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« True Cost Of The Wall Street Bailout - PBS VIDEO | Main | GE Dumps Offshore Wind-Power Plans AFTER Collecting $125 Million In Stimulus From Taxpayers For Wind Projects »
Saturday
Oct012011

NYT: Tim Geithner Convinced NY AG Andrew Cuomo To Back Off Wall Street Prosecutions

It's long past time for jail sentences and orange jumpsuits.

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Tim Geithner's Secret Meetings With Andrew Cuomo

New York Times

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 — the equivalent of determining why a dog did not bark — is anything but simple.  But a private meeting in mid-October 2008 between Timothy F. Geithner, then-president of the Federal Reserve Bank of New York, and Andrew M. Cuomo, New York’s attorney general at the time, illustrates the complexities of pursuing legal cases in a time of panic.

At the Fed, which oversees the nation’s largest banks, Mr. Geithner worked with the Treasury Department on a large bailout fund for the banks and led efforts to shore up the American International Group, the giant insurer. His focus: stabilizing world financial markets.

Mr. Cuomo, as a Wall Street enforcer, had been questioning banks and rating agencies aggressively for more than a year about their roles in the growing debacle, and also looking into bonuses at A.I.G.

Friendly since their days in the Clinton administration, the two met in Mr. Cuomo’s office in Lower Manhattan, steps from Wall Street and the New York Fed. According to three people briefed at the time about the meeting, Mr. Geithner expressed concern about the fragility of the financial system.

His worry, according to these people, sprang from a desire to calm markets, a goal that could be complicated by a hard-charging attorney general.

Asked whether the unusual meeting had altered his approach, a spokesman for Mr. Cuomo, now New York’s governor, said Wednesday evening that “Mr. Geithner never suggested that there be any lack of diligence or any slowdown.” Mr. Geithner, now the Treasury secretary, said through a spokesman that he had been focused on A.I.G. “to protect taxpayers.”

Whether prosecutors and regulators have been aggressive enough in pursuing wrongdoing is likely to long be a subject of debate. All say they have done the best they could under difficult circumstances.

But several years after the financial crisis, which was caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged.  This stands in stark contrast to the failure of many savings and loan institutions in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail. Among the best-known: Charles H. Keating Jr., of Lincoln Savings and Loan in Arizona, and David Paul, of Centrust Bank in Florida.

Former prosecutors, lawyers, bankers and mortgage employees say that investigators and regulators ignored past lessons about how to crack financial fraud.

As the crisis was starting to deepen in the spring of 2008, the Federal Bureau of Investigation scaled back a plan to assign more field agents to investigate mortgage fraud. That summer, the Justice Department also rejected calls to create a task force devoted to mortgage-related investigations, leaving these complex cases understaffed and poorly funded, and only much later established a more general financial crimes task force.

Leading up to the financial crisis, many officials said in interviews, regulators failed in their crucial duty to compile the information that traditionally has helped build criminal cases. In effect, the same dynamic that helped enable the crisis — weak regulation — also made it harder to pursue fraud in its aftermath.

A more aggressive mind-set could have spurred far more prosecutions this time, officials involved in the S.&L. cleanup said.

“This is not some evil conspiracy of two guys sitting in a room saying we should let people create crony capitalism and steal with impunity,” said William K. Black, a professor of law at University of Missouri, Kansas City, and the federal government’s director of litigation during the savings and loan crisis. “But their policies have created an exceptional criminogenic environment. There were no criminal referrals from the regulators. No fraud working groups. No national task force. There has been no effective punishment of the elites here.”

Even civil actions by the government have been limited. The Securities and Exchange Commission adopted a broad guideline in 2009 — distributed within the agency but never made public — to be cautious about pushing for hefty penalties from banks that had received bailout money. The agency was concerned about taxpayer money in effect being used to pay for settlements, according to four people briefed on the policy but who were not authorized to speak publicly about it.

To be sure, Wall Street’s role in the crisis is complex, and cases related to mortgage securities are immensely technical. Criminal intent in particular is difficult to prove, and banks defend their actions with documents they say show they operated properly.

But legal experts point to numerous questionable activities where criminal probes might have borne fruit and possibly still could.

Investigators, they argue, could look more deeply at the failure of executives to fully disclose the scope of the risks on their books during the mortgage mania, or the amounts of questionable loans they bundled into securities sold to investors that soured.

Prosecutors also could pursue evidence that executives knowingly awarded bonuses to themselves and colleagues based on overly optimistic valuations of mortgage assets — in effect, creating illusory profits that were wiped out by subsequent losses on the same assets. And they might also investigate whether executives cashed in shares based on inside information, or misled regulators and their own boards about looming problems.

