By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.
Eric Holder has come out with details on the task force. But first, let’s look at a smoke signal. At this press conference announcing the task force, Holder had to apologize for Lanny Breuer, Assistant Attorney General for the Criminal Division, one of the key leaders of the investigative unit. Breuer, you see, couldn’t make it to the press conference because he was traveling. That’s how important this task force is to Breuer, so important that his travel schedule couldn’t brook interference. Such a bureaucratic snub has been no doubt noticed by the various underlings at the DOJ and the US Attorney offices.
Ok, let’s go to the substance.
I am pleased to report that this Working Group has considerable Department resources behind it as it builds on activities that have been underway through the broader Task Force. Currently, 15 attorneys, investigators, and analysts – here at Main Justice and throughout our U.S. Attorneys’ Offices – are supporting the investigative efforts that this Working Group will be focusing on going forward. And the FBI has assigned 10 agents and analysts to work with the group immediately. In the coming weeks, another 30 attorneys, investigators, and support staff from U.S. Attorneys’ Offices will join the Group’s work.
So that’s a total of 55 people, 10 of whom are FBI agents. Let’s do a few comparisons. During the Savings and Loan crisis, Bill Black reminds us that there were about a thousand FBI agents working on the various cases. That’s one hundred times the number of people working on a scandal that is about forty times larger and far more complex.
To put it another way, let’s say that this scandal cost the American public $5-7 trillion in lost home equity. That’s about $100 billion of lost home equity per person assigned to this task force. If someone stole $100 billion a corporation, like say, if somehow Apple’s entire cash hoard which is roughly that amount, suddenly disappeared, I’m guessing that the FBI would assign more than one person to the case.
Another comparison might be Enron, which had 100 FBI agents assigned to the case. Or the stress tests. Remember this?
For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.
Yup, roughly four times as many people were assigned to conduct sham stress tests as are assigned to investigate the causes of the financial crisis and prosecute the people responsible. So we see that this is a not a serious deployment of government resources to unmask a complex economy-shaking financial scheme. It just isn’t. And as if to emphasize this, Breuer didn’t even show up to the press conference announcing it.
And finally, the fissures I warned about are already beginning to appear. Here’s more of what Holder said.
On Tuesday night, the President referenced this initiative, asking us to, “hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.”
That is precisely what we intend to do. And the good news is that we aren’t starting from scratch.
Over the past three years, we have been aggressively investigating the causes of the financial crisis. And we have learned that much of the conduct that led to the crisis was – as the President has said – unethical, and, in many instances, extremely reckless. We also have learned that behavior that is unethical or reckless may not necessarily be criminal. When we find evidence of criminal wrongdoing, we bring criminal prosecutions. When we don’t, we endeavor to use other tools available to us – such as civil sanctions – to seek justice. My number one to commitment to the American people is that we will continue to devote significant resources to combating financial fraud and be as aggressive and creative as we can be in holding accountable those who, in violating the law, contributed to the financial crisis.
For example, in just the last six months, the Department has achieved prison sentences of 60, 45, 30, and 20 years in a variety of financial fraud cases charging securities fraud, bank fraud, and investment fraud. And, just last month, I announced the largest fair lending settlement in history, resolving allegations that Countrywide Financial Corporation and its subsidiaries engaged in a widespread pattern or practice of discrimination against minority borrowers from 2004 through 2008.
I keep coming back to this point – the administration and its cabinet members truly believes they have worked hard to get to the bottom of the financial crisis, and has done so as best as anyone possibly could. To them, “mortgage fraud is a top priority”, and has been for years. They might think they have mishandled the politics, but as Holder makes clear, they have brought criminal cases where they felt they could, and they settled where they thought they needed to. Even the anecdote about Countrywide is weak – note he says they resolved “allegations”, because Countrywide didn’t even have to admit wrongdoing!
There are reasons Schneiderman wants to have Federal resources to bear on this problem, but this is a drop in the bucket compared to what is needed, and the leadership with whom Schneiderman needs to work simply doesn’t believe they have done anything wrong. To them, this is business as usual.
Now on to the other news of the week, which is a $25 billion settlement for foreclosure fraud, which is supposedly done along the lines of a narrow release just for robosigning. I haven’t seen the language, and until I do, I wouldn’t be comfortable describing it as a narrow release. But if it is, then it isn’t a real shift in the landscape. The banks simply don’t want to pay that much for so little, and they’ll probably end up gaming the financing so that they claim to have paid $25 billion by engaging in loan modifications and principal write-downs they would have engaged in already. And if it’s a broader release, it seems unlikely to be something the recalcitrant state AGs would agree to.
The real anchor in our financial system is the heavy burden of unpayable mortgage debt, as well as rampant servicer conflicts that render modifying this burden impossible. We need to find a way to cut that debt through a negotiated workout, which can’t happen without a real investigation of the people who are grabbing as much as they can. There are ways Schneiderman and the state AGs can force movement even without a big commitment of Federal resources by better leveraging the people on the ground who are fighting foreclosure fraud on a regular basis. And depending on how it’s organized, this task force gives state AGs more jurisdiction, access to the investigative resources and documents done by the Feds so far, and a few FBI agents and lawyers. Still, that’s not nearly enough. The administration saw this as a way of co-opting the issue for the reelection and stopping the bitter undercurrent from the Democratic base (similar to floating the rumor that Geithner won’t come back in term two). Will it work? I’d expect a few semi-significant actions in the months ahead, complaints or indictments perhaps. We’ve already seen some subpoenas. But without a major figure investigated and prosecuted (like if Vikram Pandit were really prosecuted for Sarbox violations), the administration’s policy of preserving the existing banking structure is the dominant policy framework.
Heh. That was the substance. That’s Breuer showing Schneiderman who’s boss. Remember when the banksters couldn’t make it to DC from NY to meet at the White House with Obama because of fog? Fog that apparently socked in Amtrak? Same deal. Super catch of a clear “tell.”
I think they couldn’t fly because of the fog (commercial and private planes).
They couldn’t get on Amtrak because that’s for the plebs.
This is part and parcel of the happy talk offensive now underway.
We can expect more investigations and prosecutions of relatively low level financial crooks – say those of less than 1 billion dollars. And if you have a foreign sounding name or are dark sinned watch out the feds will get you.
While those able to steal larger sums or whom are connected to congress somehow either via the revolving doors or via campaign contributions (bribes) will continue to go free.
There is a strong feeling of dissent among the 99% as evidenced by the resonance of the questions about Mr. Romney’s finances.
So what will happen ?
The mortgage issues will not be solved easily or simply since there are clear issues with the titles and with the pooling and servicing agreements. These are fraudulent.
We can expect another collapse of the financial system especially the real estate market.
And we can expect that some little spark will set off serious disruptions. These will make occupy look like childs play.
But in the mean time listen to the happy talk.
Have another beer, watch the game and oh there are more snacks in the kitchen.
Friday afternoon, eh? My gracious, it’s almost like Obama’s campaign wants to dominate the news cycle all the way through the Sunday shouting heads, and into Monday.
@sleeper “dark sinned” LOL
Hey Yves…a future link and a comment:
Economists have yet to identify the incentives
that cause this cycle to repeat. A new unit will
be formed to study the problem and pay itself
(out of tax payer funds).
It’s almost as if false economic signalling (via fraudulent credit extension) leads to catastrophe. Economics is hard.
Yeah, Lanny had a prior engagement. A little foursome at the Boca West Country Club, consisting of Lanny, myself, Angelo Mozilo and Vikram Pandit. They just put in new greens and I’d have to say they’re some of the best in the area. We all had a great time.
Lanny is out taking checks. The unit Obama announced is a fund raising unit, afterall….
KnotRP — “How It Works” – Then and Now:
Michael Hudson’s history – “Banks weren’t Meant to Be Like This” – at Naked Capitalism yesterday, and at http://www.neweconomicperspectives.blogspot.com.
“CONJURING HITLER” by Guido Giacomo Preparata;
“THE ANGLO-AMERICAN ESTABLISHMENT” by Carroll Quigley;
“TRADING WITH THE ENEMY” by Charles Higham;
“AMERICAN DYNASTY” by Kevin Phillips;
“FUNNY MONEY” by Mark Singer;
“IN GOD’S NAME” by David A. Yallop;
“NOBILITY and Analogous Traditional Elites in the Allocutions of Pius XII” by Plinio Correa de Oliveira (York, PA, 1993).
Connect the dots, follow the money and the DNA.
Richard Cordray (newly appointed head of the CFPB) was supposed to be joining us, but he and his team of examiners had to scrutinize a handful of big banks that make high-cost loans.
