Government Action Against Big Finance Criminals?

Broadly speaking, Washington appears to be in collusion with Big Finance, leaving the two of them in collision with The People. But collusion with the super-rich may be going out of favor…”maybe.
Some evidence exists that government is becoming fed up with the excesses of the super-rich. Assessing this evidence requires scrutiny of the details and attention to the results, specifically convictions, penalties actually paid, and the rank of those jailed and required to pay back fraudulent earnings. That said, here is some evidence for your consideration:
1.      Attorneys General of All 50 States Cutting Deal
As the evidence that the 50 state attorneys general pressuring the big banks are moving toward cutting a very pro-bank deal, some of the more courageous and patriotic attorneys are staking out independent positions, wherein may lie the best hopes of society for holding Big Finance responsible for the financial crisis that it, in close cooperation with government regulators and Congress and the White House and the semi-governmental Fannie Mae, brought us. One of the most recent examples is an Oct. 5 statement by Massachusetts Attorney General Martha Coakley:

I have lost confidence that the banks will bring to the table an agreement that properly holds them accountable for wrongful foreclosures….Because our office for some time has anticipated that result, we have begun preparing for litigation. [New York Post 10/6/11.]

 2. Federal suit against Allied Home Mortgage

[the Government sued] Allied Home Mortgage Corporation; its founder, Jim Hodge; and Jeanne Stell, the company’s executive vice president and director of compliance….The lawsuit said the default rate climbed to “a staggering 55 percent” in 2006 and 2007, at the height of the housing boom, when the government paid $170 million to settle Allied’s failed loans. It said an additional 2,509 loans are now in default and that HUD could face $363 million more in claims.
Allied, based in Houston, operated 600 or more branches at once but only maintained two quality control employees in its corporate office, requiring branch managers to assume financial responsibility for their branches, the lawsuit said.
“Allied thus operated its branches like franchises, collecting revenue while the branches were profitable, then closing them without notice when they were not, leaving the branch managers liable for the branch’s financial obligations,” the lawsuit said.
The government said Allied had failed to impose its internal quality control plan, “effectively allowing its shadow branches to operate independently of any scrutiny whatsoever,” the lawsuit said. [New York Times 11/1/11.]

Question: Will they settle out of court and let the bad guys get away?

3. FHFA Sues Major Banks

The Federal Housing  Finance Agency is suing 17 major banks for “selling Fannie Mae and Freddie Mac $200 billion worth of sub-par mortgage-backed securities.” [ 10/24/11.] The parties are currently under the judge’s guidance to organize the mammoth suit.

Question 1: Will the semi-government officials who were running Fannie Mae and Freddie Mac at the time also be tried for their role in this fraud?

Question 2: Why were some big banks that seem obvious candidates omitted from the suit?

Suggestive evidence perhaps, but not much substance yet. Exactly which politicians are defending the banks and which are defending the people is very difficult to determine. Watch for deals, convictions, individual penalties, relationship between fines assessed and the profits derived from the original frauds.

Creating Enemies

Undermine their democracy movement. Install a dictator. Pump him full of weapons. Ignore the complaints of the people until they turn in desperation to a religious extremist who kicks you out. Support the invasion of a vicious neighborhood dictator. Threaten the dictatorship, shoving it further to the right. Slap it in the face for any show of moderation -it must be a trick! Build up a local nuclear client; hand it a nuclear monopoly; encourage its nuclear threats. Deny your enemy the right of self-defense. Make your own threats. Make the leaders extreme and solidify their control. Overstate the enemy’s power. Scare everyone. Release reports claiming that the enemy “might” have something or “might” be thinking about something. Trim social services to pay for more weapons, and transform the CEO’s who provide them into multi-millionaires. Thank you, Mr. Extremist Third World Dictator. If you did not exist, we would have had to create you.

Do Not Mention the War

Political correctness is a pretense of politeness covering for abuse of power, and the most taboo of all the politically correct taboos is reference to the war that the super-rich and their political lackeys are so successfully fighting against the other 99.9%. Is it really a case of government-corporate collusion to defraud and rob the people? To answer that question, you need to look at the details.

The Department of Defense has admitted that it spent $285 billion on contracts between 2007 and 2009 with corporations “that defrauded the Pentagon during the same period’ [“Release: Pentagon Spent Billions on Contractors that Committed Fraud,” Senator Bernie Sanders’ website 11/7/11].

