The herb alpert foundation, supporting organizations Whose Mission is to promote compassion and creativity in our society. The john d. And catherine t. Macarthur foundation, committed to building a more just, verdant and peaceful world. More information at macfound. Org. Park foundation, dedicated to heightening Public Awareness of critical issues. The kohlberg foundation. Barbara g. Fleischman. And by our sole corporate sponsor, mutual of america, designing customized individual and Group Retirement products. Thats why were your retirement company. Welcome. As youve heard, eric holder has announced that hes resigning as attorney general. He will leave behind a mixed scorecard a for civil rights, c for Civil Liberties and f for failing to prosecute the banking executives who brought about the financial calamity of 2008. Holder let the bankers off the hook individually as he negotiated civil settlements with their institutions for issuing mortgagebacked securities tied to faulty where a federal jury acquitted four mortgage holders charged with fraud after hearing testimony that Bank Executives had pulled out all the stops to seduce them into taking out those toxic loans. One of the key expert witnesses in that case is with me now. Bill blacks testimony helped blow up the prosecutions contention that the little guy was the culprit, when in fact it was the Bank Executives who had deliberately created the fraudulent loans to enrich themselves. They pulled off the classic shell game. Bait and switch. Take the money and run. Let ordinary people suffer the consequences. Its a story bill black knows well. A scholar, litigator, and regulator, he helped prosecutors convict more than 1000 crooked bankers during the horrific savings and loan scandals back in the 1980s and 90s. He exposed five United States senators, the socalled keating five, who took big Campaign Contributions from Bank Executive charles h. Keating, jr. , and then tried to help him hide his crimes from bank examiners. His classic book the best way to rob a bank is to own one is now available in an updated edition. He holds two academic appointments, one at the university of missourikansas city and also at the university of Minnesota School of law. And welcome back. Thank you. In a nutshell, what did the jury decide in sacramento . And why should we care . Well, this is the first time that a jury has ever got to hear what actually caused the crisis. And the jury was horrified. Because it was the lenders who deliberately made massive amounts of fraudulent loans and then sold these massive amounts of fraudulent loans through additional frauds to the secondary market and eventually brought down the Global Financial system. And the testimony that came out in the case is that the agents, the fbi agents and the irs agents simply assumed that the banks were the victims and the bankers were the victims and simply assumed that the little people, the mice, were the problem in all of this. So they never even investigated the banks and the bankers. The mice . Yeah, the saying in the savings and loan debacle is you never wanted to be the guy that was chasing mice while lions roamed the campsite. So the mice are these alleged tiny frauds type of thing, where they ignore the lions, who are the ceos of the banks and such. And the jury said, no, its the lions. Its not the mice. Yes. So this is a crisis created by the lenders. And the reaction of the u. S. Attorney, whos Benjamin Wagner there was, well, were not going to be deterred in prosecuting mortgage fraud. Well, we dont want them to be deterred. We want them to prosecute but prosecute the lions and stop this nonsense. Even eric holder never seemed in doubt about who was responsible. I mean, his own words indicate that he knew that guilt lay at the feet of those who run the banks. Here he is being interviewed by nbcs pete williams. Mr. Attorney general, what does jp morgan admit that it did wrong in the settlement . Well, it packaged loans that it knew did not pass its own stated Due Diligence test. We have a whistleblower who indicated that she expressed concerns about what the strength of these mortgagebacked securities were. And they put them out there to the market and said that they were perfectly fine when in fact they were not. So to be clear, youre saying that jp morgans conduct here contributed to the housing collapse . Not only the conduct of jp morgan. It was the conduct of other banks doing similar kinds of things that led directly to the collapse of our economy in 2008 and in 2009. Yet eric holder didnt bring one criminal case against any executives in charge of the banks lending. Youve called this the greatest strategic failure in the history of the department of justice. Yeah, in baseball terms theyre batting 0. 000. But theyre not just batting 0. 