There's been no shortage of federal prosecutions stemming from the global financial crisis, but the headlines belie a crucial distinction: The crimes tackled so far are predominantly the kind revealed by a meltdown, not the type that cause it in the first place.
Ponzi schemes, of course, are Exhibit A; they're running all the time, but only surface when the economic tide goes out. The Department of Justice (DOJ) has taken down a number of mortgage fraudsters and corrupt borrowers, but they're small fries in the grand scheme of the financial meltdown and comparatively low-hanging fruit for prosecutors.
The first step in a criminal investigation of a bank executive is often a criminal referral from the low-level examiners who constantly oversee financial institutions. Black draws a stark comparison between the volume of those referrals at the height of the S&L era and today.
"In 1987 and '88, I believe there were more than 11,000 criminal referrals from the agencies," he says. "In the current crisis, we have numbers from two of the agencies, the Office of the Comptroller of the Currency [OCC] and the Office of Thrift Supervision [OTS]: The number is zero."
Add to scant investigation resources the fact that complex financial cases are never a favorite of prosecutors. They are paper intensive, hard to explain to juries and can take years to bring to trial.
Because prosecutors are usually judged by the number of cases they win and the money they recover, taking on a single big financial case can represent a significant career risk.