William K. Black, J.D., Ph.D. is an Associate Professor of Law and Economics at the University of Missouri-Kansas City. According to his website Financial Sense, Dr. Black was the “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.”
Recently, Dr. Black has written a 3-series set of essays that center around the theme that President Obama and his Attorney General Eric Holder refuse to prosecute “elite banksters,” a decision that follows the policy of the previous Bush Administration.
For your reference, please go to this link on the FBI’s website to read the “2010 Mortgage Fraud Report: Year in Review.” You will notice immediately when you enter the FBI’s website that it issued Mortgage Fraud Reports for five consecutive years, from 2006 through 2010, but has been awkwardly silent for almost three years.
This report can also be found, and is discussed, in my book “How to Commit Short Sale Fraud . . . and Get Away with It,” albeit from a different perspective. My own inquiry to the FBI confirmed that there have been no mortgage fraud reports by the agency since the 2010 report and the FBI apparently has no plans to publish any future similar reports. This fact alone gives credence to Dr. Black’s accusation that the Obama Administration, including the Department of Justice, has no interest in holding the banks accountable for the bulk of the mortgage crisis.
The first of Dr. Black’s articles is titled “The FBI’s 2010 Mortgage Fraud Report Reveals Why the Banksters Love Holder” and is published on New Economic Perspectives. I will attempt to summarize the key points of this first article, as follows:
- Both the Bush II and Obama administrations have had a hands-off policy with respect to prosecuting C-suite bankers for their role in precipitating the mortgage crisis, i.e., making subprime loans and “Liar’s Loans” not only possible but ubiquitous;
- Both administrations are adherents to the “cult of the Virgin Crisis” – that is, the mortgage crisis emanating from throwing caution to the wind and revising centuries-old tried-and-true underwriting practices was unforseeable, which many of us in the real estate and mortgage industries find incomprehensibly naive;
- As such, “the rule of law no longer applies to wide ranges of life and that crony capitalism will continue to reign.”;
- The Federal Reserve, the FDIC, the OCC (Office of the Comptroller of the Currency), and OTS (Office of Thrift Supervision) are all banking regulatory agencies, yet none of them contributed information regarding reporting of mortgage fraud to the FBI. Nor has the SEC proven to be anything short of worthless in protecting American citizens and residents from abuses (“control fraud“) by the banks;
- Honest appraisers and white-collar criminologists who approached the above agencies, including the FBI, to warn of post-Enron control fraud by banks were ignored.
- MARI, the Mortgage Asset Research Institute, “had warned the entire mortgage industry (and the FBI) that the incidence of fraud in liar’s loans was 90 percent.”
- Benjamin Wagner, the U.S. Attorney for the Eastern District of California, does not prosecute bank executives because he apparently doesn’t believe banks would deliberately underwrite fraudulent loans. “It doesn’t make any sense to me that they would be deliberately defrauding themselves,” says Wagner, quoted in Dr. Black’s article.
In his second article, “The Incredible Con the Banksters Pulled on the FBI,” Dr. Black states what is obvious to all except state and federal prosecuting agencies: “banks will not make criminal referrals against their own CEOs.” Obviously, then, “criminal referrals have virtually vanished against the ‘accounting control frauds’ that drive our recurrent, intensifying financial crises. ” To prove his point, he cites the investigative reporting of Huffington Post report David Heath, as well as the 1993 article by George Akerlof and Paul Romer called “Looting: The Economic Underworld of Bankruptcy for Profit”. The sum of all three writers is that since there is no required reporting by banks of criminal activity of their executives, criminal behavior by bankers (aka “banksters”) is now “epidemic.”
Dr. Black posits that the above named federal regulatory agencies failed to provide the FBI with evidentiary findings of fraud, leaving the FBI dependent on either the non-existent self-reporting or that of whistleblowers. I can personally confirm that at least one of the offices of the California Department of Justice (California Attorney General) claims to be interested in prosecuting banksters to the exclusion of what they consider to be minor crimes, such as the expanding epidemic short sale fraud, but astoundingly thinks they are going to get evidence of said crimes from “insiders,” meaning whistleblowers. As evidence of the logic of their thinking, not a banker in California has been criminally prosecuted, to my knowledge.
So, with $25 million in its pocket from its 50-state settlement with the largest banks, what is the Office of the California Attorney General doing to protect homeowners by punishing banksters? As far as I can tell, very, very little.
And the FBI? According to William Black, the FBI got “conned” by the Mortgage Bankers Association (MBA) – the trade association of the “perps,” by convincing the feds to “partner” with them on posters and alerts to warn lenders about how lenders are “victimized” by borrowers submitting fraudulent loan applications. In other words, if an individual borrower lies on a loan, this is a crime against the banks, but both sides were comatose in discussing the other side of the issue: that the banks engaged in robosigning, “lost” paperwork on homeowners’ loan applications, fraudulently foreclosed on homeowners and lied to investors about the toxic assets sold to institutional buyers. And certainly not a single sentence about control fraud committed by the banks, aka accounting fraud.
Coming: more reporting on William K. Black’s series of articles describing how state and federal government has abandoned homeowners by permitting control fraud by bank executives.