Time for bankers to face gangsters’ RICO laws?

For nearly thirty years, Federal prosecutors have wielded a powerful tool for clamping down on organized crime.

The “RICO” law — the Racketeer Influenced and Corrupt Organizations Act — has devastated criminal operations ranging from the Hells Angels to the Gambino crime family.

Maybe it’s time to dust off RICO and use it against America’s financiers? It now appears that many banking executives were simply robbing their corporations, their shareholders and the taxpayers.

Consider this dispatch from the Wall Street Journal:

As bad as 2008 was for Merrill Lynch & Co., it was very good for Andrea Orcel, the firm’s top investment banker. Although Merrill’s net loss ballooned to $27.6 billion last year, Mr. Orcel, 45 years old, was paid $33.8 million in cash and stock, just shy of his pay in 2007.

While Merrill staggered, 11 top executives were paid more than $10 million in cash and stock last year, say people familiar with the situation. An additional 149 received $3 million or more.

Meanwhile, former executives from Countrywide Financial — the geniuses who helped inflate the devastating housing bubble — are now profiting from the implosion. Here are the details from the New York Times.

Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.

“It has been very successful — very strong,” John Lawrence, the company’s head of loan servicing, told Mr. Kurland one recent morning in a glass-walled boardroom here at PennyMac’s spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished.

“In fact, it’s off-the-charts good,” he told Mr. Kurland, who was leaning back comfortably in his leather boardroom chair, even as the financial markets in New York were plunging.

Is profiteering criminal? Probably not.

But the RICO laws give prosecutors wide leeway to seize assets built through the commission of dozens of federal and state crimes, including bankruptcy fraud, embezzlement, racketeering, insider trading, and money laundering.

As we pour billions in taxpayer dollars into the financial system, the Feds need to move aggressively to identify and punish those who behaved criminally.

Tags: economy