The Story of the Only Bank Prosecuted Following the 2008 Economic Meltdown
Special to The Hawai‘i Herald
In 2008, America careened on the precipice of an economic meltdown that ultimately resulted in a $22 trillion loss to the American economy. The crisis had been fueled by a long era of cheap credit and free market deregulation that had ushered in a perfect storm of financial manipulation, outright fraud and predatory abuse that would have made the robber barons of the 19th century’s Gilded Age blush at its unabashed greed and brazenness. Virtually every major financial institution and big bank in the country was engaged in a feeding frenzy of issuing spurious home loans to unqualified borrowers and then selling those loans to unwary investors — but only after concealing their actual worth. In three years, over $4 trillion in fraudulent loans were issued, and when they defaulted — which they were guaranteed to do — the home foreclosure rate exploded by 555 percent by 2010.
The architects of this Hobbesian nightmare included Morgan Stanley, Citicorp, JP Morgan Chase and Goldman Sachs — institutions whose breadth and reach were so vast and pervasive that prosecuting them would have wrecked the global financial system and sent the world spiraling down into another Great Depression. In the parlance of the times, they were “too big to fail.” Instead, the Bush and Obama administrations fined the big banks a paltry $110 billion after they had made trillions off of their fraudulent deals. Inexplicably, the federal government also threw in a $700 billion bailout with no strings attached and no requirements for the banks to change their practices. To this day, no American bank has been prosecuted for the part it played in igniting the financial crisis of 2008. Except one.
The story of the one commercial bank that the government did prosecute is the focus of filmmaker Steve James’ Academy Award-nominated documentary, “Abacus: Small Enough to Jail,” which was produced for PBS’ “Frontline” series. James, who has given us remarkable moviemaking with such past offerings as “Hoop Dreams” and “The Interrupters,” has crafted a well-balanced and thoughtful examination of how the American justice system operates under the influence of money, power and politics.
Born in Shanghai, China, in 1935, Thomas Sung immigrated to New York City at the age of 16, eventually becoming a lawyer and real estate investor and a respected member of lower Manhattan’s Chinese community. In 1984, Sung opened Abacus Federal Credit Bank after he grew tired of watching bigger uptown banks exploit the naïveté of vulnerable Chinese immigrants whose deposits were always welcomed, but whose applications for credit were regularly denied.
Sung’s bank grew quickly, eventually boasting over 100 employees, originating over $100 million in loans and expanding to six branches servicing thousands of customers in Chinatown.
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Alan Suemori teaches Asian American history at ‘Iolani School. He is a former Hawai’i Herald staff writer.