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Recent Financial Crackdowns A Sign Of Government Toughness

LINDA WERTHEIMER, HOST:

This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer. It's a time for crime and punishment in the financial world. Last week, the Justice Department indicted the $14 billion hedge fund, SAC Capital Advisors; indicted them on insider trading. And on Thursday, the SEC got its first big verdict in connection to risky Wall Street moves that precipitated the recent financial crisis. Fabrice Tourre, who goes by the memorable nickname Fabulous Fab, was a trader at Goldman Sachs, and it was a verdict against him. For more on the Wall Street crackdowns, we're joined by Joe Nocera of the New York Times. Joe, welcome.

JOE NOCERA: Oh, thank you, Linda.

WERTHEIMER: So, what are we to make of Fabulous Fab and his verdict?

NOCERA: They finally got somebody - five years later, yeah. Unfortunately, it's quite the small fry in the grand scheme of things. The Goldman Sachs' trader who put together a deal that the SEC believed - and I think the evidence shows - was deceptive, at least to the people on the other side of the trade. And, you know, unlike everybody else at Goldman, he wrote some emails he really shouldn't have written and made himself a nice, big, fat, juicy target. And the SEC took full and complete advantage.

WERTHEIMER: So, the Justice Department charges that hedge fund with insider trading and then shortly after that this happened. Are we looking at a trend?

NOCERA: Ah. Well, in terms of prosecuting individuals involved in the financial crisis, we are not looking at a trend. We are looking at an end-point. What the trend might be is that we have a new chairwoman at the SEC, Mary White, who's a former prosecutor, who has really beaten the drums about being tough on financial crime. And I think what we are seeing is the beginning of a new toughness by the SEC for which this victory gives them kind of, if nothing else, kind of a moral authority to say we can charge forward and there's a lot more financial crime out there that we are uncovering. And even though it's necessarily related to the financial crisis, we are going to be tougher. We're going to prosecute. We're going to bring tougher civil actions against firms and perhaps individuals. So, I think in that sense it does signal something new.

WERTHEIMER: Are we going to see something happen to the people from the big banks, Joe?

NOCERA: That is the big question. You know, the Justice Department has also kind of sprung into action recently with the indictment of SAC, the big hedge fund, although that's insider trading. But the Justice Department also recently announced that it had Bank of America in the crosshairs for some deals that it thought didn't pass the smell test. And I was surprised by that because, you know, this is the same Justice Department whose head, Eric Holder, said not all that long that the big banks were too big to indict.

So, I think that we are in fact seeing the Justice Department, the SEC, the government in general, wanting to get tougher on financial crime. Whether they will go after companies or individuals, I think, remains to be seen but I think there's been so much criticism in the press and in the public at the inability to do anything about the people who ran firms that collapsed or that helped bring about the crisis that I think they want to show that they can do this.

WERTHEIMER: I wonder if there isn't some element of looking at these big bankers and these big funds. They appear not to have learned any lessons.

NOCERA: I absolutely think that's part of it. There was a story in the New York Times this week of how S&P, Standard & Poor's, the rating agency, was loosening its ratings so that it can give everybody AAA ratings again. JPMorgan just settled for 400 and some-odd million dollars for, you know, rigging electricity prices. So, yes, it just feels like no lessons have been learned. Nothing has changed. And I think the government, on some level, is sick of it.

WERTHEIMER: Joe Nocera writes for the New York Times. Joe, thank you very much for joining us.

NOCERA: Thanks for having me, Linda. Transcript provided by NPR, Copyright NPR.

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