Why financial fraud doesn’t guarantee jail time

Inside Job director Charles Ferguson opened his Oscar speech with the following words, "Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that's wrong."

According to Morgan Housel of Fool.com, why these corporate crooks have avoided prosecution can be boiled down to 3 points:

1. The most disgusting, outright-fraudulent parts of the bubble years didn't take place on Wall Street. It took place on the ground in areas like Orange County and Las Vegas, where mortgage brokers, Realtors, and borrowers lied through their teeth, forged loan documents, and actively pursued screwing over anyone within reach. Thousands of mortgage brokers and scam borrowers have indeed been charged, and in many cases jailed.

2. High-level fraud cases are typically referred to the Justice Department by industry regulators. Regulators have a long history of coddling the banks they oversee because banks fund their activities. In addition, the FBI has seen it's financial crimes division cut from 1000 agents to a mere 240 since 9-11.

3. It's not illegal to be stupid. Blowing up your company isn't necessarily a crime. Leveraging 30-to-1 isn't unlawful. Neither is buying securities backed by homeowners unable to repay. Nor is ignoring caution signs. Or disregarding history. Much of what brought the financial system to its knees was unbelievably stupid and unethical, yet perfectly legal. Many executives walked away unabashedly filthy stinking rich from such unethical activities.