As the world marks the 10th anniversary of the worst financial crash in recent history, it’s worth looking into who was held responsible for knowingly issuing fraudulent mortgages that led to the crisis.
On 15 September 2008, legendary Wall Street banking giant Lehman Brothers went bust. The 158-year-old investment bank was heavily involved in subprime mortgage–backed securities. The institution failed to sell the papers fast enough to meet its other obligations to clients. Lehman’s fate was sealed after the US government refused to bail out the bank and rescue bids by Bank of America and Barclays failed to materialize.
Lehman Brothers filed for Chapter 11 bankruptcy protection, citing $639 billion in assets and $619 billion in debt. The collapse, which is still ranked as the largest bankruptcy in US history, spread panic across Wall Street, forcing an unprecedented rescue of the financial system. Global markets immediately plummeted after news of the bankruptcy.
The historical failure of Lehman Brothers dragged down the other banking institution and mortgage companies, including AIG, Citigroup, Countrywide, Merrill Lynch, Bear Stearns, Washington Mutual, IndyMac and others.
The biggest lenders, such as JPMorgan Chase, Bank of America, Deutsche Bank and Wells Fargo were accused of fraud and contributing to the biggest financial crash since the Great Depression. However, none of the top executives, serving at the corporations at the time, has ever been held responsible.
A US government watchdog overseeing the federal government’s bailout fund says the idea that no bankers went to prison for crimes related to the financial crisis is a myth. In a report to Congress, the Troubled Assets Relief Program (TARP) states 35 bankers have been sentenced to prison.
TARP says it distributed more than $400 billion in funds to banks that were in danger of failing during the financial crisis and has been prosecuting cases of fraud in the use of those funds.
They point out that 59 bankers have been convicted, including Edward Woodard, former CEO of the Bank of the Commonwealth in Norfolk and two executives at NOVA Bank in Philadelphia.
However, critics point out that many of the crimes involved relatively small amounts of money at smaller banks, rather than massive fraud at Wall Street banks.