Category Archives: William K. Black

The Wall Street Journal Applauds Homophobia

By William K. Black
Quito: April Fools’ Day 2015 

April Fools’ Day continues to bring it delights, including a trifecta of homophobia I found on the website of the Wall Street Journal and other papers today.  The WSJ news staff first reported on Indiana’s “Religious Freedom Restoration” Act in a March 27, 2015 story in which CFOs reported their fear that the Act was “Hampering Hiring Ability.”  The WSJ news sections recently cited the strong majority of Americans supporting marriage equality and the fact that support is growing quickly among conservatives.

The WSJ’s infamous editorial team was cranking up to send the opposite message.  They support the oxymoronic “Defense of Marriage Act” (defending marriage from marriage) and oppose any constitutional rights protecting gay Americans from discrimination.  The business community overwhelmingly opposes the new state hate acts adopted by the Indiana and Arkansas legislatures.  The CEOs of America’s leading business thought leaders oppose the new state hate acts.  The WSJ, on issues of hate, does not serve the interests of the business community.  The title of the opinion piece is “The New Intolerance: Indiana isn’t targeting gays. Liberals are targeting religion.”  The opinion piece doesn’t even try to support the claim that “liberals are targeting religion.”  But the use of the word “liberals” shows how out of step the editorial zanies have become with American businesspeople on the issue of discrimination against gays.  A majority of conservatives oppose discrimination against gays.  Young conservatives are even more strongly opposed to discrimination against gays.

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HSBC Violates its Sweetheart Deal and Lynch Praises It

By William K. Black
Quito: April Fools’ Day 2015

HSBC got a sweetheart deal from the Obama administration.  It laundered vast amounts of money for Mexico’s murderous Sinaloa cartel, helped bust sanctions for terrorists and mass murderers, and did not cooperate with the investigation.  The U.S. Attorney in charge of the case, Loretta Lynch, refused to prosecute any of the HSBC bankers or even sue them individually.  Instead, there was a pathetic non-prosecution agreement limited to HSBC.  Lynch is accused of not contacting either of the primary whistleblowers in the case.  The failure to contact one of the whistleblowers has already blown up in Lynch’s face as it became public a few months ago that the governments of the U.S. and Europe were provided many years ago with data on HSBC’s Swiss affiliate that show it was helping terrorists, genocidal leaders, the most violent drug gangs, and tens of thousands of wealthy people evade taxes.  Lynch failed to bring that case or use any of the invaluable data provided by the whistleblower who copied the files from the Swiss bank.

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We Send Teachers to Prison for Rigging the Numbers, Why Not Bankers?

By William K. Black
Quito: April Fools’ Day 2015

The New York Times ran the story on April Fools’ Day of a jury convicting educators of gaming the test numbers and lying about their actions to investigators.

“ATLANTA — In a dramatic conclusion to what has been described as the largest cheating scandal in the nation’s history, a jury here on Wednesday convicted 11 educators for their roles in a standardized test cheating scandal that tarnished a major school district’s reputation and raised broader questions about the role of high-stakes testing in American schools.

On their eighth day of deliberations, the jurors convicted 11 of the 12 defendants of racketeering, a felony that carries up to 20 years in prison. Many of the defendants — a mixture of Atlanta public school teachers, testing coordinators and administrators — were also convicted of other charges, such as making false statements, that could add years to their sentences.”

This was complicated trial that took six months to present and required eight days of jury deliberations.  It was a major commitment of investigative and prosecutorial resources.  But it was not investigated and prosecuted by the FBI and AUSAs, but by state and local officials.  In addition to the trial success, the prosecutors secured 21 guilty pleas.

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DealBook’s Willful Blindness Exemplified in the Whistleblowing Article’s First Sentence

By William K. Black
Quito: April Fools’ Day 2015

The odious New York Times “brand” (DealBook) managed in its lead sentence to show that how complete its pro-CEO banker bias is and how that bias prevents it from getting even the most basic aspects of our recurrent crises correct.  The April Fools’ Day article is entitled “S.E.C. Fires Warning Shot About Confidentiality Agreements.”

“A sound that delights regulators and strikes fear in corporations — employees’ blowing the whistle on wrongdoing — is poised to become louder.”

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The Homophobic Law and the Indiana Governor Who Dares Not Speak Its Purpose

By William K. Black
Bloomington: March 29, 2015

Sodomy, of course, was once referred to as the crime that dare not speak its name because the combination of fear and hate of straight males for gays was so intense that it was barbaric and even murderous.  It is a measure of how much things have changed that the haters now know that they dare not speak their hate.  They also know that they are losing.  The vast majority of gay Americans live in States with marriage equality and conservatives expect to that the Supreme Court will soon strike down as unconstitutional bans on marriage equality in the Supreme Court.  Some equality advocates are warning that the desperate measures like Indiana’s new law designed to authorize merchants to discriminate against gays are similar to the relatively successful strategy to attack abortion rights.  They are right to warn about the need keep working, but the LBGT rights are not analogous to reproductive rights.  I will discuss only one reason – business.  The paradox is that a law purportedly vital to protect the right of merchants to discriminate against gays is the last thing that merchants want.  Gays make very good customers.  They have income and they buy goods and services.  Merchants want to sell goods.

