The Department of Justice (DoJ) has been harshly criticized for its lack of individual prosecutions in fraud related matters behind the mortgage derivatives products that were at the center of the 2008 crash.
DoJ going after individual mortgage company executives
With financial reform organizations such as Better Markets pushing hard for individual accountability for wrongdoers as a method to generate lasting deterrence comes word today that the Department of Justice (DoJ) is filing suit against individual mortgage company executives.
Bloomberg, citing two unnamed sources, is reporting that Angelo Mozilo, co-founder Countrywide Financial Corp., a mortgage originator based in Los Angeles, CA, and ten other executives may face individual civil actions for their role in preparing and selling questionable mortgage products to financial institutions.
Is this enough to deter future crime on Wall Street?
“Only individual accountability in the executive suites will stop the Wall Street crime spree,” Dennis Kelleher said in a statement to ValueWalk. “If DOJ sues individual executives from Countywide, that will be a good start, but must only be a start and much more needs to be done.”
In other words, DoJ, there is more work to be done.
DoJ: The RICO violation
While knowingly selling faulty financial products to a financial institution is a RICO violation, and people have served prison time, the statute of limitations has run out on criminal charges in this instance and there will be no individual criminal charges.
Mozilo was reported to have personally made $535 million from 1999 to 2008, just before the mortgage derivatives imploded and was followed by an economic recession that the country still has not recovered from. By contrast, Better Markets estimates that the resulting economic collapse spurred on by the faulty derivatives, cost $12.8 trillion.
While individually charging individuals at a California mortgage originator may be a step in the right direction, the sign the government is serious is when those inside the controlling Wall Street banks are held accountable which, to date, has proved elusive.
“DOJ has to go directly after the Wall Street banks and executives that inflated the subprime bubble, spread toxic waste throughout the world, enriched themselves lavishly and almost caused a second Great Depression,” noted Kelleher.