Bill Black: The Incredible Con the Banksters Pulled on the FBI

Yves here. Bill Black continues his forensic work about the dogs that didn’t bark in both the runup to and the aftermath of the crisis.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posed from New Economic Perspectives

This is the second in my series of articles based on the FBI’s most (2010) “Mortgage Fraud Report.”

In my first column I began the explanation of how many analytical conclusions one can draw from a close reading of what is left out of the FBI report.

In particular, I emphasized the death of criminal referrals by the SEC and the banking regulatory agencies.  The FBI report implicitly confirms the investigative reporting of David Heath that first quantified the death of criminal referrals by the banking regulatory agencies.

Because banks will not make criminal referrals against their own CEOs, this means that criminal referrals have virtually vanished against the “accounting control frauds” that drive our recurrent, intensifying financial crises.  As George Akerlof and Paul Romer explained in their famous 1993 article (“Looting: The Economic Underworld of Bankruptcy for Profit”) the death of prosecutions of the controlling officers of banks will lead to accounting control fraud becoming a “sure thing.”

[M]any economists still seem not to understand that a combination of circumstances in the 1980s made it very easy to loot a financial institution with little risk of prosecution. Once this is clear, it becomes obvious that high-risk strategies that would pay off only in some states of the world were only for the timid. Why abuse the system to pursue a gamble that might pay off when you can exploit a sure thing with little risk of prosecution? (1993: 4-5).

In criminology jargon, the death of criminal referrals has created an intensely criminogenic environment which creates incentives so perverse that accounting control fraud can become epidemic.

The central puzzle is how the largest epidemics of elite white-collar crime in history, frauds that drove the ongoing financial crisis and made the Wall Street banksters wealthy beyond their most avaricious dreams, resulted in not a single conviction of those elite frauds.  The FBI report allows us to figure out some of the key missing puzzle pieces that explain this tragic mystery.

This article (and the next) focus on the brilliant con that the mortgage lending industry was able to pull on the FBI because the banking regulatory agencies and the SEC failed to provide the FBI with the expertise and investigative findings of fraud essential for the FBI and the Department of Justice (DOJ) prosecutors to succeed in investigating and prosecuting the officers controlling complex frauds.  Three key facts are essential for the public to understand the FBI’s total dependence on criminal referrals from the banking regulatory agencies.  First, “control frauds” cause greater financial losses than all other forms of property crime – combined.  “Accounting control frauds” must gut their underwriting process and internal controls in order to make massive amounts of bad loans.  That is equivalent to hanging a sign on the front door inviting thieves to rob the bank with impunity.

Second, the FBI has roughly 2,300 white-collar specialists and our Nation has over 1,300 industries.  That means that the FBI “specialists” will rarely have expertise in the industry they are investigating.  It also means that FBI agents do not “walk a beat.”  They only investigate when they receive a criminal referral alerting them to a possible white-collar crime.  The only sure (and generally safe) means by which they can gain the essential expertise about the industry and its fraud schemes is from the federal regulators.

Third, banks virtually never make criminal referrals against the people who control them.  This means that only the regulators will make criminal referrals against the elite banksters.  If the regulators do not make criminal referrals the FBI agents will never learn of the control frauds.  The (minor) exception is whistleblowers.  Whistleblowers, however, are rare and typically are too low in the food chain to have direct evidence of the controlling officers’ frauds.  Whistleblowers cannot stop or even impede materially an epidemic of control fraud.  Only the regulators can bring the necessary expertise, resources, relentless attention, and vigor to make the criminal referrals (and take a vast range of other actions) essential to stem an epidemic of control fraud and prosecute many hundreds of elite white-collar criminals.  In the vastly smaller S&L debacle our agency, the Office of Thrift Supervision (OTS), made over 30,000 criminal referrals and produced over 1,000 felony convictions in cases designated as “major” by DOJ.

So we return to the question this column addresses – how could the DOJ make zero criminal prosecutions of the elite banksters that caused this crisis through the twin epidemics of accounting control fraud by lenders (appraisal fraud and fraudulent “liar’s” loans)?  The FBI Report shows (indirectly) that the answer is an exceptionally effective con run by the mortgage industry on the FBI.  The con could have never succeeded had the banking regulators not ceased making criminal referrals and providing their expertise to the FBI and DOJ on accounting control fraud schemes.  The OTS was supposed to regulate Countrywide, Washington Mutual (WaMu), and IndyMac – three of the most notorious fraudulent lenders in the world.  The OTS made zero criminal referrals in this crisis – which was over 70 times worse than the S&L debacle in terms of losses and fraud.

