Announcing the Bank Whistleblowers United Initial Initiatives

William K. Black
January 29, 2016     Bloomington, Minnesota
Revised January 30, 2016

I am writing to announce the formation of a new pro bono group and a policy initiative that we hope many of our readers will support and help publicize.  Gary Aguirre, Bill Black, Richard Bowen, and Michael Winston are the founding members of the Bank Whistleblowers United.  We are all from the general field of finance and we are all whistleblowers who are unemployable in finance and financial regulation because we spoke truth to power and committed the one unforgivable sin in finance and in Washington, D.C. – being repeatedly proved correct when the powerful are repeatedly proved wrong.

Economists rely largely on “revealed preference” – we think what you do matters more than what you say.  For nearly seven years, every financial firm has known about my three colleagues.  They are famous for their skills, courage, and integrity.  Every financial firm claims that it now wants to make integrity their credo.  Any financial firm that actually was committed to making integrity its credo, as opposed to its spin, would have long since hired my colleagues.  Similarly, any government regulator, enforcer, or prosecutor that was serious about restoring the rule of law on Wall Street would have recruited us.

Our group publicly released four documents on January 29, 2016.  The first outlines our proposals, all but one of which could be implemented within 60 days by any newly-elected President (or President Obama) without any new legislation or rulemaking.  Most of our proposals consist of the practical steps a President could implement to restore the rule of law to Wall Street.  As such, we expect that candidates of every party and philosophy will find most of our proposals to be matters that they strongly support and will pledge to implement.

The second document fleshes out and explains the proposals.  We ask each candidate to pledge in writing to implement the portions of our plan that they specify to be provisions they support.  Again, we invite President Obama to do the same.

The third document asks each candidate to pledge not to take campaign contributions from financial felons.  That group, according to the federal agencies that have investigated them, includes virtually all the largest banks.

The fourth document explains why we formed our group is and contains our bios.  I am personally proud and honored to be associated with my colleagues in this endeavor.  We are (and have been) actively reaching out to encourage other bank whistleblowers to join Bank Whistleblowers United.  The founding members of our group share some common traits, but are also diverse in our views.  Overall, the bank whistleblowers that tried so hard and paid such a large price for trying to protect the public from the most recent crisis are an exceptionally diverse group of people and we want our group to reflect that full diversity.  We cannot, however, in good conscience fail to act now given the urgency of the problems caused by the collapse of personal accountability for Wall Street elites.  Our economy and our democracy are both imperiled by that collapse and require urgent redress.  Please help us to get our proposals to every candidate, the media, and the public.  Please ask the candidates you support to go on record supporting our initiatives and our campaign financing pledge.


The Bank Whistleblowers United Plan of Urgent Financial Change

January 29, 2016

We are a newly formed organization of financial sector whistleblowers dedicated to holding the elite financial leaders who led the fraud epidemics that caused the financial crisis and the Great Recession personally accountable and to helping to implement the urgent changes necessary to prevent or at least reduce the frequency and harm of future crises.  Our group has expertise in finance, banking, real estate, accounting, underwriting, economics, law, securities, criminology, regulation, and financial derivatives.  We also have international expertise.

We are releasing four documents today.  This first document provides the outline of our plan that would allow any newly elected President (or President Obama) to restore the rule of law and end “too big to fail” without any new legislation or rules within 60 days.  The second document explains and fleshes out the outline of our 60-Day Plan.  The third document is our proposal to encourage the candidates to pledge that they will not take contributions from banks (and their officers) that the federal government, after investigation, have found to have engaged in fraud or other felonies.  The fourth document explains who the whistleblowers are and provides our bios and contact information.

Our group is predominately former bankers who worked at fairly senior levels for enormous financial institutions.  We do not hate banks or bankers as a group.  We know, however, that when elite fraud is not stopped by the regulators and the prosecutors it is likely to create a “Gresham’s” dynamic.  The Nobel Laureate George Akerlof was the first economist to describe this dynamic in 1970.

“[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”

We can confirm Akerlof’s warnings about fraud.  Indeed, we can testify from personal knowledge that when bad ethics is encouraged it will over time tend to drive good ethics out of individual firms.  Fraudulent senior bankers deliberately create a Gresham’s dynamic within the firm and in hiring “independent” professionals in order to drive honest employees out of the bank and to suborn outside professionals that are supposed to act as external “controls” to serve instead as fraud enablers.  At places like Countrywide, thousands of employees left annually because they refused to abuse their customers.  Only by restoring the rule of law to Wall Street can we allow honest banks and honest bankers to dominate Wall Street.

Similarly, the financial regulatory agencies are often dominated and rendered feeble by leaders who are the products of the “revolving door” or plan to use that “door” to increase their income.  We have seen first-hand how that “door” can impair once great agencies.

Our goal of restoring accountability to Wall Street is not controversial.  Indeed, there is unanimity among the candidates for the presidency that accountability for Wall Street elites has disappeared and urgently needs to be restored.  But that same unanimity among candidates has existed for over a decade.  Beginning with DOJ’s failure to prosecute the elite bankers that aided and abetted Enron’s senior managers’ looting and destruction of Enron in 2000-2001 – the consensus on the need to restore accountability has failed to produce accountability for elite bankers for over 15 years.  Every political leader says they want to help honest bankers succeed.  Nearly every political leader agrees that the “revolving door” corrupts Wall Street’s regulators.  The movie The Big Short has a scene at a pool that is designed to be emblematic of the public perception that the SEC (and, by extension, the other federal financial regulators, the FBI, and the DOJ) is staffed by lawyers whose goal in life is to be hired by Goldman Sachs.  One of our major insights is how law enforcement priorities with regard to financial elites have become sharply perverse as the financial regulatory agencies’ input to the FBI and DOJ have virtually ceased through the destruction of the agencies’ criminal referral process and been replaced by misdirected law enforcement priorities pushed by the elite bankers.  We propose concrete steps to return our priorities to the most damaging financial frauds, which are always led by elites.

The public and the men and women running to be President have said that they want to hold Wall Street elites accountable.  Our plan provides a practical means, designed by experts with a track record of actually holding elite bankers personally accountable for their crimes and abuses, that the next president can implement without new legislation or rules to promptly restore accountability.  We hope that the candidates will treat the portions of our plan that they support, and our group, as a resource to embrace in order to achieve the goals they publicly say they share with us and the American people, starting with restoring personal accountability to Wall Street.

As whistleblowers who were the subject of retaliation we have been tested in the hottest and most brutal of business and regulatory crucibles.  The warnings we gave to our superiors and politicians proved correct and we were attacked because we were correct substantively and insisted on doing the right thing.  We are unemployable in banking and financial regulation precisely because of these qualities.  (That fact should tell our readers a great deal about how deep and widespread the problems are in finance and financial regulation.)  We have members who have led the most successful financial reregulatory efforts in the United States and helped produce the most effective investigative and prosecutorial system of elite financial criminals in our history.

We have no constraints on our ability to speak the truth and we have a history of speaking truth to power.  What follows is not the product of press flacks or political spinmeisters.  We have the expertise and personal knowledge to explain five key facts.

  • The most recent U.S. bubble and resultant financial crisis and Great Recession were driven by three epidemics of fraud led by elite bankers. The three epidemics that drove the crisis are appraisal fraud, “liar’s” loans (collectively, these were the loan origination frauds), and the resale of those fraudulently originated mortgages through fraudulent “reps and warranties” to the secondary market and the public.  Banks, like fish, rot from the head – the “C Suite.”   Liar’s loans is an industry term that shouts the industry’s knowledge that it was originating overwhelmingly fraudulent loans.  In a liar’s loan the lender agrees not to verify data that is essential to prudent underwriting.  This would be an insane practice for an honest lender – and it was practice that was always discouraged by the federal regulators – but it optimizes “accounting control fraud.”[1]

Tom Miller, the Nation’s longest serving state attorney general (for Iowa), was also a leader of key combined DOJ and state task forces on mortgage fraud.  Industry spokesmen invariably try to get the public to believe that the banks were the victims of liar’s loans, but as Miller testified before the Fed, investigations prove the opposite.

“[Many originators invent] non-existent occupations or income sources, or simply inflat[e] income totals to support loan applications. Importantly, our investigations have found that most stated income fraud occurs at the suggestion and direction of the loan originator, not the consumer.”

  • Not a single one of those elite bankers who led the fraud epidemics has been prosecuted and only one, a woman who was only moderately senior, has been held personally accountable in any meaningful way through a civil suit (made possible by a whistleblower). This is the greatest strategic failure of the DOJ in recent history.
  • The SEC has also proven ineffective in holding the elite Wall Street bankers who led these fraud epidemics personally accountable. As with DOJ, one of the fundamental problems that has gotten worse is the “revolving door.”  We propose a practical means of reducing that problem.
  • Dodd-Frank has not fixed the gaping problems endemic to finance that will cause future epidemics of elite financial fraud and resultant global crises.
  • We know how to identify developing fraud epidemics before they hyper-inflate financial bubbles, how to prevent or at least greatly reduce such epidemics, and how to prosecute effectively the elite banksters. Our group includes former regulators who demonstrated each of these abilities.  What we need is the political will to make the vital changes in the face of fierce opposition from the elite banksters.  That will is sapped by the revolving door.

Our initial purpose is to get candidates on record on which portions of our plan they will pledge to implement.  Our 60-day plan is the first of the initiatives we will place before the public and the candidates.  It consists of measures that the new President can take immediately on his or her own initiative without legislative action.  We ask every candidate for the presidency to indicate which specific proposals of the Whistleblower Plan they will pledge to implement.  As a group, we will not endorse any candidate.  We will simply give a public certification that a candidate has provided a written pledge to implement the portions of the Whistleblower’s Plan that the candidate chooses to support.  In the detailed description of our 60-Day Plan we set out dates on which the specific could be implemented by a new President (or President Obama) without new legislation or regulation.  Those dates are illustrative of how quickly a President with the will to restore the rule of law and safety to Wall Street could do so.  We are not demanding that candidates certify that they would meet that exact time schedule we set out.  Our Plan can be implemented in 60 days and that would be desirable, but we realize that a new President will have many priorities and could implement our 60-Day Plan over, say, 120 days.

We unanimously support the 60-Day Plan, but our Plan is not a “take it or leave it” demand.  The candidates will choose which provisions of our Plan they support and will pledge to implement.    In this first document we outline the substance of the Plan.  We are simultaneously releasing a longer document that explains the rationale for our Plan provisions and exactly how they can be implemented without new legislation or rules.  Again, the dates that the longer document provides are designed to illustrate how quickly accountability could be restored without any news laws or rules.

We are also releasing today a campaign funding pledge that the Whistleblowers United supports.  We will make public any pledges we receive from the candidates to implement our campaign funding pledge.  The fourth document we release today explains who we are and why we came together to urge the prompt implementation of the restoration of the rule of law for Wall Street.

The Whistleblowers United 60-Day Plan:

  1. Restore the mandatory criminal referral process and Criminal Referral Coordinators at every financial regulatory agency
  2. Require that all new hires agree to conditions that will end the “revolving door” – with no provision for waivers.
  3. The FBI and the Department of Justice (DOJ) will publicly terminate their “partnership” with the Mortgage Bankers Association – the industry trade association which has a clear conflict of interest and harms prioritization by pushing solely for the prosecution of what should be far lower priority cases of crimes v. banks and never for the prosecution of what should be the highest priority cases of frauds led by banks’ senior officers
  4. Ban DOJ from making deferred prosecution agreements with elite white-collar criminals
  5. Reassign 500 FBI agents to the white-collar crime section
  6. Request authority from Congress to hire 3,000 FBI agents, 250 DOJ attorneys, 250 SEC investigators and enforcers. This is the only portion of our plan requiring legislation.
  7. Stop prosecuting the mortgage fraud “mice” and use all DOJ and FBI resources against the fraud “lions”
  8. Rescind the FBI’s false claim on its web site that asserts:

“Ethnic groups involved in mortgage loan origination fraud include North Korean, Russian, Bulgarian, Romanian, Lithuanian, Mexican, Polish, Middle Eastern, Chinese, and those from the former Republic of Yugoslavian States.”

This false ethnic claim, again, leads the FBI to prioritize the fraud “mice” rather than the “lions.”

  1. Prioritize FBI and DOJ resources by creating a “Top 100” list of the worst financial fraud schemes
  2. Revamp the federal treatment of whistleblowers and False Claim Act complainants to encourage their efforts and use them to hold financial elites personally accountable
  3. Make public a list of exemplary financial whistleblowers and set forth in writing what they have done for the Nation. (The President should, of course, do this for whistleblowers in each field, not just finance.)
  4. The President should hold a public event at which he or she presents appropriate awards in person to these exemplary whistleblowers. We are not talking about financial awards and we are willing to be excluded from consideration for these Presidential awards lest we be charged with self-aggrandizement.
  5. Review the backlog of whistleblower and False Claims Act complaints with fresh eyes committed to finding any useful source of information to assist in deciding whether to bring enforcement, civil, or criminal actions against elite financial frauds.
  6. Make public the Clayton reports on secondary market sales. These reports document pervasive secondary mortgage market fraud.
  7. Federal banking regulators will:
    1. Impose individual minimum capital requirements (IMCR) for all systemically dangerous institutions (SDIs) commensurate with the risk they pose because of their size
    2. Impose IMCRs for all SDIs commensurate with the risk they pose because of their non-commercial bank activities
    3. Impose IMCRs for all banks commensurate with the risk posed by their executive compensation systems
    4. Impose IMCRs for all banks commensurate with the risk posed by their hiring, retention, and compensation systems for purportedly independent professionals such as outside auditors, appraisers, and credit rating agencies
    5. Announce that it is the policy of the United States never to engage in a regulatory “race to the bottom” with any other government
  8. Direct each major federally regulated bank to conduct and publicly report a “Krystofiak” study on samples of “liar’s” loans that they continue to hold. Krystofiak studies quantify the extent of loan origination and secondary market fraud by lenders.
  9. Appoint new, vigorous heads of each federal financial regulatory agency
  10. Promptly train federal banking and securities regulators, the FBI, and DOJ on sophisticated fraud schemes, particularly fraud via accounting
  11. End the use of deliberately unenforceable financial regulatory “guidelines”

