The Untouchables
By PBS Frontline
Updated March 18, 2013 11:08:00
In this investigation we hear from industry whistleblowers who were forced to approve loans they felt would almost certainly fail.
It's over four years since the global financial crisis began. We now know the crisis that took the world to the brink of financial meltdown - throwing millions of people out of work and devastating entire communities - began on Wall Street.
In the wake of the crisis, the newly elected President Barack Obama promised to make greedy bankers pay for their crimes. Four years on, not a single senior Wall Street executive has faced criminal prosecution. The question is why? Are they simply too big to jail?
"I think prosecutors around the country... should speak to regulators, should speak to experts, because if I bring a case against institution A, and there is some huge economic effect... it's a factor we need to know and understand." Senior Federal Prosecutor
Next on
Four Corners, a PBS-
Frontline investigation asks why the United States Department of Justice has failed to act on credible evidence that Wall Street deliberately packaged toxic loans and sold them to investors.
These allegations don't simply come from disgruntled investors. In this investigation we hear from industry whistleblowers who were forced to approve loans they felt would almost certainly fail.
We also hear from financial experts hired by the banks to assess the quality of loan portfolios that would later be resold. They tell how they were ordered by their bosses on Wall Street to approve the purchase of portfolios that clearly contained loans based on flawed assumptions. In effect, they were being asked to overlook fraud. In one case, one due-diligence underwriter became so alarmed he wrote to the chairman of the bank employing him. His warnings were ignored.
Legal experts claim these testimonies should have provided the basis for Justice Department prosecutions. In this brutally frank exposé, prosecutors and Government officials explain how the hard decisions were not taken, and how Wall Street was allowed to get away with one of the biggest frauds in history.
"So you are telling me that not one banker, not one executive on Wall Street... committed provable fraud? I mean I just don't believe that." Former Federal Political Advisor
"The Untouchables", reported by Martin Smith and presented by Kerry O'Brien, goes to air on Monday 18th March at 8.30pm.
It is replayed on Tuesday 19th March at 11.35pm.
It can also be seen on ABC News 24 on Saturday at 8.00pm and at ABC iview.
Show transcript
Transcript
"The Untouchables"| PBS Frontline - Monday 18 March 2013
(Steep shot up a shiny building on Wall Street)
KERRY O'BRIEN, PRESENTER: They plied a trade in fraudulent loans and brought the world to the edge of disaster.
(Camera pans across the midsections of men in conservative suits)
CHRISTOPHER CRUISE, LOAN OFFICER TRAINER 1990-2008: You got the sense that Wall Street was in control of underwriting standards, and not the mortgage industry.
KERRY O'BRIEN: So why haven't they been brought to justice?
MARTIN SMITH, REPORTER: Do you think the Government should have brought criminal cases against these players?
MARK PALMER, FINANCIAL ANALYST: I would find it difficult to believe that there wasn't sufficient evidence to at least indict many of the players involved here.
KERRY O'BRIEN: Were they simply too big to prosecute?
Welcome to Four Corners. It was a moment in history when the world held its collective breath - the global financial crisis hit in late 2008 and for a time, it seemed the entire international system could very easily go into free fall.
Millions of jobs were lost, countless lives destroyed. Most of the developed world plummeted into recession.
The crisis had been spawned on Wall Street in an era of unmitigated greed, when banks bought and on-sold massive packages of housing loans that were unsustainable but worth many hundreds of billions of dollars - a practice that many experts now describe as a giant fraud.
Some of the small operators who wrote the original loans - minnows compared to the whales of Wall Street - have since been prosecuted, but not one single senior Wall Street banker has been charged, let along prosecuted or sent to jail.
Worse still, as one Harvard Law professor put it recently, we live in a world where the architects of the financial crisis regularly dine at the White House.
Tonight we run a story whose central contention, strenuously denied, is that the US Justice Department ran dead in its investigations of Wall Street. It comes from the PBS Frontline program.
The reporter is Martin Smith.
