Wall Street got off way too easy for nearly destroying the global economy back in 2008, but two banks’ behavior was particularly—and knowingly—egregious. In 2016, the Obama administration was closing in on substantive, potentially criminal charges against them. But the Trump administration put a quick end to that, as this ProPublica investigation reveals.
The two big U.K.-based banks, Barclays and Royal Bank of Scotland (RBS), were facing stiff fines and potential criminal charges for top officials. U.S. District Judge Kiyo Matsumoto said of the Barclays case that the “complaint is probably one of the more fulsome complaints I’ve ever seen.” That complaint “alleged that Barclays engaged in fraud on a massive scale, deceiving investors about the characteristics of mortgages used to create securities that sold for tens of billions of dollars.”
They did so knowingly. Federal prosecutors had records of communications in which bank officers said things like the pool of mortgages they were bundling to create securities was “about as bad as it can be.” The same banker also said another group of loans he was securing “scares the shit out of me” because he thought the company that held the mortgages was going to go bankrupt soon. Barclays bought up the bad mortgages anyway. One RBS executive called the mortgages it was buying up to put into securities “total fucking garbage” on a recorded conference call discovered by prosecutors.
They knew what they were doing and were going to be potentially on the hook for it criminally until one Rod Rosenstein, then-deputy attorney general with an eye for pleasing his new boss, told prosecutors to stand down and pursue civil rather than criminal charges. Other political appointees also intervened, overruling career prosecutors to reduce the settlements. Billions of dollars were left unrecovered and criminal executives were sheltered even from having to pay their own fines, according to several people familiar with the settlements who talked to ProPublica.
Altogether, the bad mortgages the two banks combined “lost a total of $73 billion, according to calculations used by the government.” The administration settled with Barclays for $2 billion, ” “a sum dictated by Trump appointees that was far below what the staff prosecutors in the Eastern District of New York in Brooklyn had sought.” The RBS settlement was $4.9 billion, “about half of what staff prosecutors in the District of Massachusetts had sought.”