Good Obama moment: Abandons the myth that pre-2008 bankster crime can't be prosecuted!

[JackRiddler]

From tonight's speech:

We’ll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments. Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.

And tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. (Applause.) This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

I certainly hope so. There have been enough broken promises (in every administration) that you know you have to "make them do it" - join Occupy and keep pushing!

This sudden sliver of hope for justice could screech to a heartbreaking halt if the Feds manage to broker the prospective deal to grant immunity to the MERS member banks for running mortgage title forgery mills.

But thanks to this passage from Obama's state of the union speech, at least we can do away with the pernicious myth, often seen here, that the banksters of the 2008 crash merely took advantage of loopholes. Or are somehow impossible to catch because you have to prove intent before you even call them in for an interview. Or because they made sure to legalize all their prospective crimes by changing the laws in advance.

But as even Al Capone learned, it's not possible to commit crimes on that scale without some damn part of it being illegal.

Fraud and forgery have always been crimes. Gramm-Leach-Bliley and the other crime-is-legal acts of the late 1990s forgot to neuter those. Both fraud and forgery were committed on an epic scale...

...in the MERS system: Many thousands of mortgage transfer forgeries known to have been committed, indications that it runs into the millions. Forgeries are actionable and showing them could in fact invalidate millions of default claims. This is why MERS is now the subject of the outrageous immunity deal the feds are trying to work out between all 50 states and the MERS member banks. May Scheiderman and Harris stand strong!

...by the predatory lenders who opened up the credit spigots for borrowers they knew would default; every witting acceptance of a false loan application by the lower-level mortgage sharks is potentially actionable.

...by the paid academic and media stooges of the Wall Street complex who devised models and promoted hype they knew were based on imaginary premises but encouraged people to invest in the lie of perpetual growth in housing prices. (Okay, it's an ideological fraud, so here you'd be right to say not actionably criminal - a pity since Cramer and his peers and their fancier counterparts at the Ivies, the academic whores-for-hire exposed by "Inside Job," have it coming.)

...by the market makers who violated fiduciary responsibility to their clients by devising and selling instruments they knew would fail, in some cases were designed to fail - and even betting against them. (Actionable, as evidenced by the outrageous immunity deals the SEC has offered in several cases, allowing the scam artists to skate with most of their profits in exchange for paying a small cut in fines and no admission of guilt. Judge Rakoff has famously suspended one of these deals, may he stay strong and determined and bring this sort of rotten exoneration deal to an end.)

...by the ratings agencies who took the payoffs from the market makers and didn't do due diligence before delivering false verdicts on these instruments, without which investors like pension funds could not have been lured into the trap. (Actionable as fraud in commercial speech, and they should be the first entities to be seized and interrogated in unravelling the fraud, being no better than Arthur Andersen.)

...by the derivatives sellers and speculators who bet on the whole system to burn down and then lit the match. (The biggest fraud of all: setting up a system allowing unlimited and unpayable bets running into the hundreds of trillions, including by institutions that are also commercial banks and therefore "TBTF" : but this one they made sure to make legal beforehand.)

Recall the beautiful moment at the start of Inside Job: Nouriel Roubini is asked, "Why do you think there weren't more vigorous investigations into financial frauds?" His marvelously deadpan answer: "Because then they would find the culprits."

THOUSANDS of executives were prosecuted during the S&L frauds of the 1980s. They were caught because of investigations. When it was seen that a crime must have been committed, authorities went to work and so they found the culprits. Thousands of financial fraud investigators were employed at the time, hundreds today. The whole trick today is NOT to investigate, therefore not to discover perpetrators, and for the SEC to offer get-out-of-jail-free immunity deals in exchange for insulting "settlements" that the banks view as a minor cost of doing their dirty business.

It's been said that the government's been spending more on investigating food stamp fraud than financial fraud, but I've found it hard to locate the actual breakdowns to determine this and it's an arguable point.

