From an old article: "Why Only One Top Banker Went to Jail for the Financial Crisis" - NY Times 30 April 2014
A summary from topic sentences:
"American financial history has generally unfolded as a series of booms followed by busts followed by crackdowns."
"The credit crisis of 2008 dwarfed those (earlier) busts, and it was only to be expected that a similar round of crackdowns would ensue. "
"But the crackdown never happened."
"Many assume that the federal authorities simply lacked the guts to go after powerful Wall Street bankers, but that obscures a far more complicated dynamic. During the past decade, the Justice Department suffered a series of corporate prosecutorial fiascos, which led to critical changes in how it approached white-collar crime. The department began to focus on reaching settlements rather than seeking prison sentences, which over time unintentionally deprived its ranks of the experience needed to win trials against the most formidable law firms."
"Part of the Justice Department’s futility can be traced to the rise of its own ambition. Until the 1980s, government prosecutors generally focused on going after individual corporate criminals. But after watching their fellow prosecutors successfully take down entire mafia families, like the Gambino and Bonanno clans, many felt that they should also be going after more high-profile convictions and that the best way to root out corruption was to take on the whole organization. A long-ignored Supreme Court ruling, from 1909, conveniently opened the door for criminal charges against entire corporations. And in 2001, Michael Chertoff, George W. Bush’s new criminal division chief, arrived at the Justice Department ready to put it to use."
"Chertoff, who worked at the U.S. Attorney’s office under Rudolph W. Giuliani, the godfather of the Wall Street perp walk, seemed like just the guy to jump-start the initiative — and he arrived at an opportune moment. Prosecutors were beginning their investigation of Enron and probe into Arthur Andersen, the accounting firm that had blessed the energy-trading giant’s phony balance sheets and shredded documents shortly after it detonated."
"The Andersen case was supposed to embolden the Justice Department, but it quickly backfired. Chertoff’s chutzpah shocked much of the corporate world and even many prosecutors, who thought the department had abused its powers at the cost of thousands of innocent workers."
Leading to an emphasis on punishing, but not destroying, the institutions:
"From 2004 to 2012, the Justice Department reached 242 deferred and nonprosecution agreements with corporations, compared with 26 in the previous 12 years, according to a study by David M. Uhlmann, a former prosecutor and law professor at the University of Michigan. And while companies paid large sums in the settlements — the days of $7 million cost-of-doing-business fees were over — several veteran Justice Department officials told me that these settlements emboldened defense lawyers."
"More crucial, they allowed the Justice Department’s lawyers to “succeed” without learning how to develop important prosecutorial skills. Investigations of individuals are more time-consuming and require a different approach than those of a corporation. Indeed, the department now effectively outsources many of its investigations of corporate executives to outside firms, which invariably produce reports that exculpate those at the top. "
"More crucial, they allowed the Justice Department’s lawyers to “succeed” without learning how to develop important prosecutorial skills. Investigations of individuals are more time-consuming and require a different approach than those of a corporation. Indeed, the department now effectively outsources many of its investigations of corporate executives to outside firms, which invariably produce reports that exculpate those at the top. "
Another prosecutorial choice: "“You do have a tough choice,” one former Southern District prosecutor says. “Am I going to chase after crimes I don’t know were committed and don’t know who by (from financial crisis), or do we go after crimes we do know were committed and by whom (from insider trading)?” Almost always, the Justice Department went after insider trading.
Another aspect from the article is individual ambition. Lawyers working in the government often hope to work for private companies which pay much higher salaries. If a lawyer does too good a job in government service, she may burn her bridge to corporate work.
http://www.nytimes.com/2014/05/04/magaz ... .html?_r=4