The preliminary report detailed how the Pentagon spent $270 billion from 2007 to 2009 on 91 contractors involved in civil fraud cases that resulted in judgments of more than $1 million. Another $682 million went to 30 contractors convicted of hard-core criminal fraud in the same three-year period. Billions more went to firms that had been suspended or debarred by the Pentagon for misusing taxpayer dollars.

The record of fraud includes repeated cases of fraud, convictions, and settlements by the three largest military contractors, all of which of course continue doing billions of dollars a year in government business worth vastly more than the penalties they paid. Defrauding the U.S. Government is extremely profitable business even when convicted.

Over the three year period from 2007 to 2009, 30 DOD contractors were convicted of criminal fraud. Despite these criminal convictions, these contractors were awarded $682,141,708 in contracts during the same three year period…

Over the three year period from 2007 to 2009, hundreds of contractors were found to have committed fraud in connection with a DOD contract. This apparently did not affect DOD’s contracting behavior, however. During that same three year period, DOD awarded $285 BILLION in contracts to the same companies!

War profiteering was of course not limited to fraud against Americans. It also continues to occur where the war was fought. Recent release by the petroleum industry watchdog Platform of secret contract renegotiations between British Petroleum and the government of Iraq show that BP succeeded in transferring:

the most significant risks from BP/CNPC to the Iraqi government, making the contracts considerably more attractive to the companies. In all of these changes, it is the Iraqi side that loses out. As a result of the enhanced compensation provisions, the Iraqi government could find itself payingBP/CNPC (and likely other companies) even when it is not earning oil revenues to offset those payments. Meanwhile, the changes undermine the Iraqi ability to ensure that it achieves value for money, and that oil is developed in the national interest. [“From Glass Box to Smoke-Filled Room,” Platform.]

An analysis of the growing disparity between the richest and the rest in the U.S. reaches this conclusion:

A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. [G. William Dornhoff, Who Rules America?]

In a brief, trenchant historical review of the post-1970 war of aggression by the rich against American society, Bill Moyers sums up American democracy:

Our politicians are little more than money launderers in the trafficking of power and policy… [The Nation 11/21/11.]

These are the reality of a system that offers incentives for short-term thinking that attacks the long-term interests of society for elite profit. The super-rich, essentially those with annual incomes in the $25 million range are not rich because they are smart or work hard; that kind of wealth requires a triple fix—1) welfare for the rich, 2) an avoid-jail-free card, 3) endless war—and the fix is in.

Clear Financial Thinking from Washington

It is not fair to criticize Washington endlessly. Here is one example of clear thinking.

If you look carefully, you can find patriotic and intelligent members of the U.S. government who are not afraid to spell out clear priorities that address national problems. Consider Representative Marcy Kaptor of Ohio, who makes this cogent statement on her website about the state of reform of the corrupt U.S. financial system:

The Dodd-Frank Wall Street reform bill did not go far enough in addressing the challenges facing our financial system. For example:

• It did not replace and strengthen Glass-Steagall, separating commercial banking from investing or speculation.
• It did not reform the credit rating agencies, which had a starring role in the misdirection of investors, including the fundamental business model of the credit rating agencies.
• It did not force every derivative to be traded openly and transparently on an exchange.
• It did not end too big too fail.
• It did not prevent Wall Street banks from replacing community banks.
• It did not encourage prudent lending.
• It did not strengthen support for those agencies finding and fighting fraud in our financial system.
• It did not properly address the housing crisis. 

People of Ohio, you are blessed to have someone actually worth voting for. (Yes, yes, I know Dennis Kucinich is also from Ohio – imagine two candidates worth voting for!)

If the reference in Point #1 to Glass-Steagall, the critical Depression Era legislation that protected your bank account from financial fraud for half a century until eliminated by a cabal of Washington lackeys serving Big Finance at the turn of the century, leaves you confused, read “Another Weapon for OWS: Pull Your Money Out of BoA.”

Concerning “too big to fail,” see “Too Big to Exist.”