The more interesting comparison is to the perpetual, Nixon-to-Obama "war on drugs." If it's about drugs, then evidence that a crime has been committed (the presence of drugs) can sometimes be enough to raid premises, summarily arrest everyone within smelling distance, seize properties and sell them before trial. Sometimes authorities don't wonder about states of mind or intents to commit or determining who exactly they can pin as the mastermind. They just move in and fuck everyone, and let the judge sort them out.

Too bad Goldman Sachs merely plundered tens of billions of dollars by some of the most evil scams imaginable (we haven't even got into the commodities speculation frauds that contributed to the food price bubble of 2008 meaning millions of victims). If only GS had kept half a million dollars worth of cocaine in the executive suite, the government would have found a reason to bust in the doors, shoot the pet dogs and shut this criminal organization down. Even if most of the banksters would get off after a raid on Goldman Sachs to arrest a few hundred suspects, they would not soon forget the being hogtied and having their wrists painfully cuffed behind their backs and being thrown into Manhattan Central Booking with the pot-smokers and the drivers with expired licenses and the poor slobs who drank a beer on the street. Some deterrent effect would stick, right?

We haven't even gotten into RICO, but same deal there. If the feds decide to designate a criminal organization, they have the means to go after them despite omerta and distributed responsibility. Once they're considered a criminal group, the crimes of any one of them are good enough to bag the executives no matter what they say they forgot.

The FBI can infiltrate and set up honey-traps and entrapments for animal rights and peace activists, and create entrapment schemes for mentally disabled patsies they style into "terrorists," but they can't place one damn spy as a secretary at Goldman Sachs?

Okay, I'm veering into satire, but why does this seem so absurd to you? Seriously. If the FBI thinks it's okay to infiltrate some Quaker antiwar meeting on suspicion they might eventually engage in some kind of sedition, then not infiltrating Goldman Sachs on the presumption that they must be doing some dirt they can be nailed for is strictly a product of class prejudice. We see no white collar crime, hear no white collar crime, speak not of it.

As Bertolt Brecht asked: Which is the bigger crime, robbing a bank or owning one?

[whatchamacallit]

1. Rec

[ProSense]

2. There

"Abandons the myth that pre-2008 bankster crime can't be prosecuted!"

...was no myth.

http://www.stopfraud.gov/news-index.html

Still, there is a lot more to come.

SOTU: Schneiderman will co-chair mortgage probe
http://upload.democraticunderground.com/1002217724

[AnotherMcIntosh]

3. If they wait just a little longer, the 5-year statute of limitations for criminal RICO will run.

18 USC 3282

A shorter four-year statute of limitations is applicable to civil RICO lawsuits.
Agency Holding v. Malley-Duff, 483 U.S. 143 (1987)
http://supreme.justia.com/cases/federal/us/483/143/

[sabrina 1]

7. What about criminal RICO suits?

I think most civil suits have a deadline don't they? But not criminal.

[AnotherMcIntosh]

9. Unless an exception applies, noncapital Federal prosecutions are subject to the 5-year S/L

in 18 USC 3282.

You're right, most civil suits are subject to deadlines under their applicable statutes of limitations. Sometimes this involves a matter of judicial interpretation, such as when a particular statute authorizing a civil action does not also include its own limitation period.

[sabrina 1]

10. Not sure if this would apply in the case of the Wall St. crimes. There are probably different

institutions that would be involved, and different crimes, but I found this:

Banks and other financial institutions have special protection under federal criminal laws. The following offenses against banks have a 10-year statute of limitations:

Bank fraud (scheme or artifice to defraud a financial institution). 18 USC 1344.

Mail fraud (using the mails for a scheme or artifice to defraud). 18 USC 1341.

Wire fraud (using wire, radio, or television in a scheme or artifice to defraud). 18 USC 1343.

Violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 USC 1962, that is predicated on bank fraud under 18 USC 1344.

Receipt of commissions or gifts for procuring loans. 18 USC 215.

Theft, embezzlement, or misapplication by bank officer or employee. 18 USC 656.

Embezzling funds from a federal financial institution. 18 USC 657.

