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Rizzo Faces Justice, But Wall Street Never Will

Rizzo Faces Justice, But Wall Street Never Will

By Tom Bevan - March 15, 2011

Score one for taxpayers. In a little noticed decision last week, a Los Angeles trial court judge threw the book at Robert Rizzo, the city manager accused of bilking the small, working class town of Bell, California, out of millions of dollars.

Last Thursday Superior Court Judge Henry J. Hall ordered Rizzo, his assistant, and two others to stand trial for what Hall called a "massive ongoing conspiracy to enrich themselves." Hall not only slapped Rizzo and his co-defendants with 54 counts related to the defrauding of Bell, he urged prosecutors to file additional charges against the group for "aggravated white-collar crimes."

Rizzo is accused of masterminding the scheme to boost the salaries of top city officials - including his own, which topped out at an astronomical $787,637 per year- using a variety of book-cooking gimmicks. Prosecutors allege that Rizzo is responsible for defrauding Bell of some $5 million in taxpayer funds overall.

Amid the current headlines of state and local budget deficits, overpaid public employees and runaway public pension plans, Rizzo stands out as a porcine poster boy of public corruption. His violation of the public trust strikes at the heart of our system of self-government, and if justice is served Mr. Rizzo will spend the better part of the next decade (or more) inside a California penitentiary.

Three thousand miles away, a similar story continues to unfold, but much more quietly. It's a story of greed, and of corruption, and a violation of the public trust. It's also - - to borrow Judge Hall's phrase - about a group of people engaging in a "massive ongoing conspiracy to enrich themselves."

We're now talking about the investment bankers onWall Street.

On Oscar night, as documentary filmmaker Robert Ferguson accepted his Academy Award, he made a poignant observation: "Three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail - and that's wrong."
Technically, it's not quite true: Bernard Madoff, the crook with the Dickensenian name is behind bars, but it is disconcerting to realize that nearly two and half years after excessive risk taking on Wall Street led to a catastrophic financial meltdown that nearly wrecked the global economy, not a single culpable banker has been held accountable. Not one has been served even so much as a criminal summons, let alone been indicted or sent to the slammer.

In fact, the only people who've paid a price - besides the employees and shareholders at Bear Stearns, who were wiped out in the early days of the crisis before the government stepped in to save the rest of the "too big to fail" players on Wall Street - have been U.S. taxpayers.

The housing bubble fueling the crisis had many culprits, including Fannie Mae and Freedie Mac, a host of free-wheeling mortgage brokers, and far too many imprudent consumers.

But it was on Wall Street where the bubble became a full blown catastrophe. The slicing, dicing, and repackaging of mortgage debt in exotic derivatives that were both insanely complex and totally unregulated permeated the global financial system like a cancer.

In the end, Main Street paid for this fiscal malignancy while the coterie of big Wall Street bankers walked away without so much as a scratch. And that's the biggest crime of all -- that there was no crime. And for that reason, it could happen again.

Didn't Congress pass "Wall Street reform" to prevent anything like this from happening again, you ask? Hardly.

There's only one way to solve the too-big-to-fail problem: break up the big banks and make them small enough to fail without putting the entire system at risk. And there's only one way to stop excessive risk-taking on Wall Street: make companies - and individuals - pay for their losses with their own money. The legislation passed last year does neither of these things.

Indeed, it's business as usual on Wall Street. Huge risk taking is back, as are huge bonuses. And so danger still hangs thick in the air, and we're only one unforseen bubble in some sector away from Wall Street once again waiting on the government's doorstep with hat in hand, warning of fiscal Armageddon if Uncle Sam doesn't help clean up its toxic balance sheets.

So we can rejoice at the small victory of watching a corrupt public official like Robert Rizzo reap what he has sown in California. But we'll have to continue to lament that the Titans of Wall Street, whose irresponsible behavior cost American taxpayers billions upon billions of dollars, won't ever get what they deserve.

Tom Bevan is the co-founder and Executive Editor of RealClearPolitics and the co-author of Election 2012: A Time for Choosing. Email: tom@realclearpolitics.com, Twitter: @TomBevanRCP

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