So the LA Times reports that former Countrywide CEO Angelo “Agent Orange” Mozilo has had a criminal investigation against him dropped.
It appears, as Atrios notes, that “If Everybody is Guilty Then Nobody Is.” As the Times puts it:
Columbia University law professor John Coffee said mortgage cases like Mozilo’s were muddied by the numerous parties involved, unlike Enron and other “cook the books” cases in which executives were convicted.
Countrywide’s model was to make or buy mortgages only to sell them off immediately to Fannie Mae or Wall Street as fodder for securities.
Given that model, Coffee said, blame could be assigned to an entire chain of players: mortgage brokers who falsified applications; investment bankers who concocted complex and “opaque” mortgage bonds; rating firms that provided high ratings on the bonds but said they were lied to; and institutional investors that relied on dubious ratings because the securities carried above-market interest while promising to be risk-free.
“All share responsibility, but none are culpable enough by themselves to compare with [Enron’s] Ken Lay, Jeff Skilling or the WorldCom CEO,” Coffee said.
It’s the old “plausible deniability” scheme (I think I remember a “24” season in which that was a theme) in different skin. Or perhaps like the operation of a cell: Various actors each undertake different activities, none of which is illegal in and of itself (though I’m sure in this instance there was enough illegality going on) and without the knowledge of what any of the other actors’ roles are. The sum of the parts constitutes a crime, but none of the individual acts does. So instead of getting dozens or hundreds of prosecutions, we’ll get none. Moral of the story: Do not commit massive fraud by yourself (i.e. Skilling, Lay, Ebbers, Madoff). Commit exponentially larger fraud with the help of co-conspirators.