Benzinga / By William K. Black
Bill Black's Handy Guide to Bankster Fraud, From 'Small Fraudulent Fry' to 'Septic Tank Scum'
December 20, 2011 | Sixty Minutes' December 11, 2011 interview of President Obama included a claim by Obama that, unfortunately, did not lead the interviewer to ask the obvious, essential follow-up questions
“I can tell you, just from 40,000 feet, that some of the most damaging behavior on Wall Street, in some cases, some of the least ethical behavior on Wall Street, wasn't illegal.”
- Only fraudulent home lenders made liar’s loans
- Liar’s loans were endemically fraudulent
- Lenders and their agents put the lies in liar’s loans
- Appraisal fraud was endemic and led by lenders and their agents
- Liar’s loans could only be sold through fraudulent reps and warranties
- CDOs “backed” by liar’s loans were inherently fraudulent
- CDOs backed by liar’s loans could only be sold through fraudulent reps and warranties
- Liar’s loans hyper-inflated the bubble
- Liar’s loans became roughly one-third of mortgage originations by 2006
The largest control frauds sold tens of billions of dollars of fraudulent loans to each other through fraudulent “reps and warranties.” The kicker here, as Charles Calomiris has emphasized, is that the control frauds on both sides of the transactions knew that they were engaged in a mutual fraud. Hundreds of senior officers fall in this category.
- Why are there no prosecutions of the felons that drove the crisis and occupy the nine worst rungs of unethical and destructive acts?
- Explain the five unethical acts by elite financial institutions that you consider the most destructive and least ethical – but which you believe to be legal. How do you rank the degree of unethical conduct and destruction in those acts?
- What specific statutory provisions did you propose to make those five unethical acts illegal? As enacted, which provisions of the Dodd-Frank Act made those five unethical acts illegal? Who has been prosecuted for those formerly legal but seriously unethical and destructive acts that were made illegal by the Dodd-Frank Act?
Bill Black is the author of 'The Best Way to Rob a Bank is to Own One' and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.