The Financial Crisis Inquiry Commission report increasingly looks like a whitewash. Even though the commission has made referrals for criminal prosecution, you’d never know that reading its end product. The references to “fraud” and “crime” are sparing, and ex mention of the SEC’s fraud investigation of Goldman, consist almost entirely of mortgage fraud, which is the FBI’s notion of “fraud for profit” or “fraud for housing”, meaning borrower fraud. The book also acknowledges the fraudulent lending by firms that were prosecuted like Ameriquest. In other words, the notion that the TBTF firms might have engaged in less than savory activity is remarkably absent from the report.
The FCIC has also been unduly close-lipped about their criminal referrals, refusing to say how many they made or giving a high-level description of the type of activities they encouraged prosecutors to investigate. By contrast, the Valukas report on the Lehman bankruptcy discussed in some detail whether it thought civil or criminal charges could be brought against Lehman CEO Richard Fuld and chief financial officers chiefs Chris O’Meara, Erin Callan and Ian I Lowitt, and accounting firm Ernst & Young. If a report prepared in a private sector action can discuss liability and name names, why is the public not entitled to at least some general disclosure on possible criminal actions coming out of a taxpayer funded effort? Or is it that the referrals were merely to burnish the image of the report, and are expected to die a speedy death?
Matt Stoller provides further support for the cynical take. Via e-mail:
I was on a conference call today with Phil Angelides and Brooksley Born, two commisioners of the Financial Crisis Inquiry Commission. During their unveiling of the FCIC report, they used words like deregulation, leverage, imprudent risk-taking, reckless behavior, failures at credit agencies, and failed regulators. Left out were words like crime, fraud, looting, or a specialized form of looting known as control fraud. At every point reporters asked about their referrals of criminal cases, which someone leaked before the report came out, they demurred. “We are not prosecutors”, said Angelides.
I asked about the criminal nature of the crisis. I said I didn’t want to know about any specific case, but whether they thought that fraud or crime was a core cause of the crisis. This is an important distinction, because the real question at hand is whether you trust the system to correct itself, or whether you believe that the people running the system are the problem and must be removed before we can fix the system. It’s obvious, as you’ll see, that Born and Angelides believe the former.
Neither Born nor Angelides would answer whether accounting fraud or crime was a primal cause of the crisis. The gist of the response was “it’s all in the report,” along with an attempt to pretend like they had discovered the systemic mortgage origination fraud that the FBI discussed in 2004. Born also repeated that they wouldn’t disclose specific cases of criminal referrals, even though I had specifically said that I was not interested in such disclosures. It was a filibuster, and an obvious one at that. I kept pressing, and asked them repeatedly to answer my question, and after the third follow-up Angelides finally said they had to go.
With that, the FCIC has completed the final act of oversight for the last Democratic Congress, and it held true to what Democrats in the last Congress believed. Everyone was at fault for the crisis, but no one is to blame. This was Bush’s line in 2008, that “Wall Street got drunk”, and Obama’s line throughout the Dodd-Frank mark-up. The Republicans went after the GSEs and “regulation”, and the Democrats sadly lamented the tragedy of the crisis. Again, everyone’s at fault, and no one is to blame. I saw high-ranking Democrat Carolyn Maloney brag yesterday about her vote for TARP in the hearing on foreclosures, noting that the Dow busted through 12,000 as a sign of prosperity. This is what they believe, in their bones. There was no theft, only tragedy. The American economy lives on the crack of financialization, not the production of valuable services and goods that solve real problems.
You can even read Obama’s Cooper Union speech from 2008, and with a few additions, it’s basically that narrative. Deregulation bad, regulation good. New Deal “outmoded”, excessive pay a problem. (I do find it amusing that Obama in 2008 brought up how other banks spread rumors about Bear Stearns so it would collapse, and then stressed how the SEC “should investigate and punish this kind of market manipulation.” But that’s kind of an exception, an adorable one that suggested there were rhetorical remnants of outrage among elites)
The FCIC report is destined for the same dustbin of history as that speech. It is a document of and by well-meaning insiders that just can’t deal with the corruption they were supposed to investigate. It’s a psychological crutch maybe, or perhaps a denial mechanism, but it doesn’t really matter. This report is just a cover-up, the same kind of cover-up that is allowing the thieves to escape with their loot.
