Must-read: Bill Black: “Announcing the Bank Whistleblowers United Initial Initiatives”

Must-Read: Bill Black: Announcing the Bank Whistleblowers United Initial Initiatives: “I am writing to announce the formation of a new pro bono group and a policy initiative that we hope many of our readers will support and help publicize…

…Gary Aguirre, Bill Black, Richard Bowen, and Michael Winston are the founding members of the Bank Whistleblowers United.  We are all from the general field of finance and we are all whistleblowers who are unemployable in finance and financial regulation because we spoke truth to power and committed the one unforgivable sin in finance and in Washington, D.C. – being repeatedly proved correct when the powerful are repeatedly proved wrong….

Our group publicly released four documents on January 29, 2016.  The first outlines our proposals, all but one of which could be implemented within 60 days by any newly-elected President (or President Obama) without any new legislation or rulemaking.  Most of our proposals consist of the practical steps a President could implement to restore the rule of law to Wall Street.  As such, we expect that candidates of every party and philosophy will find most of our proposals to be matters that they strongly support and will pledge to implement. The second document fleshes out and explains the proposals.  We ask each candidate to pledge in writing to implement the portions of our plan that they specify to be provisions they support.  Again, we invite President Obama to do the same. The third document asks each candidate to pledge not to take campaign contributions from financial felons.  That group, according to the federal agencies that have investigated them, includes virtually all the largest banks. The fourth document explains why we formed our group is and contains our bios….

The most recent U.S. bubble and resultant financial crisis and Great Recession were driven by three epidemics of fraud led by elite bankers. The three epidemics that drove the crisis are appraisal fraud, ‘liar’s’ loans (collectively, these were the loan origination frauds), and the resale of those fraudulently originated mortgages through fraudulent ‘reps and warranties’ to the secondary market and the public. Banks, like fish, rot from the head – the ‘C Suite.’ Liar’s loans is an industry term that shouts the industry’s knowledge that it was originating overwhelmingly fraudulent loans.  In a liar’s loan the lender agrees not to verify data that is essential to prudent underwriting.  This would be an insane practice for an honest lender – and it was practice that was always discouraged by the federal regulators – but it optimizes ‘accounting control fraud.’… Not a single one of those elite bankers who led the fraud epidemics has been prosecuted and only one, a woman who was only moderately senior, has been held personally accountable in any meaningful way through a civil suit (made possible by a whistleblower). This is the greatest strategic failure of the DOJ in recent history. The SEC has also proven ineffective in holding the elite Wall Street bankers who led these fraud epidemics personally accountable. As with DOJ, one of the fundamental problems that has gotten worse is the ‘revolving door.’  We propose a practical means of reducing that problem….

We unanimously support the 60-Day Plan, but our Plan is not a ‘take it or leave it’ demand.  The candidates will choose which provisions of our Plan they support and will pledge to implement. In this first document we outline the substance of the Plan.  We are simultaneously releasing a longer document that explains the rationale for our Plan provisions and exactly how they can be implemented without new legislation or rules…

March 31, 2016


Brad DeLong
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