Mass incarceration is for the masses, not for the elite.
Judge Jed Rakoff
That’s according to Judge Jed Rakoff.
Judge Rakoff was speaking earlier this week at the Association of Certified Fraud Examiners convention in Las Vegas.
“I am increasingly convinced that the federal government and the federal system of justice has somewhat retrogressed over the past couple of decades in its prosecution of fraud, or at least in its prosecution of fraud when it is perpetrated by people at the highest levels of the financial establishment,” Rakoff said.
“When the history of the great recession is written, historians will say that fraud played a major role in creating the mortgage bubble that lead to the crash, but that few of the people most responsible for that fraud were ever brought to justice. This has led me to become a little more cynical about our legal system as a whole.”
Rakoff said that there were only a few regulators — — Neil Barofsky at TARP and Sheila Bair at the FDIC — who said that the government should start aggressively prosecuting the fraud that led to the crash — “but they were more or less overruled at high levels by a combination of the Fed, the Treasury, the SEC and the Department of Justice.”
“Eventually, as a result of a public outcry, there were prosecutions brought against the banks themselves,” Rakoff said. “But that was really not until about 2015. But to this day, no cases have been brought against virtually any of the high level executives involved in the creation of this fraud.”
“Even the belated prosecution of the banks that resulted in large fines, still resulted in settlements that resulted in only a small fraction of the profits gleaned by the banks before the bubble burst. Indeed, in almost every case, a bank’s stock price rose after it settled with the government — a clear indication that even the largest settlements were viewed by investors simply as a cost of doing business.”
Rakoff said that while “we have been locking up a record number of low income people, often for nonviolent crimes, and in the face, mind you, of decreasing crime rates — people who are being locked up often for thefts and other transgressions involving relatively modest amounts of money — the perpetrators of frauds that resulted in trillions of dollars of losses and misery to millions of people, have largely if not totally gone unpunished.”
“Mass incarceration, it seems, is only for the masses, not for the elite,” Rakoff said.
“It’s hard to escape the conclusion, inherent in the phrase ‘too big to jail,’ that when a fraud is big enough and committed at a high enough level, the legal system is unable or unwilling to see that it is punished. Nor should we be blind to the detrimental effects that this failure has on our economy and on our people.”
“When the economy is so dependent on the notion that our financial markets are honest and yet a fraud of this magnitude goes unpunished, it sends a very doubtful message about how truly unrigged our financial markets are. And when people, everyday folks, see that no one is being prosecuted for such frauds, it is bound to encourage a cynicism on their part, a cynicism that regretfully I have come to share.”