Falsifying bank records (reports, entries or transactions). 18 USC 1005.

Falsifying records of a federal financial institution (reports, entries or transactions). 18 USC 1006.
Falsifying, forging, or counterfeiting a statement to the Federal Deposit Insurance Corporation (FDIC). 18 USC 1007.

Making a false statement or report, or overvaluing assets for a federal loan. 18 USC 1014.

Making a false statement or report, or overvaluing assets as it relates to insurance and a financial institution. 18 USC 1033.

See 18 USC 3293.

http://www.federalcriminallawyer.us/2010/12/05/the-statute-of-limitations-defense-for-federal-crimes/

So maybe ten years? I bolded a few on the list that seem to relate to some of what was done, eg, robo-signing, but that would be the Law Mills mostly.

The civil case in New York against Wells Fargo and the law mill run by Steven Baum on behalf of thousands of people foreclosed on by them, was filed as RICO case eg.

It would definitely be better if it was ten years.

[AnotherMcIntosh]

13. Thanks for the link. The article, of course, is very well written.

Also, of course, individual attorneys can disagree with one another for a number of reasons, one being that they can separately focus upon different things at different times. Even judges sometimes disagree with one another, and do so without regard as to whether they are left-leaning or right-leaning.

Now that there's a chance that there may be prosecutions (thank you OWS), there will undoubtedly be one or more articles in the bar jounals that will analyize the particular question that you raised.

There's are additional questions related to your question. For purposes of determining which statute of limitations applies, who are the victims? And should the instrumentality used to perpetrate the frauds be determinative?

Banks were used to perpetrate the frauds, but who were the intended victims? Arguably, some or all of the statutory references that you highlighted in bold face are applicable. Naturally, however, that's only arguable in court if there's a factual basis for it. Some may disagree, but in my view, the intended victims were those who took out loans and the shareholders, not the banks themselves. Banks were used as instrumentalities to perpetrate the frauds, and were used on a wide scale, but in my view, to the extent that they were only used as instrumentalities, there was no bank fraud.

Arguably, another exception to the five-year rule might be applicable. If there are records to support it, a good Federal prosecutor might be able to find and prosecute tax fraud. The staute of limitations for such criminal activity is generally six years.

Incidentally, I like what you have to say from time to time and am proud that you speak up to say it.

[sabrina 1]

17. Have you read the two year Senate Committee's report on what caused the meltdown?

It was referred by them to the DOJ a few months ago. It is long and pretty detailed and the Committee stated that there was 'evidence of criminal activity' which is why they referrred it to the DOJ. I am in a hurry right now so can't take the time to find it, but it is available online.

'No bank fraud'. Perhaps, unless they knew what the Law Mills were doing re robo-signing, forged documents when they could not produce the notes etc.

Who were the perps? On the surface, you might say the Ratings Agencies for one, giving triple A ratings eg, when they should have known better, (see the bolded point in my comment above) but I've seen with some of them and they can claim not to have received the proper information.

The mortgage lenders, and/or their agents. The FBI actually did alert on fraud in the mortgage industry as early as around 2006, and stated they did not have enough manpower to investigate properly. Bush instantly reduced the manpower. And MERs.

There were so many victims, investors, homeowners, even record-keeping agencies in Town Halls across the country who lost fees as mortgages were not recorded with them. That part is a tragedy in many ways as it destroys the history of homeownership.

I will post the Senate Committee's findings later when I get back. I think you might be able to get more out of them than I can. But I wonder if that is the reason for the President's change of attitude towards recognizing that there was crime involved.

Thank you for your comment, I appreciate your comments very much also

[AnotherMcIntosh]

20. Thanks for mentioning the Committee Report. I just found it and it looks lengthy.

There's a lot of details.
http://www.hsgac.senate.gov//imo/media/doc/Financial_Crisis/FinancialCrisisReport.pdf?attempt=2

Too bad that they can't bring back Eliot Spitzer.