The FBI’s Perverted “Partnership” with the Perps’ Lobbyists

In the absence of the banking regulators providing the essential criminal referrals and expertise, the FBI took two seemingly logical, but disastrous steps.  First, they focused on the criminal referrals they did receive – from the lenders.  My fourth column in this series will explain why that proved so harmful.  Second, in 2007 as the fraudulent mortgage lenders began to collapse on a twice weekly basis the FBI formed what it called a “partnership” with the Mortgage Bankers Association (MBA) – the trade association of the “perps.”

The bottom of the MBA press release, in small print boilerplate, revealed the financial tsunami that was devastating the industry.  In April 2006, the same boilerplate stated that the MBA had over 3,000 members employing over 500,000.  By the March 8, 2007 press release the number was “over 2,200” lenders employing over 280,000.  The industry and the MBA were being crushed by the twin (appraisal and “liar’s” loans) epidemics of mortgage fraud origination that became endemic in the industry and that the MBA fought tenaciously to protect from effective regulation.

The FBI was desperate to address the mortgage fraud catastrophe in 2007.  The irony was that it was vulnerable to political attack because it had been so right, so early about mortgage fraud.  The FBI warned publicly in September 2004 that mortgage fraud had become “epidemic” and predicted that it would cause a financial “crisis” if it were not stopped.  By 2007, however, the FBI had assigned only 120 FBI agents nationwide to investigate the epidemic of mortgage fraud that had grown massively since the FBI warnings.  As I have explained on many occasions (and will reprise briefly in my fourth column in this series) that pittance of agents was assigned to relatively minor mortgage frauds because, as I describe below, the MBA conned the FBI into defining out of existence the control frauds.  With no assistance from the banking regulators, and an industry collapsing in an orgy of mortgage fraud that the FBI had warned about but could not understand or effectively stop given the death of criminal referrals by the financial regulators an overwhelmed FBI turned for industry expertise to the MBA.  It was a disastrous choice – and the FBI has refused to end the partnership with the perps.

The partnership’s output consists of two products.  This column explains “the Poster.”  The next column discusses the MBA’s faux definition of mortgage fraud that defined control fraud out of existence and transformed the fraudulent loan originators into saintly fraud victims.  It is the greatest con of modern U.S. history in its pure audacity.

Be Afraid, be very Afraid: the FBI/MBA Mortgage Fraud Poster

The MBA and the FBI’s vaunted partnership produced a poster.  The poster only addresses mortgage frauds against banks by the bank’s customers.  The MBA provides the poster to lenders so that they can display it to its evil, ultra financially sophisticated customers and warn them not to defraud the poor, virginal, honest, and too-trusting lender.

Fraud against lenders is a rapidly growing problem. It can affect not only lending institutions, but innocent homeowners and the community at large. It is a problem that requires the close cooperation of law enforcement and the real estate finance industry. That cooperation includes educating the general public as to what constitutes mortgage fraud and what the consequences of mortgage fraud are.

To that end, the Federal Bureau of Investigation and the Mortgage Bankers Association have jointly produced a Mortgage Fraud Warning Notice. This Warning Notice makes clear that mortgage fraud is a federal offense with serious penalties, and will be fully investigated and prosecuted by the appropriate authorities. The FBI and MBA strongly encourage lenders to consider integrating the Warning Notice into their loan processes.

You too can print out your very own warning poster.

Please do not alter the FBI seal, and note that the FBI threatens to prosecute you if you create a satirical sign using their seal or name that explains their failure to prosecute the banksters or promises to start prosecuting them.  You can, however, provide us at New Economic Perspectives with your proposed revised text that would warn the lenders and their CEOs that some [unstated] entity will investigate and prosecute the control frauds (as soon as we get a real Attorney General).