000, they took called strikes. They never got the bat off their shoulder and even swung. They didnt even try. Do you remember when znju president obama told 60 minutes, i think it was late december of 2011 that, some of the most damaging behavior on wall street wasnt illegal . I do. What did you think . I thought that he was wrong. That in fact if he listened to what the United States of america has demonstrated in court and through investigations, the activity was clearly illegal, it was a violation of a whole series of laws that make it felonies. And these are just the frauds that caused the crisis. In addition to the frauds that caused the crisis, which are massive and we could talk about, we have the largest cartel in world history. This was the bid rigging of libor, which is an International Standard that sets the prices on over 300 trillion in contracts. A trillion is a thousand billion, right . And then we have the foreclosure frauds where we have false affidavits. Over 100,000 felonies in that context. And then we have the bid rigging on bond prices where all the major banks, according to the Justice Department, were involved. And then we had the federal Housing Finance administration, a federal agency suing virtually every largest, of the largest 20 banks in the United States of america, saying they defrauded fannie and freddie through false sales. And it goes on and on. The savings and loan debacle, we made over 30,000 criminal referrals. Here, zero criminal referrals as far as we can get any public information. So the first thing holder shouldve done is reestablish the criminal referral process. Because, you know, banks dont make criminal referrals against their own ceos. Do you tell yourself, well, there is a justifiable and understandable reason why they dont prosecute . No, there is no justifiable reason. Apparently modern financial regulators are vastly more sophisticated than we were as financial regulators 25 years ago. Because we had never figured out that the key to Financial Stability was leaving felons in charge of the largest Financial Institutions in the world. But they do claim with a straight face that they cant prosecute. They make it sound like the only choice we have is to prosecute banks as opposed to bankers. And thats nuts, right . Weve always prosecuted bankers. We prosecuted successfully over 1,000 bankers in the savings and loan and bank crises. And those are just the major cases and such. And it of course, it greatly enhanced Financial Stability instead of the other way around. Indeed, none of the people in that era came back in this crisis and were able to lead frauds. And they couldnt because they had criminal records. But in the next crisis, these folks have no criminal records. Theyll easily be able to come back. In fact, if you want to create the next crisis and make it vastly worse, leave the people in charge who led the frauds in the senior ranks at the banks in charge of those banks. So now they have all the postgraduate education in how to run a fraud. And they learned that there are no consequences other than good consequences. How does it feel to be right . Because when you said that this is the greatest strategic failure in the history of the department of justice, it was before the Justice Department Inspector General himself issued a report that determined the fbi criminal Investigative Division ranked mortgage fraud as the lowest ranked criminal threat in its lowest crime category. The number of fbi agents assigned, that the number of investigations and cases was falling still, that they were misleading the public by claiming that they were making it a higher priority, and that they had lied about the number of criminal cases they had brought against the mice, and that they persisted in using the false statistics when they knew that they were false. All of those things were found by the Inspector General. It feels terrible to be right about those things. Theres clearly been a culture of deference toward the banks in the obama administration. You would agree with that . Absolutely. Again, i blame holder. I blame Timothy Geithner. But they are fulfilling administration policies. The problem definitely comes from the top. And remember, obama wouldnt have been president but for the financial contribution of bankers. And its an extraordinary political story. Because the clintons, of course, have been close to banking for decades and very supportive of it. But a junior senator from illinois was able to outraise by a substantial margin political contributions from the Banking Industry to win that nomination. And then outraise his opponent, who was, of course, famously or infamous for his support of banking, john mccain, by more than two to one. And a person who led that effort to take big finance money and get it to then senator obama was, of course, jamie dimon, the ceo and chairman of the board of jp morgan. Whom the times has referred to as president obamas favorite banker. As his favorite banker even though, as holder now admits, jp morgan was one of the leading, what we call criminology, accounting control frauds in the world. It takes the New York Times six pages to list the violations on its website of jp morgan chase. So these are serial fraudsters. And jamie dimon has even said out loud to his own shareholders what we call the accounting control fraud recipe. His phrase is, its easy to produce low quality revenue. Bad underwriting means income today and losses tomorrow. Now, of course, it doesnt mean real income today. It