Roy Oppenheim’s commentary was originally published on Yahoo Homes! and is being republished on South Florida Law Blog with their permission.
The banks are too big to jail.
The Department of Justice, as much as they will try to tell you otherwise, believes it.
When push came to shove, prosecutors did not have the stones to do what is right, and what is absolutely necessary.
Wall Street has been given the road map to the land of Business As Usual. Just get as big as you want, do whatever you want, and have no fear of being caught. You will still be off-limits from criminal prosecution.
By choosing not to indict HSBC for money laundering, and instead handing them a nearly $2 billion settlement in order to defer prosecution, that is what the DOJ is effectively saying.
HSBC didn’t get handcuffs. They got a tax write off, otherwise known as the cost of doing business in today’s banking industry. Are we really supposed to call that a deterrent?
What’s troubling, and not the least bit ironic, is this is the same government that screams that homeowners who strategically default are creating a moral hazard.
That is exactly what federal prosecutors have done by not seeking an indictment. They have created a moral hazard on Wall Street, a slippery slope that will only get worse unless the DOJ reverses direction.
And this hazard will have a much greater impact on the real estate market than when a homeowner decided to walk away from a worthless underwater mortgage.
Edward DeMarco, acting director of the Federal Housing Finance Agency, has repeatedly made the argument that it is wrong for Fannie Mae or Freddie Mac to offer principal reduction to someone who is behind on their mortgage because it will encourage other homeowners to engage in risky behavior in order to benefit financially.
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