Lee Farkas, former chairman of Taylor, Bean & Whitaker Mortgage Corp., is seen in this handout photo. Farkas was convicted this year of helping run a more than $1.9 billion fraud scheme aimed in part at the government's Troubled Asset Relief Program. Photographer: Marion County Sheriff's Office via Bloomberg
May 10, 2011 (Bloomberg) -- The defining characteristic of crony capitalism is the ability of favored elites to loot with impunity and the failure of regulators to do their jobs.
We have seen this in the financial crisis that started in 2008 and in an earlier era, when the savings-and-loan industry collapsed.
In the Texas “Rent-a-Bank” scandal of the 1970s, for example, two ringleaders created a fraud network of 50 lenders that caused billions of dollars in losses. The watchdogs removed and sanctioned one of the main culprits, but because the crimes weren’t prosecuted, the same crooks reappeared in the 1980s to do it all over again, only on a bigger scale. Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive.