Bill Black Helps Defendants win “Unprecedented Acquittal”

By Stephanie Kelton

I knew my colleague had been in Sacramento this summer, and I knew he was there to testify in a federal case involving mortgage fraud.  But I didn’t know the details of the case.  I didn’t know the defendants had been the homebuyers or that they were on trial for mortgage fraud. This morning, I learned these details and more in this story from the Sacramento Bee.  The whole thing is astonishing, and I doubt anyone but Bill could have helped to persuade a jury that, in spite of all the evidence, the real fraudsters were the elite bankers who looked the other way, even as borrowers falsified loan applications.

The jurors heard shocking testimony from ‘control fraud’ expert William Black that regular people who got loans they were unable to pay back did not (defraud) the banks. The elite bankers commit the fraud while prosecutors look the other way and prosecute the wrong people.”

Go Bill!

11 Responses to Bill Black Helps Defendants win “Unprecedented Acquittal”

  1. Of course it was shocking to the jurors. They never heard any of this through the mainstream media, and with good reason. Spend 20 minutes on Google for the bio’s of the boards of directors of EVERY parent firm of big media. All have at least one board member with a “Wall St.” pedigree.
    There is one exception–Fox News’ News Corp. I guess Fox didn’t need any help slanting the crisis news in a pro-Wall St. direction.

  2. The Banko Haram boys didn’t just look the other way, they “encouraged” the borrowers to falsify loan applications and when that didn’t work they did it for them. Back in the “old days” when appraisals were done on typewriters, I knew an appraiser who stormed into a lender’s office, went through their files and found his appraisals which had been altered with White Out and retyped to “suit their needs”. He took all of his appraisals with him.

    I love stories like this and wish I could read one every day.

    From the articles I’ve read, the Banko Haram boys are trying to whitewash/blame the entire episode (the big meltdown) by suing borrowers, appraisers, real estate brokers, title companies, surveyors, inspectors, etc., because, well, it certainly couldn’t have been their fault. They’re trying to get it all cleaned up before the next implosion which is just right around the corner.

    Go, Bill!!!!!!!

  3. OK…but this means that absolutely no one will be prosecuted for any bank fraud, from top to bottom. Seems like a phyrric victory to me.

    • Yeah, I agree. It seems now that if the government decides not to prosecute one side of a conspiracy they can’t convict the other side. Hopefully, this will just encourage them to go after both sides.


    • Uhhh, he made the point that it was the CEOs, not the borrowers, who were the fraudsters, ,didn’t he?

  4. Yes, go Bill.

    Eventually someone is going to get one of those bankers on tape. Some of them encouraged people to apply for NINJA loans, telling them they could pay the loans back easily, without having much income, because their house would rise in value over the years– as if flat or declining home values were an impossibility.

  5. jerry hamrick

    Amen! Bill Black’s light never dims.

  6. Congrats to the defendants, Professor Black and his team.

    About time, I would say.

  7. As seems to be case these days, when the boys and girls of UMKC pull their trigger, the floor gets littered with corpses! Intellectual Weapons of Mass Economic & Legal Enlightenment. Go Bill Go!!

  8. Of course this ruling will not stand in a Robert’s Court. Banks can’t cheat themselves and they have not been proven to have broken the Rule of Law. Of course the moral compasses of the bank CEOs are broken, but that doesn’t count. Ben Franklin had his “Speech of Father Abraham” or “The Way to Wealth”, old-fashion rules to follow when conducting business. Being honest and working hard are near the top of the list. Concepts like control fraud and moral compass are not a matter for the Roberts court system, even though a jury might find being swindled by your banker objectionable.
    In this case, the swindlers were swindled, because they did not perform the underwriting function for which they were paid. The Robert’s court will say the public has no valid expectation not to be swindled by bankers, appraisers, real estate agents or loan originators, and must perform due diligence themselves. Swindling swindlers is just….wrong! Such is the Libertarian view of capitalism.

    There have been discussions about why bankers have not gone to jail. Another discussion might question why they are still in charge? Apparently, being morally bankrupt and dishonest are now attributes rather than negatives when doing business, especially when the worst of the worst continue to sit in positions of leadership. Profit trumps morality. My guess is that economics worked more smoothly when the the conduct of business was more predictable. The lack of business morality even fooled Greenspan.

  9. I have been a dedicated state-level prosecutor for 30 years, and I must say “Bravo” to the defense team. Professor Black’s point is absolutely correct: for a lie to constitute “fraud” it must be “material” to the other party’s detriment. We have learned that after Deutsche Bank figured out the “Big Short” there was a thriving market for mortgages designed from the outset to fail, conditions which created demand for “liars loans” from unscrupulous originators. Juries will not convict a single conspirator when his or her co-conspirators are not also prosecuted, because it if fundamentally unfair to pick and choose between equally guilty parties.

    Unfortunately, since 2007 we state-level prosecutors have been powerless to go after the fraudsters who drove the crisis, when Justice Ruth Bader Ginsburg wildly expanded Federal preemption of bank regulation in Watters vs. Wachovia Bank (2007) 550 U.S. 1 (read Justice Stevens’ blistering dissent to get a picture of how “wildly”).