Monthly Archives: February 2016

Whistleblowers Challenge Candidates: Stand Against Wall Street Fraud

Crossposted from Common Dreams

Isaiah Poole

Four people who have been at the center of some of the nation’s biggest Wall Street scandals have come together to send a message to the 2016 presidential candidates: Pledge to stand against Wall Street fraud and corruption – not just with words, but with the kind of actions that Americans have long expected but have yet to see.

The four veterans of battles with banksters – Gary J. Aguirre, William K. Black, Richard M. Bowen III and Michael Winston – on Thursday called on the candidates to not take contributions from financial companies or officers that have been charged with fraud, particularly related to the 2008 financial meltdown. They have also outlined a set of actions that they say will “restore the rule of law” on Wall Street. They have formed a new organization, Bank Whistleblowers United, to move that agenda forward.

“We use the f-word a lot,” said Black, who came into national prominence for his role in exposing the “Keating Five” savings-and-loan senatorial scandal in 1989, “the five-letter word, ‘fraud,’ that you are supposed to be able to say in polite company.”

That word, he said, is central to the issue these whistleblowers are concerned about: the fact that regulators and prosecutors have too often in the wake of the financial crash given a pass to banks and other financial institutions that profited from deception and dissembling.

Black recalled that during the era of the savings-and-loan scandal, when the federal government brought an action involving a financial institution “we actually spelled out in the English language what had happened.” The news media echoed that language, and in the glare of that disclosure “the politicians who took political contributions from those institutions rushed to return the contributions or to donate them to charity.”

In today’s era of no-blame settlements and obfuscatory language, “that never happens now,” Black said.

Nonetheless, people running for office have no excuse. It is clear that the financial meltdown was a consequence of actions that done by individuals rather than Wall Street institutions would likely have landed those persons behind bars. The biographies of the founding members of the Bank Whistleblowers United make that clear.

Bowen, for example, was at Citigroup when in 2006 he saw first-hand how the bank was issuing large numbers of subprime mortgages and then selling bundles of those mortgages on the securities market. His warnings that the deals violated bank and regulatory standards not only went unheeded; he was fired for speaking out. His experience, however, was probed by the Financial Crisis Inquiry Commission, which was created by Congress to document the causes of the Wall Street meltdown and make recommendations. It was also featured in a powerful “60 Minutes” segment.

Winston had a similar experience as an executive in the mortgage unit at the now-defunct Countrywide Financial. He recalled being told by a fellow senior executive of the impetus from the very top of the company to approve mortgages by anyone, regardless of qualification. “If they can fog a mirror, we’ll give them a loan,” he was told. With the complicity of a bond-rating agency that allowed the mortgages to be bundled as high-quality securities, Countrywide made billions – until the house of cards crashed, taking with it people who found their homes foreclosed and communities economically devastated. Winston, too, was fired after flagging fraudulent practices he saw and for refusing a direct order to disseminate false information on behalf of the company. For a brief time he found exoneration when a jury ruled in his favor in a California county superior court suit against Bank of America, which absorbed Countrywide during the depths of the financial crisis. The bank succeeded, however, in getting that verdict overturned in an appeals court on grounds that critics found highly irregular and suspect.

Aguirre experienced Wall Street corruption from the perspective of a regulatory agency, as a Securities and Exchange Commission attorney. While heading an insider trading investigation of Pequot Capital Management, formerly the world’s largest hedge fund, Aguirre resisted his supervisor’s demands to give preferential treatment to a Wall Street titan involved in the case. He was fired for “insubordination,” but he would later prove to the satisfaction of two Senate committees, a federal court and three federal agencies that the SEC had acted unlawfully.

Then there is Black, who in addition to his Keating Five work is known for having essentially written the book on “control fraud,” the methods banks have used to turn fraudulent activity into a business model that is highly profitable and hard to prosecute. The book that explains that topic has a title that says it all: “The Best Way to Rob a Bank Is to Own One.”

