Bill Black; "In finance, we implicitly assume that transparency also involves providing light."

"(Anyone who has walked into a glass door on a very dark night knows that transparency without light is no great protection.) John 3:20 is also about accountability – the desire of the evil to use darkness to avoid having their evil “deeds” “reproved.” A related verse, from our semi-sacred secular texts, was doubtless influenced by these religious themes – Supreme Court Justice Louis Brandeis’ famous phrase was that “Sunlight is the best disinfectant.”

In finance, because of the deliberate destruction of effective financial regulation by Presidents Clinton and Bush and President Obama’s refusal to recreate it..., our only means of bringing light to the dark places where the elites “doeth evil” is whistleblowers.

...Obama never misses a chance to miss the chance to hold the banksters accountable.

...No one is surprised at Obama and Holder maintaining their perfectly imperfect batting average of .000 – all on called third strikes – against the senior bankers who grew wealthy by leading the three fraud epidemics that caused the financial crisis and the Great Recession. [U.S. Attorney for the Southern District of New York, Preet] Bharara is the shocker, for he has been the proverbial “one-eyed” prosecutor in the valley of the morally blind...

...Two important points of interest along the way are worth noting. The “Deal Book’s” 2012 article unintentionally revealed how depraved the mainstream financial media had become. Upon learning that whistleblower [Edward O’Donnell] (a) had as a bank officer attempted to prevent the fraud and had been retaliated against for doing so, (b) had then brought the fraud to the attention of Bharara, and (c) upon learning the facts from O’Donnell, Bharara viewed the fraud as “brazen” – the Deal Book attacked O’Donnell. O’Donnell is the only one who acted with courage and integrity. He is the obvious hero of the piece. The Deal Book made no snide remarks about Countrywide and Bank of America’s corrupt senior officers who had ripped off the U.S. Treasury (by defrauding Fannie and Freddie). That contrast is why I used the word “depravity” to describe how odious Deal Book has become...

To sum it up, after a full trial with some of the best criminal defense lawyers in the world backed by Bank of America’s immense wealth and resources, Bharara’s trial team convinced a jury, by the preponderance of the evidence, that Countrywide/Bank of America committed “crimes” consisting of intentionally, and massively, defrauding Fannie and Freddie. Further, if you read Judge Rakoff’s opinion closely about the nature of the fraud – deliberately gutting underwriting standards and making the incentives perverse in order to create fund enormous numbers of bad loans – you know that this was an “accounting control fraud.”...

With all these new facts available to them about Bank of America’s frauds, the unprecedented size and universality of frauds committed by each of the largest banks, and the recognition even by the NY Fed – the apologists-in-chief for Wall Street – that Wall Street’s “culture” was profoundly corrupt, the NYT abandoned the word “fraud” in its title and substituted the euphemism “misdeeds.” “Misdeeds?” That’s what your three year old nephew does at a picnic.

...An earlier false-claims lawsuit filed by Mr. O’Donnell was instrumental in Mr. Bharara’s pursuit of a civil fraud claim against Bank of America and a former Countrywide official for selling shoddy mortgages. The lawsuit centered on a program at Countrywide nicknamed the hustle, which rewarded employees for producing more loans regardless of the quality.

In July, a federal judge ordered Bank of America to pay a $1.27 billion penalty in that case. The former Countrywide executive who faced civil action in that lawsuit, Rebecca Mairone, was ordered to pay a $1 million fine for her role in directing the program.

...DOJ’s tight-fisted approach to the best whistleblowers like O’Donnell and his counterparts at many banks ...is self-destructive.

...The officers running the schemes to originate millions of fraudulent mortgages routinely provided exceptionally generous incentives to the loan brokers to ensure that they delivered those millions of fraudulent loans. ...The $20,000 fee that loan brokers could make for making crappy/predatory loans was a significant portion of the “profits” that the lender would (fraudulently) recognize on making the crappy loan and then selling it through fraudulent “reps and warranties” to the secondary markets. The senior officers running these fraud schemes recognized that they would make far more money by being generous and using the prospect of such a killing degrade the ethics of the brokers and induce them to bring in huge amounts of crappy/predatory loans with fraudulently inflated appraisals and borrowers’ incomes.

The bad guys used financial incentives to degrade ethics and reward the least ethical people. DOJ refuses to use financial incentives to encourage good people to do the right thing and stop ongoing frauds that can trillions of dollars in losses. Whistleblowers of integrity always suffer retaliation and that retaliation typically causes them great harm...

The Prosecutors That Didn’t Bark, or Wag Their Tails

Sherlock Holmes famously solved a case by focusing on what did not happen – the dogs that did not bark. The things the NYT wrote in 2012 and 2014 relating to O’Donnell are important for ...revealing ...what the articles do not report. In a world of great financial journalism the articles would have discussed the matter I’m about to explain, but in the world we live in the blame must go almost exclusively to Obama, Holder, and Bharara. There is not a word in the article from Obama, Holder, Bharara or anyone in the U.S. government (Thomas Curry, Bank of America’s anti-regulator, is the most unforgivably absent regulator) saying...;

1. Thank you Mr. O’Donnell

2. Mr. O’Donnell’s courage and integrity was a great public service, we ask in the strongest terms possible for everyone with knowledge of frauds and crimes to follow his example and contact us. We will vigorously pursue all credible leads on these elite frauds to the fullest extent of the law.

3. We are delighted, in addition to our cash award of $120 million (a more appropriate figure), to announce that President Obama, Attorney General Holder, and U.S. Attorney Bharara will personally present Mr. O’Donnell with (pick your prestigious medal). At that same ceremony we are also proud to announce that other American heroes such as Richard Bowen, Alayne Fleischmann, and Rachel Steinmetz will be receiving that same award. (The names I have given are simply illustrative, many more whistleblowers should receive the award.)

I have checked seven other major financial media outlets and none reports any statement by any representative of the U.S. government in conjunction with the financial award to O’Donnell. To their credit, Reuters contacted Bharara’s office to seek a comment. “A spokeswoman for the U.S. Attorney’s office declined comment.” Simple politeness, particularly in this holiday season, should have led Bharara’s people to say a simple “thank you” to O’Donnell.

...DOJ was humiliated by the Frontline documentary (“The Untouchables”) when the producers made the point that they were inundated by whistleblowers as soon as word got out that they were investigating the failure to prosecute – and, overwhelmingly, the whistleblowers explained that DOJ never tried to contact them. Each of the three very large bank civil cases brought by DOJ was made possible by whistleblowers. O’Donnell was not contacted by DOJ – he initiated the contact. At each of the press conferences announcing that they were bringing the three largest domestic bank cases (1) DOJ failed to mention the whistleblower, (2) failed to thank the whistleblower, and (3) failed to call on new whistleblowers to come forward. It was almost if they didn’t really want to be inundated with whistleblowers exposing the crimes of the elite bankers.

...This entire pattern would be surreal if one believed that the Obama administration actually wishes to regulate banks vigorously and effectively and actually wishes to prosecute vigorously the elite bank frauds who cost this Nation over $20 trillion in lost GDP and over 10 million American jobs.

But no one believes that, so the refusal to restore the rule of law is all too real.

The way in which they spurned a heaven-sent invitation to drive one out of the park is simply the latest proof that in Obama’s case we need to revise the introductory question to Pesach’s famous “four questions.” For Obama, it should read, “Why is this night the same as all other nights?” The Obama administration never misses an opportunity to miss an opportunity to hold accountable the senior bankers who were made wealthy by leading the three fraud epidemics that caused the financial crisis and the Great Recession.

I would love to be proved wrong..."


No comments: