Yves here. I’m serving an extra heaping of contempt on the latest giveaway bank settlement, this one with Citigroup for a headline figure of $7 billion which is really $4.5 billion in cash and the rest in various chits. We’re turning the mike over to Bill Black, who excoriates Attorney General Eric Holder.
One noteworthy feature of the deal is the astonishing claims in the Department made about how tough the deal was and all of the bad conduct the agency says it found versus the lack of any admissions or information in the agreed-upon statement of facts. The Department of Justice has a proud history of exaggerating its accomplishments on the mortgage front. It was caught out greatly inflating both the dollar value of frauds it had intercepted and number of individuals prosecuted. So now Eric Holder has apparently gotten smarter and now engages only in verbal and not numerical puffery.
As we noted in an earlier post, Holder and Citigroup would have us believe that only one unnamed managing director had the foggiest idea of what was going on. Mind you, this took place when CDOs were included in the settlement and Citigroup and its CFO paid fines for it had $40 billion of them sitting on its balance sheet but hid that from investors. With conspiracies of that order taking place at Citi during that time period, the “hardly anything to see here, move along” posture is an offense to the public.
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. Originally published at New Economic Perspectives
The third omission from Attorney General Eric Holder’s press conference announcing the settlement with Citigroup of civil charges was the words “criminal” and “indictment.” The
Department of Justice (DOJ) press conference had a scripted press release.
According to DOJ’s Statements there should have been Numerous Indictments
The DOJ press release contains the following statements that logically should have led to an indictment of a large number of Citi’s officers. Holder states: “The bank’s activities contributed mightily to the financial crisis that devastated our economy in 2008.” Citi “made serious misrepresentations to the public – including the investing public – about the mortgage loans it securitized in RMBS.” Holder’s press release called them “toxic mortgages.” Holder emphasized the “strength of the evidence of the wrongdoing committed by Citi….” Holder stated that Citi’s officers knowingly made false “reps and warranties.”
Contrary to those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew had material defects.
Citigroup nevertheless securitized the loan pools containing defective loans and sold the resulting RMBS to investors for billions of dollars. This conduct, along with similar conduct by other banks that bundled defective and toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.
The U.S. Attorneys leading the investigation made these statements in the press release.
“[O]ur teams found that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone,” said U.S. Attorney of the Eastern District of New York Loretta Lynch. “The investors in Citigroup RMBS included federally-insured financial institutions, as well as a host of states, cities, public and union pension and benefit funds, universities, religious charities, and hospitals, among others. These are our neighbors in Colorado, New York and around the country, hard-working people who saved and put away for retirement, only to see their savings decimated.”
The Federal Housing Finance Administration (FHFA) even got to play a part in the press release.
Michael Stephens, Acting Inspector General for the Federal Housing Finance Agency said, “Citigroup securitized billions of dollars of defective mortgages, after which investors suffered enormous losses by purchasing RMBS from Citi not knowing about those defects. Today’s settlement is another significant step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit in the lead up to the financial crisis….”
Note that Stephens was the only one to use the “f” word.
DOJ & Citi Framed their “Statement of Facts” to Obfuscate the Facts
The press release states that Citi has made admissions “as part of the settlement” of “serious misrepresentations.” “Misrepresentations” is a fancy way of saying Citi lied and deceit is the key to proving fraud.
As part of the settlement, Citigroup acknowledged it made serious misrepresentations to the public – including the investing public – about the mortgage loans it securitized in RMBS.
I began drafting an explanation of what the convoluted statement of facts includes and excludes and why and how it was drafted to be useless, but discovered that the explanation requires me to explain at length the proper analytics of the toxic mortgage frauds led by Citi’s senior officers, which is the subject of the fourth installment in this series.
Holder Ignores the Criminals and Purports to Hold a Legal Fiction “Accountable”
Notice that Holder and his lieutenants did not identify any of Citi’s banksters who led, and were made wealthy by, some of the most damaging financial frauds in history. DOJ, inadvertently, demonstrated that the primary fraud scheme involved Citi’s senior officers “looting” Citi. Holder describes (but does not understand that he has done so) a classic case of accounting control fraud. These fraud schemes were described decades ago in the white-collar criminology literature, the financial regulatory literature, and the classic 1993 article by George Akerlof and Paul Romer entitled “Looting: The Economic Underworld of Bankruptcy for Profit.” They were then described (partially) again in the literature on “tunneling.”
The primary intended victims of looting/accounting control fraud are the shareholders and creditors. The frauds are led by the persons that control the bank. Holder sees only a part of the fraud scheme and misunderstands that part. He understands that Citi’s officers lied about the quality of the loans Citi was selling. He fails to understand that this was not a means of making Citi more profitable. It was a means of making the senior officers wealthier at Citi’s expense. Holder did not have to read the criminology, economics, or regulatory literature to understand this – he simply had to read the report of the Financial Crisis Inquiry Commission’s (FCIC) description of what Richard M. Bowen, III found at Citigroup..
“In June 2006, Bowen discovered that as much as 60% of the loans that Citi was buying were defective. They did not meet Citigroup’s loan guidelines and thus endangered the company—if the borrowers were to default on their loans, the investors could force Citi to buy them back. Bowen told the Commission that he tried to alert top managers at the firm by “email, weekly reports, committee presentations, and discussions”; but though they expressed concern, it “never translated into any action.” Instead, he said, “there was a considerable push to build volumes, to increase market share.” Indeed, Bowen recalled, Citi began to loosen its own standards during these years up to 2005: specifically, it started to purchase stated-income loans. ‘So we joined the other lemmings headed for the cliff,’ he said in an interview with the FCIC” (FCIC 2011: 19).
Holder emphasizes that Citi’s controlling officers – over the vehement warnings of Bowen – continued to deliberately, eagerly, and knowingly buy “toxic mortgages.” Holder knows that Citi’s officers knew that the “toxic mortgages” they were buying could only be resold through Citi making “reps and warranties” that the mortgages were not toxic waste. Holder’s “statement of fact” repeatedly discusses reps and warranties. (The recurrent claim that those selling loans in the secondary market had “no skin in the game” is false.) As FCIC explains, one of the remedies that the purchasers of “toxic mortgages” from Citi had was to require Citi to buy back the mortgages. What FCIC does not explain makes the point even more powerfully. First, Citi would likely have to buy back the mortgages at the worst possible time when their value had plummeted. Second, the purchasers had additional remedies including the ability to sue Citi for fraudulent reps and warranties and to secure punitive damages (or even treble damages under RICO). FCIC draws the correct conclusion: Citi’s purchase and resale of “toxic mortgages” “endangered the company.”
Why then did “endanger[ing] the company” become Citi’s controlling officers’ paramount mortgage strategy despite Bowen’s copious, dead-on accurate warnings? Citi’s most senior managers, including former Treasury Secretary Robert Rubin, were personally put on written notice by Bowen that an extraordinary and growing percentage – eventually 80% – of Citi’s purchased mortgages were “toxic” and that it was reselling them through fraudulent “reps and warranties.” Unlike Holder, there is no conceivable dispute that every Citi officer warned by Bowen instantly understood the implications. There is only one logical answer – they knew that the accounting controlling fraud scheme Bowen described was a “sure thing” guaranteed to make them personally wealthy at the expense of Citi’s shareholders (and, absent a federal bailout, Citi’s creditors).
In response to these frauds Holder’s response is to fine the bank (Citi) – and to do nothing to the officers who grew wealthy by looting Citi’s shareholders. The fine, of course, will be paid by Citi’s shareholders – who were one of the primary victims of the controlling officers’ “toxic mortgages” fraud schemes. In the DOJ’s carefully scripted press release, Holder and his lieutenants repeatedly call this sick parody of justice holding the bank “accountability.” Yes, Citi probably cries itself to sleep every night because of the shame of its civil settlement. You can’t compete with Holder’s unintentional self-parody. Note that this quotation from the press release attributed to Holder not only fails to mention the culpable controlling officers, but also lacks any acknowledgement that officers exist.
The bank’s activities contributed mightily to the financial crisis that devastated our economy in 2008. Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business. Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last.
Let’s be clear – a “financial institution” is not a person (whatever the Supreme Court’s myths). It cannot be held “accountable.” Accountability is a moral concept. Corporate personhood is a legal fiction. Unlike “banks,” officers are real and can become wealthy through the “sure thing” of leading frauds. “Banks” can only commit serious frauds through the fraudulent acts of their officers.
It is sensible to fine a corporation as part of the remedy when it profits or when the senior officers intended the bank to profit from a crime or a tort. When the corporation is being looted it is a perversion of the word “remedy” to rely on corporate fines as the remedy.
Holder and the banks’ controlling managers that are settling these cases know the following real world dynamics. First, the controlling managers are in an inescapable conflict of interest that should require them to recuse themselves from any involvement in the settlement. They led the accounting control frauds that caused the financial crisis and the Great Recession. Their potential criminal and civil liability is immense. They should be imprisoned for lengthy terms and they should be required to pay punitive damages that bankrupt them. They are very wealthy, powerful, and high-status people and they control the bank – not the shareholders or the board of directors. (Witness the JPMorgan proof of this point where Jamie Dimon got a raise for leading a bank that DOJ found to be a criminal enterprise.) The obvious “solution” from the perspective of the fraudulent bank CEO is to trade off agreeing to fines – indirectly paid for by the shareholders – to escape any personal liability. The CEO’s prime priorities are to keep out of prison, retain his fraud proceeds and wealth, and keep his job and income.
