No Crime, No Punishment

When the Justice Department recently closed its criminal investigation of Goldman Sachs, it became all but certain that no major American banks or their top executives would ever face criminal charges for their role in the financial crisis.

Justice officials and even President Obama have defended the lack of prosecutions, saying that even though greed and other moral lapses were evident in the run-up to the crisis, the conduct was not necessarily illegal.

But that characterization of the financial industry’s actions has always defied common sense — and all the more so now that a fuller picture is emerging of the range of banks’ reckless and lawless activities, including interest-rate rigging, money laundering, securities fraud and excessive speculation.

Which is not to say that prosecuting wrongdoing in the financial crisis is easy. Proving federal fraud requires evidence of intent, no small lift. But proving intent does not require a smoking gun. The financial crisis, fomented over years by big banks and presided over by executives, involved reckless lending, heedless securitizations, exorbitant paydays and illusory profits, all of which led to government bailouts and economic calamity. Is it plausible that none of that broke the law and that none of the people in positions of power and authority knew what was going on?

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