Nothing will come from the generation in power who created this mess. They just don’t have it in them. The bad guys will steal again. I mean, crime pays. Besides, who’s going to call it crime, anyway?
Nothing will come from the generation in power who created this mess.
That’s true, but to believe a “new” generation within the same system will be any different is still just a derivative of the mindset being criticized.
Instead, we must fulfill the logic: Nothing will come of the structure which created this mess. It’s elitist economic and political structures themselves which are inherently criminal and empower and cause criminals to commit crimes. One can’t separate the cadres from the cadre. It’s a terminal kleptocracy, and that doesn’t just mean the current personnel. The system is inherently criminal, since it was built on massive robbery in the first place. All Wall Street has done is follow through on the system’s logic.
But when today’s politicians cover for Wall Street, that’s no different in kind from when they allow some two-bit factory owner to pay his workers less than the full value of their work. In principle it’s the same robbery.
I agree with what you say at the beginning, however, your assertion that a factory worker receive the “full value of their work” is misleading at best.
If the factory owner pays the worker in accordance with their agreement, and the agreement was not made under duress of some kind specific (like work for this or I won’t let your enslaved sister out of the whorehosue), then it is a fair deal, and had nothing to do with the outright thievery and illegal transference of wealth that has and is occurring. If however, the factory owner pulled some shenanigan, such as stating that because you missed the schedule, and were late, that you lose 50% of the weeks wage, and BTW the schedule is in a locked room that you cannot get to and it was changed to an earlier start after your shift had already started, then indeed –the factory owner could be compared to the criminal klepto-ogilarchs.
No one “deserves” a job. I am not saying that is your view, but it is many peoples view that they deserve “their 40”. That is simply and patently not true. You can expect (and deserve) to be treating fairly under the numerous implied contracts that we live under (such as the Constitution), and certainly this is not happening at this time, however expectations beyond that are not just unrealistic, they are harmful.
I don’t know if you’re serious, but it certainly is my view that anyone who’s willing to work has a right to work. If nothing else, we have the right to till the land.
No one has a right to “own” land beyond what he actually productively uses. The same goes for all the produce of the earth and of the productive people. So that pretty much covers it for all resource inputs and economic infrastructure.
We all have the right to the produce of our labor.
As for those alleged “contracts”, they’re not. No contract extorted from someone in a weak position by someone in a strong position, where the weak party has no choice but to “bargain” because otherwise he’ll freeze and starve, has any moral validity, and no “law” which would recognize such a contract has any validity either.
However, even according to our rigged laws capitalist contracts aren’t valid, since they’re what are called contracts of adhesion, meaning the extortion I just described.
No, by definition the only valid, truly voluntary economic contracts are between economic equals.
dood, you need to flow your own thoughts. you’re just riding other people’s thought waves at the communal super-ego level. seriously, go take a walk in the woods and forget your name and everything in the world, and then just feel your connections that come up through your chest, like billows of invisible light, and then channel those. that’s flowing your own thoughts and getting the super-ego static out of the pikture. It’s not that hard. Then take a look at the ants in the dirt, and the birds in the sky, and the crows. Does any one of them not have a job. IF a squirrel gets flattened by a car, then there are 4 or 5 crows right there on clean up patrol. Nature works that way. And and and
Well after the S&L, Dot.com, MBS alphabet soup exponential pump me up only way to get fiat wood these days my prescription ran out shenanigans WTF is next[?], food and war bonds?
▬ Matt Stoller said:
I said I didn’t want to know about any specific case, but whether they thought that fraud or crime was a core cause of the crisis. This is an important distinction, because the real question at hand is whether you trust the system to correct itself, or whether you believe that the people running the system are the problem and must be removed before we can fix the system.
The FCIC report is destined for the same dustbin of history as that speech. It is a document of and by well-meaning insiders that just can’t deal with the corruption they were supposed to investigate.
Nothing will come from the generation in power who created this mess. They just don’t have it in them. The bad guys will steal again. I mean, crime pays.
▬ CNN said:
Protesters who have taken to the streets in several Arab nations of North Africa are angry at their own governments, and lashing out over some specific problems in their countries. But what they’re looking for — and, in the end, what inspired them to stand up and demonstrate — is very similar, experts on the region said Thursday.
“They all want the same,” said Emile Hokayem, with the International Institute for Strategic Studies in the Middle East. “They’re all protesting about growing inequalities, they’re all protesting against growing nepotism. The top of the pyramid was getting richer and richer.”
Speaking to CNN about the recent demonstrations that have occurred, to varying extent, in Algeria, Egypt and Tunisia in northern Africa, and Yemen on the Arabian Peninsula, Hokayem said the protesters were also standing up “against a high level of police brutality.”
“Fundamentally it’s a question of dignity. People’s dignity has been under assault for decades,” he said.
Juan Cole, a Middle East historian at the University of Michigan and a blogger, put it this way: “There’s a feeling a lot of people are being left behind.”
The protesters are driven by economic frustrations, “discontent with authoritarian character of the regime,” and the “feeling that there’s no real representation” — although to different degrees in each nation, Cole said.
▬ Lawrence Goodwiyn in The Populist Moment said:
[T]he relatively expansive pre-industrial sensibilities that had animated Thomas Jefferson, George Mason, and the original Anti-Federalists gradually lost that strand of democratic continuity and legitimacy which, in fact, connected their time and their possibility to our own through the actions of Americans who lived in the interim; the Populist connecting link was lost to the heritage. The egalitarian current that was part of the nation’s wellspring became not a constantly active source of ideas, but a curious backwater, eddying somewhere outside both the conveyed historical heritage and the mainstream of modern political thought that necessarily builds upon that heritage.
The result is self-insulation: the popular aspirations of the people of the “third world” in the twentieth century have easily become as threatening to modern Americans as the revolt of their own farmers was to goldbugs eighty years ago. Though American foreign policy and American weapons have defended anachronistic feudal and military hierarchies in South America, Africa, and Asia, such actions being justified at home as necessary to the defense of “democracy,” neither the policy nor the justification has proved notably persuasive to the non-Americans who are the mass victims of such hierarchies. The resulting unpopularity of America puzzles Americans. The policies themselves, however, are not debatable within the limits of public dialogue sanctioned in modern America. Under such constraints, the ultimate political price that Americans may be forced to pay for their narrowed cultural range in the twentieth century has emerged as a question of sobering dimension.
▬ Hannah Arendt in Crises of the Republic said:
Henry Steele Commanger is entirely right: “If we subvert world order and destroy world peace we must inevitably subvert and destroy our own political institutions first.” The much-feared boomerang effect of the “government of subject races” (Lord Cromer) on the home government during the imperialist era meant that rule by vioence in faraway lands would end by affecting the government in England, that the last “subject race” would be the English themselves.
looks like an excellent report to me
You have just revealed you either do not know the terrain very well or have a vested interest in keeping people ignorant.
Since you didn’t indicate in what way you found it excellent, let me guess.
It was the way in which it continues to provide cover for the ongoing global perfidy of the rich and the banks under their control.
I think he means excellent, like when Rainman said, “I’m an excellent driver.”
Oooh. It looks like Lloyd Blankfein is reading your blog. Or is it Jamie Dimon?
anon says: “looks like an excellent report to me”
Anon, go ahead, be a pit viper, like we care.
Me too. ;)
John E. Cash, CDO, OCD, AA, BYOB
Division of Mortgage and Risk
Lootem & Howe Capital Partners
Well, yes, it was all just one big DOOZY of a mistake but now that the Bernank has ramped the markets back up to bubble
territory again, we can all relax and take a well-deserved
vacation. Mission accomplished!
Pretty simple, really. We have finally opted for self-delusion as national policy. Our leaders have decided
we can’t handle the truth. Colonel Jessup is in charge.
As the bard said long ago, “Treason never prospers. What’s the reason? Why if it prospers, none dare call it treason”.
Can the financial blogs pour through the report and find evidence of fraud? The financial blogs do a much better job of covering what actually goes on. Can “regular people” take up the mantle?
Unfortunately, the financial blogs can’t do anything about it — not legally, at least. We can all expose to our heart’s content the criminality, but until someone does something, nothing will happen.
Numerous times the past decade, I’ve seen cases where crime is so blatant it’s as if they were thumbing their noses at us and saying, “Nyeah-nyeah. Look at what we can do, and you can’t do a darn thing about it.”
Agreed, during the housing bubble, the M&A feeding frenzy, the expansion of multiples under advice from our so called financial advisers, well, I actually had friends state…well it must be OK because it must be legal, because they aren’t going to jail.
I tried to explain to them how things have been so far over the line for so many years. for my efforts, the general praise I received was being labeled a chicken little —even after my predictions become 100% true. Knowledge sucks, maybe Ill just get a 6 DVD selection of Dancing with the Stars.
Can you order me a set?
I too have a label “Don’t mention the banks! You won’t live through it”
I expect that I will be flamed for this, but it really hard to prosecute fraud crimes in a control fraud unless 1) a whistleblower comes forward and lays out the whole scheme (see Enron) or 2) you can get someone for a false official statements either made to the regulator (such as the false filing Bernie Ebbers made to the SEC) or an investigator (Martha Stewart and the FBI. Fraud is a specific intent crime usually, and if can argue that one has even a bad faith mistaken belief that the security is worth something, then one has “reasonable doubt.” See what happen to the Bear Stearns traders whose RMBS hedge funds collapsed was the signal that the party was coming to an end were acquitted despite some dodgy e-mails about what crap they were putting into the RMBS. http://www.nytimes.com/2009/11/11/business/11bear.html
Nonsense. 1000+ white collar execs went to jail during the S&L scandal.
Yeah, but that was when financial crime was taken seriously.
There seems to be an existing e-mail record illustrating that folks like Mozillo and the Bear Stearns execs (who are still working on Wall Street) knew that they were misrepresenting the mortgages and securities they were selling, i.e., committing securities fraud. Certainly enough of a smoking gun to launch a criminal probe if we had a real justice system.
We don’t, but I think you knew that.
I expect that if we count the small timers, and those like Madoff not associated with the big banks, we have several hundred convictions already in this scandal.
Even though S&Ls had been partially deregulated, they still had to file reports with the FSLIC and respond to audits by the Office of Thrif Supervision. The officers who usually had to sign something that they knew to be false. That even in the S&L scandal such convictions were hard is shown by the history of Charles Keatings trials and then successful appeals. http://en.wikipedia.org/wiki/Charles_Keating#Legal_consequences
Also, it is probably significant that the S&L scandal mostly played out in the cities and towns across the verdant plains, and did not involve very many Wall Streeters. With the exception of Milliken and Drexel, Burham, Lambert (and they were outsiders on Wall Street), I don’t think to many on the Street went to jail circa 1989-1993.
By the way, I will say this, it is probably no accident that the both the interpretation of the laws by courts increasingly dominated by Federalist Society members, and the high price and talented attorneys serving the rich in the defense bar, have combined to make convictions for financial fraud harder with the passage of time.
In America, “Investigation Commission” is shorthand for “Whitewash.”
This was just more pablum for the few members of the voting public who were aware of it. One wonders why they bothered even with that.