('The Untouchables', produced and written by Martin Smith for Frontline, PBS)
KERRY O'BRIEN: It's worth noting that in recent testimony to Congress, the US Attorney General Eric Holder confirmed that his department did consider the economic fallout that could result from prosecuting senior Wall Street figures - so justice isn't blind, just selective.
Next week on Four Corners, a fast reveal, as allied troops prepare to hand over to Afghan forces next year.
We go on the frontline and find a story of poor training, limited resources, Keystone Cops and criminal behaviour, begging the question 'What have people died for?'
Until then, goodnight.
END OF TRANSCRIPT
Show background information
Background Information
ONLINE INTERVIEWS
Ted Kaufman: Wall Street Prosecutions Never Made a Priority | PBS Frontline - The lack of high-level prosecutions from the financial crisis can be traced to the Obama administration's ambivalence to upset the banks, the former U.S. senator told FRONTLINE.
Phil Angelides: Enforcement of Wall St. is "Woefully Broken" | PBS Frontline - The current system of enforcement in the financial services industry has done little to deter pervasive fraud, says the former chairman of the Financial Crisis Inquiry Commission.
Lanny Breuer: Financial Fraud Has Not Gone Unpunished | PBS Frontline - Lanny Breuer serves as assistant attorney general for the Department of Justice's Criminal Division. He told FRONTLINE that when fraud from the financial crisis has been detected, the Department of Justice has pursued charges. "But when we cannot prove beyond a reasonable doubt that there was criminal intent, then we have a constitutional duty not to bring those cases," Breuer said.
Read more.
FURTHER READING
Fallout from 'Untouchables' Documentary: Another Wall Street Whistleblower Gets Reamed | Rolling Stone | 4 Mar 2013 - A great many people around the county were rightfully shocked and horrified by the recent excellent and hard-hitting PBS documentary, The Untouchables, which looked at the problem of high-ranking Wall Street crooks going unpunished in the wake of the financial crisis.
Senate report blasts JPMorgan Chase risky trades | USA Today | 14 Mar 2013 - The nation's largest bank hid high-risk derivatives trading that ran up $6.2 billion in losses by inflating trade values, dodging federal regulators, and misinforming investors and the public about the dicey strategy, a scathing new congressional report charges.
REPORT: JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses | Permanent Subcommittee on Investigations | 15 Mar 2013 - Download the report here.
Audio: Lessons not learned and Depression could be in the offing: economist | ABC AM | 15 Mar 2013 - A top economist is warning that the world has failed to learn the lessons of the global financial crisis and that the next downturn is likely to spark a Depression.
Holder: Big Banks' Clout "Has an Inhibiting Impact" on Prosecutions | PBS Frontline | 6 Mar 2013 - Attorney General Eric Holder said that the Justice Department had considered the economic fallout that could result from prosecuting major banks for their role in the financial crisis, in Senate testimony on Tuesday.
Lanny Breuer, Justice Department criminal division chief, is stepping down | Washington Post | 24 Jan 2013 - Lanny A. Breuer is leaving the Justice Department after leading the agency's efforts to clamp down on public corruption and financial fraud at the nation's largest banks, according to several people familiar with the matter.
The Untouchables: How the Obama administration protected Wall Street from prosecutions | The Guardian | 23 Jan 2013 - A new PBS Frontline report examines a profound failure of justice that should be causing serious social unrest.
Too Big To Jail? The Top 10 Civil Cases Against the Banks | PBS Frontline | 22 Jan 2013 - In nearly every major legal case to emerge from the crisis, government prosecutors have won multi-million dollar settlements, but companies and officials have not been required to admit wrongdoing.
Opinion: HSBC, too big to jail, is the new poster child for US two-tiered justice system | The Guardian | 12 Dec 2012 - DOJ officials unblinkingly insist that the banking giant is too powerful and important to subject to the rule of law, by Glenn Greenwald.
Editorial: No Crime, No Punishment | NY Times | 25 Aug 2012 - When the Justice Department recently closed its criminal investigation of Goldman Sachs, it became all but certain that no major American banks or their top executives would ever face criminal charges for their role in the financial crisis.