The fraudulent CEOs controlling our largest banks get superb legal advice (paid for by the bank) that allows them to optimize these settlements. They know that Holder and Presidents Bush and Obama dread the prospect of putting elite banksters in prison and losing political contributions that are controlled by bank CEOs. They know that it is unwise to throw any officers to the wolves if they were aiding the approved fraud schemes because DOJ may “flip” them and have them testify against other officers. The CEOs gladly trade off fines paid for by the bank (in economic substance, the shareholders) for de facto or de jure immunity from prosecution and compensation “claw backs” for the officers. This tradeoff is even easier when the bank is a systemically dangerous institution (SDI) (aka “too big to fail”) because DOJ’s policy is never to “cause” (sic – the fraud, not the remedy, causes a failure) an SDI to fail. Therefore, the CEO knows going in to the negotiations that the fine will sound large to the public but can never be substantial relative to the immense size of the bank lest the fine “cause” even the slightest risk that the bank will fail.
Holder is clueless about the Citigroup fine being “beyond … the mere cost of doing [fraudulent] business.” (Note that Holder did not use the word “fraudulent” in his press statement.) The quoted phrase is a non sequitur. DOJ did not impose any “cost” on the officers who led the frauds and grew wealthy through those frauds. If Citi proves to be like JPMorgan the CEO may even get a raise for getting Holder to enter into yet another deal imposes zero cost on the officers and directors for leading the frauds that made them wealthy. The toxic mortgage fraud schemes that Citi’s managers used the bank to commit caused vastly greater societal losses than the $7 billion total settlement (and a large chunk of that deal is phony “consumer relief” fluff that isn’t a real expense to Citi).
The Top Questions You’ll Find Unanswered by Holder’s Press Release
You can read the entire DOJ press release on the Citi deal, the attached documents, and watch the video of the press conference and you will never be able to even begin to answer the most important questions about the “toxic mortgage” fraud schemes at Citi.
- Which senior officers led the fraud schemes?
- Why did they do so?
- How did they get hundreds of Citi officers and employees to commit the systematic frauds involving the sale of hundreds of billions of dollars of “toxic mortgages”
- Why did a host of banks originate “toxic mortgages” and sell them to Citi through fraudulent “reps and warranties?”
- Why did a host of sophisticated financial firms buy “toxic mortgages” from Citi when even the most primitive underwriting would have disclosed that Citi’s “reps and warranties” were endemically false?
- What is DOJ going to do about all these signals of endemic accounting control fraud led by the senior officers of Citi, the lenders that fraudulently sold their fraudulently originated toxic mortgages to Citi, and the financial institutions that bought Citi’s toxic mortgages?
- Why did DOJ create a task force that does not even investigate the massive loan origination frauds that were the primary cause of the financial crisis?
- Why didn’t DOJ and the banking regulators hold them personally accountable years ago?
- DOJ investigations (as pathetically weak as they have been) have now confirmed that the three largest banks in America (with roughly 30% of our total bank assets) were systematically used by their senior officers as “weapons” to commit the most destructive financial frauds in world history, triggering the financial crisis and the Great Recession: why isn’t this treated as a moral, political, and economic crisis demanding an urgent, radical transformation of our moral, financial, and political systems?
- Why is no leader of these financial frauds going to prison or losing their fraud proceeds, or even being kicked out of their elite clubs?
- Has anyone seen the President of the United States? He’s been MIA on these issues for six years. Every time he speaks about bank fraud he downplays it.
- Why doesn’t President Obama award the Bowen the Presidential Medal of Freedom – this coming Monday – in a Rose Garden ceremony? At the ceremony, Obama and Holder can announce: the creation of the Federal Whistleblower Center, a national call on Americans to come forward and blow the whistle on elite crimes, the indictment of Citi’s senior managers, and the restoration of the criminal referral process at the banking regulatory agencies.
I am dead serious about these proposals for what Obama and Holder should do Monday. They are all things that make perfect sense substantively and politically. They would be good for the world and add to Obama’s popularity. They are all within his power – his political opponents cannot block them and they would look terrible if they tried to do so. I also think the chance that he will take any of these actions closely approximates zero. That combination is the most revealing aspect of the whole situation. I have reached the point where my assumption is that Obama won’t do the right thing even when the Nation and he would gain from doing so. .
In my next installment of this series of articles I explain why the statement of facts reveals the wholesale analytical errors by the DOJ and the FBI and why the fraud case against Citi’s officers is far stronger than that presented by Holder and his lieutenants at the press conference. This installment has explained why even with all these analytical flaws and want of intellectual honesty and political courage Holder should have indicted a wide swath of Citi’s managers.
And all of these firms had their own Richard Bowen’s, that I am confident of. For me, this is Bill Black’s finest work, not because of the complexity of the analysis but because the threads are so coherently communicated. All of these transactions had, by reference, underwriting guidelines that were ignored, and the CDO machine was the final takeout. Easily the greatest crime in western history given the dollar volumes that were driven through the execution. Eagerly awaiting the next installment.
“Why is no leader of these financial frauds going to prison or losing their fraud proceeds, or even being kicked out of their elite clubs?”
The answer is that the ruling class in our kleptocracy, even those who aren’t criminal banksters, enjoys huge benefits from belonging to the same select club of people who are above the law. If Bernie Madoff hadn’t made the mistake of swindling other members of this elite club he would also still enjoy the freedom of his fellow kleptocrats to loot with impunity.
I wish that there were a mechanism by which the vast majority of us law-abiding citizens could hold these criminal banksters accountable. Unfortunately our political and legal systems have been completely captured to serve only the interests of the kleptocracy. It seems like the best we can accomplish is to do what Bill Black does so well in this piece– expose the hypocrisy and corruption, and hope for some dramatic changes that will allow decency and fairness to flourish in our broken world.
“The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.”– Joseph Stiglitz (h/t Jesse)
Citizen’s Grand Juries are one way to present formal accusations to attorneys generals, but, without funding, access to the press, tipping points in numbers and some very visible names it is impossible to get an indictment.
Such is our present system of (in)justice.
The cgj track record so far isn’t encouraging, but maybe a cgj could be one method to pressure officials to actually prosecute these frauds.
Unless your willing to put criminals in jail, your saying their behavior is acceptable and WILL happen again.
And of course, it just adds to the riches of the rich, and diminishes the resources of the not so rich
Yves, you may want to serve it instead of sever it, but given your talking about Citi I could be wrong.
Should read “severing heads”.
Aargh, fixed, thanks!
My question: how long would this logical edifice remain standing under the barrage of a battery of Harvard-trained lawyers? We now socialize and educate a segment of our elite to powerfully and convincingly argue that black is white and confuse every issue they cannot control. By the time any jury got through the six months of complex and conflicting testimony, they would be convinced that Citibank had done nothing that was wrong. Worse, the lawyers on the other side would be so overmatched and confused by the bewildering barrage of bullshit that they would effectively throw the case by losing confidence in their own.
I would love to see this happen, but I have no confidence even if it did that justice would prevail.
Yves, Holder is corrupt and the system is broken.
The System is _not_ broken. The system is currupt, corruption is the system.
The system’s not broken. It’s fixed.
Bill Black has it exactly right: banks cannot be accountable, but bankers can be. Moreover, all of the evidence used against banks can be used against bankers; it’s a matter of perspective, not a lack of evidence. Three things to add to his excellent take:
1) the point of accountability must be deterrence. Banks cannot be deterred, but bankers can be, by being personally held criminally and civilly liable. Without deterrence, the fraud and looting won’t stop.
2) law enforcement should not be focused on how many billions already defrauded shareholders should have to pay to the Justice Department or dole out in consumer relief. Victims would be much more effectively compensated by a BP, Boston bombing, 9/11 compensation fund to which they can submit proper documentation to a special master and receive appropriately tailored compensation. Alternatively, they should be given a special and straightforward private right of action to be compensated. But the days of special formulas of credit for bankers to game to their advantage while providing random amounts of help to random victims has to end. Same with settlements in the name of one victim class–in this case investors–where most of the money is given to others–in this case mostly the DOJ.
The only reasons that the bankers have been allowed to dictate how they ‘help’ their victims are the raw political power of the bankers, and the fact that so many don’t see the homeowners as true victims but as ‘irresponsible borrowers’, a myth the government has helped the bankers reinforce.
3) the two most critical battles of our era are a) the constitutional and common understanding of personhood–we need a constitutional amendment to strip corporations of constitutional rights, which will only come after the public consciousness coalesces on the issue–and b) voting rights (broadly conceived to include voting hours, redistricting, ID laws, etc.).
Thanks again for mentioning the constitutional amendment that we need: one that abolishes constitutional rights for corporate entities of all kinds. The language is in House Joint Resolution 29, introduced in this Congress by Reps. Nolan and Pocan on 2/14/2013.
NC Readers: please do not be taken in by the charade of SJR 19 and HJR 119, which would just throw campaign finance reform back to Congress–like giving the alcoholic the keys to the corner bar.
