FCIC to Recommend Prosecuting Wall Street?

Here is a surprise: Shahien Nasiripour reports that the law that created the Financial Crisis Inquiry Commission gives the panel an affirmative responsibility to refer for prosecution any evidence of lawbreaking to the Justice Department, state attorneys general, or both.

Huff Po:

Among those who testified were the heads of the nation’s largest financial institutions — all of them recipients of multi-billion dollar public bailouts. Among those who testified were Lloyd Blankfein, chief executive of Goldman Sachs Group Inc.; Jamie Dimon, chief of JPMorgan Chase & Co.; and Robert Rubin, a former Goldman chief and Clinton administration Treasury Secretary, who later held a prime executive chair at Citigroup. The panel also questioned Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan.

The commission drew on testimony from less prominent senior executives with intimate knowledge of how Wall Street engaged in modern-day financial alchemy, turning mountains of dubious mortgages into seemingly rock-solid investments rated as safe as American Treasury bonds.

Richard Bowen, former chief underwriter for Citigroup’s consumer-lending unit, testified that, in the middle of 2006, he discovered more than 60 percent of the mortgages the bank had purchased from other firms and then sold to investors were “defective,” meaning they did not satisfy the bank’s own lending criteria.

Keith Johnson, former president of Clayton Holdings, one of the top mortgage research companies, testified that some 28 percent of the loans given to homeowners with poor credit examined by his firm for Wall Street banks failed to meet basic standards. Yet nearly half appear to have been sold to investors regardless, he added.

More on this later . . .

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