Financial Meltdown Accountability: Bring On the Class Actions! The Financial Crisis Inquiry Commission's report concludes that ineffective regulators and big banks were the primary causes of the financial meltdown. (The "dissenting" minority report frames things differently but in fact identifies many of the same causes. A third report, authored by a commissioner who is an American Enterprise Institute fellow, is as ideologically driven as that think tank is, and is sharply at odds with the other two in assigning most of the blame to the federal government's housing policy.)

But as detailed as the 400-plus page majority report is, many more nitty-gritty details of the ugly reality underlying the meltdown will come to light, because the Commission is posting an enormous trove of documents online, including much that hasn't been made public before. That library, which the website notes will soon grow with the addition of an "interactive timeline; audio files; transcripts and notes for interviews conducted by the commission; staff data project files; and additional documents and emails added to the archive" will prove an invaluable resource for people who want to sue the banks, among others. And as large as it is, the blog Naked Capitalism reports, the commission could have gotten -- and thus shared -- so much more.

Still, what the commission will be publishing is more than enough to make banks and associated companies nervous, as the Blog of the Legal Times reported Thursday.

"The commission's final report and its pledge to post raw materials -- apparently including information obtained from companies as well as other government agencies -- is an astounding abuse of process that would effectively create a government-sanctioned Wikileaks," said Lisa Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform, according to the BLT. It's worth noting that Rickard didn't claim the documents are false. She and the companies she represents are mad that people will have easier access to the information they need to successfully sue banks for securities fraud or other claims.

From a public policy perspective, why is that a bad thing? Given the lack of widespread civil -- or better yet, criminal -- charges by the federal government or the states over these securitizations, accountability has to come from somewhere. I say bring on the class actions, far more than the several dozen already filed. And make sure the executives and ex-executives who profited so obscenely while they created this mess are named as defendants.

So Many Reasons to Sue


Victims abound, but not all will have good chances of winning a lawsuit. Investors who bought fraudulently issued securities have the best shot of being repaid, as their claims are relatively easy to bring as class actions, and without the potential for a class settlement, attorneys can't afford to put in the tens or hundreds of thousands of man-hours of work necessary to successfully bring a suit.

Homeowners -- whether steered into expensive mortgages when they qualified for more affordable ones, or who were honest with a mortgage broker who in turn fraudulently filled in their paperwork, or were told to default in order to get a modification and were then foreclosed on -- are going to have a hard time forming a class, because so many individual issues are involved in each case. But some attorneys are trying, and if they have success, I imagine more will follow.

It would be great if lawsuits could force banks to pay communities for all the foreclosed houses banks aren't maintaining and the damage that those empty eyesores are causing to the communities. Or if they could be compelled to pay for the "bank walkaways" -- homes that banks have started to foreclose on, but left in limbo to avoid having to pay property taxes and maintenance costs. And I'd love to see lawsuits to force the mortgage securitizers to pay communities the more than $1 billion in taxes they avoided by the invention and use of Mortgage Electronic Registration Systems. I don't know if any such suits are possible, much less in the pipeline. But some action to hold those responsible accountable for the damage they've done is necessary.

Of course, better than any of these civilian lawsuits would be effective prosecutions by the government, whether state or federal. The American people need to know that the government will hold suit-wearing crooks accountable. Yes, the government has (belatedly) gone after Ponzi schemers like Bernie Madoff and Allen Sanford. Yes, Securities and Exchange Commission sued Goldman Sachs over one deal.

Where Are the Feds?


But the SEC has faced criticism even from the judges overseeing its cases that its settlements with Bank of America and Citigroup were too lenient. And now the inspector general for the SEC is investigating whether or not its top prosecutor protected Citigroup executives from prosecution in connection with that settlement. Not exactly the image of a government agency fighting financial miscreants in a spirited defense of investors.

And where's the Department of Justice? Kudos to DOJ for going after the banks' defrauding municipalities with bid-rigging, and investigations under the False Claims Act sound good, but oh, there's so much more to be done. As Business Insider asked: "Where are the perp-walks?" The blog Naked Capitalism more than once has pointed out the failure to bring criminal charges or even consider the banks' actions potentially criminal.

