The fallen giants of finance

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By Fang Wang, Steven Bernard, Joanna Chung, Saskia Scholtes, Greg Farrell and Francesco Guerrera
Published: December 22 2008 19:21 | Last updated: December 24 2008 18:10

The search for scapegoats in the worst financial crisis since the Great Depression is under way. As one financial group after another has collapsed, wiping out thousands of billions worth of value for investors, a plethora of investigations by prosecutors and regulators has been launched.

Federal officials have opened investigations into at least 25 large companies, including Lehman Brothers, the collapsed investment bank; Fannie Mae and Freddie Mac, the mortgage financiers taken over by the government; and Washington Mutual, the biggest bank to go under in US history.

Investment banking league table 2008 - Dec-22

Subpoenas have been handed down in some cases, including Lehman and Fannie and Freddie. Prosecutors, along with officials at the Securities and Exchange Commission, are trying to determine whether managers misled the public about the financial condition of their companies. Defence attorneys are likely to argue that companies, as well as their individual directors and executives, cannot be blamed for the unprecedented market turmoil. “One thing we know for certain is that stupid choices were made by hundreds of businessmen but that is not a crime. Some executives may have been overly optimistic but so were a lot of people,” said Daniel Richman, a former federal prosecutor in New York’s southern district and now a Columbia University professor.

The subjects of these profiles, or their spokespeople, were contacted for this article but declined to comment. Compensation includes cashed-in share options.