Will You Support the Whistleblowers’ First 60-Day Pledge?

And so we ask each presidential candidate – which portions of the Whistleblowers’ 60-Day plan will you pledge to implement?  We hope the candidates will commit to breaking Wall Street’s power over our economy and democracy.  The Whistleblowers’ 60-Day plan provides any candidate with the practical steps necessary to make real the twin goals of restoring the rule of law to Wall Street and ending crony capitalism.  Our goal is to offer constructive, realistic means by which the next President can achieve these twin goals.

[1] “Control fraud” refers to the use of the entity by the officials who control it as a “weapon” to defraud others.  In finance, accounting is the fraudsters’ “weapon of choice.”  Epidemics of accounting control fraud drove our three modern crises – the Savings and Loan debacle, the Enron-era scandals, and the most recent crisis.

28 Responses to Announcing the Bank Whistleblowers United Initial Initiatives

  1. I notice that credit rating agencies (CRA s) are not prominently included in your plan. Shouldn’t there be at least a minimum requirement that CRA s not be funded by the banks whose assets they are evaluating. How about all banks contributing to a blind trust fund that compensates CRA s by an hourly rate independent of their ratings. Perhaps a different compensation scheme can be devised, but I will leave that to the experts.

  2. Here is a position paper detailing a path to effective economic recovery in America. These laws have been in existence since Moses brought the Decalogue down from the Mount, most recently refined into the 2500+ pages of RESPA-TILA 2015. Implementation requires no legislation. Implementation only requires the will to act. I support the Presidential Candidate who evidences the will to act starting 21 January 2017. Even you, Donald smile emoticon

  3. rich caldwell

    Bill, great initiative. What’s the plan for:
    – website?
    – PR to get the story out and get media for you wbs?
    – assistance to gain access and get your dox in front of the candidates?
    – entity to accept donations in support of the initiative? I want to give now, today – how do I do it?.

    all the best – Rich Caldwell

  4. The two real sins to the money changers are (1) not abjectly worshiping them and (2) making more money than it takes to pay their loans back. They despise the truth and other people making money. I see it daily.

    I know it’s hard to believe, but it’s even more surreal and fantasy driven on the mortgage side today than it was prior to the 15 year long collapse leading up to 2008.

  5. I wholly support this initiative and volunteer any support to this group that I may have to offer.

  6. You must succeed !

  7. A plan is certainly needed and this 60-day initiative is exactly what we want our political candidates to embrace. Legal professors all over this country have expressed their concern regarding this financial corruption epidemic. Finally, thanks to Prof. Black and his posse, we have the beginning of real change. It had to be said and it had to be done. Thank you all. You are sincerely appreciated.

    Now, we move forward and provide our support.

  8. Bank Reform Now

    Fantastic work Bill. You are a champ..!! Let’s hope you and your colleagues can lock in the support of a significant number of politicians before the election.

    We put up a slightly more radical proposal recently 🙂

  9. Charles Kennedy

    I am in. Anchorage, Alaska

  10. Absolute support and endorsement of this initiative, I have reposted the article here : in Ireland, the home of the singular, most damaging, banking collapse of the entire 2008 debacle. Absolutely nobody held accountable in the face of complete regulatory / governmental oversight, asleep at the wheel is the understatement of the century while the socialization of financial gambling debts has hit the Irish taxpayer exponentially harder than anywhere else on the planet. This week saw the publishing of a banking enquiry report (which Bill gave evidence at) which I could have written eight years ago, whitewash, obfuscation and downright criminal.

    • On 15 February 2011 Bill Black gave this interview to Irish Journalist David McWilliams.
      5 years later what has been learned by the Irish Government?
      Tragically Nothing.
      Even worse, those who borrowed to purchase a family home during the boom years in Ireland 2003-2007 and who now are in huge negative equity and being evicted with the bank pursuing the residual debt. CRIMINAL.
      Only in Ireland but hey we’re great Craic.

