NO ADVERTISING, GOVERNMENT OR CORPORATE FUNDING

  • Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics


  • Who Is the Unsung Hero of the $7 Billion Citigroup Settlement?


    Bill Black says that a just settlement would include criminal prosecution of senior Citigroup officials who led the fraud and covered it up -   July 15, 2014
    Members don't see ads. If you are a member, and you're seeing this appeal, click here

    Audio

    Share to Facebook Share to Twitter



    An awesome daily supply of genuine, un-spun world news - Chris Attwell
    Log in and tell us why you support TRNN

    Bio

    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.

    Transcript

    Who Is the Unsung Hero of the $7 Billion Citigroup Settlement?ANTON WORONCZUK, TRNN PRODUCER: Welcome to The Real News Network. I'm Anton Woronczuk in Baltimore. And welcome to another edition of The Black Finance and Fraud Report.

    Now joining us is 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, a former financial regulator, and regular contributor to The Real News.

    Thanks for joining us, Bill.

    BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

    WORONCZUK: So let's get your take on the $7 billion settlement that Citigroup must pay for its mortgage-backed securities fraud. It's apparently the largest settlement ever levied by the US Department of Justice.

    BLACK: Yes. So first a brief explanation. You've managed to track me down in Breckenridge, Colorado, at about 10,000 feet, after the wedding of our daughter Janina and Kyle. So big mazel tov to the couple--or "molotov," as my brother-in-law said.

    This is the latest in the way of embarrassing settlements by the Department of Justice that they're trying to bill as if they were holding Citicorp accountable. So it's $7 billion. As you say, the $4 billion is a larger number than has previously gone to the United States, but it's not the biggest settlement. The JPMorgan settlement is larger in overall terms. And it really doesn't matter how much goes to the federal government versus state governments in these terms.

    Let me give you two words that you're not going to hear in the coverage of this, and those words are Richard Bowen. Richard Bowen was the whistleblower that made all of this possible, that gave this case on a platinum platter to the Department of Justice. And today the attorney general of the United States, Eric Holder, has given a press conference in which he has never mentioned Richard Bowen's name and has never used it as an opportunity to praise him and to ask other people to come forward and blow the whistle so that we can prevent these kind of crimes.

    In addition, you'll note that there are no criminal charges in this case against the individuals or against Citicorp. And as a result of all of this, all of the individuals who became wealthy through what the Department of Justice describes as an egregious fraud that was followed by a coverup--in other words, multiple felonies--have not been charged at this point, and, frankly, there's no indication that they're about to be charged as well. So the people that committed the frauds get to keep all of the bonuses that were created as a result of those frauds, and it's another disgraceful moment in the chapter of the Department of Justice.

    WORONCZUK: So what would be an appropriate fine or legal punishment for Citigroup's role in this mortgage-backed securities fraud and its role in the financial crisis?

    BLACK: You should be prosecuting the senior officials who led the fraud and covered up the frauds. And we know from Richard Bowen that he sent the memorandum to the most senior people at Citicorp. And our viewers can look at this free online in the report of the Financial Crisis Inquiry Commission. But I can summarize it briefly.

    Richard Bowen was in charge of looking at the quality of mortgages that Citicorp was selling to Fannie and Freddie. And Richard Bowen found that 40 percent of these mortgages were being sold to us under false representations and warranties. And so he warned the senior people and asked them to fix it. They did nothing in response. Richard Bowen and his staff looked again, and the percentage of lies--again, that's a felony--in Citicorp's sales to Fannie and Freddie had risen to 60 percent. He became so frustrated that he CCed Robert Rubin, the former Treasury secretary of the United States of America and one of the most senior Citicorp officials on these letters of complaint. And we know what Citicorp did in response to this, because (a) the Attorney General of the United States has just said that they covered it up, and (b) we know that Richard Bowen was demoted. Virtually all of his staff was removed. I think he had one secretary reporting to him instead of an entire staff of auditors who had found this embarrassing facts.

    So Richard Bowen should be one of the people in America that is best known for his honesty, integrity, and courage in coming forward, and it is a particular disgrace that Eric Holder has never even mentioned his name or given any credit today in his press conference.

    WORONCZUK: And, Bill, can you put this $7 billion, this settlement, in context? How does this compare to the profit that Citibank made off of the mortgage-backed security, as well as to the damage they did to the U.S. economy?

    BLACK: Well, Citicorp doesn't necessarily make profit out of all of this. As I've tried to explain many times, many of these fraud mechanisms involved looting the corporation, which is, again, another reason why the prosecution should center on the individuals, not on Citicorp. After all, this fine is not going to be paid by the officers who are made wealthy by the fraud; it's going to be spayed by the shareholders. And the shareholders frequently already lost money because of the looting.

    But if you ask me what was the damage done by these kinds of frauds, the best estimate of economists right now is that we lost $21 trillion--a trillion is a thousand billion--$21 trillion in lost productivity as a result of the Great Recession that is a direct result of this epidemic of these kinds of fraud. And we lost 10 million American jobs. Now, that's just the American story. In Europe, both of those numbers are significantly larger.

    WORONCZUK: Okay. Bill Black, thank you so much for joining us.

    BLACK: Thank you.

    WORONCZUK: And thank you for joining us on The Real News Network.

    End

    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Comments

    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

    Comments


    Latest Stories


    Venezuelan Gov. Releases Audio of Coup Plotters
    The Greek Debt and the German Acquiescence
    Maryland Police Reform Advocates and Opponents Speak Out Prior to Hearing
    Baltimore College Fights To Keep Accreditation Status
    An Irish-Style Banking Inquiry into the 2008 Financial Crisis
    What Role Can Social Media Play in Supporting Protests Against Egypt's Military Regime?
    Greece Now Positioned to Negotiate a New Loan Agreement
    Netanyahu on a Destructive Path
    Chicago Mayor Emmanuel Forced Into Historic Runoff
    Guardian UK Exposes Horrific Abuses at Police 'Black Sites'
    Greek Reform Proposal Preserves Privatization Commitments, Ignores Debt Restructuring
    The Modern History of the Greek Debt Crisis
    Iran's Intent is the Real Issue, Says Former IAEA Inspector
    Bill O'Reilly May Have Covered-Up a Massacre
    How Radical is the SYRIZA Party in Greece? (2/2)
    Leaked RCMP Report Targets Activists as a Threat to National Security
    European Banks vs. Greek Labour
    What Happened to Making Steel in Baltimore? - Mark Reutter on Reality Asserts Itself (2/3)
    Black, Brown and Woman: Afro-Latinas and Legacies of Imperialism
    Capitalism's War on Democracy
    What Was Missing from Obama's Anti-Terrorism Speech
    Prejudicial Trial, Prejudicial Verdict: $218 Million
    Iceland's Supreme Court Upholds Jail Sentences of Four Banking Executives
    What Happened to Making Steel in Baltimore? - Mark Reutter on Reality Asserts Itself (1/3)
    Will Quantitative Easing Solve the European Economic Crisis?
    Sankofa Dance Theater Marks 25th Anniversary
    TRNN Replay: Wisconsin's Billionaires Make a Sacrifice?
    Malcolm X: The Power Structure is International
    The Rich Hide an Estimated 21 Trillion in Offshore Accounts
    Germany's Collective Denial

    RealNewsNetwork.com, Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting