Notice this far-right wing global Wall Street group is selling the idea that Elizabeth Warren is POPULIST----SHE IS OUR LEFT REVOLUTIONARY WITH BERNIE SANDERS.
Elizabeth Warren as a college student and grad from a TEXAS UNIVERSITY----made her mark teamed with CLINTON AND ROMNEY. While Clinton and Romney were team global Wall Street in the 1990s breaking down all that was Federal laws and US Constitutional COMMON LAW espousing free markets with NO MONOPOLY------Elizabeth Warren was writing that corporate raider bankruptcy law needed because all of what ROMNEY and BAINS CAPITAL was doing was ILLEGAL. Clinton ignored Federal laws surrounding monopoly allowing Romney to go wild bringing US corporations down and gutting them of assets throwing US workers into unemployment, killing unions and worker benefits. Clinton and a Republican Congress needed corporate bankruptcy laws to do this and Elizabeth Warren was the source of these laws. That partnership of Warren with the Clintons is as strong today as that corporate bankruptcy work led her to her job as professor at Harvard.
Notice how this ONE WORLD ONE GOVERNANCE BY CORPORATE TRIBUNAL ROOSEVELT INSTITUTION sells Warren as populist because she did some work on personal bankruptcy----that progressive bone.
THE WORD PROGRESSIVE HERE IS ECONOMIC PROGRESSIVE-----FAR-RIGHT WING GLOBAL WALL STREET MAKING THE RICH EVEN RICHER PROGRESSIVE AND YES, WARREN WROTE THOSE BANKRUPTCY LAWS THAT WAS USED BY AIG IN SPINNING ALL THEIR ASSETS FROM SUBPRIME MORTGAGE FRAUD BEFORE THEY WENT TO BANKRUPTCY.
SEE HOW NATIONAL MEDIA AND CLINTON NEO-LIBERAL OUTLETS SELL WHAT ARE FAR-RIGHT WING GLOBAL WALL STREET CANDIDATES AS SOCIAL PROGRESSIVES WHEN THEY ARE ECONOMIC PROGRESSIVES?
Finance & WealthPolitics
How Elizabeth Warren Put Bankruptcy on the Progressive Map
By Roosevelt Institute | 09.15.11
http://bit.ly/1Pb4AFDShe’s already had a knack for raising the profile of ignored but important issues, and the office of U.S. Senator can act as an even bigger megaphone.
Elizabeth Warren, who yesterday announced her candidacy for the Senate in Massachusetts, is best known as the inventor and rightful director of the Consumer Financial Protection Bureau. In that role, and in appearances on The Daily Show, her disarming charisma — made up of equal parts moral commitment, intellectual firepower, and a sense that she’s listening as intently as she’s talking — became familiar to millions.
But I still think of Warren at least as much for a role she played earlier in the decade: bringing the issue of bankruptcy into the public debate, most notably in the Warren Reports, which she and some of her students and protégés at Harvard Law School set up as a subsection of Josh Marshall’s Talking Points Memo blog in 2005. The Warren Reports set bankruptcy reform, which passed Congress that year, in the context of middle class families’ struggles to stay afloat in the economy. It showed us how bankruptcy — the chance to start over after a financial disaster — is as essential a part of the social safety net as unemployment insurance or savings.
What Warren did with the CFPB — put forward a specific policy idea and watch it pass into law — is rare enough, given the American political system’s resistance to good ideas. But what Warren did with bankruptcy is even more impressive. She took an entire issue that had no political salience whatsoever and helped make it matter. Bankruptcy was a classic example of an issue that had no constituency in the world of narrow interest groups except for the credit card companies and banks, all big political donors, that wanted to make it much harder for people to declare bankruptcy and start over with manageable debts. Unions didn’t think it was important (it would affect their members, but not the unions themselves); anti-poverty groups were more focused on federal programs and most bankruptcies affected the working middle class, not the very poor; health care advocates knew that health crises were a leading cause of bankruptcies, but it was not their issue. A handful of bankruptcy lawyers pushed back, but they were plainly self-interested and no match for the credit card behemoths. Members of Congress, including many Democrats (especially those from states that you might see on the return address of a credit card solicitation), voted to tighten bankruptcy laws year after year before the bill finally passed, and rarely did they hear a protest from a constituent or an activist.
But Warren, her TPM blog, and her other activism helped put the issue on the radar for the emerging “netroots.” The most useful contribution from the online activists of the netroots has been to break that single-issue interest group model of progressive politics and look more comprehensively at everything that matters for the middle class and working poor in America as a whole. They don’t say, “That’s not my issue” if it’s important. Key netroots blogs of that period, such as Daily Kos and Mydd.com, picked up Warren’s message and began to blast Democrats who had voted for bankruptcy reform, and it was a major issue in Maryland Rep. Donna Edwards’ successful 2008 primary challenge to Rep. Al Wynn. The bill had passed by then, unfortunately, but at last the issue mattered. Reversing the changes to bankruptcy law reform is now a major progressive priority.
