Bill Black: Who Said This? A Bank Fraud Quiz

By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives

I cannot write many blogs during the fall semesters because I teach four classes (I co-teach one of them).  The fall term of instruction at UMKC is now over so I am writing one piece before turning to grading.  I have recently done additional research on a topic I know is of great interest – the prosecution of elite white-collar criminals.  I have organized it in the form of a game in which the reader guesses who authored the quoted passage.

1. Which President described the elite banksters of his era as “charlatans, chiselers and cheats?”
2. Which Vice President criticized prosecutions, enforcement actions, and even safety rules for the elite white-collar criminals of his era in these terms?

But the number of complex regulations is only half the problem. As President [deleted] has repeatedly emphasized, it is also the adversarial and seemingly mindless enforcement methods that really get under people’s skins. Business owners are sick of being treated like criminals. They see a government that just doesn’t make sense, that charges them with safety violations when no one is in harm’s way.

[Note that enforcement action is supposed to be ‘adversarial’ and that ‘business owners’ need to be ‘treated [as] [not ‘like’] criminals’ when they are criminals.  A safety violation that does not cause injury because no worker is in the unsafe trench when it collapsed should be charged as a safety violation because it is.  A well-run company with a strong safety record takes that approach to safety.  The government must too.]

3. Which U.S. Attorney General offered the excuse for refusing to create a national task force to prioritize the prosecution of the elite banksters of his era that the fraudsters were merely “white collar street criminals”?
4. Which U.S. Attorney General explained in these terms why he was working with the regulators because prosecutions of elite banksters require enormous sophistication and prioritization?

[T]hese investigations most often involve complicated paper trails leading to highly sophisticated schemes which disguise illegality under the veneer of legitimate business and financial transactions.

[Note that this AG understood the essential danger that makes ‘control frauds’ uniquely damaging – the fact that the CEO finds it far easier to ‘disguise illegality’ ‘under the veneer’ of seeming ‘legitima[cy].’]

5. Which U.S. President met with the Nation’s U.S. Attorneys to emphasize in these terms the criticality of prosecuting elite banksters?

It takes a snake, a cold-blooded snake, to betray the trust and innocence of hard-working people,” [deleted] said in a speech to his administration’s U.S. attorneys in announcing his effort. “And so, if we have to look under rocks to find these white-collar criminals, then we will leave no stone unturned.

6. Which U.S. President proclaimed “I did not run for office to be helping out a bunch of fat cat bankers on Wall Street”?
7. Which FBI Director characterized the level of elite fraud in failed insured institutions as ‘pervasive’ and explained that the fraud problem came from the top in these terms?

The American public relied upon banking institutions and financial institutions being soundly managed by people who were honest. Therefore, it is absolutely essential that this program go forward to the end no matter how long that takes.

He discounted past arguments that Texas’ economy was the root cause for the state’s financial crisis.  “Although it was the general economic downturn in Texas that surfaced the problem, it appears to the FBI as if a pervasive pattern of fraudulent lending activity began much earlier.”

8. Which U.S. President told the Nation’s leading bankers “My administration is the only thing between you and the pitchforks”?

[Note that the President was characterizing the American people as a mob out to murder the banksters that caused the financial crisis – and stressing that his administration would safeguard them from accountability for their crimes.]

9. Which U.S. Attorney General explained in these terms how he began working with the new regulator the day after he was appointed to ensure the prioritization of the most elite banksters in the ongoing financial crisis they were both confronting?

I met with [deleted] Director of [deleted], the day after he assumed office to map out a joint effort between the regulatory agencies and the  Department of Justice to winnow through the mass of referrals that had already been made to ensure that we were focusing upon the most significant cases as our first priority.

10. Which regulatory agency made the ‘mass of [criminal] referrals’ the AG was referring to? How many criminal referrals did the agency make in response to its financial crisis?  How many felony convictions of individuals did the Department of Justice (DOJ) obtain in ‘major’ cases in response to these referrals?
11. Which senior law enforcement agency warned in September 2004 that an ‘epidemic’ of mortgage fraud was developing that would, he predicted, cause a financial ‘crisis’ if it were not stopped?
12. Which administration “debated for months the advantages and perils of a criminal indictment against HSBC” given an FBI investigation confirming the congressional finding that the bank, between 2001 and 2010, “exposed the U.S. financial system to money laundering [by a leading drug cartel] and terrorist financing risks” [by Saudis]”? The U.S. Attorney General, at the urging of the Fed and the Comptroller of the Currency, refused to indict the bank or its senior officers who committed and profited from tens of thousands of felonies.
13. What U.S. Attorney General testified to Congress in the following terms that the largest banks were too big to prosecute?

I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.

14. Under which administration did Scott G. Alvarez, general counsel at the Federal Reserve successfully intervene with the SEC to weaken fraud penalties against some of the world’s largest banks?
15. Under which administration did Timothy Geithner, then President of the NY Fed, successfully intervene with then NY Attorney General Cuomo to caution against vigorous prosecution of elite banksters? Did this harm Geithner and Cuomo’s careers?
16. Which President unconstitutionally appointed the first Director of the Office of Thrift Supervision – after being warned that appointing him without the Senate’s ‘advice and consent’ would be unconstitutional? Why did the President do so – and why did the Senate not protest the action?
17. Which administration ended the career prospects of a top regulator they appointed when he had the audacity to bring an enforcement action against the President’s son?
18. Which U.S. Attorney General wrote: “We are presently facing the largest financial disaster in American history grounded in the betrayal of public trust by flagrant self-dealing in ‘other people’s money’”?
19. Which U.S. Attorney General described the causes of the financial crisis he was investigating “the biggest white-collar swindle in history”?

For bonus points, these questions relate to a non-government party.

20. Who wrote the following – and made it public?

“Our savings and loan industry has created the largest mess in the history of U.S. financial institutions,” [deleted] said in a letter to the [industry trade association – the ‘league’]. “The league responds to the savings and loan mess as Exxon would have responded to the oil spill from the Valdez if it had insisted thereafter on liberal use of whisky by tanker captains.” [Deleted] blamed the league for ‘constant and successful’ lobbying over many years that prevented government regulators from cracking down on S&Ls run by ‘crooks and fools’ and persuaded regulators to use ‘Mickey Mouse’ accounting….

“It is not unfair to liken the situation now facing Congress to cancer and to liken the league to a significant carcinogenic agent….”

“Because the League has clearly misled its government for a long time, to the taxpayers’ great detriment, a public apology is in order, not redoubled efforts to mislead further.”

Answers: (plus the President that appointed the official):

1. George HW Bush 2. Gore 3. Mukasey (Bush II) 4. Thornburgh (Bush I) 5. George HW Bush 6. Obama 7. William Sessions (Bush II) 8. Obama 9. Thornburgh (Tim Ryan was the OTS Director he worked with) 10. OTS, during the S&L debacle, made > 30,000 criminal referrals (all federal banking agencies combined made fewer than a dozen criminal referrals in response to the Great Financial Crisis) and DOJ obtained > 1,000 felony convictions in cases DOJ defined as ‘major.’ 11. The FBI (through Chris Swecker) 12. Obama 13. Holder (Obama) 14. Bush II 15. Bush II (No, Cuomo was elected Governor of NY and Obama appointed Geithner as Treasury Secretary) 16. George HW Bush (the unconstitutional appointment was Danny Wall as OTS Director) 17. George HW Bush (Tim Ryan was the OTS Director who brought the enforcement action v. Neil Bush) 18. Thornburg (Bush I) 19. Thornburgh (Bush I) 20. Warren Buffett and Charles Munger (May 30, 1989).