Yeah, as a matter of fact, they’re over at the Boca West Spa this weekend, “scrutinizing” as we speak, in an ambiance of serenity and ultimate relaxation, while enjoying the benefits of professional skin care experts and skilled massage therapists.
Yes because missing a press conference is a sure sign of a conspiracy.
In the upper reaches, it’s a world of ritual and relationships. We live in a world of results and realities.
In other words, damn silly but might be true.
This just like the scene in the Godfather, and Goodfellas too, where the camera pans around the room to who didn’t show up cause that’s the ‘mole.’ (I would heve watched more carefully, but Dancing With the Stars was on.)
Very telling 1st move Lanny! And also telling: did AG make attendance MANdatory?
And the Commander-in-Chief? Didn’t he infer this (foreclosure) equivalent to a Seal Team was gonna (vernacular used to be more understood by the under-classes) ‘hit-the-ground-running.’ Oops Mr. President.
Do we have to watch the rest? Why not just save the $ this fiasco is going to cost and pay the mortgages to get the country/economy back on its feet?
keepon, will they find Lanny hanging under Blackfriar’s Bridge with stones in his pockets? The result of Blankfein’s doing *God’s work*?
“IN GOD’S NAME” by David A. Yallop (Bantam, 1985, 1984). Connect Cardinal Cody from New Orleans to Chicago, and Continental Illinois for banking God’s way.
He ‘hit the ground running’ to Blackfriar’s Bridge as a penance in search of ‘deadbeats’ and Occupiers “to do God’s Work” is how Holder reported it. Now, we’re going to take the rap for this malfeasance too! :-[ WhoEVER the perpetrators, they had the common decency not to bloody him with the stones, they just filled his pockets. He always liked his pockets filled.
No, you idiot. Ten FBI agents instead of hundreds is evidence of a conspiracy. A co-chair not showing up to the press conference is just corroboration.
Just like Schneiderman sitting next to Michelle Obama during the State of the Union isn’t a conspiracy–it’s scripted political theater.
Barofksy: “Window dressing,” “political rebranding.” So where’s the Special Prosecutor if these are such complex cases to make?
Has Richard Cordray, that so bold an Obama appointee, been otherwise deployed? Has Obama neutered him? I thought HE was going to be our ‘great white hope.’
He (it’s always a “he”, isn’t it?) got reassigned to anti-terrorist duty and hasn’t been replaced.
LS, Why has William K. Black not been appointed Special Prosecutor?
A question that answers itself, once asked.
Because Mr. Black would actually go after the people that committed the crimes and that leads to them there elite types.
This whole commission/Schneiderman thing was a gambit to add a line in the SOTU and neutralize an underling who might have caused Obama a few PR problems. 10 FBI agents sounds like a perfectly fine number for a sham commission. I mean how many agents does a sham commission need?
It does undercut the rationale that was being put forward about Schneiderman coming on board so that he could gain a bunch of resources to turbo charge his investigations. But that’s really Schneiderman’s problem now. The perception of Schneiderman selling out is as useful to the White House as if he did in fact sell out. They win no matter what. The credulous veal pen will hype a non-existent victory. Critics will chalk him up as another failed hero. They get the upside and Schneiderman gets the downside. A great outcome from where Obama et al are sitting.
As for Breuer, the sham head of the sham commission doesn’t show and we are supposed to be surprised because . . .?
Right, Hugh, *ten* is a quorum in certain circles doing “God’s work.”
The agents and lawyers assigned to this Wunder Task Force could prove to be one of the most expensive public employee Rubber Rooms ever funded. Hope they all have souped-up smartphones play on the internet to pass the days as they non-investigate.
Anyone watch The Wire? Ten reject agents are sent on a hopeless crusade to catch a wildly smart and organized criminal cartel mastermind. They are expected to fail, but generate enough “we’re on the case!” press for the pols in charge to win re-election.
Does life imitate art?
IIRC, the agents in “The Wire” turned out to be a lot smarter, shrewder, and tougher than expected, and they DID catch the masterminds (although other masterminds promptly appeared to replace the ones who were caught). And no, I don’t expect life to imitate art.
Right, and its worse than that. Do you remember the go-to “head shot” charge the FBI uses to nail dirty pol?
“Freamon explains the “head shot” to State’s Attorney Rupert Bond and A.S.A. Rhonda Pearlman. Since Clay Davis paid back the $80k his mother-in-law gave him for the down payment on his property, it falsifies the loan application (by making the gift a loan). Under federal law, the penalty is thirty years and a million dollar fine.”