means fictional income through accounting fraud. So he gets it. If you have terrible, terrible underwriting, you will be mathematically guaranteed to report record profits that will make the executives wealthy through modern executive compensation. And if theres a problem, well, the government will bail you out and give you massive subsidies if youre too big of fail. And, of course, jp morgan is the quintessential example of too big to fail, too big to jail. Do you remember when obama was elected president he called the bankers to the white house and he said, im all thats standing between you and the pitchforks, meaning between you and a wronged and indignant public. I thought that was an obscene statement, slanderous about the American People. The American People dont want pitchforks. They want justice. They want these Senior Officers to be prosecuted. If theyre found guilty, they want them to be sent to prison. And they want their fraudulent proceeds, the bonuses and compensation to be recovered. And that is a very good thing about the American People. To man that wall between the bankers and the public he chose eric holder as everyone knows who at the time was at the elite law firm of covington and burling which represents some of the very banks he would later exonerate from criminal prosecution. Within that justice were three other top lawyers from covington and burling, including the firms star lawyer defending against White Collar Crime who became holders right hand man running the Criminal Division of the Justice Department. What are we to make of that coincidence . Well, first, you should avoid it. But i want to caution that it isnt just the conflict, and indeed that in some ways takes one away from where the primary focus should be. So in the savings and loan crisis, president bush, the first, brought in a covington and burling lawyer when they represented banks and such. And he promptly, his name is Harris Weinstein, increased Enforcement Actions by fivefold. And we went after the biggest folks and we had by far our greatest victories. Because Harris Weinstein was picked because he was tough and competent and because he was given a mission which was you will go after the worst folks and you will demonstrate the rule of law exists in the United States. And that there was a political subtext of, i inherit, i, president bush, inherited this crisis and ill be seen as fixing it. Show the American People that there is no exception to the rule of law. Whereas holder had exactly the opposite instructions which are, you know, dont rock finance. And that was reinforced by Timothy Geithner. But again obama picked Timothy Geithner who was notorious as the worst failed regulator in the United States of america in the field. Why do you think on any evidence you have that they didnt want to fix the problem . Because two things. One, they were wrapped into this insanity that Timothy Geithner and ben bernanke were pushing that said, we must not do anything negative about the banks. We must instead foam the runways, is the infamous phrase of Timothy Geithner. To make a soft, safe landing. For the banks. For the banks. Not for the people. We will use the people as the excuse to get these programs. But the programs we all know are really for the banks. You do acknowledge that there have been some big settlements, i mean, and not all of them by holder, but thereve been settlements of over, you know, 125 or more billion dollars so far. Most of the money is actually deals they wouldve cut anyway. And its window dressing, but its in the interests of both the bank and the Justice Department to claim very large dollar amounts. Step back from what weve just been saying though and think, you know, put my lawyer hat on, of negotiating deals like this. Im representing the banks, youre eric holder. I know that you believe that im too big to fail and that therell be a disaster if i have any risk of failure. Are you going to ever assess a fine on me that matters to my institution . Of course not, because it was violate all of those conditions. So what do i want as ceo . Of course i dont want to go to jail and im happy to trade off some dollars in a fine to make sure that i never go to jail. But i also dont want the little officers to go to jail because they might be flipped by the prosecutors and the prosecution might move up the chain. So i want to negotiate immunity not just for me, but for everybody. Otherwise theyll rat on me . Otherwise they might rat on me. And this immunity doesnt have to be formal. Its just no cases will occur, right . Right . Right. So often there isnt a formal deal of immunity, but you see a practice of no prosecutions. And the other thing that i want in the best of all worlds, i want to make sure that i get to keep all my bonuses and compensation for all the frauds that ive led. And thats the other part of the deal. In all of these cases, they get to keep the fraud proceeds. That has never happened in modern United States. That is why its the worst strategic failure, but its also failure of integrity at the Justice Department and at the obama administration. And the Bush Administration was no better on this