Here’s an excellent piece that explains the difference:
I have only one thing to say- if they are repeating over and over again that the mortgages were faulty and had material defects then WHY haven’t the homeowners been protected? Why are they continuously punished and have to jump thru all the hoops for a mod??? It is sickening that the people who are the REAL investors (the homeowners) getting raped in court and constantly tortured over loan mods. This is what needs to be addressed. F the “investors” they had a prospectus…… Where was ours!?
I have been writing about this for years and was writing about what is now called robosigining before it is news. Your criticism is misplaced. I’ve explained repeatedly that when banks owned loans, they used to make modifications for viable borrowers (stress viable, they had to see some income). Today, the overwhelming majority of mortgages are securitized, and the incentives of servicers (who do not have a stake in the loans) are to foreclose. They get paid in the case of a foreclosure. A modification is much more work, and even with lots of incentive programs from the Federal government, they still don’t think they get paid enough to put in the extra effort.
Most on sites like this have no idea what it means to the loan originator to sell a Derivative or how that works to transfer the risk of the loan going bad due to inability of mortgagee to make payments and repay the note! Sell the loan sell the risk. Securitization of loans was the perfect crime!
Those who bought them with OPM were guilty of criminal negligence, those who used their own money, just plaIn fools!
Nothing new about old fashioned fraud, except this time the Criminals who robbed others already had the money!
What could have taken place, but did not, but was measures of recourse back to the original loan originator. I’ve wondered, lately, just where the former heads of the Ameriquest(s), New Century, et. al., have all been hiding lately. And last but not least – Mr. Killinger of WAMU.
My heart raced when I saw the title of this article. I’m sure many shared my disappointment when I realized that the title only showed what Holder should have done, and not what he actually did. Oh well.
Me, too, Vatch.
Good article and I regard Black as largely a good man who has taken up the noble cause of educating the public on the pervasive fraud at the heart of our financial system, but I have one consistent criticism of him: while he correctly points out that Holder and Obama basically glaze over the personal responsibility of the purveyors of the fraud, who Black properly lays the responsibility of intent upon, Black does the same for Holder and Obama that Holder and Obama does for the banksters in acting like they (Holder and Obama) are absolutely clueless to the concept of holding those perpetrators legally responsible and how that would effectively create a real deterrence to such fraud in the future and he (Black) also remains incredulous as to why they (Holder and Obama) would do so. Hint: they both will financially benefit from their bankster-servile deeds once they leave office. They are not cognitively captured, they are financially captured.
Holder and Obama damn well know what they are doing – covering up for the banksters – and why they are doing it – to enrich themselves. And Holder can’t be so stupid that he does not understand that the banksters personally benefited from the fraud while the institutions that they allegedly led suffered. Black too often suspends disbelief when it comes to the Holder and Obama and their intents.
For a brief moment I had hope and pride in Obama’s team . But unlike Pinnochio who, when he acquires a deeper understanding of himself, is eventually transformed into a real boy, Obama puppets will remain forever tied to strings.
You may be right, but several factors mitigate against using your tactics: 1) making such accusations instantly makes you an enemy, and any chance that anything positive will be done via your advice vanishes forever; 2) how do you prove it, even ex post facto, given the subtle way bribery operates in our society?; 3) such accusations get you shunted to the tin foil hat brigade in the media, further destroying any chance that anything good will come from your arguments and research.
If Black wants anyone in any position of power to do anything about this crap to listen to him, he can’t start out by saying, “Obama and Holder are bag men for the banks and the whole system is a sewer of corruption.” Those accusations may be true but they are wildly counter-productive if your objective is to get anything done. Of course, if you are sure that nothing can be done, will be done, under the current system then you can go to town and make any accusations you want. But don’t expect to have any impact until the system collapses, and by then who practiced control fraud back before the deluge will be the least of our problems.
I think you can lead people to that conclusion (“Obama and Holder are bag men for the banks and the whole system is a sewer of corruption”) but, for almost any audience, you can’t begin with it. This does have the great merit of being true, but not everybody can take their whiskey neat.
Thanks for the reply.
Appealing to the virtues of politicians who consistently choose courses of action that they perceive is in their best interests – over what is best for the people they purport to represent – makes the grand assumption that they are swayed by these appeals. And after over 6 years of observing Obama’s performance art of empathy – and the actions that he takes that completely contradict his empty, empathetic words – I don’t know why any knowledgeable person would have any hope whatsoever that this technique is effective.
That tactic hasn’t worked. It has been a dismal failure. And it plays right into Obama’s act that he’s a great guy with noble intentions who is somehow unable to bring his plans of great deeds to fruition due to the evilness of those that oppose him and that he is so congenitally noble that he is unable to lower himself to use tactics to effectively oppose these evil forces.
