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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.
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.
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
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