The poster’s existing language talks solely about “person[s]” and warns that it is a federal felony to commit appraisal fraud (“to willfully overvalue any land or property”).  How about banks?  Borrowers rarely are able to inflate appraisals.  Lenders and their agents are the ones that extorted and bribed appraisers to “overvalue” appraisals – and they did so at least hundreds of thousands of times.  Only a fraudulent lender would overvalue the collateral.  As the poster says, the banks and controlling officers could have been sentenced, respectively, to pay a fine of up to $1 million for every act of mortgage fraud and to 30 years in prison for a single, relatively small act of mortgage fraud.  Consider the mirth this poster prompts among the senior officers of the lenders who caused the twin epidemics of appraisal and “liar’s” loan frauds, then committed contract and securities fraud by fraudulently selling their fraudulent loans to the secondary market, and topped it off by committing hundreds of thousands of cases of foreclosure fraud.  You know – the mortgage fraud “victims” according to the MBA and the FBI.

Given the fact that the CEOs of large fraudulent lenders are criminally liable for tens or even hundreds of thousands of acts of mortgage fraud we should be seeing our prisons overrun with elite white-collar criminals.  Instead, the DOJ has no convictions of the elite bankers who led the control frauds that caused the crisis.

Note that in the second paragraph of its statement quoted above the MBA conflates “mortgage fraud” with “fraud against lenders” by their customers.  The concept that the controlling officers of banks defraud customers through mortgage fraud (and that such frauds massively outweigh in magnitude and harm the frauds by mortgage applicants against their lenders) disappears under the MBA/FBI poster.  Remember that only fraudulent lenders are vulnerable to material fraud by customers because such lenders must gut their underwriting and internal controls – systems that had proven for many decades that they prevented any material fraud by mortgage borrowers.  The largest “victims” of mortgage fraud, therefore, are victims because they are enormous perpetrators of mortgage fraud.  The MBA/FBI warning poster might have made sense if it were put in the office of every mortgage lender’s CEO.  Doing so, however, would have exposed the missing asterisk in the MBA’s statement above that should have read “mortgage fraud … will be fully investigated and prosecuted” * (* “except where it is led by the lender’s controlling officers”).

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  1. Richard

    Dearth. The word is dearth. As in a shortage or scarcity of something. Not only did you feel the need to use the exact same word multiple times within the first few paragraphs (I stopped reading after that) but you misspelled it EVERY TIME.

    1. skippy


      I know neurotoxins can take a extended period to manifest obvious signs of detritus effect, but, your indignation at spelling errors of one word, light of the posts contents can not be explained by any other.

      Your mental rigidity is profound.

      skippy… I stopped reading after that, every time in caps…. shezzz…

      1. from Mexico

        But are we sure it was a spelling error?

        The “death of criminal referrals by the SEC and the banking regulatory agencies” seems to fit the empirical reality much closer than the “dearth of criminal referrals by the SEC and the banking agencies.”

        Death would signify the complete absence of, whereas dearth would signify a scarcity of. And, as Black goes on to point out, “criminal referrals have virtually vanished.” So it seems to me that death is a much better word to describe the empirical reality than dearth is.

        1. optimader

          I’ll go w/ “death”.

          In any case, resorting to a critique of spelling rather than content is intellectually vacuous, dare I say a dearth of meaningful criticism?

        2. acmerecords

          I was certain that was using death as a metaphor to describe the end of white collar prosecution in the USDOJ -and was therefore not forced to withdraw my attention from the thoughts expressed in his piece as an act of outrage over the effrontery of a misspelled word

          – please note that if I had found a misspelled word that would have been a certain indication that Obama and Holder have been working overtime to jail the banking felons, who, through their greed inspired criminality, destroyed the world economy (including threatening the pension of my 3rd grade math teacher), and to establish protections for borrowers and investors to ensure that we taxpayers never have to bailout private companies to the tune of 16 to 23 trillion dollars again

          1. xrayd

            Yes, along with deaTh of common sense, truth, logic, justice democracy, free markets, and freedom!

    2. William K. Black

      See my comment below. I used “death” deliberately, and appropriately. The series of columns is, in part, explaining the death of the criminal referral process at the regulatory agencies and its consequences. It is unfortunate that you ceased reading before you understood the word usage and theme. I hope you will have an opportunity to read it in full now that you know that I have no dearth of understanding of the words “dearth” and “death.”


    3. bankster

      It is nice to see that you feel responsible for (badly) proofreading the internet. It must keep you busy.