I assume that lots of Warren’s friends have asked her why she would want to bother being a senator. Until they become committee chairs after three or four terms, or unless they can wedge themselves into the position where they are the critical 60th or 50th vote on key legislation like Ben Nelson of Nebraska (the most conservative Democrat), each senator has very little clout. Former governors, accustomed to the limitless power of the executive, often chafe at the endless talk and indecision. But a very few Senators are able to have an impact far greater than their institutional clout because they ignore institutional power and treat the Senate as a platform for ideas. That’s what Paul Wellstone did at the peak of his career (although it took him a while to figure it out), or the great liberal figures of the 1980s and earlier, Howard Metzenbaum of Ohio and William Proxmire of Wisconsin. On the right, Jesse Helms did much the same thing. Because any senator can introduce any amendment at any time, and with a subcommittee she can hold hearings on almost anything, she can force debates that the American political process doesn’t want to have. Combine that with a good use of all the external platforms that are available to a person with the words “U.S. Senator” before his or her name, and it can become an enormous megaphone for what Warren did with bankruptcy and the CFPB: putting an issue or an idea on the agenda. And if she’s elected, she might show some of her colleagues that if they want to make a difference, they have to do more than sit around and vote in committee meetings.
Mark Schmitt is a Senior Fellow and Director of the Fellows Program at the Roosevelt Institute.
We want to share an article that is VERY BORING-----but this article shows the point in which global Wall Street pols CLINTON/BUSH/OBAMA re-imagined as Roosevelt Institute would say how our US Justice and Federal Trade Commission FTC would interpret ANTI-TRUST MONOPOLY. Here we see why these few decades global monopolies were allowed to take all US economy----creating stagnant local economies to kill small and regional businesses-----these are the policies having the focus of our Federal agencies tasked to stop monopoly now looking globally in enforcing monopoly laws overseas.
When WE THE PEOPLE watched on T V as global Wall Street bank executives came to Congress to admit they created the environment for massive subprime mortgage fraud notice the national media made clear these executives CAME FORWARD ON THEIR OWN TO TESTIFY---this is how the laws below create that condition of LENIENCY ---that led to NO BANK EXECUTIVE BEING PROSECUTED and the US Justice investigation sealed all data that would allow for private prosecution of those massive frauds.
Whether it is those corporate raider bankruptcy laws or these global trade monopoly laws---
THIS IS WHY GLOBAL WALL STREET POLS ARE NOT ENFORCING OR PROSECUTING CRIMES OF FRAUD AND ANTI-TRUST.
Congress can pass laws that create new statute but Federal courts must follow COMMON LAW COURT PRECEDENCE to void these MONOPOLY-KILLING LAWS.
This is the only anti-trust monopoly law enforced since CLINTON/BUSH/OBAMA ----and that is why every industry in the US is consolidated to monopoly and now our public health and public education is being made those global industries.
December 2, 2010
Leniency Program of
the U.S. Department of
Justice, Antitrust Division
Sanctions, Fear and Transparency
“These three major cornerstones
severe sanctions, heightened fear of detection, and transparency in enforcement policies –
are the indispensable components of every effective leniency program.”
Scott D. Hammond, Director,
U.S. DOJ Antitrust Criminal
Leniency Program Organic Documents
Leniency Program (1978)
Corporate Leniency Policy (1993)
Leniency Policy for Individuals (1994)
“Frequently Asked Questions Regarding the Antitrust
Division's Leniency Program” (2008)
Model Leniency Letter
Speeches and Presentations
Original Leniency Program (1978-1993)
Established in 1978
Institutional genesis of leniency in cases of horizontal anticompetitive conduct (for individuals to
avoid jail and fines; corporations to avoid fines):
Market allocation (of consumers, sales)
Leniency at DOJ’s discretion, even if the requirements were met
Leniency conditioned on request prior to DOJ beginning its investigation
DOJ received only one request for leniency a year
Leniency Program failed to uncover a single international cartel
Current Leniency Program (1993-Present)
Program modified in 1993 for corporations; in 1994 for individuals
Guarantee of leniency if requirements and conditions met
Leniency given by DOJ (not by other agencies)
The Program has been very successful
20 times increase in number of reported cartels
Increase in the quantity and amount of the fines
Fines to corporations commonly exceed USD$100M
>USD$5 billion in fines due to the Program
Program has generated 90% of DOJ’s cartel investigations
Average of 50 DOJ investigations at a time (40% concerning cartels)
2 Types of Leniency
DOJ still unaware of anticompetitive activity
If disqualified for Type A,
may be eligible for Type B
Applies after DOJ has received information on the
Leniency as to the criminal charges against the
corporation and directors/officers/employees who
If the corporation does not qualify or comply with conditions,
its directors/officers/employees may apply for leniency
separately (Type B).