Bank Whistleblowers United have devised a “60-day plan” that the next president – or even the current president – should execute. The plan has 19 actions, 18 of which can be done by the executive branch or regulatory agencies with laws and regulatory authority they already have, “so there are no excuses,” Black said. Only one action – hiring more FBI agents, Justice Department attorneys and regulatory investigators – would require budgetary action in Congress.

At the top of that list is restoring “the mandatory criminal referral process and Criminal Referral Coordinators at every financial regulatory agency.” That would lead to bank executives actually being charged with crimes and the possibility of being held accountable for their actions, rather than a process that allows financial institutions to buy a get-out-of-jail-free card through a settlement negotiation.

But a first step is to persuade presidential candidates, and for that matter congressional candidates, to make the simple pledge to, as Black put it, “no longer take money from financial felons.”

The whistleblowers have not yet had a candidate sign on to their pledge, although Democratic presidential candidate Bernie Sanders, having sworn off super PAC dollars and shunned Wall Street political donors, is closest in spirit and practice to the pledge. Meanwhile, Hillary Clinton is selling herself as the candidate who has the most comprehensive plan for curbing what she calls the “shenanigans” of a broad range of financial institutions – a word that Black said reflects Clinton’s reticence to call a crime a crime and respond accordingly.

These insiders are offering a tough standard for candidates to measure their Wall Street reform agenda against. But that is because of what they have seen first-hand, and the lives that were damaged because of the banks’ illicit behavior. It’s good that there is a competition in the Democratic Party presidential primary to sound tough on Wall Street. The next step is for each candidate to address how much of the whistleblowers’ plan for “breaking Wall Street’s power over our economy and democracy” and returning the rule of law to the financial sector he or she is willing to embrace.

“I think the public has to make a decision, and that is why we are trying to tee this up for the candidates so that the public can see and speak to them,” Aguirre said.

“It is ingrained in the fiber, in the DNA of our Congress and our government to defer to Wall Street,” he added. “And until we change the DNA it’s going to remain the same.”

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

Isaiah J. Poole has been the editor of since 2007 and also directs the Campaign for America’s Future’s online communications.

The Ogre & the Cog


Classically, we imagine money being aggregated by an entrepreneur who uses it to build a factory, purchase raw materials, hire labor, and begin manufacturing widgets which are then sold in the marketplace. This same result could be had by the process of an ogre appropriating a factory by intimidation, acquiring raw materials by force, and using slave labor to produce the widgets. The difference is that, in the first case, the process produces customers (the laborers) who can purchase the widgets with their wages, whereas—in the second case—the ogre’s widgets have no paying customers. One model produces an economy, the other model doesn’t.

If we look at the modern global corporation, we see something of the ogre. Yes, they pay to build their factories—but prefer to coerce local communities into footing much of the cost through preferential land and tax deals (as well as, in many cases, the appropriation of local water supplies) in exchange for the “local jobs” the factory promises to create. They also do not outright “steal” their raw materials, but do manage to argue that the minerals existing in the ground of public lands are somehow theirs by right in exchange for a nominal rent. True, as well, they do not employ slave labor, but instead employ strategies that have, in the end, the same result: they minimize the use of local labor (all those jobs they promised to create) by using robotic technologies—and by outsourcing much of the “make-work” of the widget components to a country with cheap (some may even characterize it as “semi-slave”) labor. It is for this reason, of course, the same global corporation is so desperate for global trade agreements which will allow it to favorably access the markets to which it has outsourced its human labor—because that’s where the theoretical paying customers (the wage earners) are that its business model is creating.