Whoever makes any false entry in any book, report, or statement of such bank, company, branch, agency, or organization with intent to injure or defraud such bank, company, branch, agency, or organization, or any other company, body politic or corporate, or any individual person, or to deceive any officer of such bank, company, branch, agency, or organization, or the Comptroller of the Currency, or the Federal Deposit Insurance Corporation, or any agent or examiner appointed to examine the affairs of such bank, company, branch, agency, or organization, or the Board of Governors of the Federal Reserve System…
Shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
“body politic or corporate” is a fancy word meaning state or local government… like, say, a county deed recorder.
beowulf, what does this imply for MF Global and JPMorgue in London?
You don’t understand. If Barack & Company aggressively investigate and prosecute the thieves, then the thieves, 1) won’t give him money for his re-election, and 2) will pay thief facilitators (e.g., PR firms) to make Barack sound like a really bad dude. A socialist, a commie, etc. etc. etc.
It’s ALL a political calculation.
DC Native, could the Adelsons be behind it, with Gingrich as Pres-Agent behind?
Come on folks, let’s call it for what it is: “KABUKI”, nothing more, nothing less, brought to you by the “O”‘s reelection committee & Wall Street.
Maybe Breuer has been sacked. He should be.
Susan, you mean “sacked” with cement shoes in the East River?
I’m wondering if Schneiderman was chosen so the AG/FBI could get a look at the evidence he’s collected, as well as learn his deeper methods and sources, so they can more effectively work around him, and shut down those sources and methods.
Best theory yet. Way to bring that foil!
Yves raised the possibility that his staff was being pursued by private dicks: http://www.nakedcapitalism.com/2011/09/are-private-investigators-being-used-to-intimidate-new-york-attorney-general-schneidermans-staff.html
I think this is a possibility although I think it’s more likely that he’s one of them but they still spy on him anyway.
Yah, dinging that assistant AG with the dominatrix stuff was quite probably a shot across the bow at Schneiderman. There are some vicious pricks at work behind the scenes, and the public needs to wake up and get over its taste for salacious scandal. Nobody’s perfect.
WE elected this GANG, so I guess we HOPE it will CHANGE!
For what it is worth, here’s my take:
Whether the AG’s willing victims or not, I don’t know, but it sure is easy for the banksters to divide and conquer.
The SOTU Taskforce = A bloodless coup.
Ms G, “Financial Lebensraum shall continue until morale improves.”
Sorry, Matt, but how can you possibly allow that “the administration and its cabinet members truly believe they have worked hard to get to the bottom of the financial crisis, and has done so as best as anyone possibly could”? Have you looked into their souls? You grant them honest motives without foundation and despite three years of consistent duplicity and treachery.
I suspect you’ve fallen under the spell of the basilisk’s election-eve neurolinguistic hypnosis techniques. Three years of evidence tell me that Obama is AIPAC’s war criminal and Wall Street’s quisling.
This report was prepared for the DOD Deptmartment of Irregular Warfare Support Progam for distribution to the FCIC. I think this is one of the more interesting sentences from this 111 page report…
Therefore, it is strongly recommended that this study and any task-force response be conducted outside of traditional Washington and Wall Street circles.
Serious risks to the global economic system were exposed by the crisis of 2008, raising legitimate questions regarding the cause of the turmoil. An estimated $50trillion of global wealth evaporated in the crisis with more than a quarter of that loss suffered by the United States and her citizens. A number of potential causative factors exist, including sub-prime real estate loans, a housing bubble, excessive leverage, and a failed regulatory system.
Beyond these, however, the risks of financial terrorism and/or economic warfare also must be considered. The stakes are simply too high for these potential triggers to be ignored. The Obama administration‘s recent call for greater financial regulation stipulates to the facts that hedge fund activity has been virtually unregulated and that dark-pool trading, Credit Default Swaps, and naked short selling provide tremendous vulnerabilities in the system.
This report concurs with these concerns as recently outlined by the heads of the SEC, US Treasury, and Federal Reserve and provides supporting data. Beyond that, this report exposes the fact that these vulnerabilities are subject to exploitation not only by greedy capitalists seeking profit but also by financial terrorists, intent on destroying the American financial system. From a historical perspective, there are numerous examples of financial attacks on specific companies and industries both for economic and non-economic reasons. In addition, there are other examples of financial attacks conducted against individual nations both for economic and non-economic reasons. Based on this awareness, the economic collapse of 2008 must be critically examined to determine the possibility that a financial attack took place as well as an assessment of future risks.