Requirements and Conditions for Leniency
1. The corporation/individual is the first to apply for leniency
regarding the anticompetitive activity;
2. At the time of leniency application, DOJ lacks sufficient evidence against the corporation/individual to make its/his conviction likely;
3. The corporation/individual terminated its/his
participation in the anticompetitive activity;
4. The corporation/individual informs the DOJ regarding
the anticompetitive activity sincerely, truthfully, and
5.The corporation/individual cooperates with DOJ
throughout its investigation;
6.For corporations, the confession for leniency is a
corporate act (not of the directors/officers/employees individually);
7. If possible, the corporation provides restitution to the damaged parties; and
8. DOJ determines that leniency for the corporation/individual would not be unjust to other parties.
The Race For Leniency
For each anticompetitive activity (e.g., each cartel),
DOJ grants leniency to only one corporation or individual – whoever applies first
Incentive to complete audit and internal investigation ASAP
Incentive to apply for leniency in different countries simultaneously
Original Program (1978-1993):
Corporation/individual had to submit leniency application even without knowing all the facts
Current Program (1993-Present):
DOJ has discretion to allow the corporation/individual to set a placeholder on the list for leniency.
Prior to submitting the application for leniency, counsel may inquire “anonymously” whether leniency is available.
But the client corporation/individual must be identified to apply for leniency.
Informing About Other Cartels
As incentive, DOJ offers “Amnesty +”
In the course of the investigation of a cartel, a corporation informs the DOJ about another cartel.
The corporation may receive amnesty pursuant to the
Corporate Leniency Policy for the other cartel, plus a
reduced penalty for the cartel originally investigated.
But DOJ also imposes “Penalty +”
The corporation is the target of investigation for its
participation in a cartel; has knowledge of its
involvement in a separate cartel; but does not divulge
that second cartel to the DOJ.
The corporation will be subject to more severe penalties.
2004 Amendments – More Severe Penalties
Increased the maximum jail sentence for individuals for anticompetitive conduct to 10 years
Policy that criminal conviction requires imprisonment
Minimum fine to corporations for anticompetitive conduct increased from USD$10M to USD$100M
Vitamins Cartel – F. Hoffmann-La Roche fined
LCD Cartel – LG fined USD$400M
Air Travel Price-Fixing – Air France and KAL fined
USD$300M each (coordination with European
Risks of Leniency
Restitution to the parties damaged by the anticompetitive conduct
May include damages caused outside the U.S.
In 2007, DOJ conducted 33 investigations (>USD$473M in fines)• But the restitution imposed was <USD$2M
Continuation of the criminal investigation
By state authorities
By the competition authorities of other countries
Regarding a separate anticompetitive activity
For violation of U.S. antitrust laws (treble damages)
Derivative actions (by directors, shareholders)
Loss of market position
Additional scrutiny by antitrust authorities
Reputational harm (e.g., purchasers/clients will know
of the anticompetitive conduct)
Hostility by employees
Risk of revocation of leniency
DOJ maintains confidential the leniency application (including the information provided per leniency agreement), but:
DOJ may try to get authorization from the corporation/individual
receiving leniency, to share the information, especially with
international competition authorities.
DOJ shares with other agencies (domestic and international) the information that results from its investigations.
Per FOIA production request, DOJ may have to provide the
information, unless divulgation: (i) interferes with implementation of the leniency agreement; or (ii) may compromise a “confidential source.”
Corporation may have a legal obligation to report the investigation to the public.
Applying for leniency is a voluntary act.
DOJ usually does not require divulgation of privileged information.
But risk of waiver of attorney-client privilege.
Limitations of Leniency Program
DOJ leniency does not provide leniency from other federal or state agencies, or in other countries
DOJ leniency does not extend to:
Illegal activity unrelated to the confessed anticompetitive conduct;
Other anticompetitive activities; or
Civil litigation initiated by private parties.
Risk of Civil Litigation
Corporation that confesses its involvement in anticompetitive activity to receive leniency, risks being sued in a civil action.
The plea bargain for leniency in the criminal proceeding may
be inculpatory evidence in the civil litigation.
Civil litigation commenced by parties damaged by the anticompetitive conduct
– Triple compensation to damaged parties
But, by statute, if the corporation obtained leniency
in the criminal proceeding, its civil liability may be limited to actual damages caused (no treble damages).
Foreign plaintiffs precluded from treble damages
antitrust actions in US courts unless anticompetitive effect in USA
F. Hoffman-LaRoche, Ltd. v. Empagran, S.A
2005 Report – DOJ has “uncovered meetings of
international cartels in well over 100 cities in more than 35
DOJ cooperation agreements with Australia, Brazil, Canada,
Germany, Italy, Israel, Japan, Mexico, UK and others
“Positive comity” provision in 1991 EC/US Agreement
OECD Anti-Cartel Program, International Competition
2006 air transportation cartel investigation “followed the
sun” – one airline sought leniency in several nations, which
resulted in dawn raids/search warrants in Asia, USA and
Europe within 18 hours
Since 1999, more than 40 foreign nationals have served
prison sentences in USA for international cartel activities
Test is whether anticompetitive effect in USA
2007 Marine Hose Case – defendants pled guilty in USA;
then appeared in UK court; credit for prison sentences
imposed in the other nation
In 1990, only USA had an antitrust leniency program; at
present, more than 50 countries offer leniency, including
Brazil, Chile, Colombia, and Mexico.