In a similar vein, economists puzzle over the lack of inflationary pressure—indeed, the tendency towards deflation—in the modern western economies, even though the financial industries seem to be “creating money” at a historical pace. It might be that there’s something of the Ogre in that financial industry as well: the money it creates is not used to build factories, acquire raw materials, hire labor, and build widgets—it is used, instead, to make bets in the casino of the financial markets themselves. Poker chips are bought and played, but the chips never get redeemed, and they never leave the casino—except when they are used to buy political power and favor to perpetuate the game. (A few chips do get redeemed as spending money for the high-rolling players—and this does, in fact, put inflationary pressure on the prices for mega-yachts and London penthouses, but who really worries about that?) What matters is that the “money” generated by the casino never shows up is in the pockets of wage-earning customers on Main Street. Their pockets, if anything, contain fewer dollars than they did a generation ago—while the store fronts they gaze into contain more and more widgets assembled by robots with make-work parts fabricated by workers in other countries.

There is, in other words, a profound disconnect in the way things are functioning. The American economy has dropped a crucial cog out of its gear-box and, as a consequence, the gears on top are spinning wildly but futilely, while the disconnected gears on the bottom are grinding slowly and ineffectually. What we need to do, somehow, at all costs, is to put that missing cog back in the gear-box. Or—perhaps that is not exactly correct—we need to connect the drive-train directly to the lower gears themselves, and insert a cog let them drive the upper gears as, I believe, the machine was supposed to operate in the first place.

A Clinton Presidency has been/would be a disaster for Black and Brown Communities. Here’s Why.

Linwood F Tauheed
February 23, 2016

Bill and Hillary Clinton used a pragmatic, practical, realistic, racist ‘southern strategy’ to win the White House in 1992.  Hillary Clinton tried unsuccessfully to use the same strategy in 2008 against Barack Obama.  This is history, what’s changed?

Hillary Clinton’s pragmatic, practical, ‘realistic’ mantra about how she would operate as president can be boiled down to: ‘Take what you can get’.  In today’s political climate this means the same thing it meant in the political climate of Bill Clinton’s presidency, it means: ‘Take what Republicans give’.

The Clinton’s have made a religion of being ‘pragmatic’, a virtue of taking what Republicans give; of embracing Republican positions and making them their own.

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Dismissing Bernie’s Supporters as “a Mob” and the Great Recession as No Big Deal

William K. Black
February 23, 2016     Bloomington, MN

In an unintentionally hilarious piece evincing exceptional moral blindness, Mr. Womack, a journalist, writes to Bernie.

Senator, you are forming a mob of angry, misinformed people and then turning it on the likely Democratic nominee. That, Senator, is a dangerous and destructive game. Does your campaign honestly wonder why it has become synonymous with nasty online invective?

Gosh, I would have thought that “nasty online invective” might call tens of millions of Americans “a mob of angry, misinformed people” who were “dangerous” because they were backing a candidate for the nomination who is not “the likely Democratic nominee.”  The idea that in an electoral nomination contest one is not allowed to criticize the current leader in delegates is, to be gentle, novel.  It is certainly not the approach that either then Senator Sanders or then Senator Clinton took when they trailed each other at various points eight years ago.

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Krugman Triples Down on His Smear of Friedman and Bernie

William K. Black
February 21, 2016     Bloomington, MN

Paul Krugman is plumbing new depths of moral obtuseness, arrogance, and intellectual dishonesty in what is now his third smear of the well-respected economist Gerald Friedman in two days.  My prior column discussed Krugman’s two columns on February 17, 2016.  Here is Krugman’s lead in his column dated February 19.

On Wednesday four former Democratic chairmen and chairwomen of the president’s Council of Economic Advisers — three who served under Barack Obama, one who served under Bill Clinton — released a stinging open letter to Bernie Sanders and Gerald Friedman, a University of Massachusetts professor who has been a major source of the Sanders campaign’s numbers. The economists called out the campaign for citing “extreme claims” by Mr. Friedman that “exceed even the most grandiose predictions by Republicans” and could “undermine the credibility of the progressive economic agenda.”

That’s harsh. But it’s harsh for a reason.

