The So-Called, 'War on Wall Street'

By John Cassidy, The New Yorker

11 August 13

t took them a while, but the Feds are finally going after some of the country's biggest banks for alleged wrongdoing during the great housing and credit bubble. In the past few days, the Department of Justice has sued Bank of America for willfully understating the risks attached to hundreds of millions of mortgage-backed securities it sold in 2007, and J. P. Morgan Chase has revealed that two different U.S. attorneys' offices, one in California and one in Philadelphia, are investigating whether it broke securities laws and duped investors with some of the mortgage deals it put together.

But while the new cases are significant and likely to go on for some time, they don't answer the question of whether anybody on Wall Street will ever end up in court, or face the possibility of prison time, on criminal charges arising from the mortgage mess. My take: there is no need for anyone on Wall Street to lose much sleep, and that includes Brian Moynihan, the chief executive of Bank of America, and Jamie Dimon, the head of J. P. Morgan. About the worst that is likely to happen is that the two big banks will be forced to pay some hefty fines, which, with both making billions of dollars of profit in the latest quarter, they can easily afford.

For years now, critics have accused the Justice Department of going easy on the bankers, whose actions during the housing and credit bubble helped bring about the U.S.'s deepest recession since the nineteen-thirties. The D.O.J.'s response has always been that it didn't have enough evidence to prove criminal intent on the part of traders, investment bankers, and senior executives at big Wall Street firms, and that, without such evidence, it would likely lose in court if it went ahead with criminal cases.

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