The purpose of this report is to consider the implications of financial terrorism and/or economic warfare and to identify and realistically list prospective threats to U.S. economic security from a means, motive, and opportunity perspective. The preliminary conclusions of the research suggest that, without question, there were actors who had the motive to harm the U.S. economy. These motives can be categorized as both economic and non-economic. In addition, these same actors have clearly demonstrated the means to carry out such an attack. Finally, the opportunity was clearly present given the existing economic condition and regulatory framework in operation. The hypothesis under consideration is that a three-phased attack is underway with two of those phases completed to date.
The first phase was a speculative run-up in oil prices that generated as much as $2 trillion of excess wealth for oil-producing nations, filling the coffers of Sovereign Wealth Funds, especially those that follow Shariah Compliant Finance. This phase appears to have begun in 2007 and lasted through June 2008.
The rapid run-up in oil prices made the value of OPEC oil in the ground roughly$137 trillion (based on $125/barrel oil) virtually equal to the value of all otherworld financial assets, including every share of stock, every bond, every private company, all government and corporate debt, and the entire world‘s bank deposits. That means that the proven OPEC reserves were valued at almost three times the total market capitalization of every company on the planet traded in all27 global stock markets.
The second phase appears to have begun in 2008 with a series of bear raids targeting U.S. financial services firms that appeared to be systemically significant. An initial bear raid against Bear Stearns was successful in forcing the firm to near bankruptcy. It was acquired by JP Morgan Chase and the systemic risk was averted briefly. Similar bear raids were conducted against various other firms during the summer, each ending in an acquisition. The attacks continued until the outright failure of Lehman Brothers in mid-September. This created a system-wide crisis, caused the collapse of the credit markets, and nearly collapsed the global financial system. The bear raids were perpetrated by naked short selling and manipulation of credit default swaps, both of which were virtually unregulated. The short selling was actually enhanced by recent regulatory changes including rescission of the up tick rule and loopholes such as the Madoff exemption. While substantial, unusual trading activity can be identified, the source of the bear raids has not been traceable to date due to serious transparency gaps for hedge funds, trading pools, sponsored access, and sovereign wealth funds. What can be demonstrated, however, is that two relatively small broker dealers emerged virtually overnight to trade trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.
The risk of a Phase Three has quickly emerged, suggesting a potential direct economic attack on the U.S. Treasury and U.S. dollar. Such an event has already been discussed by finance ministers in major emerging market nations such as China and Russia as well as Iran and the Arab states. A focused effort to collapse the dollar by dumping Treasury bonds has grave implications including the possibility of a downgrading of U.S. debt forcing rapidly rising interest rates and a collapse of the American economy. In short, a bear raid against the U.S. financial system remains possible and may even be likely.
Phase Two may have concluded with the brief market rebound that was supported by an emerging regulatory response calling for greater transparency across the board. Efforts including regulation of credit default swaps and proposed oversight of previously unmonitored trading activity, as well as Federal support of systemically vital institutions. But, we remain left with the critical unanswered questions of who and how? The recent seizure of $134 billion face value in supposedly counterfeit U.S. Federal Reserve bonds underscores the reality of the economic threat. This may be as significant as the Japanese radio intercepts were before December 1941. (Buck note: his later discussion of this is interesting.)
Immediate consideration of the issues outlined in this report is vital. Further study is essential and prospective responses must be crafted to address future risks. Finally, there are legitimate questions about the performance of the regulatory regime and Wall Street institutions. Implications that these parties have been complicit or otherwise co-opted cannot be ruled out. Therefore, it is strongly recommended that this study and any task-force response be conducted outside of traditional Washington and Wall Street circles.
It really just shows that the whole investigation is just for “show”. It is a half effort to appease the American public particulary during a campaign year. For God’s sake, they put that much investigation into the Martha Stewart inside trading issue and she WENT to JAIL. These white collar criminals and those protecting them from real prosecution have been, I would assume, well compensated for their efforts or should I say, lack thereof? The worse part of this is they are, as we speak, still ripping off the American homeowners, have large scale robo signing operations and continue to break laws left right and sideways while most courts find in their favor. This is like a horror movie that we can’t wake up from. How sad.