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Wall Street’s Message to Young Adults: “You are Clueless”

William K. Black
February 21, 2016     Bloomington, MN

Wall Street CEOs are very upset with young adults.  They believe you are “clueless” and “voting against [your] own interests” when you support Bernie Sanders.  A Wall Street CEO took to the pages of the Wall Street Journal to decry the fact that “Millennials are flocking to Sanders.”  It would be cruel to note that one has to be clueless to believe that writing an op ed in the WSJ was a good way to reach millennials supporting Bernie.  But at least we can gain an insight into Wall Street’s theory of why Bernie is bad for young adults.  It turns out that Wall Street is worried that Bernie is pushing Hillary Clinton to take inequality seriously because younger Americans take inequality seriously.  Wall Street, of course, loves and exists to produce staggering inequality.

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Krugman and the Gang of 4 Need to Apologize for Smearing Gerald Friedman

William K. Black
February 21, 2016     Bloomington, MN

If you depend for your news on the New York Times you have been subjected to a drumbeat of article attacking Bernie Sanders – and the conclusion of everyone “serious” that his economics are daft.  In particular, you would “know” that four prior Chairs of the President’s Council of Economic Advisers (CEA) (the Gang of 4) have signed an open letter to Bernie that delivered a death blow to his proposals.  Further, you would know that anyone who dared to disagree with these four illustrious economists was so deranged that he or she was acting like a Republican in denial of global climate change.  The open letter set its sights on a far less famous economist, Gerald Friedman, of U. Mass at Amherst.  It unleashed a personalized dismissal of his competence and integrity.  Four of the Nation’s top economists against one non-famous economists – at a school that studies heterodox economics.  That sounds like a fight that the referee should stop in the first round before Friedman is pummeled to death.  But why did Paul Krugman need to “tag in” to try to save the Gang of 4 from being routed?

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Jamie Galbraith’s Letter to Former CEA Chairs

Jamie Galbraith has written an excellent letter to the four former Chairs of the Council of Economic Advisers under Clinton and Obama regarding their letter to Professor Gerald Friedman and Senator Bernie Sanders. The full text is below.

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President Obama Sides with U.S. Corporate Tax Cheats

William K. Black
February 16, 2016     Bloomington, MN

I have been planning to respond to a January 26, 2016 article in the Wall Street Journal entitled “Washington’s Corporate Purge” that begins with the claim that “Bernie and Hillary compete to drive more U.S. companies overseas.”  My title was going to be:  “WSJ Shills for Tax Cheats and Cheers Race to the Bottom.”  The context was a typical WSJ claim that it was “moral” to do a tax inversion deal with Ireland to cut a U.S. company’s corporate tax rate dramatically.  Murdoch’s minions’ explanation of this “moral” concept is as follows:  “A CEO obliged to act in the best interests of shareholders cannot ignore this competitive reality.”  The idea that CEOs “act in the best interests of shareholders” as opposed to the best interests of the CEO is contrary to economic logic and reality, but let’s focus on the claim that as soon as any competitor engages in the race to the bottom on taxes all U.S. CEOs have a “moral” duty to race to the bottom by avoiding paying U.S. taxes.  If that is true, then it is essential to either impose a new form of taxation that corporations cannot evade through such inversion scams ( a point that Donald Trump, of all  people, made in the most recent debate) or for governments to cooperate to prohibit such a race to the bottom.

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The Whistleblowers’ Weekly Lemons Award Goes to Dr. Ben Carson

William K. Black
February 15, 2016     Bloomington, MN

The Bank Whistleblowers United announce an early winner of our second Financial Fraud Lemons of the Week award, and it relates to our inaugural winner, the Department of Justice (DOJ) for its lies about the latest humiliating settlement with Morgan Stanley.  If DOJ had actually prosecuted the elite Morgan Stanley bankers that led its mortgage fraud epidemic the new winner of our lemons award could not have said what he did about that settlement with a straight face.

Our second financial fraud lemons of the week award goes to Dr. Ben Carson, candidate for the Republican nomination for President in the latest GOP debate.  The Wall Street Journal’s Kimberly Strassel asked the following questions of Carson and received this wondrous response.

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