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Meet Citi’s Ethical Underwriters That Tried to Save It and America: Sherry Hunt

By William K. Black
Quito: March 26, 2015

This is the fourth and final column in my series that began by focusing on Richard M. Bowen, III.  Bowen blew the whistle on Citi’s sale of scores of billions of dollars in toxic mortgages, primarily to Fannie and Freddie, through fraudulent reps and warranties.  After Bowen protested and blew the whistle within Citi to its senior management (including Robert Rubin) – Citi’s senior officers’ classic accounting control fraud strategy expanded both in terms of the volume of sales and the incidence of fraudulent reps and warranties – which rose to 80 percent.

I have explained how Bowen and his boss’ banking careers were destroyed by the retaliation of Citi’s senior managers and how the SEC, the Department of Justice (DOJ), and the Financial Crisis Inquiry Commission (FCIC) have followed the disgraceful policy of trying to keep Bowen’s detailed disclosures from becoming public and being used to bring Citi’s criminal controlling officers to justice.

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How FCIC Spurned Its One Chance at Greatness

By William K. Black
Quito: March 25, 2015

This is the third column in what I intended to be my three-part series about Citi’s most famous whistleblower, Richard M. Bowen, III.  In this column I discuss Bowen and Citi’s senior (but not controlling) officers’ presentations before the Financial Crisis Inquiry Commission (FCIC).  Upon further research I realize that a fourth column is required to bring in the related story of Bowen’s estimable colleague and fellow-whistleblower, Sherry Hunt.  Hunt’s story is not simply important and necessary to understand the scandals of the Department of Justice (DOJ) and the SEC and Citi’s top managers the FCIC’s spurning its one chance at greatness – it also deserving of a movie.  It’s too complex and rich to add it to this column.  Hunt also deserves full length treatment devoted to her attempted service to Citi, her service to the Nation, and to DOJ’s and the SEC’s failure to act against any of Citi’s fraudulent officers despite her offering them up tied with a bow.

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The DOJ and the SEC Spurn their Ace in the Hole: Richard Bowen

By William K. Black
Quito: March 24, 2015

In this second column about Richard M. Bowen, III, I discuss the failure of the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to make use of his expertise and testimony.  Bowen was the Citi SVP who blew the whistle on Citi’s senior managers’ strategy of knowingly buying massive amounts of fraudulently originated loans sold to Citi through fraudulent reps and warranties and then reselling those toxic mortgages (primarily to Fannie and Freddie) through false reps and warranties.  My first column described that strategy and the failures of the Financial Crisis Inquiry Commission (FCIC) to understand how damning Bowen and Clayton’s testimony was.  Clayton was the dominant “due diligence” firm for secondary market mortgage sales and was designed to be an easy grader.  The two great epidemics of mortgage origination fraud (appraisal fraud and liar’s loans) were so endemic and so crude that even Clayton found a 46% incidence of false reps and warranties by the sellers to the secondary market who fraudulently originated the loans.  That incidence grew to 54% by the second quarter of 2007.

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The Lessons Richard Bowen’s FCIC Testimony Should Have Taught the Nation

By William K. Black
Quito: March 20, 2015

This is the first of three columns prompted by Richard Bowen’s interview this morning on Bloomberg.  Richard Bowen, a Citi SVP, blew the whistle within Citi on Citi’s massive fraudulent sales of fraudulently originated mortgages, primarily to Fannie and Freddie.  Even Attorney General Eric Holder now repeatedly labels these mortgages “toxic.”  Had Citi’s leadership been honest, Bowen’s warnings could have substantially reduced the three fraud epidemics driving the financial crisis and Bowen would be one of Citi’s most senior leaders.  No spoiler alert is required because even my readers who know anything about Bowen know how the story actually ended.  Citi’s senior managers did not ignore Bowen’s warnings – they actively made the frauds he documented worse and they destroyed Bowen’s distinguished career in banking.  Citi, Fannie and Freddie, and Treasury lost billions of dollars and Citi’s senior officers were made wealthy by the “sure thing” of the accounting control fraud “recipe.”

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Stanford Exposes Rodgin Cohen’s Myth of the Myth of Regulatory Capture

By William K. Black
Quito: March 19, 2015

Sometimes the fates conspire to bring together two stories that when considered together bring that lightbulb moment.  The first story, dated March 18, 2015, is from the Wall Street Journal.  It overwhelmingly conveys the opinion of Rodgin Cohen, the super-lawyer to the super-fraudulent bank CEOs.  He was a leader of the financial regulation wrecking crew that produced the criminogenic environments that drove our recurrent, intensifying financial crises.  As I will explain in a future column, Cohen basically has one speech, which he has repeated with minor variants for decades.  The latest Cohen variant claims that:

“[T]he regulatory environment today is the most tension-filled, confrontational and skeptical of any time in my professional career.

Cohen says the strained relations between government regulators and bank officials stems from ‘the myth of regulatory capture.’

‘The consequences of such as approach are likely to be less effective examinations, not more,’ he said. ‘Unless we deal with the canard of regulatory capture, we will inevitably be placing pressure on examiners to disprove this charge.’”

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