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Doherty

"Following the catastrophic, cascading collapse of major investment banks on Wall Street in 2007.....Nobody was prosecuted, no hearings were held and no reforms were implemented."

Michael Doherty on Friday, December 9th, 2011 in a news release

State Sen. Mike Doherty claims financial collapse led to no prosecutions, hearings or reforms

When former New Jersey Gov. Jon Corzine was ordered to appear Dec. 8 before a House committee investigating the collapse of brokerage MF Global, it was a landmark moment, according to one state senator.

Corzine’s testimony marked the first time that federal officials had taken any action dealing with Wall Street in response to the financial crisis that rocked the world a few years ago, state Sen. Michael Doherty (R-Warren) said in a Dec. 9 news release.

"Following the catastrophic, cascading collapse of major investment banks on Wall Street in 2007, which caused the current global economic recession, the United States Government held no one accountable," Doherty said. "Nobody was prosecuted, no hearings were held and no reforms were implemented.

"It is obvious to everyone on Main Street, from the Occupy camps to the Tea Party, that Wall Street is broken. Yet only yesterday did the U.S. Congress take any action."

No prosecutions, no hearings, no reforms? PolitiFact New Jersey says: No way!

Since the financial crisis began in 2008 -- not 2007, senator -- federal officials have held numerous public hearings and passed a financial reform law, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act.

While high-profile executives on Wall Street have not faced criminal charges, federal officials have prosecuted cases against other individuals for financial crimes before and during the time of the economic collapse.

Doherty told us his claims are supported by a Dec. 4 segment on 60 Minutes on CBS, which stated "there has not been a single prosecution of a high-ranking Wall Street executive or major financial firm."

In an email, Doherty also responded to our charge about the Dodd-Frank Act: "Regarding reform, there has been no reform. If there was reform, how did MF Global take $1.2 Billion of client money from segregated client accounts and now they don’t know where the money went?  Reform would have stopped that from happening."

Let’s review what PolitiFact New Jersey found:

It’s true that prominent Wall Street executives have not been prosecuted, according to various news reports. But it’s wrong for Doherty to say "nobody" has.

For example, Lee Farkas was convicted in April of helping to commit a more than $2.9 billion fraud scheme that contributed to the collapse of Alabama-based Colonial Bank, one of the 25 largest banks in the country in 2009.

Now, let’s talk about those hearings and financial reform.

Charged with examining the causes of the financial crisis, the Financial Crisis Inquiry Commission "held 19 days of public hearings" in 2010, according to its website.

Congressional committees and subcommittees also have held hearings about the financial crisis. In April 2010, a Senate subcommittee held four hearings about the causes and effects of the crisis, including one when Goldman Sachs CEO Lloyd Blankfein testified.

About three months later, President Barack Obama signed the Dodd-Frank Act.

The reform measures within that legislation include setting up a Consumer Financial Protection Bureau. U.S. Senate Republicans recently blocked the nomination for the bureau’s first director.

So, contrary to what Doherty claimed, it’s clear that federal officials have conducted hearings and passed financial reform in the wake of the financial crisis.

Doherty also referred to the "current global economic recession," but economists with the National Bureau of Economic Research have said the recession in the United States ended in June 2009.

Our ruling

In a news release, Doherty claimed that following the collapse of major investment banks on Wall Street in 2007, "nobody was prosecuted, no hearings were held and no reforms were implemented."

But major investment banks collapsed in 2008 and there have been some prosecutions, although not targeting high-profile Wall Street executives. Numerous hearings have been held and a financial reform law was enacted last year.

Doherty has a point about the lack of prosecutions against high-profile Wall Street executives, but his overall argument about inaction by federal officials is flat-out wrong.

We rate the statement False.

To comment on this ruling, go to NJ.com.

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About this statement:

Published: Monday, December 19th, 2011 at 7:30 a.m.

Subjects: Economy, Financial Regulation, Occupy Wall Street

Sources:

Doherty: Corzine’s Lame Excuses Don’t Fix the Problem, Dec. 9, 2011

PolitiFact, No CEOs have been arrested for bringing down the economy, said Michael Moore, Oct. 7, 2011

National Public Radio, Why Prosecutors Don't Go After Wall Street, July 13, 2011

CBS News, Why no Wall Street prosecutions?, Dec. 4, 2011

The Washington Post, Congress passes financial reform bill, July 16, 2010

U.S. Senate Committee on Banking, Housing & Urban Affairs, Dodd-Frank Wall Street Reform: Conference Report Summary, accessed Dec. 9, 2011

The White House, Remarks by the President at Signing of Dodd-Frank Wall Street Reform and Consumer Protection Act, July 21, 2010

Congressional Research Service, The Dodd-Frank Wall Street Reform and Consumer Protection Act: Issues and Summary, July 29, 2010

Library of Congress, Dodd-Frank Wall Street Reform and Consumer Protection Act: Bill Summary & Status, accessed Dec. 9, 2011

U.S. Securities and Exchange Commission, Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act, accessed Dec. 9, 2011

U.S. Department of the Treasury, website of the Financial Stability Oversight Council, accessed Dec. 9, 2011

Financial Crisis Inquiry Commissionwebsite, accessed Dec. 9, 2011

Federal Reserve Bank of St. Louis, The Financial Crisis: A Timeline of Events and Policy Actions, accessed Dec. 9, 2011

The New York Times, In Financial Crisis, No Prosecutions of Top Figures, April 14, 2011

The New York Times, Timeline: Investigations and Enforcement in the Financial Crisis, April 14, 2011

Financial Fraud Enforcement Task Force -- First Year Report, accessed Dec. 12, 2011

The Wall Street Journal, Financial Crimes Bedevil Prosecutors, Dec. 6, 2011

U.S. Department of Justice, Former Chairman of Taylor, Bean & Whitaker Convicted for $2.9 Billion Fraud Scheme That Contributed to the Failure of Colonial Bank, April 19, 2011

Reuters, Jury acquits ex-Bear Stearns hedge fund managers, Nov. 11, 2009

Email interview with Sen. Michael Doherty, Dec. 12-13, 2011

CBS 60 Minutes, Prosecuting Wall Street, Dec. 4, 2011

National Bureau of Economic Research, US Business Cycle Expansions and Contractions, accessed Dec. 13, 2011

U.S. Senate Committee on Banking, Housing & Urban Affairs, List of Hearings, accessed Dec. 13, 2011

U.S. House Committee on Financial Services, List of Hearings, accessed Dec. 13, 2011

U.S. Senate Committee on Homeland Security & Governmental Affairs, List of Hearings, accessed Dec. 13, 2011

Written by: Bill Wichert
Researched by: Bill Wichert
Edited by: Caryn Shinske

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