Fraud and Cover Up In the Banking Scandal

The fraud that has brought our economy to the brink of collapse occurred at every level, from the borrowers, to the mortgage lenders, to the investment bankers pooling the loans, to the ratings agencies, to the government regulators themselves.  It is time to ask yourself why after at least fifteen (15) months since the public became aware of the crisis (which started 2 years ago) have there been no fact finding investigations in Congress as to the roots of the crisis?  Sure, Congress called in some of the ratings agencies, but where is the fact finding investigation about the practices, who was involved, who knew what when?The Senate engages in endless debate about political appointees, but passes bailout legislation without even understanding why the money is needed.  Ask why have there been no prosecutions for the fraud yet?  The answer may very well be that our senior elected officials from both parties and the top regulators are involved in covering up the extent of how bad the crisis is.

On April 3, 2009, PBS's Bill Moyers interviewed William K. Black, a professor of law and economics at the University of Missouri-Kansas City School of Law, and author of The Best Way to Rob a Bank Is to Own One .  (Hat tip to Economic Populist and Market Ticker.) Black was a former prosecutor and chief regulator in for the Federal Home Loan Bank Board during the Savings and Loan crisis in the 1980's.  Black understands bank fraud and how it occurs.  He was instrumental in setting up laws that would prevent such crises in the future - laws that are now being ignored.    The interview is about 20 minutes, but it is worth watching if you want to understand the extent of the fraud.  If you don't want to watch, read the transcript here.  

Black points out that the roots of the fraud extend back to the Clinton administration, and were exacerbated by the Bush administration diversion of regulatory attention from white collar crime to homeland security.  What is worse is that current Treasury Secretary Timothy Geitner was the chief regulator of the New York banks while he was President of the New York Federal Reserve District.  In recent testimony before Congress, Geitner denied that he had regulatory authority.  In September 2004 the FBI warned that this crisis was occurring and the fraud was building.  The FBI warning was ignored on every level.  

It is time that we insist that our Government Hold Those Responsible Accountable.  If the Department of Justice will not prosecute those involved, then Congress needs to pass a law allowing private rights of action to enable individuals to prosecute fraud actions on behalf of the government.  We have laws dating back to the Civil War, called Qui Tam actions, that permit private citizens to sue and recover on behalf of the Government when there is fraud against the government - typically a whistle blower actions involving misuse of government funds.  It is time that we expand those laws to allow private individuals to act on behalf of the government to pursue those who were involved in the fraud.