  11. I wholeheartedly support your reforms , they’re long overdue and I actually believe that there is a good chance of implementation , unfortunately I think that implementation will occur after the banksters fully collapse our current system. Ending the fraud incentives and enforcing common sense regulation with real penalties for the bigwigs is the only way to bring back the rule of law to Wall Street.

  12. I endorse this initiative — Houston, TX.

  13. M. Nawaz Raja

    I fully support this sacred mission. These culprits have been committing fraud and deceit for so long that their actions have remained inscrutable behind their shutters. For this reason alone, we have standing to bring this suits/ actions through whistle blowers and seek justice for these culprits wrongful acts and fraud, because fraud vitiates everything. See U.S. vs. Throckmorton, 98 US 61, at page 65; Nudd v. Burrows (1875) 91 U.S. 416. (Fraud vitiates everything it touches.); Boyce’s Executors v. Grundy (1830) 28 U.S. 210. (Fraud destroys the validity of everything into which it enters
    It appears that in order for securitization process to occur, a line of credit was established by the real “Borrower ”, mortgage loan broker, who would pledge Homeowner’s credit score/ rating/ history; thus, what Homeowners signed at closing appears to have contained misrepresentations as to real status of Mortgagor based on semantics utilized by deceased MERS [since January 1, 1999] and MERSCORP. No disclosure to Homeowners, thus statute of limitation has been tolled. The game of semantics utilized within “MERS® System” appears to have inherent double meanings when it comes to use of terms by its own “member/users” than what average layman consumer or Homeowners would understand as a sole purpose meaning, as in term “Borrower”.

  14. Full support and endorsement of this initiative.
    What is needed is Honest Investigative Reporting
    Having recently watched the films The Big Short and Spotlight it does confirm the Banking system has so much in common with the Church. The Banking system also has the power to withhold important sensitive information and prevent the truth from getting out. It is time now to –
    Investigate the corruption being committed now and in the past by the banking system.
    Investigate the collusion in this corruption by solicitors/lawyers.
    Investigate the collusion in this corruption by estate agents.
    Investigate the collusion in this corruption by receivers.
    Investigate the collusion in this corruption by barristers.
    Investigate the collusion in this corruption by the judiciary.
    Investigate the collusion in this corruption by the media.
    Investigate the collusion in this corruption by politicians.
    Investigate the collusion in this corruption by senior civil servants.

    What is happening is criminal. Will it take several generations for the crime and mental torture (abuse) committed by the financial institutions against the ordinary person, aided by a host of others to finally be exposed?
    The control of information makes history and the Banking system controls it ………. For now.

  15. Sound like great ideas. A little proofreading/editing might help tighten up the proposal a bit. I caught this one:

    “The fourth document explains why we formed our group is and contains our bios. ”

    Good luck!

  16. Good on you for organizing this, Professor Black.

    We probably need a similar “intelligence agency whistleblowers united initiative”. Starting with “Fire and arrest the people who authorized violations of the Constitution”.

  17. I support Mr. Black’s 60 day plan.

    In addition, I believe the JUDICIARY must be reformed. Most judges now hold most of their retirement in mutual funds, which if invested in mortaged backed securities, they are not on the hook to disclose. This is a sham, it erodes our system of justice to being “JUST US,” the black robes.

    Mr. Black, as a homeowner fighting the criminality of these entities for SEVEN years, I salute you.

  18. I think it is a great start and I hope it will be well received by the Presidential candidates. I do believe that the rating companies and title companies need to be heavily scrutinized though. NTC in Florida has been doing assignments for the past 10 years transferring every property in the USA to another pretender lender. The Atty General in Florida and the Governor do nothing about it.

    Cheers to your new commitment. I stand behind you 200%

  19. Stupendous Man - Defender of Liberty, Foe of Tyranny

    Great idea, and I applaud you gentlemen.

    But you might have left something out – guillotines. For display and entertainment purposes only, or course.

    • I hope these are shown on TV. We need a new reality show. Maybe Donald T-rump could be the first guest, demonstrating how they work.

  20. Fantastic!

    It’s about time there’s some accountability and oversight!!

    Good job – you have my support!!

  21. Richard Routman

    This is an important and creative initiative. Keep it up and keep us posted.

  22. I’m all in.
    Someone (or group of someones) has to change the course in this country. Voters refuse to vote for their best interests (maybe they think they will all be bankers and MOTU someday).
    Raise as much hell as you can, many of us have your back.