How brazen must bankster fraud be to bring prosecution?
William K. Black
I’ll get the obvious out of the way first and then turn in future discussions to aspects of the Department of Justice’s (DOJ) civil suit against Bank of America (BoA)/Countrywide that are vital to understanding but are more subtle. The obvious issue arises from the facts that the DOJ alleges that its investigation has found.
The complaint and the DOJ press release state that elite financial criminals committed tens of thousands of “brazen” frauds targeting U.S. government funds. We’re on the hook for all the resultant losses because Fannie and Freddie were systemically dangerous institutions (SDIs) that the Bush administration concluded had to have their creditors bailed out to prevent a far graver global systemic crisis.
DOJ alleges that the fraud persisted for years, that senior officers were warned that the lending program they designed would cause endemic fraud, that the senior officers knew that BoA was selling billions of dollars of fraudulent loans to Fannie and Freddie by making false representations, that BoA’s senior leadership consciously covered up the information that the loans were commonly fraudulent, that the senior leadership created perverse bonus systems for their junior (non-professional) employees with the expectation, desire, and actual knowledge that doing so led to the origination (and sale to Fannie and Freddie) of endemically fraudulent loans, and that even when Fannie and Freddie confronted BoA with its violations of its representations and warranties BoA refused to honour it contractual obligation to repurchase the fraudulent loans.
DOJ alleges that the frauds persisted for years and continued after BoA purchased Countrywide. The obvious question (not asked by the AP, WSJ, and NYT articles about the lawsuit in the online version on Wednesday 24 October) is: why the DOJ has refused to bring a criminal prosecution of the senior officers who led this “brazen” fraud?
The only slightly less obvious question (again, not asked by any of the three articles) is: if the DOJ is going to bring only a civil complaint, why did it fail to include the culpable senior executives in that civil lawsuit? It does not appear that the reporters asked the DOJ either of these questions. Our top reporters are so used to DOJ abdicating its responsibility to prosecute elite frauds that they approach the newest example of elite impunity from criminal sanction as not worthy of discussion or even note. The obvious has become unfathomable to our elite media.
William K Black JD PhD is Associate Professor of Law and Economics at the University of Missouri (Kansas City). Bill Black testified before the Senate Agricultural Committee on the regulation of financial derivatives and the House Governance Committee on the regulation of executive compensation. His interview by Bill Moyers on PBS went viral. He appeared extensively in Michael Moore’s recent documentary: “Capitalism: A Love Story.” He featured in the Obama campaign release discussing Senator McCain’s role in the “Keating Five” (his testimony was highly critical of all five Senators’ actions). He is a frequent guest on local, national, and international television and radio and is quoted as an expert by the national and international print media nearly every week.Know someone interested? Please share