  2. Skeptic

    Four points about the Massive Crime Wave.

    1. The definition of criminogenic is “producing or tending to produce crime or criminality”. The use of this word does not indicate whether the Crime Wave is accelerating and metastasizing . I believe it is and is moving into Industries other than FIRE. If that is so, that is, 1% crime is accelerating, at what point does the system become predominantly criminal? Another way to ask this question is: how many serious white collar criminals are now operating and expanding their operations?

    I have read a lot of articles on this subject and have rarely seen any mention of acceleration of the Crime Wave.

    2. If 1 is true, where would a real Department of Justice ever get the experienced prosecutors and staff to deal with these criminals? These folks would have to come from the same institutions that train the criminals. Or is there a gigantic Monastery somewhere which has folks able to do the prosecutorial job? Has anyone ever bothered to even calculate how many Untouchables would be needed and how much it would all cost? Crunch a few theoretical numbers and the task is daunting.

    3. Combining 1 and 2, it is very likely that, if not already, the US will become a Society predominantly run by criminals.

    4. The analysis then needed may address this question: How does an honest citizen live in a criminal society? What lessons does history teach us on this subject?

    1. nobody from nowhere

      Skeptic at 6:47 – I also want an understanding of #4 – How does an honest citizen live in a criminal society? Especially when that honest citizen wants to marry a woman who wants to have children, with only a moderate hope of ever becoming part of the scam (i.e., an independently wealthy rentier).

      That might end up being the real question of our time – how to live in a dark, criminal, and soul-crushing society.

      1. Skeptic

        Hello Somebody from Somewhere

        Thanks for your post. That is partly what I was getting at. These economic/political machinations on High have to be dealt with by people in their daily lives. How do we do that?

        Your question about marriage/children is very apropos. As a baby doomer who saw a lot of this developing back in the 70s/80s I faced the same dilemma you mention. My decision was to immerse myself in information about the situation. One thing I did was read extensively about TV and its development. I spent a winter reading all the books I could get on TV, a less sophisticated mind control INTERNET. That convinced me, along with many other tea leaves, that we were going to a bad place.

        So, I explored alternative/contrarian ways of living and believing. Living between the Cracks, if you will. Thus, Skeptic. But not a pessimist.

        There is a lot people can do to both resist the system and also build a good life. Limit your transactions and interactions with their system. Seek out people and places that do the same. You might even want to make a geographical move like I did. Awareness, consciousness, sentience have immense value particularly to the quality of Life.

        I certainly believe that people who are informed will fare much better than those who are ignorant.

        Good luck on you journey.

      2. rob

        Our model of how to live is as commonplace as any historical occupation.Life has always gone on under occupation.The rulers of the world and the US,the global elite; are occupying our planet.We are playing the same games for life, as were the serfs around the castle, or the population, amongst the military…
        We can take a cue, from the sociopaths at the gate, we need to keep the police at arms distance, never standing out in a crowd, we need to appear to be normal slobs, so as not to exact any perversion of scrutiny, and hope we don’t fall under the whimsy of any connected cog.Or even some local hall monitor,trying to improve his lot.The world is broken.
        What our children will have to deal with;that is worse.

        One thing I’m sure many from the “hot spots” around the world are wondering is why we;in the rulers world;are at such a loss to do anything. After all, we are not being subjected to civil wars/strife.Bombings,killings,rapes,on a daily basis,every time we go outside.
        As an American, I may be poor compared to many,but I live like a king,compared to many more….What I can never understand, is the inability for the general population to even have the inclination to look at the things around them.Which is a pre-requisite ,before any change could even theoretically be made to happen.
        So with the “mind-lock” on the masses…. we live under occupation…. until there is a viable alternative.

      3. bill wolfe

        The answer is to live in truth and rebel.

        There really its no other choice, and such a life will better prepare you psychically and physically for the collapse of empire and the industrial culture.

    2. Dino Reno

      Living in a neofeudal society dictates that one align himself with families and/or corporations or organizations with sufficient economic or political power to make themselves immune to most civil law proceedings and criminal law indictments. Those outside the figurative walls of the castle are subject to all the laws and penalties set forth. For most of the history of civilization, this has been the common state of affairs. Only in the last 200 years have we been privileged to experience across the board social justice. That ship has sailed and now it’s back to business as usual.

