Too Big to Jail


When fraudulent banking nearly sank the global economy in 2008, one former government official knew exactly how to nail the crooks. And he'd already swooped in to clean up a similar mess. More than two decades ago, during the savings and loan crisis, Bill Black exposed the Keating Five, senators who took big campaign contributions from the most infamous of the savings and loan executives and then tried to hide their crimes by stopping bank examiners from doing their job. The scandal ended the careers of three of those senators. One of them—John McCain—went on to run for president.

Black also helped prosecutors convict more than 3,000 crooked bankers, a third of them high-level executives. He also trained bank examiners and FBI agents in what to look for and showed prosecutors how to frame charges and present complicated evidence to juries in a compelling manner.

After that, Black, a lawyer, got a doctorate in criminology and developed a theory he calls "control fraud" to describe how corrupt bankers turn legitimate institutions into criminal enterprises. He devised techniques to help bank regulators quickly spot crooked banking practices, and rolled all this into a book,The Best Way to Rob a Bank Is to Own One.

With a track record like that, you might think Black would have been the first person President Barack Obama called when he took office five years ago as the economy was being gutted because of reckless and rapacious banking practices that plundered profits through subprime mortgages and devilish derivatives. A second Great Depression was stalking America, as the stock market was tanking and businesses small and large were hemorrhaging jobs.

The economy is still recovering from those cynical depredations, and many people are still wondering why no one has gone to jail for pushing us all to the brink of ruin.

But to this, day no one in the White House or the Justice Department, no one in the banking regulatory agencies, will return Black's calls. In 2012 he did get invited to brief Capitol Hill staffers on fraud by banks. He bought plane tickets to D.C. from Kansas City, Mo., where he teaches law and economics at the University of Missouri's law school there. But before the plane took off his phone rang. "I was told not to come," Black recalls. "The staff said they were afraid I would engage in too much bank bashing."

Federal officials say they have no need of Black's expertise because the FBI is diligently investigating crooked banks. They say that without providing any evidence that they have successfully completed any significant cases. Or are even doing much of anything.

In December 2011, after being buffeted by complaints that no one had gone to jail for nearly bankrupting the country, President Obama said on 60 Minutes, "Some of the most damaging behavior on Wall Street—in some cases some of the least ethical behavior on Wall Street—wasn't illegal." Black called me then, asking how the declaration, which he regarded as at best woefully uninformed, could get past the serious journalists who work on that show.

When Obama's explanation didn't quell the protests, the White House decided to pretend to flex its muscle. Attorney General Eric Holder announced in October 2012 that an interagency task force had generated 530 criminal charges for bank crimes involving more than $1 billion.... And then publicists at the Justice Department stonewalled reporters who asked for details, names and case numbers.

Black said then that Holder's boast was hooey—and said it again when the attorney general repeated the claim last year.

And now the Justice Department's inspector general has issued a report that proves Black was right, that Holder and the Obama administration did nothing to prosecute those who racked in billions through illicit banking practices.

When the inspector general asked to see those 530 cases Holder claims to be so proud of, he saw "numerous significant errors and inaccuracies." The inspector general reported last month that "despite being aware of the serious flaws in these statistics," Holder and the Justice Department continued to cite them.

The report also notes that in 2009 Congress gave the FBI an additional $196 million to investigate mortgage fraud. However, the inspector general says, "the number of FBI agents investigating mortgage fraud as well as the number of pending investigations decreased" over the next two years.

Mortgage fraud became "a low priority, or not listed as a priority, for the FBI field offices we visited, including Baltimore, Los Angeles, Miami and New York," the report says. The extra money allotted to bust the perpetrators of the subprime meltdown was diverted elsewhere.


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commented 2014-04-17 13:18:25 -0400 · Flag
A.R. writes:

Welcome to the Matrix…except he refused to play. Now he is not a millionaire, but his dignity is intact.
commented 2014-04-17 13:12:11 -0400 · Flag
T.N. writes:

Breuer replies that although he found Wall Street riven with “abominable greed,” he lacked the proof beyond a reasonable doubt that “makes a criminal case.”

A parody of Breuer’s response is posted at a website maintained by Black’s colleagues at the University of Missouri-Kansas City law school. In it, Breuer says,

“If I contact people who have firsthand knowledge of fraud, I am going to have to follow up!

“Look at my suit,” the parody voice continues, "if I prosecute the most powerful people in the world, what will be left of my career? Nothing. Nada…. I have a stellar career ahead of me if I use the revolving door in Washington properly. If I go after bankers, I’m going to end up like Bill Black, marginalized, an assistant professor at some small university somewhere…. "

Black, a ruddy-faced man of 62, chuckled when I ask him about the parody video. It is true, he says, that he hasn’t managed his career as shrewdly as he might have were he only looking to get rich. “I’ve created all sorts of obstacles to getting anyone to hire me or even listen to me,” he says, smiling. “That’s what happens in America these days when you just tell the truth and point out the obvious.”