The Bankers Behind the Financial Crisis Actually Got Promoted

By now it"s well known that no senior bank executives went to jail for the fraudulent activities that spurred the financial crisis. But a new study shows many of the senior bankers most closely tied to pre-crisis fraud didn"t suffer one bit in the aftermath. They mostly kept their jobs, enjoying the same kinds of opportunities and promotions as their colleagues.

Worst of all, the most plausible explanation the researchers came up with for why senior management didn"t fire the people who blew up the economy is that they didn"t want to admit their own failure as bosses. And if nobody on Wall Street is willing to see the problem, and the Trump administration is stocked with bankers and corporate cheerleaders, you can bet fraud will continue to shift into other products, harming consumers and investors while executives look the other way.

The study comes from John Griffin and Samuel Kruger of the University of Texas-Austin, and Gonzalo Maturana of Emory University. They tracked 715 individuals involved in issuing residential mortgage-backed securities (RMBS) from the key housing bubble years of 2004 to 2006, including the senior managers who actually signed off on the deals.

RMBS were the building blocks of the crisis, bundles of toxic loans passed on to investors who were not told about their poor quality. Since the crash, major banks that issued RMBS have paid over $300 billion in government penalties, at least implicitly acknowledging they fucked up.

With settlements and deferred prosecution agreements, federal law enforcement tried to influence corporate culture so banks would discourage bad behavior and punish those responsible within their own ranks. But until now, nobody had studied whether the large civil fines actually did lead to internal discipline. So the researchers compared the careers of RMBS bankers after the crisis to other bank employees whose work was relatively free of fraud.