By L. Randall Wray

By now you’ve heard that Citigroup admits—yet again—that it engaged in fraud. Heck, it was the business model under Bob Rubin. If you want to blame three individuals for the Global Financial Crisis, only Larry Summers and Alan Greenspan deserve more credit than Rubin.

Together they “softened-up” Congress so that it would free the Banksters, and then he ran Citi into the ground as he sucked gazillions of dollars of executive compensation out of the bank. Like all the CEOs of the biggest banks, he oversaw fraud on a scale never imagined—let alone seen—in the history of the globe.

And what did he get for all the fraud? Rich! Beyond your wildest dreams. Don’t cry for Rubin, he’ll stay rich. His bank will pay the fines–$4 billion in “real” money and another $3 billion in promised, illusory, relief to some of the people his bank screwed.

Don’t worry, Eric Holder will not prosecute actual human beings for crimes. He just wants some piddling fines paid out of shareholder value so that he can trumpet all the money he’s turning over to Uncle Sam.

You do feel rich, now, fellow American, don’t you? Four billion bucks. Sounds nice. Sounds big. Even a guy like Rubin could retire with that in the piggy bank.

Oh, wait. Citi and the other “dirty dozen” biggest global banks destroyed an estimated 10 million jobs and cost our economy $21 TRILLION. Trillion is with a capital “T”; it rhymes with “B” but it is a heck of a lot bigger than a billion.

By far the best analysis I’ve seen of Holder’s sell-out to Rubin’s Citi was by my colleague, Bill Black. You can read or hear the full interview here.

According to Bill,

“This is the latest in the way of embarrassing settlements by the Department of Justice that they’re trying to bill as if they were holding Citicorp accountable… you’ll note that there are no criminal charges in this case against the individuals or against Citicorp. And as a result of all of this, all of the individuals who became wealthy through what the Department of Justice describes as an egregious fraud that was followed by a coverup–in other words, multiple felonies–have not been charged at this point, and, frankly, there’s no indication that they’re about to be charged as well. So the people that committed the frauds get to keep all of the bonuses that were created as a result of those frauds, and it’s another disgraceful moment in the chapter of the Department of Justice….”

No, Holder should not get any praise. He should be fired.

Bill’s particularly peeved because Holder tried to take all the credit for uncovering the fraud; actually he was helped (or, better, pushed to take action, yelling and screaming) by an insider at Citi, who made his bank’s frauds public when he could not get Rubin to stop “egregious” fraud. Here’s Bill, again:

“Let me give you two words that you’re not going to hear in the coverage of this, and those words are Richard Bowen. Richard Bowen was the whistleblower that made all of this possible, that gave this case on a platinum platter to the Department of Justice. And today the attorney general of the United States, Eric Holder, has given a press conference in which he has never mentioned Richard Bowen’s name and has never used it as an opportunity to praise him and to ask other people to come forward and blow the whistle so that we can prevent these kind of crimes.”

Bowen had discovered evidence of monumental fraud in Citi’s securitization business. As I’ve been arguing since 2008, the mortgages put into packages for securitization did not meet the “reps and warranties”, which means the buyers got screwed. That is only one of the many, many ways that the Banksters were screwing customers on every side of their balance sheets. Here’s Bill again:

“Richard Bowen was in charge of looking at the quality of mortgages that Citicorp was selling to Fannie and Freddie. And Richard Bowen found that 40 percent of these mortgages were being sold to us under false representations and warranties. And so he warned the senior people and asked them to fix it. They did nothing in response. Richard Bowen and his staff looked again, and the percentage of lies–again, that’s a felony–in Citicorp’s sales to Fannie and Freddie had risen to 60 percent. He became so frustrated that he CCed Robert Rubin, the former Treasury secretary of the United States of America and one of the most senior Citicorp officials on these letters of complaint. And we know what Citicorp did in response to this, because (a) the Attorney General of the United States has just said that they covered it up, and (b) we know that Richard Bowen was demoted. Virtually all of his staff was removed. I think he had one secretary reporting to him instead of an entire staff of auditors who had found this embarrassing facts….”

Bob “hear no evil, see no evil” Rubin was happy to overlook fraud so long as it lined his pockets. And what did it cost the rest of us? Bill says

“the best estimate of economists right now is that we lost $21 trillion–a trillion is a thousand billion–$21 trillion in lost productivity as a result of the Great Recession that is a direct result of this epidemic of these kinds of fraud. And we lost 10 million American jobs.”

Here’s “just the facts, ma’am” reporting of the shameful “settlement”:

“The settlement includes an agreed upon statement of facts that describes how Citigroup made representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors,” a statenent from the Justice Department reads. “Contrary to those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew had material defects.”

“Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were scrutinizing, the bank and its employees concealed these defects,” Attorney General Eric H. Holder Jr. said in a statement.

“The bank’s misconduct was egregious,” Holder Jr. stated.

“As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits,” he said

“Citigroup was also the recipient of $45 billion in government bailout funds in 2008.”

True, but as we showed, Citi continued to rake in bailout funds after 2008, feeding at the Fed’s trough for years—getting billions in the Fed’s alphabet soup of special facilities at near-zero interest rates. (See here and here.) That $45 billion was a mere drop in the proverbial bucket.

By comparison, the $4 billion Citi is now paying Uncle Sam is barely a molecule.


  1. When are people going to break out the pitchforks?

  2. Interesting that the Justice Department is now using the original definition of corporation for this case. The purpose of corporations was to separate the people from the business so that only the corporation could be sued and not the people. Hobby Lobby changed that by saying the people and the corporation are the same thing and that decision should open the people to lawsuits or trials.