In Financial Crisis, No Prosecutions of Top Figures | NY Times | 14 Apr 2011 - It is a question asked repeatedly across America: why, in the aftermath of a financial mess that generated hundreds of billions in losses, have no high-profile participants in the disaster been prosecuted? Answering such a question ... is anything but simple.
Timeline: Investigations and Enforcement in the Financial Crisis | NY Times | 14 Apr 2011 - After a financial crisis largely caused by reckless lending and excessive risk taking by financial institutions, there has been no concerted government effort to investigate wrongdoing. Here is a look at milestones in the crisis, along with key decisions or actions on investigations and legal action.
Naming Culprits in the Financial Crisis | NY Times | 13 Apr 2011 - A voluminous report on the financial crisis by the United States Senate - citing internal documents and private communications of bank executives, regulators, credit ratings agencies and investors - describes business practices that were rife with conflicts during the mortgage mania and reckless activities that were ignored inside the banks and among their federal regulators.
REPORT: Wall Street and the Financial Crisis: Anatomy of a Financial Collapse | US Senate Permanent Subcommittee on Investigations | Apr 2011 - The result of two years' work, this investigation examines the origins of the 2008 financial crisis.
BACKGROUND READING
The Smartest Girls In The Room | The Global Mail | 3 Dec 2012 - The world's best known ratings agency has been hit with a billion-dollar civil law suit from the US Justice Department for misleading and deceiving investors leading up to the financial crisis. But it was an obscure Australian judge and hard-charging lawyer who exposed the juggernaut's illegal behaviour.
Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States | Financial Crisis Inquiry Commission | Jan 2011 - The Commission was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." The Commission concluded that this crisis was avoidable - the result of human actions, inactions, and misjudgments. Warnings were ignored.
Download their final report.
Financial Crimes Report to the Public| FBI | 2010 -11 - The FBI focuses financial crimes investigations on corporate fraud, securities and commodities fraud, health care fraud, financial institution fraud, mortgage fraud, insurance fraud, mass marketing fraud, and money laundering. View Report.
Justice for Some | Project Syndicate | 4 Nov 2010 - The mortgage debacle in the United States has raised deep questions about "the rule of law," the universally accepted hallmark of an advanced, civilized society. The rule of law is supposed to protect the weak against the strong, and ensure that everyone is treated fairly. In America in the wake of the sub-prime mortgage crisis, it has done neither. By Joseph E. Stiglitz.
Hedge Fund Managers at Bear Stearns Found Not Guilty of Fraud | NY Times | 10 Nov 2009 - It was, prosecutors claimed, a clear case of Wall Street crime — and a chance to bring to account two culprits of the subprime age. But jurors disagreed, and on Tuesday, two former Bear Stearns hedge fund managers were found not guilty of securities fraud in federal court in Brooklyn, in what legal experts called a setback for prosecutors hoping for easy victories in this era of bailouts and foreclosures.
The Financial Fix | Huffington Post - The latest news and analysis on Wall Street reform.
WATCH RELATED FOUR CORNERS PROGRAMS
Happy Banking? | 5 Apr 2012 - A story that reveals how key Australian banks dealt with the Global Financial Crisis and the shocking impact it had on their customers: loans terminated, businesses liquidated and lives in turmoil.
Watch online.
Dicing with Debt | 8 Mar 2012 - A story that details a private sector debt binge and bailout in one of Europe's smallest countries, that still has the capacity to spark another round of financial panic across the globe.
Watch online.
One Shitty Deal | 14 Jun 2010 - A story that reveals how a toxic cocktail of investment packages helped poison the retirement funds of hundreds of Australians.
Watch online.
The Perfect Storm | 9 Feb 2009 - Last year Australians watched in disbelief as the financial markets of Europe and America faltered and collapsed. Now it's finally hit home in Australia.
Watch online.
First posted March 18, 2013 11:00:00
website.