      1. Banger

        Great statement–I would say that the past three centuries rather than two. At any rate, the normal state of affairs is precisely as you describe and that is the world that we will live in and are partially living in today. BTW, there is great virtue to that way of life–and we need to maximize them and prepare for the future for that will be the future since there is no counter-movement I can see.

      2. Walter Map

        The very existence of a large and prosperous middle class is an aberration of history, now undergoing correction.

        In the historical model the general population, mostly impoverished, is dominated by a small, corrupt class of wealthy elites. It got away from them in the 20th century, but they’re restoring the normal order just as efficiently as they can and should complete the process in a few short years. You can watch it happen in real time.

        This process will inevitably result in the destruction of most or nearly all of civilization. So far the ruling class apparently doesn’t see this as a problem, but unfortunately for them they have to live on this planet too.

        Also die on it. But the way they see it whoever dies with the most toys wins, and they’re determined to win at any cost. The extermination of most of humankind simply does not enter into their calculations.

        1. jonboinAR

          Your first three paragraphs describe the way I understand the rough outline of middle-class history. It’s historically an aberration. More “normally”, the bulk of the population is virtually enslaved to a distinct minority. We are presently in fairly grave danger of reverting to that social condition.

        2. nonclassical


          ..this is general synopsis by wealthy and powerful (marginal 1%) with whom I have shared latte’…(and conversation).

          However, there is-was actual method in “middle-class” designation-towit; buffer between rich and poor…to maintain status-quo. Read Robert Fisk’s, “The Great War For Civilization-the Conquest of the Middle-East”, and see where historical documentation, contrasting U.S.-Brit. propaganda leads your thought…?

          1. Nathanael

            The buffer classes, the middle classes, are spectacularly important for social stability. Earl Grey understood this.

            Our current idiot elites do not understand this. Neither did King Louis XVI.

    3. from Mexico

      According to neoclassical economic theory, #3 is inevitable. Everyone, or almost everyone, is motivated purely by self-interest, which makes the collective action problem unsolveable. Thus a non-cooperative equilibrium in which the majority of people cheat is just the nature of things. This state where almost everyone cheats is thus inevitable. It is engraved in stone.

      However, there is a dissident school of thought out there which challenges the orthodox dogma. It believes that this non-cooperative equilibrium, where almost everyone cheats, is induced by social structures. Conversely, it holds that a cooperative equilibrium where few people cheat is possible, and that this can be induced with the appropriate social structures.

      There are a couple of changes required of our current social structures which will be necessary before a cooperative equilibrium can be induced:

      1) The worship of selifishness and greed, the placing of them on a moral pedestal with the veneration of selfishness and greed being a fundamental tenet of orthodox economics, must stop, and

      2) Cheaters must be punished.

      Both of these, of course, fly in the face of the instrumental rationality which forms the core of the neoclassical creed.

      There is a great deal of literature which has been published by this dissident school. Here’s an example:

      “Strong Reciprocity, Human Cooperation and the Enforcement of Social Norms”

      And another:

      Moral Sentiments and Material Interests

      1. from Mexico

        I’m not really much of a biblical scholar, and am quite the skeptic of Christianity, but Walter Map nevertheless cited a biblical passage which I think captures the spirit of the self-interest axiom proselytized by neoclassical economists quite well:

        Woe unto them that call evil good, and good evil; that put darkness for light, and light for darkness; that put bitter for sweet, and sweet for bitter!

        Isaiah 5:20


        I’m not willing to place self-interest per se into the good or evil camp, but the dogma that holds that it is not only the universal human condition but also the alpha and the omega is indeed evil.

        1. Banger

          The Bible is full of such things–I was recently reading Psalms and there is constant reference to the injustice of oligarchs. If Christians were actually Christians this society would be radically different.

      2. Banger

        Indeed, without a robust moral structure society cannot continue. I believe the future moral structure will be engineered and is being engineered through thought-control mechanisms (advertising, PR, propaganda) and the worship not so much of selfishness but of technology which has its own agenda of moving toward the mystical “singularity” predicted by many techno-worshipers.

        I think moral values will make a resurgence outside the current regime to the extent people will look inward for guidance and, at the same time, seek others who share their vision of a perennial philosophy (see Huxley’s book of that name). There is no choice but to find more universal values–the alternative is to go into fundamentalism/tribalism which will result in perpetual war as we see in the ME today.