More Bank Fraud

The latest bank scandal, concerning Belgium’s Dexia, suggests that Europeans learned nothing from the 2008 financial crisis brought to them by the U.S., and now it’s our turn to get the favor returned.
You may not care about every little example of criminal collusion between rich bankers and politicians who conveniently (for their careers) govern for the good of those same rich bankers, the whole group carefully practicing joint fraud for profit and using taxpayer funds to pay themselves back whenever they gamble wrong and lose money.
No doubt even that one sentence has made your eyes glaze over. So stop reading if you dont really want to know the tawdry details of the latest government bailout of a bank Belgiums Dexia. Just realize this: Dexia is spelled A.I.G, and when A.I.G. collapsed in 2008 and was be bailed out by U.S. taxpayers (courtesy of Bush and Obama), the end result was some 10,000,000 unemployed Americans and a pile of foreclosures so big that those houses are still sitting empty and rotting. Unless you were on the moon for the last three years, you already know this story and can guess where we are, once again, headed, so I will not bore you with the details about Dexia.
The bottom line is that Europe evidently learned nothing from watching U.S. politician-banker complicity in fraud at popular expense in 2008, even though the resultant financial crisis hit them. Now it is the turn of the U.S. to be hit by European politician-banker complicity in fraud:
  • Bankers are still committing financial fraud;
  • Politicians are still covering up this fraud even when reported by government regulators;
  • When the bills come due at these gambling firmsah…“banks, governments are still handing taxpayer funds to the banks and allowing the criminals to walk away with their pockets stuffed full of what amounts to stolen cash.
So here we go again. You may wish to stockpile some canned food, buy some non-Monsanto vegetable seeds, and start building a greenhouse. If you are a pessimist, you may wish to hire someone to dig you an old-fashioned well with a bucket (you know, the kind of well from which you can get water even if the electricity fails because, say, of social disruption and the interruption of government services).
READINGS: For those of you who are masochists, further details are available via The New York Times, an Icelandic financial blog, the French paper Liberation, and this blog. Warning consumption of these items during meals may cause serious gastro-intestinal upset.

On the secret bailouts Washington handed U.S. banks (beyond the well-publicized TARP bailout), see “Which Bank Is the Worst…”; for brilliant graphs showing the degree to which the rich are stealing the American Dream away from the other 99%, see “The Shocking Graphic Data….”

On the confused, corrupted, and weak-kneed effort of the 50 state attorneys general to hold Big Finance to account, see the critically important analysis by Adam Levitin, “The Sweep It Under the Rug Housing Plan.” Levitin sums up the situation facing U.S. society nicely:

Who should pay? This is basic justice. Those who broke the economy should pay to fix it.  You break it, you take it. We bailed out the banks because they are indispensible to the economy as a whole, but that doesn’t mean that they shouldn’t have to pay now. $20-25 billion is a fine price tag for robosigning. But this isn’t and shouldn’t be about robosigning. Robosigning was symptom of a much larger endeavor in reckless lending, in which corner cutting was the order of the day, from MERS to securitization paper work to no-doc loans.  All of this was done to maximize profits and to enable a housing bubble that was hugely profitable to a limited number of financial institutions and with extraordinary collateral damage.  Simply put, there needs to be accountability for blowing up the economy.

Pursuing Financial Criminals

Judicial movement against some of the institutions that created the financial crisis are intensifying, although so far there is little indication that individuals in the financial corporations, much less the Government, will be held responsible. Despite these limitations, this process is a bellweather of the health of our democracy and merits close attention. With luck, we will all eventually have a clearer indication of the degree to which the appearance of fraud reflects reality even if the degree of corporate-government collusion remains concealed by the fog of politics.
  1. The SEC sued Goldman Sachs for fraudulent betting against its own customers in 2010. Goldman settled a few months later, paying a half billion dollar fine.
  2. The National Credit Union Administration (NCUA) sued Goldman Sachs for misrepresentation in August 2011. The NCUA is the Federal credit union regulator. This is its fourth suit flowing from financial schemes that contributed to the recession.
  3. Goldman Sachs and two other firms agreed in August 2011 to cease foreclosure fraud and compensate victims.
  4. A class action suit was filed against Goldman Sachs in August 2011.
  5. The Federal Housing Finance Agency, which regulates Fannie Mae, is bringing suit against 17 banks and mortgage firms, including Goldman Sachs, Bank of America, JP Morgan Chase, and Deutsche Bank, and Countrywide Financial.

It is also unclear how many of the victims of the financial scheming will be compensated.