Oppenheim Law

Moral Hazard Lies On Wall Street, Not Main Street

Blog post   •   Aug 30, 2012 18:48 EDT

If there is only one thing that I hope to see as an attorney, it is the law applied fairly to all sides of the courtroom.

And there has been no greater sense of frustration for me than to see the banks, time and time again, not be held to the same standards as you or me.

It has become standard practice for banks to wiggle and maneuver and do everything possible to escape accountability.

But perhaps even more maddening is when those in power refuse to dig their heels and go after these banks. The latest example: the Justice Department’s refusal to prosecute Goldman Sachs.

They hedged their bets and sought to make money on the backs of their clients. This is nothing new to any of my readers, nor is the Justice Department’s lack of reprisal.

Both Matt Taibbi, Rolling Stone’s excellent political reporter, and the New York Times Opinion Page called Eric Holder on the carpet, and now it is my turn.

No one is suggesting that prosecuting Goldman Sachs would have been a walk in the park. But prosecuting them was necessary, if the climate of Wall Street is ever going to change.

What is absolutely maddening about all this is that by allowing Goldman Sachs to skate, the DOJ is all but announcing that the banks can continue to engage in other unconscionable and illegal activities without the fear of retribution This is called a moral hazard — encouraging certain negative behavior by allowing it to continue.

“Ironically” — we only hear about moral hazard in the media, it’s FROM the banks, or government officials like Edward DeMarco, who are alarmed at the notion that homeowners might participate in moral hazard. They will use that alarmist notion, despite the fact that it has yet to be substantiated, as a reason not to do principal write-downs or provide homeowners the meaningful assistance they need.

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