William K. Black was one of the premier federal litigators during the S&L crisis. He spoke last week at Occupy LA:
In the Savings and Loan crisis, which was 1/70th the size of this crisis, our agency made over 10,000 criminal referrals, and that resulted in the conviction on felony grounds of over 1,000 elites in what were designated as major cases...
... Epidemics of fraud [are] led from the C-Suite, from the CEOs and CFOs... in the Enron era, [there were] always frauds from the very top of the organization, and in this crisis, the frauds came from the top of the organization again.
But what's different in this crisis? In this crisis, the same agency that I worked with, that made over 10,000 criminal referrals, in a tinier crisis, made zero criminal referrals. They got rid of the entire function. And so there are zero convictions of anybody in the elite ranks of Wall Street.
And if they can defraud us with impunity then they will cause crisis after crisis and they will produce maximum inequality. The group that has the audacity to refer to itself as the "productive class" is the largest destroyer of lives, of jobs and of wealth of any group ever produced in this world.
They wiped out six million existing jobs and five-to-six million jobs that would have been created. As you've heard they've left 26 million Americans wanting full-time work with no ability to find that work...
And then they had the nerve to say [that] they are "the productive class"... [but] they are mass destroyers of jobs...
Everybody opposed our re-regulation of the [financial] industry. The big deregulation bill... occurred in 1982, and became effective in 1983... but by November of 1983 we were [trying to re-regulate] the Savings and Loan industry, and we were called re-regulators because that was the greatest swear-word the Reagan Administration believed existed; to call people "re-regulators". But [opposition to re-regulating] was not partisan, a majority of the members of the [Democratically-controlled] House... co-sponsored a resolution saying, "do not... re-regulate"...
The Reagan Administration was so outraged that we were closing insolvent S&L's with great political support, that the OMB threatened to file a criminal referral against the head of our agency on the grounds that he was closing too many insolvent banks. Have we had that problem recently? Do you see Geithner out trying to close the big, powerful banks?
We can prosecute these frauds... the Federal Housing Finance Administration (FHFA) has just filed complaints saying seventeen of the largest banks in America committed massive fraud, endemic fraud, and that there is a paper trail proving that they did so.
So where is the justice department? Why is it not indicting these clear frauds?
... Remember, it is the lenders who put the "lies" in "liars loans", not the borrowers. We know this empirically. And we stopped that [in 1982] because, [as regulators] that was insane. So guess what happened, the leading folks making liars loans gave up their federal charter; gave up federal deposit insurance and became a mortgage bank, for the sole purpose of escaping regulation.
And they changed their name... to Ameriquest... the leading predatory lender that, in addition to making liars loans, every day, every day of the week, targeted minorities, to destroy [minorities'] wealth... they targeted latinos, they targeted blacks, and they were caught three times doing this, and the justice department refused to prosecute, instead [Ameriquest] settled for $400 million, [but] guess what happened to the head of Ameriquest? ... we [made] him our ambassador to the Netherlands.
Why do you think we made him our ambassador to the Netherlands? Because he was the leading political contributor to the President of the United States of America.
And that's bad, but what comes next is far worse, remember [that Ameriquest] is the most notorious fraud in the nation. [It is a company that] targets minorities, [and] everybody knows it does so, [but] two entities rush to acquire [Ameriquest's] personnel and business, and their names? Citicorp, and Washington Mutual, who become two of the most notorious frauds in [the subprime crisis]...
When we prosecuted [in the S&L crisis] we had a 90% conviction rate, [even] when [the defendants] had the best criminal defense lawyers in the world, and they spent money like water to protect the CEO from going to prison. So when they tell you, "no one can stop this", it is utter nonsense.
[I] will leave you with these statistics: The FBI warned of this in September of 2004, in open testimony. It warned, expressly, that there was an... epidemic of mortgage fraud, and it predicted it would cause a financial crisis.
If that's not enough, the [mortgage] industry's own anti-fraud experts, in 2006, in writing, went to every mortgage banker in America... and said three things:
1.) "Stated income loans" are an open invitation to fraudsters
2.) The incidence of fraud in [stated income loans] is 90%
3.) These loans are deserve the phrase... "liars loans" because they are pervasively fraudulent
What did the industry do after it was warned? Did it stop making these loans? No. It massively increased the amount of these loans such that by 2006, one out of every three home loan in America was a "liar's loan" and that's why we have a crisis. And it came from the very top of these organizations, and it went through, as the FHFA said in its complaint, the largest banks in the world, [which] were endemically fraudulent.
It is not a few rotten apples, it is an orchard of one-percenters who are rotten to the core.