Just to revisit last week's discussion ----the Affordable Care Act was written by Obama and Clinton neo-liberals to do just that CREATE GLOBAL HEALTH SYSTEM MONOPOLIES in our US cities deemed Foreign Economic Zones.
National media and global Wall Street Clinton neo-liberals like making fun of WE THE PEOPLE by calling Obama a CONSTITUTIONAL SCHOLAR grad from HARVARD ------to HARVARD there is no US Constitution---they say there is only international politics and public policy so Obama as a Constitutional scholar from Harvard DOES NOT SEE OUR US RULE OF LAW OR OUR US CONSTITUTION as was true of Clinton and Bush.
The problem for these sociopaths is NONE OF THIS IS LEGAL ----IT IS ALL UNCONSTITUTIONAL----no matter how much power they think they have.
So, breaking GLASS STEAGALL----a banking law written during FDR to address the massive Wall Street frauds that brought the GREAT DEPRESSION by Clinton era neo-liberals and Republicans was KNOWINGLY opening up banking monopolies. Global Wall Street created CREDIT UNIONS to sell the idea this was not monopoly----know what this coming economic crash from the same global Wall Street fraud will do to community banks and credit unions?
SEND THEM INTO BANKRUPTCY IN WHAT WILL BE CORPORATE RAIDING BY GLOBAL WALL STREET.
Business News | Mon Aug 29, 2016 | 11:53am EDT
More U.S. counties to see Obamacare marketplace monopoly: analysis
By Trevor Hunnicutt | NEW YORK
Nearly a third of U.S. counties likely will be served by only one insurer that participates in an Affordable Care Act (ACA) marketplace in 2017, according to an analysis published on Sunday by the Kaiser Family Foundation.
The 31 percent of U.S. counties that will have just a single option of insurers within the ACA's exchanges would represent an increase from 7 percent this year, the nonpartisan group found. Despite sharing a namesake, the Kaiser Family Foundation is not associated with healthcare provider Kaiser Permanente.
UnitedHealth Group Inc (UNH.N) and Aetna Inc (AET.N) have decided to largely exit government-run online marketplaces in 2017 that sell subsidized plans created under President Barack Obama's national healthcare reform law, citing low enrollment and high service costs.
The bulk of the decrease in counties with a choice of insurers is due to UnitedHealth's pullback, which was announced in April.
The data underscores the degree to which industry retrenchment is curtailing individual's options within the marketplaces. Insurer departures may lead to higher costs within that market, analysts have said.
One county - Pinal County in Arizona - risks having no insurer options at all within the marketplace, the analysis found. The study's authors said another plan offered elsewhere in the state could expand to serve the county.
The foundation said it could take more months and more data for the full impact of the changes for 2017 to become clear.
"A number of steps remain before the full picture of this year's Marketplace competition is known but the ACA has greatly expanded the insurance options available to consumers in the individual marketplace," said Marjorie Connolly, a spokeswoman for the U.S. Department of Health and Human Services, in a statement.
'He is a Program Fellow in the Health Policy Program at the New America Foundation and a former Senior Fellow at the Center for American Progress'.
When we see an article written by today's US Justice Department and someone tied to CENTER FOR AMERICAN PROGRESS----a far-right wing global Wall Street think tank----we can see where the agencies tasked with enforcing US anti-trust and monopoly laws are now staffed with people whose job it is to tell WE THE PEOPLE why these monopolies are NOW GOOD.
OLD ANTI-TRUST LAWS NO LONGER WORK says this article. So, because global Johns Hopkins is able to have a health system campus in Thailand paying staff NOTHING to do the job our strong professional medical staff in US does----these monopolies are OK. WE THE PEOPLE are made to believe all the problems in soaring US health care costs these few decades of CLINTON/BUSH/OBAMA are tied to those WORKERS AND THEIR WAGES and not the SOARING HEALTH INDUSTRY FRAUD AND PROFITEERING which still exists and is growing.
OUR US CONSTITUTION AND CENTURIES OF FEDERAL LAW AND COURT PRECEDENCE PROTECTS WE THE PEOPLE AND OUR ANTI-TRUST MONOPOLY STANCE HERE IN THE US. PLEASE FIGHT FOR THESE POLICIES BECAUSE WE CANNOT REBUILD A REAL FREE MARKET BROAD-BASED LOCAL ECONOMY WITH THESE MASSIVE GLOBAL CAMPUSES.
Antitrust: The Problem and Solution for Health CareIt's a new world for health care, so old antitrust solutions no longer work.
By David Balto, Contributor | April 12, 2013, at 4:15 p.m.
Antitrust: The Problem and Solution for Health CareDavid Balto is an antitrust attorney, consumer advocate, and former Federal Trade Commission policy director. He is a Program Fellow in the Health Policy Program at the New America Foundation and a former Senior Fellow at the Center for American Progress. The views expressed herein represent only those of Mr. Balto and not of the New America Foundation.
No domestic economic goal is as important as controlling health care costs. Health care costs are increasing dramatically and will exceed 25 percent of the country's GNP by the end of the decade. No matter what measure is used, health care costs are greater in the U.S. and are increasing at a faster rate than any other industrialized country.