Merrill Lynch, for example, understated its risky mortgage holdings by hundreds of billions of dollars. And public comments made by Angelo R. Mozilo, the chief executive of Countrywide Financial, praising his mortgage company’s practices were at odds with derisive statements he made privately in e-mails as he sold shares; the stock subsequently fell sharply as the company’s losses became known.

Executives at Lehman Brothers assured investors in the summer of 2008 that the company’s financial position was sound, even though they appeared to have counted as assets certain holdings pledged by Lehman to other companies, according to a person briefed on that case. At Bear Stearns, the first major Wall Street player to collapse, a private litigant says evidence shows that the firm’s executives may have pocketed revenues that should have gone to investors to offset losses when complex mortgage securities soured.

But the Justice Department has decided not to pursue some of these matters — including possible criminal cases against Mr. Mozilo of Countrywide and Joseph J. Cassano, head of Financial Products at A.I.G., the business at the epicenter of that company’s collapse. Mr. Cassano’s lawyers said that documents they had given to prosecutors refuted accusations that he had misled investors or the company’s board. Mr. Mozilo’s lawyers have said he denies any wrongdoing.

Among the few exceptions so far in civil action against senior bankers is a lawsuit filed last month against top executives of Washington Mutual, the failed bank now owned byJPMorgan Chase. The Federal Deposit Insurance Corporation sued Kerry K. Killinger, the company’s former chief executive, and two other officials, accusing them of piling on risky loans to grow faster and increase their compensation. The S.E.C. also extracted a $550 million settlement from Goldman Sachs for a mortgage security the bank built, though the S.E.C. did not name executives in that case.

Representatives at the Justice Department and the S.E.C. say they are still pursuing financial crisis cases, but legal experts warn that they become more difficult as time passes.

“If you look at the last couple of years and say, ‘This is the big-ticket prosecution that came out of the crisis,’ you realize we haven’t gotten very much,” said David A. Skeel, a law professor at the University of Pennsylvania. “It’s consistent with what many people were worried about during the crisis, that different rules would be applied to different players. It goes to the whole perception that Wall Street was taken care of, and Main Street was not.”

Continue reading at the New York Times...

There are charts, infographics, multimedia that accompany this story.

---

Here's one of Geithner's crimes:

Video - Max Keiser & Stacy Herbert

At issue is Tim Geithner's criminal behavior in orchestrating the AIG bailout to favor Goldman Sachs through counterparty payouts at par, and then the massive cover-up.

 

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Reader Comments (16)

Who would ever think a Tax Cheat would cover up lol and what does this say about cuomo that he could be persuaded like that or about obama for appointing a pig like that?

See how this works remember the bankruptcy bill of 2005? Sweet they made it so a regular person who loses their job or is hit by disaster well they still pay...

http://www.opednews.com/articles/genera_pam_mart_080226_obama_s_money_cartel.htm

BUT-

It's worth noting that, thanks to the industry-written 2005 Bankruptcy Bill, derivatives claims are not stayed in bankruptcy -- so the financial institutions that gambled and lost would nevertheless be the first ones paid off. Isn't gaming the system fun?

http://www.huffingtonpost.com/arianna-huffington/tim-geithner-cnbc-and-the_b_173137.html

http://tpmmuckraker.talkingpointsmemo.com/2009/03/government_sachs_tarp_funds_just_the_tip_of_the_ic.php

http://www.washingtontimes.com/news/2009/mar/27/obama-raised-cash-even-after-leaving-senate/

Citi a major contributor to obama who gave lots of money for his inaugeration BTW sweet deal they got

http://mcauleysworld.wordpress.com/2009/03/01/obamas-citi-group-move-crash-burns-obama-pays-premium-for-citi-stock-that-goes-bust/

http://www.reuters.com/article/2009/03/16/us-citigroup-pandit-idUSTRE52F3MP20090316

Then they cost us the TAXPAYERS 2.3 Billion

http://money.cnn.com/2009/11/02/news/tarp.travails.fortune/
Apr 15, 2011 at 4:52 PM | Unregistered CommenterLiberatedCitizen
Glad you highlighted this story from Gretchen Morgenson, DB. It's full of juicy information, but Geithner's "conversation" with Cuomo is the juiciest.