      3. Chauncey Gardiner

        Counter-arguments to the philosophical underpinnings of the now dominant creed can come from surprising sources. Although she was addressing a different broader context, Rand was also addressing similar behavior by those in control:

        “When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, ‘Who is destroying the world?’ You are.” —Ayn Rand

        Our collective challenge is to restore the rule of law and the Constitution in an environment where lawmakers, regulators, senior officials in law enforcement agencies, and senior members of the executive branch are all reliant upon the continuing favor of the most wealthy segment of society to continue to hold their office, or in the case of the chief executive and some others, are looking down the road to “The Big Payoff” after their term in “public office” expires.

        Rulings like that of the Citizens United case make this task very difficult, but not impossible.

        1. from Mexico

          In order for a cooperative equilibrium to be achieved, social structures must punish and heap moral opprobrium upon two types of cheaters:

          1. High-producing individuals who are not generous enough and who do not share enough, and

          2. Low-producing individuals who are lazy and do not exert sufficient work effort

          The problem with Ayn Rand’s one-eyed view of the world is that she only perceived the latter type of individual as being deserving of punishment and moral opprobrium, while the former type of individual she perceived as sinless, and even praiseworthy.

          But, as Hilliard Kaplan and Michael Gurven point out in Chapter 3 of Moral Sentiments and Material Interests (which is titled “The Natural History of Human Food Sharing and Cooperation: A Review and a New Multi-Individual Approach to the Negotiation of Norms”), in the type of societies in which hominids lived for all but the last few thousand years of their evolutionary history (which has lasted over two million years):

          Those who do not produce or share enough are often subject to criticism, either directly or through gossip, and social ostracism.

          They thus conclude that

          cooperation can be stable in large groups, if noncooperators are punished and if those who do not punish noncooperators are also punished.

          Furthermore, Kaplan and Gurven also argue that

          intrafamilial resource flows are critical to the understanding of interfamilial sharing and that neither the human life course nor human intelligence could have evolved without long-term imbalances in flows of food between families.

          If Kaplan and Gurven are correct, then it goes to show the intellectual and moral shortcomings of Rand’s ideology, not because its claims are false, but because they are incomplete. She only presented parts of the truth to the jury, not the whole truth.

          1. F. Beard

            In order for a cooperative equilibrium to be achieved, social structures must punish and heap moral opprobrium upon two types of cheaters:

            1. High-producing individuals who are not generous enough and who do not share enough, and

            2. Low-producing individuals who are lazy and do not exert sufficient work effort

            NO! Instead the rules should be fair. So-called “high-producers” are not worthy of the so-called “low-producers'” legally stolen purchasing power because of, you know, “Thou shall not steal.”

            As for Ayn Rand and Maggie Thatcher, they both appear to have been ignorant of how much ANY backing for the banks is welfare for rich. But, of course, despising the poor and admiring the rich does not give one much objectivity wrt justice.

          2. psychohistorian

            I have a problem with your solution of punishment and heaping moral opprobrium on the problem elements of our society. Please tell me how this changes anything.

            I would suggest we change the rules of inheritance and ongoing accumulation of private property to return to the public commons (roughly speaking) the holdings of the top 10 %. Those 10% can retain whatever that level of millions that works out to, keeping them from abject poverty…….
            Think about how such a change would effect the incentives throughout the world.

            IMO, we need to flatten the hierarchy of our class system at both ends.

            1. from Mexico

              How do you propose to effect your more egalitarian society if you do not first solve the collective action problem?

    4. Banger

      Well, if all the elites are “criminals” then they are no longer, technically “criminal” are they? Actually what you have is a neo-feudal system–meaning those in power have complete power not mediated by an outside system of rights as in our Constitutional system. That Constitutional system has been gamed and is, in my view, only partially in force and will be mainly gone in another few decades.

  3. Sleeper


    The FBI / DOJ are criminals.

    Criminal activity is routinely ignored even when the FBI / DOJ are warned repeatedly and in many cases had fore knowledge of the crimes to be commited.

    These criminals routinely execute detainies without trial.

    These criminals routinely engage informants who are allowed to engage in criminal activity including murder without threat of prosecution – think Whitey Buldger and Dynomite Bob of Birmingham among others.

