Since the economy began to tank back in 2008, people have been looking for someone to blame.  Was it government and their lack of regulation that caused the crisis? Was it consumers and their addiction to overspending their limits? Or was it the financial institutions and the people who run them?

Photo by Jp Corkery
Photo by Jp Corkery

While the truthful answer is most likely a combination, financial institutions are the only one of these three that can really be brought to task for the problems over the last year; how can you indict government for not having laws in place, or consumers for having a certain mindset? Therefore, in the past year we have seen a dozen or more criminal investigations of financial institutions and their managers. However, it is difficult to pin the blame for investing mistakes to any particular person, and so many of these investigations look like they may never see a conviction.

The Financial Crisis Scapegoats

Lets take a look at the companies that have had charges brought against them, and the progress of some of these criminal proceedings:

Bear Stearns Co.

Two hedge fund managers, Ralph Cioffi and Michael Tannin, were accused of misleading investors about the state of their fund. The two were indicted on securities fraud charges.
Status: Both Cioffi and Tannin were found not guilty after a three week trial.

Credit Suisse

Two former brokers, Julian Tzolov and Eric Butler were charged with securities fraud for allegedly lying to investors about putting their money into “auction rate” securities.
Status: Butler was convicted of al charges, Tzolov plead guilty to three criminal indictments.

Countrywide Financial Corp.

Investigators are questioning whether executives engaged in insider trading or misled investors by understating risks of buying certain loan backed securities.
Status: Ongoing, no charges yet.

Fannie Mae and Freddie Mac

While there no official charges, these companies have been issued subpoenas asking for their account information. They have said that they are cooperating.
Status: Ongoing, no charges yet.

Lehman Bros. Holdings, Inc.

There are a variety of investigation into Lehman Bros., such as whether executives overstated its asset values, made misstatements about the firm’s health, or put investors into auction-rate securities before the market collapsed.
Status: Ongoing, no charges yet.


This investigation is concerning whether or not David Shulman, who ran the auction-rate-securities business, engaged in insider trading in selling his auction-rate securities ahead of the market collapse.
Status: Ongoing, no charges yet.

AIG, Inc.

AIG executives were accused of overstating the value of “credit default swap” contracts. The company has said that it is cooperating with the investigation.
Status: Ongoing, no official charges yet

Washington Mutual, Inc.

The investigation into WaMu is pretty general at this stage, but investigators are looking into the cause of the bank’s collapse.
Status: No charges yet.

There is also a Congressional hearing scheduled this month concerning the Bank of America® buyout of Merrill Lynch.  Three of the Bank’s executives have been called in to testify.

Let Bygones be Bygones?

While the public is calling for blood or at least for some explanation of how this crisis happened, it looks like it could be a difficult prospect to place the blame on a single company, never mind a few executives. The reality is that there were potentially a whole basket of mistakes that led t this crisis, and regardless of the outcome of any criminal investigation, nothing done now will erase the damage done to the economy. All we can hope to come out of these investigations now is an explanation that could keep such a collapse from happening again, and hopefully some continued transparency from some these financial institutions, so that if they were in fact guilty of any criminal behavior, they will know that next time they will not get away with it.

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