Wall Street Scrutinized for Fraud, Fat Paychecks
The FBI's decision to investigate criminal wrongdoing at four troubled financial firms at the center of the market's dramatic shakeup represents one of the bureau's largest undertakings in years, a potentially more daunting task than the five-years-long investigation into Enron.
Federal officials announced that they will probe Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and American International Group Inc., bringing to 26 the number of financial institutions under scrutiny, The Post's Carrie Johnson reports. (CNN reports that Countrywide Financial is part of the investigation, too.)
As Congress debates a $700 billion bailout plan, pressure is rising to find a way to restrict the multi-million-dollar pay and bonuses for executives at investment houses, banks and mortgage lenders. For example, Richard Fuld Jr., chief executive at now-bankrupt Lehman Brothers, made $34 million in 2007, the East Bay Business Times reports. Business Week, however, suggests that such measures may be more difficult to impose than many lawmakers think.
The highest profile criminal cases related to the housing crisis so far involve two former Bear Stearns hedge-fund managers indicted in June for allegedly misleading clients about the risk of certain investments, a case that took months to establish.
The Wall Street Journal writes that it is unlikely a Charles Keating-type figure will emerge from the FBI's investigation into Wall Street (Keating served four years in prison for fraud related to the savings and loan scandal in the 1980s.).
It is more likely, the paper reported, that the bureau will pursue hundreds of smaller, "retail-level" fraud cases against individual brokers, real-estate agents and buyers. (The FBI has already launched a state-level mortgage fraud task force in December that resulted in hundreds of indictments of brokers, lenders and buyers this summer.)
The New York Times notes that Attorney General Michael B. Mukasey has rejected calls for an Enron-like national task force to look into Wall Street's problems, saying the wrongdoing in the mortgage crisis was more localized and similar to "white-collar street crime."
While lawmakers mull how big a bailout to approve and whether to impose limits on Wall Street compensation, the nonprofit Sunlight Foundation points out that many of them have received substantial contributions from finance, insurance and real estate firms. For example, Sen. Chris Dodd (D-Conn.), chairman of the Senate Banking Committee, has raised some $13 million since 1989 from such companies, 30 percent of his total contributions. Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, has taken $2.4 million from those firms, or roughly 31 percent.
By Derek Kravitz |
September 24, 2008; 11:04 AM ET
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