For the most part, the only thing that has worked to get Obama to work in the best interests of the people is if the Obama brand is in danger of being damaged and he is personally called out for the charlatan that he is. That’s what he fears more than anything: that his cloak of plausible deniability will be removed and people will see him for who he is – a fraud, a man that is not only a terrible president, but a horrible human being. So I do think that exposing Obama for who he is is the most effective mechanism to get him to cede to the best interests of the country, because then there is an alignment with what he perceives is in his best interests. Little is more important to him than the strength of his brand. And being recognized as misleading the nation by giving them false hopes of positive change in order to serve his own vanity and add another few orders of magnitude to his wealth certainly doesn’t strengthen that brand.
As to your point number 2, there’s probably not going to be a taped conversation between Holder and Obama – if, by some off chance they openly speak in those words – with them admitting that they are putting their future financial interests above the well-being of the country. But I certainly think we’ve seen enough since 2009 to justify those beliefs.
As far as your third point is concerned, does Black get space in the major media? Does the nytimes publish his works? Is he invited on any of the network and cable talk shows? Maybe he does – I don’t know – but I don’t think so. And if he doesn’t, then what access is he losing?
Again, after 6+ years of Obama and Holder, I don’t think that there is much merit in acting like they don’t know what they are effectuating. They do; they are not stupid or oblivious. They frequently say the right thing and then do the exact opposite, often trying to cover their tracks while they deceive the public. At this point, I think we are much better off pointing out their personal responsibility for our corrupt financial system.
Right on, Z! James offers Solomonic wisdom in favoring face-saving criticism free of the condemnation that clouds reason. And Bill Black is an fine gentleman professor, whose objective arguments may be more persuasive without scorn, which tends to harden the heart.
That said, and with high regard for Bill Black’s judicious approach, I’m in complete agreement with you. IMO, the Obama regime hardened its heart long ago and crossed the pardonable threshold of serial betrayals and egregious crimes (political, finance, civil rights, military). Obama, his cabinet, and appointees now have a long, unbroken record as active, willing accomplices in this global crime syndicate. And once again, in this case, the regime indicts itself — implicitly — as co-conspirator, hung itself on the elastic rope given time and again to its political patrons. It is high time to declare that, without equivocation or evasion, to stand and draw a hard line. No further, no more passes for Obama and his cronies! Basta!
What bothers me is after Rahm Emanual’s record at the White House, he promptly goes back to Chicago and gets elected. What??????? I guess there weren’t many choices in the ballot box.
In fact, I think we are almost always better deferring to the truth. As one commenter on this site used to constantly point out: deception is the most pervasive and powerful political tactic on the planet … or something like that. But anyway, why play into it? Why not oppose it?
Black isn’t doing his opposing in the way you would prefer. It’s big Internet.
Yes, it’s a big internet. And what’s your point? That therefore we shouldn’t share our opinions when we don’t entirely agree with someone’s commentary?
I guess I’m really not enthusiastic about giving Black an assignment to write other than he does. No doubt there are people — you, for example — who can take Black’s material and give it your own spin.
Very perceptive post. I think perhaps this preservation of the fiction that O. and H. would do the right thing– if they only knew how– is psychologically akin to what a “positive reinforcement” parent does with a naughty child. “Now Timmy!! I know you really didn’t mean to push Janet in the mud and make her cry. You tell her right this instant that you’re sorry, and show us that you’re the good kind of big brother we all know you are!”
It might help if the ruse of oversight or regulation were removed from the equation. Let investors take the loss in the barest most fundamental of free markets.
Yeah, but I’m using “your” when “you’re” is called for. Oops, my bad.
‘Citi’s officers lied about the quality of the loans Citi was selling. He fails to understand that this was not a means of making Citi more profitable. It was a means of making the senior officers wealthier at Citi’s expense.’
How? Through bonuses? Stock options? How much incentive-based payment did senior officers receive, in comparison to salary?
One is certainly prepared to believe that senior officers were enriching themselves. But such serious claims need to be supported with evidence, some of which likely is available from Citi’s annual reports for those years.
Banks pay a variable proportion of their gross profit to executives and employees, roughly speaking 40% to 60%. This means base salaries form a small part of total remuneration for bankers who command highly profitable divisions — they basically get a huge chunk of the profits they produce, creating a very large and direct incentive to engage in activity that earns short-term profits at the expense of the bank’s long-term health.
Puhleeze. You know too much about stocks to take this line. The fact that investment banks have highly bonus oriented compensation schemes (and “banks” have emulated that save in retail and back office functions) is hardly a secret. Back when Sallie Krawchek was at Sanford Bernstein as a mere analyst covering Wall Street stocks, she commented on this blandly, saying it was better to be an employee of a Wall Street firm than to hold shares in one.