    • It should but it won’t. Right Wing judges were appointed by Right Wing presidents, for the purpose of doing a job that consists of making Right Wing rulings and then reasoning backwards, trying to find some legal reason for the rulings.

  3. And Rubin was Obama’s mentor.

  4. Free Speech

    And, at this very moment, mortgage lenders and appraisal management companies are coercing appraisers into over-appraising properties with threats of lost business, blacklisting, lawsuits, reporting to state agencies, etc. If the appraiser won’t do such, the lender and or AMC are reporting these appraisers to the state regulatory agencies for any contrived reason possible. The state regulatory agencies, in the vast, vast majority of cases, are siding with the lenders and AMC’s and punishing appraisers for not doing what they are forbidden to do, which is inflate values. Anyone who thinks that USPAP, Dodd-Frank, state regulatory agencies, etc., etc., are set up to make things better, they are completely delusional. They are set up to protect the image of lenders and to punish and ruin appraisers who won’t tow the line and kowtow to the dominant paradigm.

    • What these laws are set up for, and how they are used by corrupt officials, may be 2 different matters. No law can regulate totally corrupt people and institutions, with no one there to expose and combat the corruption. For that reason, we are always more a government of people than of laws, although we are both to some degree.

  5. Free Speech

    Furthermore, reporting appraisers to state regulatory agencies has become little more than a way for the state “regulatory” agencies to extort money, in the form of outrageous fines, from appraisers. Based on what I’ve seen, the worst appraisers go through their careers unscathed while the straightest, most ethical people in the appraisal industry get taken down and ruined by the state agencies.

  6. Freespeech: Interesting! That is exactly what was going on in the run-up to the collapse. Appraisers even had a petition signed by thousands begging Policy-makers to intervene to stop the pressure on them to perpetrate fraud. But the Banksters prevailed–no one intervened and we got the crash. This is the first I’ve heard that it was rebooted. But of course it would be! The Obama administration has taught that “fraud pays well”, so there’s little doubt that the Banksters will reboot all their fraudulent practices.

    • True about the Obama administration. Although I don’t know if they had much choice. There is the matter of the Deep State, which apparently tells the president what to do, not vice versa. It includes the big banks and the CIA and the rest of the military/security industrial complex. If you google for it, you’ll find that plenty has been written about it. There was a president about 50 years ago who bucked the Deep State, so I suppose Obama could have too. That president was JFK. The way it worked out for him does not inspire other presidents to follow his role model though.

  7. Robert Avila

    I find it interesting that you make no mention of Sandy Weill who created CitiGroup in violation of Glass-Steagall, getting an after the fact waiver from regulators. Nor do you mention the legendary “entrepreneurial” culture at CitiBank going back to Wriston and earlier such that there were endless stories about no one understanding everything that was going on inside. And finally Rubin’s widely acknowledged total ignorance of the banking business, a very different animal from Rubin’s Goldman Sachs of the 70s & 80’s. Sandy only wanted Rubin because he could add some respectability to Sandy’s monstrosity and open up doors all over the world and s it turns out left holding the slop bucket when it all came tumbling down. Would have made a good story for Scott Fitzgerald.

  8. “Together they ‘softened-up’ Congress so that it would free the Banksters, and then he [Robert Rubin] ran Citi into the ground as he sucked gazillions of dollars of executive compensation out of the bank.”

    The U.S. has acquired most of the characteristics of a gangster state, with the exception that gangster states are usually thought to occur in third-world countries. In this instance, we have evidence of a corrupt government (corrupted by business leaders who infiltrated government regulatory agencies) colluding with big business to rip off investors and all the ordinary people who pay the taxes. And then there’s the judicial department, headed by a corrupt official, that lets the perpetrators go.

  9. Have folks here seen this article?
    Neoliberalism, the Revolution in Reverse

  10. With all of these judicial acrobatics to grant corporations the rights set forth in the bill of rights for people, where the hell are they now? I have yet to hear of a conviction of the entity known as citi group and its numerous child entities. Humans have all of their assets frozen, are removed from society if found guilty, or plead guilt, so was citi’s charter pulled and it declared no longer an entity for a set unit of time, aka prison?

    No need for fury or complaining about such inconveniences in Corporate America, so long as you discuss $ and jobs.

  11. Liberty Street Diner

    I’ve recently learned (from reading this site) that the government does not really “need” the tax money it collects (cash tax payments are shredded); so would it be correct to claim that these 4 billion in fines (not even a year’s profit for CitiGroup) will not truly “help” the government in the big picture. . . ?

    • It will help the bank-controlled government to pretend to be regulating the banks. The appearance of regulation is very important for p r purposes. Otherwise it would be more difficult for the government to continue to be the loyal servant of the mega-banks without the public suspecting that they are being screwed over.

  12. The neoliberal propaganda is getting aimed at younger and younger people. Will it be grade school next?

    Koch High: How The Koch Brothers Are Buying Their Way Into The Minds Of Public School Students

  13. When Hillary Clinton gets the nod in 2016 people like Bob Rubin will once again have the keys to the kingdom.

    Yikes !

  14. The vampire squid gang already cashed out and immunized themselves against ‘the downside risk’.
    Their fellow travelers, including a protege or two, also hit the silks a while ago.
    Now hapless Yellen is left to try to clean up.
    The game plan calls for more dire news, reaching a crescendo by election day.