score. No, what youre saying is that more than one administration cooperated in maintaining a system that is based upon deference to the banks and disrespect for the public. Right, and, but its also a component in the case of obama of were humans and we are, everything we learn in research about humans is were reciprocal. And so the finance area is the reason hes president of the United States. When he was in his hour of greatest need, when he had, was written off as a candidate against hillary in the nomination battle the first time around, he had this miraculous survival. And that took money. That took lots and lots of money. And who gave that money . It came overwhelmingly from finance at the critical moment when he needed it most. All of us as human beings, the people that helped us in, a friend in need is a friend indeed is the saying that we have as human beings. Is that a way to run the government of the United States . Its a way to run it into the next disaster. You think thats possible . Oh no, not possible, its certain. We have created the incentive structures that is going to produce a much larger disaster. And just look at it. Again it isnt just the frauds that led to the crisis. It is all the frauds afterwards. Hsbc knowingly launders over 1 billion in funds for the sinaloa cartel, one of the most vicious drug cartels in the world that has caused the deaths of thousands of people. We dont prosecute. We have them dead to rights. We dont say that you cant do business anymore. We take no serious sanctions, just one of these silly fines again. Standard chartered, one of the, again one of the largest banks in the world, not only evaded sanctions on funding terrorist groups and nations that we say are funding terror, but actually had training manuals on how to deceive the United States regulators. So these are banks doing things that used to be in those really bad novels that you would read at an airport when you had only 10 of your brain functioning, right, about bankers, these awful conspiracies and theyre funding terrorists and such. Well, they actually are. Its the modern reality. What does it say about our financial capitalism . Well, theres no threat to capitalism like capitalists. They are destroying the underpinnings. px and when dishonest people gain a competitive advantage in markets, it creates something that in economics and criminology we call a greshams dynamic. And that means bad ethics drives good ethics out of the marketplace. And so the key is to have a real rule of law, to have real regulation. Because that not only protects the consumer, it protects the honest banker. But youve just described a situation which has to discourage folks out there, you know that, that they understand what youre saying but youve also described why it cant be fixed, because of the relationship between wall street and washington. Wpntn so First Citizens united has made this far worse, and thats an atrocious decision and it has to be overturned if were going to restore our democracy and such. But beyond that, theres never going to be a decisive victory against power and money and finance. We have to fight. Every generation has to engage in this struggle. And if it gives up and says its hopeless, well, itll give up and it will be hopeless. Bill black, thank you very much for being with me. Thank you. At our website billmoyers. Com see the top five Bank Bailouts that you probably have never heard about. Thats all at billmoyers. Com. Ill see you there and ill see you here next time. Dont wait a week to get more moyers. Visit billmoyers. Com for exclusive blogs, essays and video features. Announcer funding is provided by anne gumowitz, encouraging the renewal of democracy. Carnegie corporation of new york, supporting innovations in education, democratic engagement and the advancement of International Peace and security at carnegie. Org. The ford foundation, working with visionaries on the front lines of social change worldwide. The herb alpert foundation, supporting organizations Whose Mission is to promote compassion and creativity in our society. The john d. And catherine t. Macarthur foundation, committed to building a more just, verdant and peaceful world. More information at macfound. Org. Park foundation, dedicated to heightening Public Awareness of critical issues. The kohlberg foundation. Barbara g. Fleischman. And by our sole corporate sponsor, mutual of america, designing customized individual and Group Retirement products. Thats why were your retirement company. Rose welcome to the program. Im charlie rose. The program is charlie rose the week. Just ahead, the latest developments on ebola in america. My exclusive interview with russian dissident mikhail khodorkovsky. And the stars of the ensemble comedy, this is where i leave you. Cannot hear that heey. What, no, were just sitting in awkward silence. Rose we have those stories and more on what happened and what might happen. Theres a saying around here you stand behind what you say. Around here, we dont make excuses, we make commitments. And when you cant live up to them, you own up and make it right
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