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Eric Holder, where are you?

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          Eric Holder, Attorney General, the head of the US Department of Justice is not doing his job.   Oh, he goes to work every day, so far as I know, but he has given the Wall Street banks, now far larger than prior to the fall of 2008 when we saw the housing "bubble" burst, a fee pass on their involvement in criminality.

          William Black, a professor at the University of Missouri, Kansas City, a lawyer and economist, has written and spoken extensively and continuously on this topic.   Mr. Black is eminently qualified to do so, since he was the leader of the team of investigators and prosecutors who pursued the crimes perpetrated during the massive Savings and Loan crisis of the 1980's under the leadership of Bill Seidman, the onetime head of the FDIC.    Seidman pressed Black into action, and, with the assistance of a thousand FBI agents, and numerous attorneys from the Department of Justice, doggedly pursued and brought to justice many hundreds of those who participated, most of whom served time in federal prison.

          Mr. Holder, by his own statements, is going to steadfastly refuse to bring criminal cases against any participant in the massive accounting control frauds perpetrated by large numbers of the Wall Street banking community.   One dramatic example of this refusal is the failure to prosecute any of the employees and others associated with Lehman Brothers.   During the bankruptcy of this firm, numerous parties were identified as having pursued illegal, criminal activities which were at the core of the issues which caused them to collapse.   And yet, to date, not a single one of these criminals has been subpoenaed, indicted, or otherwise suffered further investigation by Holder's organization.   We know that the FBI is the police side of the DOJ.   We know that hundreds of agents were assigned to the 9/11 crisis, and continue to work primarily on matters relating to the Department of Homeland Security.    We know that DHS is only one of at least 15 governmental agencies assigned to providing us with national security.   None of these agents so assigned, has been redeployed to other areas of our national justice needs to pursue things like the Wall Street debacle participants.

          Now, with millions thrown out of their homes by foreclosure, forced to file bankruptcy, lost their jobs, without health insurance, many times into poverty, how can we allow this to happen without getting to the core of the matter and cleaning things up for a fresh start.   First there was TARP, Hank Paulson and Tim Geithner's solution to potential economic collapse.   Of that $700 million dollar fund, one could argue that the only really useful purpose to which this money was put was to save GM and Chrysler and the US automobile industry.   The largest part of it was devoted to AIG, the holder of massive numbers of Credit Default Swaps, the insurance hedging tool used by the banks and others to offset potential losses from the failure of the massive numbers of CDO's perpetrated by the banks on their investors and customers worldwide.   When CDO's become trash, as large numbers of the "liars" loans made by unscrupulous mortgage banks tied to the Wall Street banks failed, the banks found that much of their massive investment portfolios turned to garbage, became worthless.   Without TARP, which plugged enough of the holes created by these losses and the effects on their asset holdings, these banks could not have survived.   Of course, no one wants to discuss the even greater amounts of financial support supplied by the Federal Reserve, as they purchased, and continue to purchase, huge numbers of these failed financial instruments at par value, simply to keep the bank's asset ratios in adequate condition to enable them to continue to do business.   This is without discussing the manipulation of the FASB rules governing asset book valuations, or the role played by the FED, Fannie and Freddie, in allowing the banks to continue to support the generation of stated income mortgage application processes (called "liar's loans" because they require no verification of the quality or even existence of income and assets of a borrower to meet mortgage underwriting guidelines), or the participation in the massive façade by the ratings bureaus which gave the CDO's developed based upon these "liar's loans" AAA investment ratings (their highest rating for quality).

          Of course the real table setting for this entire debacle was the deregulation of the financial community which occurred in 1999 under Bill Clinton and Alan Greenspan when Congress passed into law the Gramm-Leach-Bliley bill, which, when enacted, abrogated the Glass Steagall reforms resulting from the Great Depression, which had prevented commercial banks from engagement in related financial activities, such as investment banking and insurance, to name just a couple.   Without belaboring this factor,   suffice it to say the none of what happened in 2008 or what continues to go on since, would be possible if Glass Steagall were still law.   We now know, for instance, that today the derivatives market has mushroomed to more than a quadrillion dollars of nominal value (that's a thousand trillion dollars), which is several times the size of the global economy annualized.   If the right things happen internationally, like a failure of the Euro zone to survive its present malaise (fairly likely at some level), or some other as yet unpredictable international financial catastrophe, these (CDO) investments could rapidly collapse, and the result would be a global financial meltdown.

          By now you are asking yourself why I am discussing all of these issues which seem unrelated to prosecuting wrongdoers on Wall Street.   The answer is really quite simple.   All of the major issues which continue to cripple the economy and contributed to a really weak Wall Street reform (after all, the Dodd-Frank financial reform, regardless of the protestations of the Wall Street elite, was largely a product of their lobbying efforts and guidance of Congress in its development and ultimate passage into law) are directly related.   So, the real answer to the question regarding Holder's failure to prosecute is simple:   Wall Street.   These folks make massive contributions to both political parties and hire and support huge and effective lobbies which manipulate not just Congress, but the entire government.   With their bought influence, the banks continue to populate the financial regulatory agencies with their chosen people.   Remember the TARP?   Neil Kashkari was responsible for the management of the TARP program.   Neil was Assistant Secretary of the Treasury under Hank Paulson (formerly of Goldman Sachs), he also was a former Vice President of Goldman Sachs, and, when he left the government in 2009, he went to work for one of the largest bond firms, PIMCO.   So, now, knowing that our President is close friends with Wall Streeters like Jamie Dimon, that in the 2008 elections, the Democrats received about $65 million from Wall Street, and the Republicans received about $54 million in congressional and presidential contributions, that Geithner, head of the New York FED and friend of many of the leaders of Wall Street with whom he worked every day, that Larry Summers, one of the major supporters of Gramm Leach and ex-Goldmanite became the president's Chief Economic Advisor, we begin to see a pattern.   Now we can understand that Holder's prosecutions of Wall Streeters would be tantamount to swimming upstream in Niagara Falls.   Sad, but true, it is unlikely to happen until we enact reforms which would eliminate the massive influence of money coming from corporations and wealthy individuals which substantially influences how our government functions.

          As a post script to what is written about, I need to mention the work of Eric Schneiderman, Attorney General in New York.   Late last year, Holder announced the formation of the Residential Mortgage-Backed Securities Working Group to be headed by Eric.   The group evolved from his refusal to go along with the settlement intended to penalize the banks for their parts in mortgage fraud and manipulations (only a fine, basically, with no criminal conduct admitted).   To date, his staff is thought to be less and fifty investigators.   They have formally announced that they will not pursue perpetrators involved in the Lehman collapse.   They do not expect to be making any criminal referrals.   Gee, I am so surprised.

          Also, after the set aside of $65 billion to assist with restructuring existing mortgages, only a few hundred million has actually been used, and this program is over two years old.   The banks simply aren't helping, and are unlikely to do so.

          As a last mention, it is interesting that so few in Congress have indicated frustration at Holder's obvious failing.   I guess that means that 99.9% of those affected simply don't give enough campaign contributions to make such outcry important.

 

Bayard Waterbury is a retired legal professional. He is an expert in the area of commercial real estate transactions. He is a respected lecturer and writer in his area of expertise. He is a former Governor of the American Land Title Association. (more...)
 
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First, I would like to point out that the Savings ... by Bayard Waterbury on Sunday, Sep 16, 2012 at 8:26:44 PM