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TRNN regular contributor Bill Black discusses his role in a major legal victory in which lenders were found to have ignored gaping holes and blatant lies in loan applications

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JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore. And welcome to this edition of The Black Financial and Fraud Report.

Now joining us is Bill Black. Bill teaches law and economics at the University of Missouri-Kansas City, and he’s the author of the book The Best Way to Rob a Bank Is to Own One. And he’s also a regular contributor to The Real News.

Thanks for joining us, Bill.


DESVARIEUX: So, Bill, you recently got back from Sacramento. What were you doing out West?

BLACK: Well, going to the front lines of the Justice Department’s supposed war on mortgage fraud, in one of the epicenters, which is Sacramento, California. And just a bit of background. This happens to be the place where the U.S. attorney, Benjamin Wagner, is the most senior prosecutor in the entire national mortgage fraud task force by the Justice Department. And he’s the one famously that said it didn’t make any sense to him that there could be such a thing as accounting control fraud, because they would never steal from themselves, okay? And he apparently thinks that the banks and the bankers are the same thing. But it’s all very confused. And I wrote to him [snip] but he corresponded. And so his office has led the nation in bringing mortgage fraud prosecutions against some very small-time folks and in not investigating and prosecuting a single elite bank or bankers.

I was asked about five weeks ago to come out by the defense team for four of these alleged fraud mice while the fraud lions roamed the campsite, and I had to scramble and learn about the case. And we put on the most remarkable defense that’s ever occurred during these mortgage fraud cases. And that defense was that it was actually the banks who were criminal enterprises. And so it was a very bizarre thing, in which the defense attorneys were presenting a prosecution case against the elite bankers and the institutions and how they were run, while the Justice Department was trying to defend three lenders that it knew were front-to-back frauds and indeed are on the list of the worst of the worst lenders, according to the Office of the Comptroller of the Currency. So everything was reversed during the trial.

DESVARIEUX: What were those three lenders, Bill?

BLACK: Well, the three lenders that I’m talking about primarily–there was a fourth, which is a subsidiary of Wachovia. But the ones I spent most of my time testifying about were GreenPoint and Aegis and Ownit. And probably almost nobody in the listening audience has ever heard of any of them, but two of the ones I listed where at various time periods among the top 20 makers of liar’s loans in the country.

And I think you’ll be able to add to your website soon what became our method of explaining this to the jury–of course, not financial experts. And it was an advertisement by GreenPoint designed for loan brokers to add their own names to it and ship this advertisement out to regular people to become customers, and it has the famous three monkeys, right? One covering the eyes, the other the ears, and the other the mouth. And, of course, that is supposed to mean hear no evil, speak no evil, see no evil. And they decided to use that as their symbol. What they say is, see no income, hear no job, speak no assets. So this is a NINJA loan–no income, no job, no assets.

And, of course, we were making the point that no honest lender would ever loan money under conditions like that, but that fraud and accounting control fraud would find it optimal to make loans that way. And, you know, I’ve gone through the fraud recipe many times. That creates the sure things that the bank will report immediately record profits–they’re fictional reports, but they trigger the second sure thing of massive compensation. So it’s a sure thing that the CEOs would be wealthy. And the third sure thing is [snip] loss. Four of these lenders produced exactly that fraud pattern.

Anyhow, the cases out in Sacramento have routinely been coming back with guilty verdicts, often within an hour. In other words, the jurors view them as slam dunks. But in this case, the jury came back with not-guilty verdicts for all defendants on all charges. And, of course, we made the point that the Justice Department ought to be prosecuting the senior officers that led these huge criminal enterprises. And most of us, the times we’ve talked, we’ve been saying the Justice Department has not prosecuted any elite bankers–and that’s true–for their role in causing the crisis.

But it’s actually worse than that. This is a different level. This is mortgage banks that most [snip] people [snip] heard of [snip] has been prosecuted either. And all of this was happening in the same week that The Wall Street Journal ran an op-ed blasting the Justice Department not for failing to prosecute, but having the audacity to even bring a civil action against the banks that caused these frauds. So The Wall Street Journal is in there fighting for complete immunity for the banksters and the banks who grew wealthy by causing this financial crisis.

But in Sacramento, a jury of 12 regular Americans started a counterattack on behalf of the rule of law and the need for the same standard of justice for everyone.

DESVARIEUX: Well, Bill, congratulations on winning your case. And we’ll certainly keep track of all of these other developments. Thank you so much for being with us.

BLACK: One trivial addition. I did all of this without charge.

DESVARIEUX: Alright. Bill black, thank you again.

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


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

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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.