    There will be no prosecution. The rule of law is dead. And has been dead for a while.

    1. Banger

      Not quite dead–I would say dying. What is dead is “equal justice” and that fact will slowly kill the law but it will take decades.

  4. William K. Black


    No, “dearth” is a word, not “the” word. “Death” is also a word. I chose to use the word “death” because I was describing the death of criminal referrals by the regulators. As in from >30,000 to zero in the case of OTS. The entire criminal referral process was killed at the OTS and the OCC during this crisis. (It is not clear that the Fed ever had a formal criminal referral process.) The FDIC was smart enough to refuse the answer the question of how many referrals it made. FYI, there is no “dearth” of criminal referrals for minor mortgage frauds made by lenders. We are now approaching 100K of them annually.

    1. optimader

      You’re a good man William K. Black, your parents raised you well. This country needs more cut of your cloth.

      And dearth mmm… no death to blog spelling marms, particularly when they are wrong! HAHA

      I wish I could give you a piece of the Salmon I am smoking today,
      Good day sir

  5. DeadlyClear

    USTPO patent researchers will tell you the banks have and had full control over all aspects of the borrowers to whom they were making the loans. The banks had the keys to the borrowers’ information through the backdoor by way of their keyboard. Banks knew exactly how much money you have/had in the bank, your credit was pulled even in stated loans which showed all of your assets and expenditures (properties, credit cards, loans, etc.), detailed credit card statements, access to your tax returns – in fact they had access to your entire life history with just an entry code into their computer which enters a data storage center.

    The banks even had patented software to detect fraud as far back as the 1990s – so the biggest con was the propaganda that someone lied on their loan application and still obtained a mortgage. These banksters were even securitizting declined loans – they have a patent for the process!

  6. F. Beard

    Remember that only fraudulent lenders are vulnerable to material fraud by customers because such lenders must gut their underwriting and internal controls – systems that had proven for many decades that they prevented any material fraud by mortgage borrowers. Bill Black

    Yes, because only some are entitled to the legally stolen purchasing power of their neighbors – those who are likely to be able to repay it plus usury (Unless you were in a redlined district where even that was irrelevant). And how is that morally relevant, Mr. Black? Hint: It isn’t.

    But for the manufacturers and others who have to pay money out, credits are still created by the exchange of obligations, the banker’s immediate obligation* being given to his customer in exchange for the customer’s obligation to repay at a future date. We shall still describe this dual operation as the creation of credit. By its means the banker creates the means of payment out of nothing, whereas when he receives a bag of money from his customer, one means of payment, a bank credit, is merely substituted for another, an equal amount of cash. Economist Ralph George Hawtrey, Currency and Credit (1919), p. 20 from [bold added]

    * Note that this obligation (Liability) is now mostly virtual because the banks enjoy a government-provided monopoly on the risk-free storage and transaction of fiat. But the obligation of the borrower is very real indeed. How is this fair? Hint: It isn’t.

  7. susan

    After having robbed us all of our livlihoods in the 90s, it doesn’t surprise me at all to learn that the TBTFs are compiling a data base to incriminate the borrowers, not the lenders. This data base will be deployed to relentlessly deny credit and further impoverish any opportunity the 99% might have. The neoliberals, seeing the end of capitalism, tried to do an end run (now gone global military) around all the assumed protocols and then blame the borrower. Blame anything but themselves. But there is a huge fact sitting in the corner like the proverbial gorilla: without growth (the big obnoxious hype of neoliberal capitalism), there can be no interest. Without interest there can be no “finance” and without “finance” we have no “capitalism.” We have had no finance – capitalism for 10 years at least. Maybe 40. I really wish Bill Black would join forces with Lynn Szymoniak. And a bunch of fed-up pro bono lawyers. Dinner at my house.

    1. F. Beard

      Without interest there can be no “finance” and without “finance” we have no “capitalism.” susan

      Not quite. Money can also be issued as shares in Equity (common stock).

      Common stock as private money:
      1) Requires no borrowing, much less usury.
      2) Does not have deflation built-in as does money lent into existence.
      3) Is ethical in that only existing owners of the common stock (plus those who willingly accept it) suffer from any price inflation resulting from over-issue. But they are also the only ones to profit from a return on the investments and also as owners of the issuing company are in control, at least indirectly, of the issuing process.

      But hey, let’s not share. Paying the banks for the dubious honor of stealing from each other is much more fun. Except when it isn’t.

    2. Chauncey Gardiner


      Addendum? … and without cheap and abundant energy, there can be no growth.

      1. F. Beard

        What is growth? If I learn to play the piano well is that growth (in addition to being a miracle)?

        But in any event, it is USURY that requires EXPONENTIAL growth. Who ordered that? Greedy people who don’t like to share?

        1. Emma

          “Greedy people who don’t like to share” – isn’t that the definition for “private equity capitalism”?

          1. F. Beard

            Bloomberg Businessweek has called private equity a rebranding of leveraged buyout firms after the 1980s. from [bold added]

            There’s that word “leverage” again which is just another word for stealing the population’s purchasing power because one is so-called creditworthy.

            I had an (unforgetable) experience with leverage once; I stepped on a garden rake whose tines were pointed up.

  8. tiebie66

    After reading this, I was wondering if it would have made any difference if the regulators did in fact do their job and referred CEOs for investigation. The Corzine case comes to mind.

    I suspect that by 2004 the rot had already weakened the system fatally. For me the question is how to create foolproof and self-correcting governance structures. Yet every time over the past decade that I’ve suggested something to be amiss and action to be taken, I was told “Oh, it’s unnecessary, it will never happen…”.

    Now I’m of the opinion that the structure cannot be torn down, as that has become too dangerous: it must be allowed to collapse.

  9. JTFaraday

    “The poster’s existing language talks solely about “person[s]” and warns that it is a federal felony to commit appraisal fraud (“to willfully overvalue any land or property”). How about banks? Borrowers rarely are able to inflate appraisals. Lenders and their agents are the ones that extorted and bribed appraisers to “overvalue” appraisals – and they did so at least hundreds of thousands of times. Only a fraudulent lender would overvalue the collateral.”

    There were many people with a stake in overvaluing property, not just lenders. This crime scene contains a cast of many thousands. It represents not just a regulatory failure but a serious failure in professionalism itself, the hallmark of professionalism being the individual capacity to understand and exercise judgment in accordance with legally accepted standards.

    I think many job holders have no concept of this whatsoever. If they understood it in some vague filmy sense when they were being trained, once they’re “on the job” they take orders from whatever sh*trag happens to be standing over them at the time.

    You see this everywhere, not just in finance and real estate. People in the US give wide latitude to others who follow orders–and incentives– on the job. This is partly due to a perception of economic necessity and partly due to the way they define holding a job, and not much more than that, as the very definition of ethicality itself.

    This could be a good argument for the regulatory police force and I’m in favor of that, but the truth is that if masses of people aren’t going to follow professional and legal standards because they’re acculturated to take orders from those who have redefined their short term incentives and minimized the long term costs to the profession, then you’re always put in the position of having to prosecute them after the fact.

    In short, it’s also a cultural problem that may continually trump efforts at regulatory policing. All kinds of ostensibly knowledgeable people decided to “play dumb” here. How do you make that happen?

    1. nonclassical

      “Standard and Poors”=”S & P”=Lifetime Bush family cohorts McGraw and Hill, who were (sic) “awarded” publishing contracts for textbooks & test print, for “no child left behind”…

      (lovely wording, when one peruses fundamentalist “Left Behind” propaganda)

      small world of family friends…who largely made those ratings choices…leading to what DOJ has described as ALL ratings fraudulent which transpired between March, 2007, and October, 2007…just prior to “meltdown”…

  10. Gaylord

    Law enforcement, justice, and other government institutions have all been captured and harnessed by the 1%, along with a whole range of other segments of society including academic institutions and the mainstream media. This is truly a coup that has unfolded.

    The only antidote to this poison will be nature’s revenge on avaricious, myopic, destructive humankind — a catastrophic end to man’s domination — which I believe is probably due to arrive within the next two decades and certainly by mid century.

    That will be the only definitive justice that we can expect, but in this case it will be indiscriminate in not only punishing the evildoers but also the innocent.

    1. nonclassical

      …ONLY “antidote” is to remove ALL campaign contribution=influence of “the people’s representative government”, by bought and sold powers…

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