We're pleased that Justice Department investigators have rounded up more than 300 minor crooks and con artists who bilked honest citizens out of $8.3 billion. Justice was served. But with respect, sir, this is cold comfort to the victims who will not get their money back.
We are heartened that Robert Khuzami, director the Securities and Exchange Commission's enforcement division, assures us that the minor fraudsters are now in the crosshairs along with the major crooks on Wall Street. Earlier this week, Mr. Khuzami observed that fraud by high-profile players grab the biggest headlines, "but other scams are equally devastating to hardworking families and retirees."
Size matters. But is the size of a headline supposed to make us feel safer? I don't think so.
General Holder, perhaps we'd feel excited if you and the SEC ramped up your efforts to stop the epidemic of financial crime before more people lose their savings. We're happy you're showing a pulse (it's overdue) and slamming the smaller weasels. We don't mean to be pushy, but how about stopping the swindlers of all sizes before they've stripped their victims to the bone?
As you know, President Obama set up the federal Financial Fraud Enforcement Task Force, which ran Operation Broken Trust. The idea was to prevent another financial meltdown. We emphasis the word "prevent." The unfortunate fact is that Operation Broken Trust prevented only an expansion of certain ongoing financial shenanigans. It amounts to a glass half full. We need much more.
Operation Broken Trust is a step in the right direction, yet it has produced a disappointing outcome for a crime-fighting crew of 20 federal agencies, 94 U.S. attorney's offices, plus a wide variety of state and local law enforcement assets. Surely, Mr. Holder, we can do better.
We call your attention to Michelle Singletary's "The Color of Money" column in the December 9 edition of the Washington Post, in which she commented on Operation Broken Trust:
"It all sounds proactive," Ms. Singletary wrote. "In many cases, however, the fraud didn't just start recently. Some of the scams began well before the latest financial scandals."
The idea is to get in front of the swindlers before they get into the pockets of their victims. Is that too much to hope for?
We are pleased by your comment, General Holder, that "cheating investors out of their earnings and savings is no longer a safe business plan." There is a degree of nobility in your sentiment. Yet we wonder if it will shake up the major fraudsters on Wall Street. Will your words send the executives of Goldman Sachs, Pimco, Oppenheimer, Charles Schwab, Merrill Lynch, E*Trade and others in search of salvation? We don't think so.
Here's food for thought: A recent study by the Financial Industry Regulatory Authority (FINRA), an outfit owned and paid for by broker-dealers, revealed that most Americans are financially "irresponsible" and naïve about money. Out of a possible top score of five on a financial literacy scale, not one state in the Union scored above 3.5. That's pretty revealing. According to FINRA, the savviest citizens were found in New York and New Jersey. The lowest scores came from residents of Kentucky and Montana.
There are proposals in the House of Representatives designed to improve this sad situation. Both the Financial Education in the Classroom Act (H.R. 5165) and the Preventing Affinity Scams on Seniors Act (H.R. 6305) have promise. (An "affinity scam" is one in which a charismatic person uses his or her relationship to defraud trusting seniors.) Neither of these proposals appears to be going anywhere. Perhaps the DOJ might step in and give them a boost.
Another suggestion, General Holder: How about publicizing your website StopFraud.gov? Sorry to report that we can't find anyone who has ever heard of it. It's a fine website with lots of anti-fraud tips for consumers, and links to people who can actually step up and do something to stop an ongoing scam.
DOJ and SEC need to be more involved with the public. That means holding financial literacy workshops, advertising anti-fraud websites and other resources, reaching out to people before the weasels get to them.