Last week, the Obama Administration continued to lay down a smoke screen to hide its negligence when it comes to investigating the criminal acts which caused the subprime crisis. The Securities and Exchange Commission and the Department of Justice announced civil lawsuits against Bank of America and JP Morgan Chase, but neither of these civil cases is really worthy of mention.
William Black, 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, wrote a scathing assessment of what he calls the DOJ’s “pathetic” lawsuit on Alternet:
The Department of Justice’s (DOJ) latest civil suit against Bank of America (B of A) is an embarrassment of tragic proportions on multiple dimensions. I’m “only” going to explore seven of its epic fails here. There are many more. The two most obvious fails (except to most of the media, which failed to mention either) are that the DOJ has once again refused to prosecute either the elite bankers or bank that committed what the DOJ describes as massive frauds and that the DOJ has refused to bring even a civil suit against the senior officers of the banks despite filing a complaint that alleges facts showing that those officers committed multiple felonies that made them wealthy by causing massive harm to others. Those two fails should have been the lead in every article about the civil suit.
Bill Black knows his topic. He spent years working on regulatory policy and fraud prevention as executive director of the Institute for Fraud Prevention, litigation director of the Federal Home Loan Bank Board and deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions. Black continues:
The complaint makes it clear that DOJ still is clueless about mortgage fraud schemes in origination and the secondary market. They continue to ignore the “recipe” for “accounting control fraud.” The fundamental fact is that B of A’s officers frequently shared a community of interest with the officers controlling the firms that purchased B of A’s fraudulent loans sold through fraudulent reps and warranties. The fraud recipe’s four ingredients are so similar for the officers controlling the lender and the purchaser of loans that both gain at the mutual expense of their firms.
Strangely, nobody inside the Obama DOJ seems capable of understanding the concept of criminal financial fraud. Likewise, the big media at The New York Times and The Wall Street Journal seem to miss the point of Obama’s latest act of inaction with respect to the moved movers of the subprime mess. Indeed, the media treat the Obama Administration’s civil lawsuits like they actually matter. My friend Gretchen Morgenson, for example, reported Sunday in “The Housing Market Is Still Missing a Backbone”:
A CIVIL case filed by the Justice Department last week against Bank of America highlights the downside of nondisclosure. In that matter, prosecutors accused the bank of misleading investors when it sold them a mortgage security in early 2008. Although the bank contended in marketing materials that the security contained prime loans that met its underwriting standards, more than 40 percent of those loans did not comply with those standards, prosecutors said.
Thus while the Obama DOJ is seeking civil sanctions against BAC for failure to disclose, the more significant, arguably criminal acts of fraud committed by the officers of the bank are going unpunished – and, indeed, are entirely unchallenged by the SEC and DOJ. Morgenson reports that “the Justice Department contends that the bank failed to disclose important facts to investors about the quality of the mortgages in the $850 million pool, which wound up performing badly. As of June 2013, prosecutors said, 15.4 percent of those mortgages had defaulted, indicating that they were of a far lower quality than advertised. The Justice Department estimates that investors will lose more than $100 million on the deal.”
And yet there are no individuals mentioned in the DOJ complaint.
The latest civil lawsuits by the SEC and DOJ illustrate the fact that Barack Obama really is a puppet of the largest Wall Street banks. The ties between President Obama and people like former Treasury Secretary Tim Geithner, former Treasury Secretary Larry Summers and their political sponsor, former Treasury Secretary (and Goldman Sachs CEO) Robert Rubin, tell you all one needs to know.
Both Summers and Geithner have said publicly that we cannot prosecute the individuals who caused the subprime crisis. Why? Because of “systemic risk.” Echoing Geithner and Summers, Attorney General Eric Holder said in testimony before Congress in March 2013:
I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.
So long as Bob Rubin and his political creatures like Geithner and Summers continue to call the shots, indirectly, on financial policy within the Obama White House, there will be no progress on bringing those responsible for causing the subprime crisis to justice.
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