Adding to ordinary Americans' skepticism that the system can crack down on the banks, consider what the Bill McBride of the blog Calculated Risk wrote about the Crisis Commission's conclusions:
This is absolutely correct. In 2005 I was calling regulators and I was told they were very concerned -- and several people told me confidentially that the political appointees were blocking all efforts to tighten standards -- and one person told me "Greenspan is throwing his body in front of all efforts to tighten standards."
Recently the government pulled off its biggest mob takedown ever. I'm grateful to see it, but the devastation the banks have wrought has caused more suffering for more people than the mob, and the fact that the damage is mostly monetary instead of violent doesn't make it any less worthy of a similar scale of prosecution. The feds have said they'll use the same tactics on financial fraud, and they appear to have succeeded in an insider trading case. But that's small potatoes compared to what recent lawsuits and the Crisis Commission have revealed. In fact, the Commission has referred cases for prosecution, according to the Huffington Post. And the well-documented allegations in the Ambac lawsuit against Bear Stearns/JP Morgan Chase, if true, constitute criminal insurance fraud, according to the standards laid out in this Dow Jones Newswire account.

Get cracking, government prosecutors. And bring on the class actions.

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Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government"in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and you will not be accepted civil servants here just because you say you are here to do the right thing.

May 29 2011 at 1:40 AM Report abuse rate up rate down Reply
Trevor

The bad guys who caused the problem wrote a repot on the cause of the problem. The bad guys didn't even blame themselves. And the sheeple bleat their approval. Gee, whoda thunk.

January 31 2011 at 9:36 AM Report abuse +2 rate up rate down Reply
Trevor

The goons pass laws that create havoc. Then write repots that deflect blame from the rules they wrote that created the havoc. The sheeple bleat their approval. The goons write more havoc-creating rules to fix the havoc ceated by their last havoc-creating rules.

January 30 2011 at 10:31 PM Report abuse +2 rate up rate down Reply
Roberson

This is front page material, Great article . The financially responsible thing to do would be to admit wrong doing & tighten the ethics regulations . This mean not to appoint one individual but a group of three individuals to monitor the Federal reserve to protect the interest of Americans from greed, political & judicial influence . No one is abouve the law even Judges...................

January 30 2011 at 6:02 PM Report abuse +3 rate up rate down Reply
cody753

Go get them Abigail. They deserve everything that they get. I agree with you completely. Time and time again the public has been screwed with no consequences. You are the first person with guts enough to call it like it is. I just wish I had the means to help you in some way.

January 30 2011 at 2:54 PM Report abuse +2 rate up rate down Reply
terry

Ambulance chasing parasite.

January 30 2011 at 2:00 PM Report abuse -1 rate up rate down Reply
jmetcalf1955

typical of a socialist regime, the uneducated masses lost their money in the stock market, or whatever financial tomfoolery they willingly engaged in, and now they look to hold someone else responsible.

you lost your money because you were stupid. ok?

January 30 2011 at 12:46 PM Report abuse -2 rate up rate down Reply
2 replies to jmetcalf1955's comment
leachcrib

The financial crisis resulted from govenment regulators poor oversight, polictical elections, and coruption from a few large corporations. Government regulators knew about the compositon of the finiacial instruments that where being sold as investments. The Federal Reserve poor leadership concerning interest rate direction, the origination of these finiancial instruments by a few major investment banks who are former treasury officiers, and panic by the FDIC played a big role in this meltdown. My investmemts in bank stocks were highly rated and not considered risky sub-prime investments.

January 30 2011 at 11:13 AM Report abuse +5 rate up rate down Reply
zekentoby

Okay, Chris Dodd is history, but how come Barney Frank is still involved in overseeing the banks. There's our #1 financial problem, and the Democrats still haven't moved him out of banking.

January 30 2011 at 9:58 AM Report abuse +1 rate up rate down Reply
1 reply to zekentoby's comment
terry

Because they cant sell their otherwise worse alternative.

January 30 2011 at 1:44 PM Report abuse rate up rate down Reply
marine1942

How can we sue Barney Frank ?? Actually, the whole commonwealth of Mass ??

January 30 2011 at 8:06 AM Report abuse +3 rate up rate down Reply