If Capitalism were alive, when Citi was at it’s banquet of consequences from gorging on every financial morsel it could find, with poisonous morsels as desert, Capitalism would have demanded a confession and penance. Instead, Socialism rushed in and pumped Citi’s stomach. Citi spent years in the hospital, racking up huge medical bills, which they have never paid. Capitalism was never heard from again.
Holder states: “The bank’s activities contributed mightily to the financial crisis that devastated our economy in 2008.” Citi “made serious misrepresentations to the public – including the investing public – about the mortgage loans it securitized in RMBS.” Holder’s press release called them “toxic mortgages.” Holder emphasized the “strength of the evidence of the wrongdoing committed by Citi….” Holder stated that Citi’s officers knowingly made false “reps and warranties.”
The Police want nothing to do with Citi’s case of financial poisoning. They think it’s just a hamburger or two that wasn’t cooked enough. They don’t realize the cooks on the inside took all the good meat for themselves and all that’s left is gristle. Besides, the Police eat just fine, so no worries.
Citi’s most senior managers, including former Treasury Secretary Robert Rubin, were personally put on written notice by Bowen that an extraordinary and growing percentage – eventually 80% – of Citi’s purchased mortgages were “toxic” and that it was reselling them through fraudulent “reps and warranties.”
Wasn’t Robert Rubin, along with Alan Greenspan and Larry Summers on Time Magazine’s cover, some fourteen years ago? Weren’t the three hailed as world saviours?
Is it too late for a retraction?
Why have I never read or seen a petition to the DOJ or the President that DEMANDS prosecutions of these banksters??!! We know he can prosecute but there is no will there, or backbone. Would a petition with a million signatures force the DOJ to do what they don’t want to do? Maybe?
Petitions?? Yeah, there have been petitions Appraiser’s Petition.
This is the age of the internet, Black. Millions of believers at your finger tips. Mobilize them. get 10 million signatures–50 million. It’s not beyond possibility. this is the greatest travesty of our age and another in a long string of travesties lead by our government –that’s not for the people or by the people any more. It’s a good governing idea, but we somehow let the protections be dismantled along the way and our vigilance wasn’t there as it needed to be. We all share some responsibility for not electing the outsiders and the anti mainstream voices that need to temper the actions of the whole. We believe the bs until it’s too late and we continue to drink the cool aid hoping that we won’t be forced off our recliners (most of us anyway, even when we are dying under mortgage debt and lack of jobs….) We can complain about it, but letting Regan do away with the Fairness Doctrine, wasn’t our finest hour, either. Somebody said the price of freedom is eternal vigilance. Have we been vigilant? This is nothing that a motivated population of citizens can’t fix, but the time for the fix-from-the-couch is long gone. Many of us have been mobilized, but those can’t do it alone they need the rest of us to stop being the silent majority. It’s time for the sleeping giant to awaken (not my line).
You are really late on this issue. In the national mortgage settlement (2012), the Administration made sure that housing groups got funds to buy their silence and approval of what is going on. There have been tons of efforts to mobilize people. I know many of the activists. They failed. I could say “we failed” since I was part of some of the efforts.
I learned you can’t beat a sitting President if he decides he really wants something and he does not need Congress to get it done.
And so all we’re left to do is eulogize the past as we enter the post-Constitutional era. I think I’ll go stick my head in an oven
Honestly, I’d like to be dismissive of the idea that something can be done as well. It would make it easier for me to sit on the couch and watch TV. However, in response to your assertion that it can’t be done, I give you the tea party and their ilk and the success they have had in the last 5 years in flipping many garden variety conservatives into radicalized hobgoblins. To me this change has been unprecedented. Their machine for manipulating and radicalizing people seems quite effective. I guess what you’re saying is conscience is just inexorably self eliminating.
‘We all share some responsibility for not electing the outsiders and the anti mainstream voices that need to temper the actions of the whole’
No. Such actors in these times are very fragile vessels in which to place our future, where they exist at all. Under the pressure of existing power or control, they either break or radically shapeshift into structures inimical to real change. Or indeed, like Holder and Obama, they always were creatures of the 1% who don the cape temporarily and sing along plausibly with the mighty Wurlitzer (carefully programmed to harmonise), only to doff it once in power and get back to beating rather than pretending to join us.
