No Evidence Justice Dept. Will Prosecute U.S. Banks Responsible for Financial
Bill Black: Although Attorney General Holder says no bank is too big to prosecute,
the Justice Department will be going after foreign banks instead of making an
example of the leadership behind the financial crash - October 3, 14
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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.
Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.
Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this edition of the Bill Black report. Now joining us is the man behind the report, Bill Black. He's an associate professor of economics and law at the University of Missouri-Kansas City. He's also a white-collar criminologist and a former financial regulator and author of the book The Best Way to Rob a Bank Is to Own One. And, of course, he's a regular contributor to The Real News. Thanks for joining us, bill.BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you. Greetings from Guayaquil, Ecuador.DESVARIEUX: Greetings from Baltimore. So, Bill, Attorney General Eric Holder recently signaled that he would be going after big banks for criminal charges. As most of our viewers know, no bankers have ever been criminally prosecuted for the financial crash. Let's take a listen to what Eric Holder had to say.~~~ERIC HOLDER, U.S. ATTORNEY GENERAL: There is no such thing as too big to jail. Some have used that phrase to describe the theory that certain financial institutions, even if they engage in criminal misconduct, should be considered immune from prosecution due to their sheer size and their influence on the economy. That view is mistaken.~~~DESVARIEUX: So, Bill, this sounds like good news for folks who are looking to go after banks. What's your take?BLACK: Well, I think it is good news, in the sense that the prior news was terrible, because, of course, the guy that came up with too-big-to-prosecute was the attorney general of the United States of America, Eric Holder. And that is a complete repudiation of the rule of law, that it doesn't apply to certain elites. As you noted, the track record is clear: they have not prosecuted any of the elite bankers whose frauds caused the crisis. But you look below the surface, what you're going to see is this is a press offensive by the Attorney General, and if he spent, you know, one-twentieth the effort actually prosecuting that he spends in trying to spin the news, we might actually get somewhere. The context of this is that he's saying, we are going to prosecute two banks. Both of them are foreign banks--Credit Suisse and Paribas. And both of them, the frauds had nothing to do with what caused the crisis. So Holder's record of batting .000 is going to remain intact even if they prosecute these places. And Holder isn't talking, at least publicly, about prosecuting the elite officers who led the Credit Suisse frauds and the Paribas frauds, and he isn't talking about clawing back the proceeds of their crimes. So there's no evidence that there's going to be any individual deterrence, which is what you need to be effective. He's continuing his whine offensive. So he, you know, keeps going on about how hard it is to bring cases. But, again, that's true. Prosecuting elite white-collar crime is a very difficult process. And that's why you do the hard things to make it successful. And one of the things that he would have done if he was really trying to be successful is make a plea for whistleblowers to come forward and for the regulators to reinstate the criminal referral process that was so effective in the savings and loan debacle.DESVARIEUX: I mean, Bill, you were a part of that savings and loan debacle that you just described. What role do regulators--being that you were a former financial regulator, what role do they have in all of this?BLACK: Well, they--and this crisis has proven it, just like the savings and loan crisis proved it in reverse. Regulators are essential--not important; essential--to any strategic success against these kind of elite frauds. In the savings and loan debacle, I know viewers have heard the number: over 30,000 criminal referrals by our agency, over 1,000 felony convictions just in cases designated major. In the current crisis, zero criminal referrals, zero successful prosecutions. But it's worse than that, because Holder and statements from a prominent U.S. attorney that's been doing the insider-trading cases, Prete Bharara, have made it clear that they're now blaming their failure on the regulatory agencies. They're claiming that, hey, we at the Department of Justice were all set to prosecute, and the regulators said, oh, don't, it might cause a world crisis. But now we've met with them. Holder said it would have been irresponsible to prosecute if you didn't know whether the regulators would respond by yanking the bank charter of the banks were you to get a conviction. Now, step back. Remember the context of all of this is Holder saying, hey, new strategy, the rule of law is going to apply to everybody, or at least to big banks, except that he immediately admits it doesn't, that if the Comptroller of the Currency, for example, says, if you, the Justice Department, get a conviction against JPMorgan, I will have to pull the charter (that's the authority for the bank to operate). And if that happens, JPMorgan will fail, and it will cause the next Great Depression. Right? So Holder is saying, it'd be irresponsible of me to follow the law if following the law would be disastrous. Now, again, this is all a silly, fake choice, because you can always prosecute the CEO, which is where you get the real deterrence. You don't have to prosecute the bank. So they're still not thinking like prosecutors and they're still not thinking like effective regulators. And Bharara noted this, saying that the regulatory agencies had the information establishing criminal conduct, and that they needed to work on cooperation. In other words, the criminal referral process still doesn't exist. In other words, where we as regulators made our top priority pushing the Department of Justice to prosecute, the current group of anti-regulators continues to urge restraint or even stopping the prosecutions of the elite banks and bankers.DESVARIEUX: I mean, that always leads to the question, Bill, of why, because it's not like they don't have the formula already. You yourself did it. You know, people know how to go after banks, they know how to go after people who commit fraud. Why is it that at this stage the regulators aren't acting like regulators and the prosecutors aren't acting like prosecutors?BLACK: Well, neither of--both of them were appointed to have a strategic failure, and they're delivering that for the leading political contributors and such. They simply got too much political heat when tkihey were too blatant about it. At first Lanny Breuer, then the head of the Criminal Division, and Eric holder basically said that they had a too-big-to-prosecute doctrine. So they've been trying to walk it back ever says.DESVARIEUX: Alright. And what about our viewers that might be listening to this and who are so frustrated with this current situation? What could they possibly do to maybe even push this along?BLACK: Well, demand that they bring the criminal prosecutions. That had--what--is what produced Department of Justice action in the savings and loan debacle. Now, it was helped greatly by the fact that we had tens of thousands, ultimately, of criminal referrals piling up that were not being investigated by the Justice Department. But that became a political scandal. And so we need Elizabeth Warren to make this one of her leading things that she hammers them with basically every day and to hold hearings in the Senate about the failure to reestablish the criminal referral process and to provide the Justice Department both the expertise and kick in the butt that regulators have to provide if they want to get prosecutions.DESVARIEUX: Alright. Bill Black, thanks for joining us, even though you're all the way and Ecuador. Thanks again for being on the program.BLACK: Thank you. Take care.DESVARIEUX: And thank you for watching The Real News Network.
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