Many people have observed that health care markets are increasingly consolidating. But depending upon one's perspective, such consolidation may be the problem or part of the solution to rising health care costs. As noted in "Strengthening Affordability and Quality in America's Health Care System," a report issued yesterday by the National Coalition on Health Care's Partnership for Sustainable Health Care noted:
Two ideas, which at times conflict, have gained acceptance with respect to health care markets: (1) market consolidation has led, in some markets, to anti-competitive developments that could result in the lack of consumer choice and may raise prices for consumers; and (2) the transition to a system of care that is more efficient and higher-quality requires increased levels of coordination among providers, payers, and, in many cases, employers Further complicating the issue is the possibility that some government regulations may impede more efficient forms of provider accountability and coordination.
As Secretary of the Department of Health and Human Services Kathleen Sebelius observed earlier this week, aspects of the Affordable Care Act, which encourages health care coordination and integration, are in "constant tension" with antitrust laws. "There is a tight balance between a coordinated care strategy and a monopoly," Sebelius said at a talk at the Harvard School of Public Health.
The apparent conflict is straightforward. Antitrust principles prefer the greatest level of competition and a lack of integration. The greatest rivalry will lead to the best allocation of resources, and hopefully to the lowest prices. At the same time, health care reform attempts to grapple with the current disaggregation in the market which often serves as an impediment to the greatest efficiency, realign incentives, better control utilization, and establish strong consumer incentives.
In testimony I gave in 2010 entitled "The Need for a New Antitrust Paradigm in Health Care," I addressed how the antitrust enforcers needed to grapple with the need to permit greater integration, such as that envisioned under the Affordable Care Act.
I noted three important lessons from the exhaustive examination of health care markets during the debate on health care reform:
- Health insurance markets are broken – markets in almost every state are highly concentrated, resulting in supracompetitive profits, escalating numbers of uninsured, an epidemic of deceptive and fraudulent conduct and rapidly increasing costs. The Congressional debate over the ACA clearly and unequivocally established the need for the comprehensive reform that was enacted. Countless Congressional hearings uncovered a disturbing pattern of egregious, deceptive, fraudulent and anticompetitive conduct in health insurance markets.
- Integration is not the problem in health care, but is an important solution for improving quality and cost in the fee-for-service health care system. Much of the Congressional health care debate focused on the lack of coordination among healthcare providers and how this led to excessive costs and poor health care results. The purpose of the Accountable Care Organizations (ACOs) established in the legislation is to provide entities that can better coordinate care and be held accountable for overall healthcare results.
- If there is a competitive problem in health care markets, it is due to aggregations of market power, such as in health insurance, and not because of improper integration among health care providers.
Bill Black is an economist who did a great job educating about the criminality of the massive Wall Street frauds----but we can tell Bill Black is not team left social progressive by what he DOES NOT SAY. This term TOO BIG TO JAIL is one of those global Wall Street talking points. It doesn't tell us why they are too big to jail-----but it is tied to these INTERNATIONAL ANTI-TRUST MONOPOLY LAWS AND US JUSTICE LENIENCY LAWS we shared today.We didn't prosecute UK and Scottish banks tied to massive frauds in the US because they would then prosecute US banks for doing the same in UK. We didn't jail Wall Street bankers because of the new INTERNATIONAL LENIENCY LAWS IN MONOPOLY AND ANTI-TRUST ENFORCEMENT. When national media uses these terms TOO BIG TO JAIL----they are failing to educate the American people on public policy DELIBERATELY.
BILL BLACK as KRUGMAN/ROBERT REICH-----all names tied to being populist or left economists -----all know these global Wall Street pols are acting illegally in re-writing our anti-trust monopoly laws. THEY ARE NOT LEFT SOCIAL PROGRESSIVE MEDIA VOICES----please be that voice in educating on public policy for WE THE PEOPLE.
'Holland: Right. “Too big to jail.”
Black: Right, too big to jail. I actually developed that phrase before this as a way of trying to embarrass the administration. But I’ve given up. They’re beyond the ability to embarrass. They adopted the phrase'.
Hundreds of Wall Street Execs Went to Prison During the Last Fraud-Fueled Bank Crisis
September 17, 2013
by Joshua Holland
This combination of Associated Press file photos shows, left, Patrick Kenny a Specialist of Lehman Brothers working his post on the trading floor of the New York Stock Exchange on Monday, Sept. 15, 2008, and right, the Lehman Brothers headquarters Monday, Sept. 15, 2008 in New York. (AP Photo)September 15th marked the fifth anniversary of Wall Street giant Lehman Brothers going into bankruptcy, which precipitated the Great Recession that lingers on today — it remains the largest bankruptcy in U.S. history. To date, no executives have faced prosecution for the widespread mortgage fraud that fueled the bubble.