Morgenson has been asking these questions for a while. See here: http://dailybail.com/home/where-are-the-wall-street-prosecutions-gretchen-morgenson-ag.html

I think this piece is an attempt to just lay out all the information we have of the fraud and corruption that has gone unpunished and unprosecuted. It may read like boring stuff (and most of the information is old news to Daily Bail readers), but she's done a yeoman's job of bringing all the different pieces together in ONE STORY. She's one journo who's done her job the last couple of years.
Apr 15, 2011 at 5:08 PM | Registered CommenterDr. Pitchfork
And the president said "lets move ahead and not look back"..............
Apr 15, 2011 at 5:12 PM | Unregistered Commenterjohn
Being a NY State resident I can state with total confidence that Andrew Cuomo gives new breadth, width and depth to the term 'Empty Suit'

An 'Empty Suit' with a night deposit slot to boot!
Apr 15, 2011 at 5:26 PM | Unregistered CommenterAlberto
Forget going after the banks or wall street, we're way past that from ever happening. Instead, why not file RICO lawsuits against the regulatory enforcers themselves, just like going after the mob, start small- build big.
Apr 15, 2011 at 5:34 PM | Unregistered Commenterjohngaltco
@johngaltco... the president will just pardon them..........
Apr 15, 2011 at 5:46 PM | Unregistered Commenterjohn
Forget investigations, forget RICO lawsuits. My understanding is that the Wall Street elite only number a few hundred. That's a quick afternoon's work for a sufficiently sharp Guillotine.
Apr 15, 2011 at 9:58 PM | Unregistered CommenterJohn S
There are no limits on the bounds of human corruption for the flesh is weak. We have elected and empowered the weakest souls in all of mankind. They destroy and plunder the masses for which there is no rival in the annals of history. We are now walking in the valley of shadows. Perdition is the destination.....our leaders goes forth with vigor and zeal down this pathway. Never mind how many lives are lost or destroyed. Turn from evil people and take a stand for the lowly and weak in spirit. Provide hope that there can be real change. Pray and seek that which is good. The direction of which we are on is not set in the ways of integrity or honor....AB
Apr 16, 2011 at 9:47 AM | Unregistered Commenterain't bullshitt'n
We must prosecute AG Mario Cuomo. By overlooking the fruad and theft he became a conspirator.

Cuomo should have done the right thing, instead he made a deal with the inmates. I support full prosecution and imprisonment for Mario Cuomo.
Apr 16, 2011 at 6:51 PM | Unregistered CommenterBenny and the Talibanks
I di not even finish reading this article.....I had to air my mind on this Mr. Geithner.....my friend you are the worst excuse I can think of to be getting anybody to keep from prosecuting anybody on Wall Street. Wall Street and all the cronies therein ought to be put under the jail....all the crap the whole bunch have been "pulling" on the American public.....and then you, a "so called" representative of the American Public.....and important member of the President's office.....I am sick of hearing all the crap you are "bringing to the table." There are others besides the different cronies on Wall Street that need prosecuting.....and I think just about all the parties involved in the foreclosure mess, all the parties involved in the "bail out" funds distribution and the crooked deals that were carried out in that mess, and many parties that work in Bank of America, Wells Fargo, AIG, Goldman Sachs, and several others that all have a hand in the mess that has our country "reeling" and "drowning in debt" --- ought to all be prosecuted to the ultimate limits of the law.....and when found guilty, sent to jail for the maximum time allowed.
Apr 16, 2011 at 7:26 PM | Unregistered CommenterJack F. Sneed
"when found guilty, sent to jail for the maximum time allowed"

Sorry Jack,

the maximum punishment for TREASON is death.
Apr 17, 2011 at 10:26 PM | Unregistered CommenterBenny and the Talibanks
Sinece using the 'Gay Marriage Issue' to obsufcate his actions i.e. hydrofracking I have changed my opinion of Governor Andrew Cuomo.

Governor Cuomo is somewhere between an empty suit and a total vacuum.
Jul 11, 2011 at 5:20 PM | Unregistered CommenterAlberto
Hasn't Santa's Evil Elf caused enough trouble?...AB
Aug 19, 2011 at 11:10 PM | Unregistered Commenterain't bullshitt'n
All the crooks wear suits.
Aug 20, 2011 at 2:45 PM | Unregistered CommenterInurface
Why does the ignorant public continue to vote for criminals???
Sep 22, 2011 at 12:58 AM | Unregistered CommenterNotsurprised
You can bet Richard Perle taught Geithner the joy of felony suckerpunching during their Vancouver Club days. The fact that the freemasonry and Skull and Bones societies pay homage to the British royal crown as subjects(by club charter) maintains an organization dedicated to the looting of the American people.The entire New York state body of law is covering for the 9-11 participants and is trying to avoid further lawsuits at the expense of the entire country. The neocon and Bush cabal are subjects of the British empire and they are just doing their job with a bit of kissy-kissy on the side.

The S.E.C. STILL is 24/7 wankers and you all will die of old age before you see an appropriate prosecution for looting the hard earned dollars which really make up the backbone of American investment potential. Not brokers and the like. Brokers and professional investors used to understand society and industry's needs and science and the future. Now, they roll in Bush41 deregulation and scoop it up and load the trunk like there is no problem. Bad idea.
Jan 2, 2012 at 12:12 AM | Unregistered CommenterHoward T. Lewis III

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