It should come as no surprise that Iceland, a country that’s happy to prosecute its own prime minister over gross negligence relating to actions leading up to the financial crisis, is also more than happy to put a few former bank CEOs in the dock.
JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon should count his lucky millions he doesn’t live a few thousand miles farther east.
The iceman cometh
The Wall Street Journal is reporting that Iceland’s special prosecutor is indicting two former CEOs for “stock price manipulation and securities fraud” relating to the financial crash, which Iceland experienced as intensely as any other country.
The special prosecutor alleges that the CEOs and other staff lent money to people so they could buy stock and prop up share prices. In March 2012, the tiny country put former prime minister Geir Haarde on trial for “gross negligence” in matters relating to the crash, which caused three of its biggest banks to fail, and sent the country into drastic recession.
Too big too jail
Does any of this behavior sound familiar? Irresponsible actions at many of our biggest banks wreaked similar havoc across our own banking system and economy. So why hasn’t the U.S. seen any of its bank CEOs, let alone any of its politicians, go on trial for similar charges?
What everyone has suspected for years was actually confirmed several weeks ago by Attorney General Eric Holder: not only are our biggest banks too big to fail, they’re also too big to jail. In congressional testimony, Holder said that fear of repercussions to the economy have prevented the Justice Department from pursuing criminal cases against top management.
Imagine Jamie Dimon sitting in the dock in federal court, day in and day out for weeks or months, with investors and the country waiting on pins and needles to see whether or not he’s going to go to jail. Would the stock crash? Would depositors pull their money? Would it cause a run that would necessitate the federal government stepping in — again — with bailout money?
The same could be said for a case against Lloyd Blankfein, CEO of Goldman Sachs Group, Inc. (NYSE:GS). And if you put Ken Lewis, the former CEO of Bank of America Corp (NYSE:BAC) on trial, who’s to say how that might affect the solvency of the superbank now, even though Lewis is gone? Because once you open this Pandora’s box of criminal prosecutions, depositors and investors might rightly think, where does it all stop?