Moyers and Company caught up with a man who knows a lot about fraud — and fraud prosecutions — to explain why that is, and what the possible consequences of letting Wall Street off the hook might be. William K. Black, now a professor of law at the University of Missouri at Kansas City, is a former bank regulator who played an integral role in throwing a number of high-level executives in jail for white-collar crimes during the savings and loan crisis in the 1980s. We spoke with Black by phone. A lightly edited transcript of our discussion is below.
Joshua Holland: To date, a few loan officers — small fish — have been convicted of various offenses related to the financial crash. But none of the big bankers have faced any charges. And it’s not that the government has been losing cases in the courts. There’s simply been no concerted effort to prosecute these guys. Can you contrast that with what happened during the savings and loan scandal of the 1980s, and also give us your sense of why this has been the case?
William Black: Sure. The savings and loan debacle was one-seventieth the size of the current crisis, both in terms of losses and the amount of fraud. In that crisis, the savings and loan regulators made over 30,000 criminal referrals, and this produced over 1,000 felony convictions in cases designated as “major” by the Department of Justice. But even that understates the degree of prioritization, because we, the regulators, worked very closely with the FBI and the Justice Department to create a list of the top 100 — the 100 worst fraud schemes. They involved roughly 300 savings and loans and 600 individuals, and virtually all of those people were prosecuted. We had a 90 percent conviction rate, which is the greatest success against elite white-collar crime (in terms of prosecution) in history.
In the current crisis, that same agency, the Office of Thrift Supervision, which was supposed to regulate, among others, Countrywide, Washington Mutual and IndyMac — which collectively made hundreds of thousands of fraudulent mortgage loans — made zero criminal referrals. The Office of the Comptroller of the Currency, which is supposed to regulate the largest national banks, made zero criminal referrals. The Federal Reserve appears to have made zero criminal referrals; it made three about discrimination. And the FDIC was smart enough to refuse to answer the question, but nobody thinks they made any material number of criminal referrals [either].
And what people don’t understand about the criminal justice system is there are roughly a million people employed in it — and of course, millions incarcerated in it. But of the million employees, 2,300 do elite white-collar investigations. And of those 2,300, you have to contrast that to the number of industries in the United States, which is over 1,300. Notice I didn’t say ‘corporations,’ I said ‘industries.’
So a couple of things should be obvious. First, the FBI agents will not have expertise in the industry. And second, they can’t patrol the beat. They have to wait until a criminal referral comes in, and won’t come from the bank itself. Banks don’t make criminal referrals against their CEOs.
It could episodically come from whistleblowers, but against an epidemic of fraud that can never work. It has to come overwhelmingly from the regulators. So when the regulators ceased making criminal referrals — which had nothing to do with an end of crime, obviously; it just had to do with a refusal to be involved in the prosecutorial effort anymore — they doomed us to a disaster where we would not succeed.
Back in the savings and loan crisis, people like me — and I did this personally a great deal of my time — trained not only our regulators, but also the FBI agents and assistant U.S. attorneys on how to identify fraud schemes, how to respond to them and how to document them. We also detailed our top examiners on the most complex frauds, so that they worked for the FBI as their internal experts, and then people like me testified as expert witnesses. And, again, we had prioritized so we were going against the absolute worst of the worst and most senior of the people. None of those things have happened now.
Because of changes in executive compensation, it’s very uncommon for people to blow the whistle in the modern era. What people often don’t understand is that executive compensation bonuses go down very low in the food chain. And so if I’m a boss and I see a crime being committed, it isn’t just that I risk losing my bonus, it’s that Fred and Mary who report to me — Fred with three kids about to go to college and Mary with a kid that has severe problems — they’ll lose their bonuses as well. And so it’s not even my greed — it’s my altruism that gets in the way.
And then the administration has never — both the Bush and the Obama administrations — made a call for the good people to come forward, the ones who fought against the frauds and were disciplined because they did so. And the Frontline special that investigated this found that as soon as word got out, they were deluged with people giving them information, and the common characteristic Frontline found was that the FBI had never even talked to them.
And of course, the Obama administration has been having an unholy war against whistleblowers.
Holland: It almost sounds like — if I could offer an analogy — if you were trying to prosecute homicides and you had no police on the streets, no homicide detectives and no snitches, your hands would be tied, even if you were a tenacious prosecutor with some ambition.
Black: It’s actually far worse than that, because as a prosecutor of those kinds of cases, I end up with a corpse that has a small entry wound and a large exit wound, and I know there’s been a homicide. I can use forensic evidence to go after those people, even in the absence of witnesses. No such things occur in the elite white-collar sphere. Instead, the lenders were making criminal referrals against the little guys — the hairdressers of the world. And they made hundreds of thousands of them.
So at the peak of the savings and loans crisis — again, one-seventieth the size of this crisis — of those 2,300 total FBI agents, 1,000 of them were working on just one industry, the savings and loan industry, to produce that incredible wave of success that we had. As recently as fiscal year 2007, there were only 120 FBI agents assigned to mortgage fraud, and that’s despite the fact that the FBI itself, in September 2004, warned that there was an epidemic of mortgage fraud — ‘epidemic’ was their word — and predicted that it would cause a financial crisis — ‘crisis’ was their word — unless it was stopped. So what happens instead? You get tens of thousands of criminal referrals about the small fish. And so every single one of those 120 FBI agents was working those cases.
