Koch Wants The Bad Guys on Wall St. Behind BarsMay 12, 2003 | New York Daily News Former mayor Ed Koch wants to see Wall Street crooks sent up the river for ravaging retirement and college savings.
"I believe jail time is required for some people," Koch told the Daily News, to change Wall Street's ways.
State Attorney General Eliot Spitzer, the Securities and Exchange Commission and a host of others settled claims against 10 banks for producing stock advice that helped their investment banking units, often at the expense of investors.
The regulators revealed E-mails from analysts at firms such as Merrill Lynch and Citigroup that showed they publicly encouraged investors to buy shares of companies they privately trashed.
Thus far, the only individual penalties were for former Salomom Smith Barney telecom analyst Jack Grubman and former Merrill Lynch analyst Henry Blodget who both agreed to life-time bans from the industry.
"They took two guys and say, 'You may not be in the securities industry anymore,' " Koch said. "Why didn't they do that with all of them?"
That should include the investment bankers and the bank officers who encouraged this deception, Koch said.
Several senators, including banking committee chairman Richard Shelby (R-Ala.), suggested last week that CEOs and other senior execs should be held accountable for their actions during the bubble.
Koch sent an outraged letter to Shelby, urging him to seek stiffer penalties.
Spitzer and SEC officials have suggested criminal charges may yet be filed against individuals for their actions during the bubble, while cautioning that those cases take time to build.
An outraged Koch also took issue with the size of the fines the firms were paying.
"Seven trillion dollars disappeared since the year 2000 as a result of the bursting of the bubble, much of which is attributable to what these guys and women did," said Koch.
Koch said the total $1.4 billion isn't even a "slap on the wrist" for these banks.
"Nobody is recouping the billions that the [banks] made," Koch said. "People have been wiped out."
To be sure, the $1.4 billion settlement included record fines and the regulators, including Spitzer, have repeatedly said investors will be able to use the evidence uncovered during the probes to sue the banks.
Still, Koch said investors shouldn't have to be "put through the lawsuits."
The strongest message, Koch said, would be prison.
"If you want to teach people a lesson, particularly middle-class people, give them a little jail time," Koch said.