Commentary: Wall Streeters behind economic collapse must be held accountable

The conviction of billionaire Wall Street tycoon Raj Rajaratnam by a New York federal jury this month may be a welcome and overdue sign that the criminal justice system can still hold major white collar criminals accountable. But if the founder of Galleon Group hedge fund turns out to be just a sacrificial lamb, his conviction won’t do much to win back the public’s trust.

Ever since the collapse of the economy began in 2007, Americans have been rightly skeptical about the ability of regulators to prevent the rampant market manipulation and self-enrichment that generated huge profits for insiders and enormous losses for defenseless investors. Prosecutors haven’t done a great clean-up job, either.

Wall Street scandals are nothing new. But when the 1980s produced the savings-and-loan debacle that led to a massive government bailout at taxpayer expense, it was followed by hundreds of felony convictions in major cases involving high-placed executives. The public purse took a beating, but the guilty paid the price. Justice was done, or so it seemed.

Today, justice remains on hold. Prosecutors have been either unwilling or unable to pursue the wrongdoers. Early on, two Bear Stearns executives, Ralph Cioffi and Matthew Tannin, were indicted after their internal hedge fund collapsed, but a jury acquitted them. Apparently, that made prosecutors decide that financial fraud cases were too hard to win.

Earlier this year, it was reported that the Justice Department would not prosecute an emblematic figure in the collapse of the U.S. housing market — Angelo Mozilo, former chief executive of Countrywide Financial, once the nation’s largest mortgage lender. Prosecutors let Mr. Mozilo walk even after he agreed to pay $67.5 million to settle a civil fraud case brought by the Securities and Exchange Commission for concealing the risks of the subprime mortgage markets in public statements to shareholders.

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