If Wall Street companies admitted guilt, they would lose a large number of investor lawsuits.
For example, Citigroup sold investors $1 billion of a CDO that contained toxic subprime mortgages. Investors lost $700 million. Citigroup made $160 million from fees and bets that the CDO would fail. Citigroup agreed to pay a $285 million fine without admitting guilt. If you deduct the $160 million, the net cost to Citigroup is $125 million, a fraction of the $700 million of investor losses.
If Citigroup admitted guilt they would still have to pay the fine and no doubt face a class action lawsuit from the investors who incurred the massive losses. Because they admitted guilt they would be in a very difficult position to defend their actions.
New laws should establish a fiduciary standard for all companies that sell investments to investors. The standard already exists for Registered Investment Advisors, but does not cover brokerage firms and stockbrokers.
Guess which type of company is ripping off investors on a regular basis? That’s right the broker/dealers.
Wall Street spends a lot money fighting a fiduciary standard for its brokerage activities.
Unfortunately, politicians have to fix this problem. That is not going to happen. They are paid large sums of money by Wall Street companies to maintain current regulations that protect companies at the expense of investors.
It is also unfortunate that investors do not have an organization that is strong enough to convince politicians to change the regulations.