Criminal referrals by all bank regulators for the 2007 financial crisis should begin to rise precipitously this year and continue for several years.
This was the case with the Savings and Loan crisis, which began in 1983 and cost the U.S. taxpayers approximately $100 billion. Five years later, in 1988, criminal referrals surged astronomically, totaling more than 5,000 over a 10-year period.
In comparison, the recent financial crisis has been much larger in magnitude, costing the U.S. taxpayers several hundred billion dollars thus far and possibly more. In addition, the lost economic growth to the United States will be trillions of dollars.
To date, five years after the financial crisis, the number of criminal referrals is roughly the same as that of the pre-Savings and Loan crisis. Therefore, we should expect a coming surge over the next five to 10 years.
Coincidentally, the statute of limitations to initiate prosecutions for many financial crimes is five years. However, these limitations can be extended under particular circumstances. In addition, there are other types of financial crimes, such as mail and wire fraud, that have a 10-year statute of limitations.
This is a key credibility test for the administration and Congress. Without the strong possibility of prosecution, these activities will likely continue, adding significant risk to our economic stability.
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