We all share some responsibility for allowing representative democracy to degenerate into the charade it now is. And actually it is mainstream voices – if you consider me and you and most of the people we talk to – to be ‘mainstream’ – that should be listened to. It is the owners and their operatives in politics who are the anti-mainstream extremists. It’s not ‘the whole’ that’s the problem here, it is a small but inordinately powerful minority who, via their ability to fashion and embed a ‘mainstream’ narrative in their own image and have it enforced from every rampart by obedient lieutenants – have exploited our inability to re-imagine and engineer the mechanisms of our governance; ie, away from the fatally flawed ‘I will elect someone else, or some other group of people whose jib I like the cut of, to make the decisions that I as a member of a democracy should be making myself’ The further a democracy gets from direct – that is, assembly, every citizen able to vote on every issue type democracy – the closer it gets to the up is down territory we inhabit now, where the range of those we can elect to represent us are all owned by those who oppress us.
‘this is the greatest travesty of our age and another in a long string of travesties lead by our government –that’s not for the people or by the people any more. It’s a good governing idea, but we somehow let the protections be dismantled along the way and our vigilance wasn’t there as it needed to be.’
If the shepherds we are able to elect are all wolves (or rather, wannabe wolves) there will always be a need for eternal vigilance and always the danger of stock loss and the occasional carnage. If however we’re all standing guard, we only have to keep an eye on the wolves themselves. As it is, we can only vote in people who will continue impoverish us and restrict the scope of our resistance. TINA, currently.
‘This is the age of the internet, Black. Millions of believers at your finger tips. Mobilize them. get 10 million signatures–50 million.It’s not beyond possibility’
No it isn’t but it is the wrong way to go about utilising the immense promise of the internet to resurrect direct democracy in some form. One-off ya-boo-sucks petitions will fizzle faster than Occupy. We need to build a permanent citizen architecture of preference voting with which to re-establish majority control of policy (or perhaps that should read ‘establish’) We would still need representatives to publicly curate and steward our wishes into policy and procedure but they too would be subject to our majority preference, rather than that of an unelected and almost unseen minority.
I have had a lot of conversations with friends, family and acquaintances lately about our local state govt’s attempts to sell off our electricity infrastructure. This is a broad range of individuals yet I could not find even one who agreed with this initiative and indeed most were, as I am, violently opposed.
This disconnect between a clear majority electorate view and an equally clear elite goal to erect private toll-booths on public assets is the sort of ground you should expect see the representatives of the people step up to the plate on behalf of their constituents. The fact that such an idea is in reality so laughable demonstrates how far we’ve let things drift.
Look, you really have to understand that there has been a “quiet coup” right under the noses, and often with the naive, nodding agreement, of “mainstream voices.” Corporate interests and the corporate form itself (including for-profits, non-profits, LLCs, unions, PACs, etc.) has completely captured every aspect not just of regulators, not just of each level of government, but of the American imagination. Please read the comment by Abigail Caplovitz Field earlier in this thread.
Every American “knows” that private interests do everything better and more efficiently than public interests. Until every American learns through bitter experience that the private interests will close our schools, starve us, rape us, shut off our water, and turn us out of our homes.
Now that federal and state governments, including the judicial system, have completely merged with, or shall we just admit been acquired by, corporate interests, no one is able to act in the public interest anymore. Get this: no elected official is able to act in the public interest anymore, no matter what they want to do. This is a systemic issue.
Local governments, especially smaller ones, may not have been completely purchased, yet they have drunk the Kool-aid of out-sourcing municipal services because it is “more efficient” and “saves money.” Because they lay off local workers who pay taxes and spend money in the local economy, it turns out that these “efficiency” and “savings” rationales for outsourcing seldom hold true, but let’s not confuse anybody with the facts.
And it’s worse. It’s global. Because banks. But I’ve gone on enough for tonight.
Better late than never!! Abolitionists “failed” for generations to eradicate slavery. Fortunately they kept trying anyway, and were eventually able to take advantage of changed conditions. The only way to guarantee continued failure, in any just cause, is to let poor initial results discourage people from trying to fight on.
The end of slavery abolished the fiction that a person was property. Now we must abolish the fiction that property (a corporation) is a person.
According to lectlaw.com:
“ACCESSORY AFTER THE FACT
“Whoever, knowing that an offense has been committed, receives, relieves, comforts or assists the offender in order to hinder or prevent his apprehension, trial or punishment, is an accessory after the fact; one who knowing a felony to have been committed by another, receives, relieves, comforts, or assists the felon in order to hinder the felon’s apprehension, trial, or punishment. U.S.C. 18”
I’ll leave it at that.
Clearly – BIG money is “Above the Law”. Clearly Rule of Law does not apply when it comes to corruption of and by the Ultra Wealthy and “politically connected”!
The last 15 years have been nothing short of disgusting to watch and experience! We continue to be deceived and led to our own distruction!
Can’t anyone initiate a class action lawsuit?
Can’t anyone initiate a private-citizen arrest?
The criminality is utterly disgusting.
I’m thankful I live in Canada.
No, you file a case as an individual and seek class certification, which the court may or may not grant.