In response to President Sarkozy’s comments to Jamie Diamond regarding Wall Street fraud, the harm it has done to the world econmy, and the lack of accountability, President Obama had this to say:
Okay, Blurtman, that was funny….in a tragic sort of way.
I am so done with our President. He has sat in office and witnessed the robo-signing scandal. And a few weeks later the REMIC scandal…..and all we heard from the administration with all this evidence of crime…”The foreclosures need to move forward.”
Fuck you Mr. Obama.
It’s pretty mind blowing that the phrase “counter party risk” only appears once in the entire document. The entire foundation of the crisis is the risk of default which led to unmeetable collateral calls. The report is a freakin joke.
The word “fraud” appears 46 times…I’m of the opinion the word should be watermarked on every page.
So basically, Matt Stoller is convinced in his heart-of-hearts that there was widespread criminality — even though he can’t prove it — and anyone who disagrees is obviously corrupt. Right. The sad thing is that this is what passes for intelligent commentary on the financial crisis in the blogosphere.
(It’s worth noting that the Valukas Report: (a) was required to examine whether civil or criminal charges could be brought; and (b) ultimately found no criminality. Also worth noting: the Bear Stearns hedge fund fraud case, which the government did prosecute. How’d that go?)
Can’t prove it? They didn’t bother to subpoena any relevant information, and they omitted what little evidence of fraud fell into their laps. That’s what makes it a whitewash.
The biggest global financial collapse had not one bit of criminality to it? No one is so stupid as to believe that.
But hey, if J is convinced, I guess we should just move on and pretend to be surprised when it happens again.
How about the email from the Bear Stearns trader admitting that they were selling “sacks of shit”?
And how about the Citi auditor admitting that 60% of the mortgages were deficient….of their own underwriting??
Pretty sure those are some smoking guns….
How about the land records of property all across the U.S. reduced to a pile of forgeries?
Look into the future, J
It increasingly seems that the homeowners are being raped at every turn. They are throwing 6 million homeowners (so far that is) and all their life savings under the bus.
WOW. Land of the free….even if you rob 6 million people….you are still free to go to work to rob more.
“Nothing will come from the generation in power who created this mess. They just don’t have it in them. The bad guys will steal again. I mean, crime pays. Besides, who’s going to call it crime, anyway?”
Were collapse of that which has been propped up and covered up, indeed, be a foregone conclusion (and it is), then surely concern is not for “the generation in power who created this mess.” Each day longer these folks wish to remain in power and further demonstrate their cowardice and insanity is but a blessing to those who know the “C” word awaits but Glass-Steagall and the write-off of those trillions of unfungible debts incurred in the vain attempt to salvage an unsalvageable Ponzi scheme imposed on a nation whose moral fiber already has demonstrated a deep abhorrence for fascism.
The limits to which this foreign ideology can be imposed with a smiling face have been reached. What’s more, no violent head fake — even one dwarfing 9/11 — could possibly defer the inevitable retrograde movement away from monetarism and toward a credit system asserting and defending the laws of nature and of nature’s god.
Furthermore, just as there was no consensus supportive of bailout — a policy I understand the FCIC report concludes was unnecessary (big news, indeed, particular here at the doorstep of another financial earthquake) — there need not be any popular consensus toward Glass-Steagall. Just a handful of congressional representatives with a bill venturing this will do, because as the rapidly developing, hyperinflationary blowout of the banking system proceeds, that rich history we have as a point of reference should act to create all the support necessary to make Glass-Steagall the law of the land once again.
Glass-Steagall first, then criminal prosecution. Should the President resist, then that taste of Egypt, American style, likely to develop as a consequence might finally persuade the Congress that, the man is a 25th amendment, section 4 candidate.
Those who so eloquently can identify, analyze and elucidate the wrongs of the system are not the type who charge at police shooting tear gas and rubber bullets.
The folk who would take to the streets, however, blame the less fortunate.
