The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.
We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
In the Texas “Rent-a-Bank” scandal of the 1970s, for example, two ringleaders created a fraud network of 50 lenders that caused billions of dollars in losses. The watchdogs removed and sanctioned one of the main culprits, but because the crimes weren’t prosecuted, the same crooks reappeared in the 1980s to do it all over again, only on a bigger scale. Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.
It seems as if we have forgotten this lesson.
Take the seven senior officials convicted in the failure of one of the lenders that drove the 2008 credit crunch. All of the cases arose from an investigation of Taylor Bean & Whitaker Mortgage Corp. The first trial occurred last month — 6 1/2 years after the Federal Bureau of Investigation warned publicly that there was an “epidemic” of mortgage fraud and predicted that it would cause a financial crisis if it weren’t contained. The trial and conviction of Taylor Bean’s former chairman, Lee Farkas, occurred nine years after his crimes were suspected.
Read whole article here: Why CEOs Avoided Getting Busted in Meltdown: William Black – Bloomberg.