Black: And there was no national task force. They were divided up into what the military would call “penny packets” — two in this office, three in this office, that type of thing. So there was no conceivable way that they would find fraud at the large institutions, because they never looked.
And actually, that same year, in 2007, the FBI forms what it calls a partnership with the Mortgage Bankers Association — the trade association of the perps. The Mortgage Bankers Association set out — imagine the audacity — to con the FBI, and they succeeded! They ginned up this fake definition of mortgage fraud under which the lending institution was always the victim and never a perpetrator. The FBI bought into this hook, line, sinker and the boat they rode out in.
So we have the incredible anomaly of the first African-American president of the United States of America, with an African-American attorney general, Mr. Holder, adopting the tea party definition of the crisis, which says that the banks were pure and this is the first virgin crisis, conceived without sin in the executive suites. Instead it’s those nasty ultra-sophisticated hairdressers who conned the poor unsophisticated bankers from Harvard and Columbia and NYU to cause this crisis.
Holland: Right. Conservatives are convinced that the Community Reinvestment Act played a major role, despite a dozen studies showing that it did not, and it’s like a zombie myth. You can stab it and you can shoot it and it just keeps walking.
Black: Look at liar’s loans — these are the loans where you don’t verify the borrower’s income, and the industry’s own experts said that these loans were 90 percent fraudulent.
Study after study after study has shown that it was the lenders who put the lies in liar’s loans — the lenders and their agents — and nobody ever made a bank make a liar’s loan. It has nothing to do with the Community Reinvestment Act. Because the purpose of it is to inflate the borrower’s income, it takes you out of Community Reinvestment, and no entity — and this includes Fannie and Freddie — was ever required to purchase a liar’s loan. In fact, [liar’s loans] didn’t qualify as credit for affordable housing goals because you didn’t verify the borrower’s income.
So after all these warnings from the industry’s own anti-fraud experts about them being 90 percent fraudulent, and the fact that even the Bush Administration anti-regulators said, “Don’t do these things,” the industry, between 2003 and 2006, increased liar’s loans by over 500 percent. By 2006, 40 percent of all the home loans made that year and half of all the loans called “subprime” were liar’s loans. Remember, there’s a 90 percent fraud incidence in all of this. That means there were over two million fraudulent loans made in 2006 alone.
Now, that’s one way of looking at it, but even more stark is, in the year 2000 — we are talking about over 13 years ago — the group of associations of honest appraisers created a petition and circulated it widely throughout Washington, D.C. and the industry. They went to all the regulators and prosecutors in the industry — it was eventually signed by over 11,000 appraisers. And the appraisers, here’s what they said: ‘There is an epidemic of lenders who are extorting us to inflate the appraisal, and when we refuse to do so, they blacklist honest appraisers and refuse to use them in the future.’ Now, note the date again: 2000. This is over a year before Enron hits. In other words, we got a warning about this crisis before Enron failed.
Okay, so what can we figure out from that? Number one: it’s coming from the lenders. Number two: no honest lender would ever inflate an appraisal, because the appraisal is your great protection against loss. So, three: the lenders are inflating the appraisal for a reason, which is to cover up losses on the underlying mortgage fraud that they’re also engaged in. Number four: these loans are being sold in the secondary market, so we know that the fraud is propagating through the system. And the only way you can sell to the secondary market is by making what we call “representations and warranties.” And of course you can’t make a rep and warranty that says, “Hi, I’m selling you a fraudulent product.”
You can only sell a fraudulent loan through fraud, and there’s no fraud exorcist, so fraud has to go through the system and it has to come out the other end when they sell the CDOs — the collateralized debt obligations — and the mortgage-backed securities.
The Home Ownership and Equity Protection Act of 1994 allowed the Federal Reserve, and only the Federal Reserve, to stop liar’s loans at any time. First Alan Greenspan and then Ben Bernanke refused to use this authority. Bernanke, finally, under congressional pressure, used this authority on July 14, 2008, to kill liar’s loans. But even then, he delayed the effective date of the rule by 15 months, because you wouldn’t want to inconvenience a fraudulent lender.
Holland: Unbelievable. Just unbelievable. Let me ask you this: Up until the dot-com bubble burst in 2000, the size of the financial services industry grew and shrank along with the larger economy. It moved more or less with the business cycle. When the economy was booming, finance grew as businesses needed more loans and people wanted to buy big ticket items. And then when we were in a recession, it tended to shrink. But that never happened after the dot-com bubble burst. Finance was about 8 percent of our economy and it stayed that way until today — it had little ups and downs, but the trend line has been pretty consistent. Bill, finance made up less than 3 percent of our economy in 1950. What does this say about where we are today economically? What does this tell you?
Black: It tells us that the tail wags the dog, and that it wags the dog into recurrent crises. So it’s like a diseased tail. A tail is of course designed for balance and it’s supposed to help things right themselves. This tail throws folks into the ditch.
In addition to the numbers you gave, the percentage of all corporate profits that go to finance is now back up to roughly 40 percent. That is staggering.
