine.

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