Crime is in the eye of the beholden.
The New Deal was not enacted because the rich & powerful were concerned about the suffering majority of US citizens. The New Deal was enacted because the rich & powerful were afraid of the alternatives if it was not.
I expect I will get flamed for this, but proving a crime in a control fraud is hard to prove, especially since most of these offenses were committed in what is called “shadow banking,” practially unregulated, and where few requirements existed for signing official statements (prosecutors love to prosecute “false official statement” see Stewart, Martha, false statement to FBI). Building a circumstantial case with some e-mails may be possible in an SEC civil action or in a civil law suit, where the standard of proof is “preponderance of the evidence.” But it is devilishly difficult to prove the mens rea, specific intent to defraud, and where the standard is “beyond a reasonable doubt” The defense is usually that “well, I thought they were really a good investment when I made the recommendation” means that prosecution has to prove a negative.http://www.nytimes.com/2009/11/11/business/11bear.html
“Matt Stoller provides further support for the cynical take. Via e-mail:
I was on a conference call today with Phil Angelides and Brooksley Born, two commisioners of the Financial Crisis Inquiry Commission. During their unveiling of the FCIC report, they used words like deregulation, leverage, imprudent risk-taking, reckless behavior, failures at credit agencies, and failed regulators.”
These are some of the elements needed for too much debt. Too much debt (whether gov’t or private) is the problem. It is a medium of exchange problem.
“Left out were words like crime, fraud, looting, or a specialized form of looting known as control fraud. At every point reporters asked about their referrals of criminal cases, which someone leaked before the report came out, they demurred. “We are not prosecutors”, said Angelides.”
Is it a crime to attempt to produce too much debt even if it does not produce price inflation or to prevent price deflation? Should it be?
“Is it a crime to attempt to produce too much debt even if it does not produce price inflation or to prevent price deflation? Should it be?”
No and no.
Is it a crime to misrepresent mortgages to investors, to charge investors for mortgages and then not transfer them to said investors, to knowingly mis-grade investment products, and foreclose without standing?
It depends how much money you have.
“No and no.”
No, it isn’t right now. Yes, I think it should be. That aside. Is it really a good idea economically to do that?
Is it a crime to make a cash withdrawal from a bank?
It may be worth an investigation if it involved tunneling, locksmithing or intimidation.
“This report is just a cover-up, the same kind of cover-up that is allowing the thieves to escape with their loot.”
These crimes run throughout our legal system, honed by a legal system amok with cover-up through verbal fraud, attorney-client privilege, and “win at all costs” gamesmanship that bankrupts anyone who fights it. Bankers, lawyers and insiders call it “just business” and if you don’t have enough money to play the game, you lose.
Watching the news stories on the effects of years of corruption in Egypt, it is easy to imagine that such a scenario is all too possible in this country as we continue to fail to stop the corruption here.
No matter how many posts or articles I read concerning these fraudulent activities I continued to be amazed at the utter ‘entitlement’ the banks and their ‘leaders’ seem to think they deserve. In addition I am baffled at how far the fraud was allowed to perpetrate considering we have government agencies that allegedly are looking out for our interests (the American people) so that THIS does NOT occur.
In essence there is no other way to ‘look at’ what has happened in the banking and financial industry…there is no other way to ‘look at’ what has happened to the average middle class American and the American Dream…other than…sadly and sickeningly…
Those with the power to STOP doing what they were doing when they knew what they were doing was massively fraudulent…DID NOT! (BIG BANKS, BIG BUSINESS, BIG HEDGE FUNDS and their CEO’s…remember they are still saying they are too big to fail) (and they are NOT failing…thanks to our government’s BAIL-OUTS.)
Those with the power to STOP the fraudulent acts…DID NOT! (Our government agencies; SEC, Congress…all elected officials who fear that they will lose the benefits bestowed on them by the lobbyists and TOO BIG TO FAIL CEO’s who (sadly and sickeningly) own THEM!