It should be small, and you should be trying to minimize it, and it should have very low returns overall in your economy. It’s all about power. And it is not just economic power — it’s political power. This is the modern face of crony capitalism. It is the great threat, not just to our economy, but also to our democracy. That’s particularly true in a Citizens United world, in which these banks can use their political power to drive what we’ve seen.
I could’ve never imagined that in my lifetime an administration would actually say that there were entities too big to prosecute.
Holland: Right. “Too big to jail.”
Black: Right, too big to jail. I actually developed that phrase before this as a way of trying to embarrass the administration. But I’ve given up. They’re beyond the ability to embarrass. They adopted the phrase.
Holland: Bill, let me ask you this — and I guess I’m shifting gears here just a little bit. What does the term ‘moral hazard’ mean, and how do you think the fact that we didn’t prosecute any bankers — and that we bailed out the industry — will affect Wall Street’s behavior going forward?
Black: Moral hazard is a concept that developed originally in insurance and was quickly applied to banking as well. It says when there’s a real asymmetry between risk and reward, you can produce either fraud or wildly imprudent risk, or both, and that either of these things in the banking context can lead to disastrous financial consequences.
Even though we have known for centuries that this produces what we who study criminality now call “control fraud” — when the people who control a seemingly legitimate entity use it as a weapon to defraud — suddenly when they get to moral hazard, neoclassical economists only talk about risk. They ignore the fraud component, which is a leading cause of the most catastrophic bank failures and bank crises.
Holland: And they also only talk about it for the little people defrauding the banks.
Black: Right, the hairdressers.
Holland: The hairdressers. They’re the ones we have to worry about.
Black: Yes, and the FBI and the Justice Department are the brave, virtuous people who are protecting the poor innocent bankers from the blood lust — I am quoting, by the way, the Washington Post — “the blood lust of the public” that wants to go after these poor innocent bankers. And fortunately, we live in a country like America, where the lawyers or the Justice Department are unwilling to be so unjust as to follow the crass prejudices of the public.
The failure to prosecute under any theory of economics and any theory of criminality means that the next crisis is far more likely, and that it’s going to be far larger, because this accounting control fraud recipe is a sure thing that guarantees that you will be made wealthy immediately as the controlling officers, and there will be no risk — zero. Not a single elite banker who caused this crisis is in prison, period. So you have absolutely maximized what we call a “criminogenic environment,” and a key element of that, as you say, is that we have taken moral hazard — the fraud dimension — and maximized it.
Holland: My final question is, very briefly, about the regulatory response we did get following the crash. Dodd-Frank has been hailed as a significant new reform by some; it has been panned as a watered down nothing-burger by others. Does the truth lie somewhere in between, and how much risk remains in this system?
Black: Right now, less risk is apparent because the economy is so crippled. Once we get back to a boom, the bad stuff will reemerge. So the good news/bad news about the weak recovery is that it’s slowing down the next crisis by continuing the current crisis.
Dodd-Frank doesn’t address any of the three central elements that create the criminogenic environment — that produce the recurrent, intensifying epidemics of control fraud that drive our ever-worsening crises. Those three elements are, first, the creation of the systemically dangerous institutions — the so-called “too-big-to-fail” firms. And the administration won’t even begin to be honest about them. It calls them “systemically important,” like they deserve a gold star. But their definition is when — not if, but when — the next one fails, it will, like Lehman, cause a global financial crisis.
These institutions are too big to manage effectively, so there would be a complete win-win-win-win were we to force the shrinkage of the systemically dangerous institutions down to the point where they no longer endanger the global economy. We would, first, reduce global systemic risk. Second, we would make markets far more efficient. Even conservatives say that when there’s a systemically dangerous institution, free markets are a myth, and their metaphor is that it’s like bringing a gun to a knife fight when they compete against anyone else. So we would have better markets. We’d have more efficient banks, because these are too big to manage, and we would remove crony capitalism, one of the leading threats to our democracy. Dodd-Frank doesn’t deal effectively at all with the systemically dangerous institutions. Its idea is to keep them around, which is nuts.
Second big thing is modern executive compensation, which creates the perverse incentive structures and is the means of looting that the CEOs use. That has gotten worse since the crisis and there is nothing effective in Dodd-Frank dealing with either executive or professional compensation.
The third area is what we call the three Ds. These are deregulation, de-supervision and de facto decriminalization. We’ve already talked about decriminalization, so that’s as bad as it can get. No prosecutions.
Deregulation, that’s slightly been reversed. We have banned liar’s loans. We have created a new consumer bureau that, you know, time will tell whether it can be effective. But that’s pretty much it in terms of regulation. There’s stuff on the Volcker Rule, and we still don’t know whether it’s going to get out of the industry’s embrace, but we certainly know they’ll be able to evade it under Dodd-Frank. So, deregulation, a little plus, but nothing to brag about.
De-supervision is still disastrous. We still have the Holders of the world refusing to prosecute, we still have anti-regulators in most of the agencies. So de-supervision? Boy, we’ve still got that in spades.