[sabrina 1]

29. The Sheriff of Wall Street!

He was commenting a lot on it before he lost his show. I wish he was the AG.

Thank you for the link, I actually read almost the whole report a few weeks ago. Levin was on several shows, including Elliot Spitzers right after the report came out and Matt Taibbi did some reporting on it also and I believe was on with Levin. But then they killed OBL and the media forgot about the Senate Report.

One article I read stated that there were literally thousands of people who had broken the law and it could take decades to sort it all out and probably will. But they have to start somewhere and I hope they start soon.

[JackRiddler]

22. Question.

You refer to intended victims. What room does the law make for crimes against incidental victims? Reckless behavior that destroys wealth and creates crisis devastates groups beyond the directly defrauded investors or the deluded mortgage buyers. I think also with fraud being so widespread and profitable, and in the end inviting a bailout of those institutions through which it was committed, this screwed those who were doing a more legit business. Banks that did not engage in fraud but were on the margin of profitability probably were pushed over the edge by the crisis as they did not get to partake in the bailouts for the TBTFs. Beyond the direct cost of bailouts, enormous debt and liability passed into the public sector, burdening everyone, for now incalculably. Then you have the economic disaster beyond that, the unemployed, the impoverished, the drop in property values and blight of whole regions, those who are underwater even if financially solvent, etc.

So to get back to the question: Who can be counted as victims with a legal stake in the proceedings beyond "intended victims" such as the ones you name: investors in fraudulent instruments and deceived mortgage buyers?

[AnotherMcIntosh]

23. That would be a good law school question and would evoke a lot of discussion. No matter which

route a person began with, because there is an absence of a black-and-white answer, any answer could be challenged and the challenges would be legitimate ones.

I think that you're raising a question that would generally be analyized by attorneys under the category of causation. We are not talking about civil wrongs or torts, but causation could still be a major part of the analysis. Does a criminal need to know the identity of a victim? No. Does a criminal need to actually see a victim? Again, no. But, except for victimless crimes such as pot smoking of home-grown pot which was not grown for distribution purposes, there has to be a victim.

In criminal prosecutions, except when a prosecutor seeks restitution, it's not necessary for a prosecutor to prove the identities of all the victims. When one person is killed by a gunshot, for example, it's not necessary for a prosecutor to also identify all the neighbors whose peace may have been disturbed by the sound of the gunshot. One victim under the circumstances is enough.

For those who are interested in filing civil suits, your question is one of the important questions that they and defense attorneys will be asking. Attorneys will disagree with one another. It's one of the things that they do.

Hope that this answer isn't too long (or pedantic).

[JackRiddler]

27. Thank you and...

OMG, not at all pedantic - I greatly value this expert insight, and you can give as much as you like afaiac.

[joshcryer]

4. I won't hold my breath over this Financial Crimes Unit.

It would be amazing if it was pushed as hard as it could be, of course. And I hope they go after the top dogs first as opposed to the little guys, especially if the poster above talking about RICO running out is on to something (not sure about that, but if so then time is certainly of the essence).

[ProSense]

5. People

"And I hope they go after the top dogs first as opposed to the little guys, especially if the poster above talking about RICO running out is on to something (not sure about that, but if so then time is certainly of the essence)."

...are always searching for ways to dimiss stuff. I mean, what five-year period is this supposed to cover?

There are prosecutions here (http://www.stopfraud.gov/news-index.html) for crimes committed before 2006.

[joshcryer]

8. I'm well aware of that.

Doesn't mean that he's going after the bankers who were well aware of this mortgage fraud, and who are responsible.

http://www.huffingtonpost.com/2011/11/03/tammy-baldwin-immunity-banks-foreclosure_n_1072909.html

We will see, is all I can say (and note, I defended immunity on this subject in the past).

[sabrina 1]

6. Wow, excellent!

Excellent OP also, JackRiddler. The previous statement that there was probably no crime although what they did was immoral, really, really angered a lot of people.

I am so glad to see this. I have not yet watched the speech, but have read part of the transcript.

I also liked what he said about education 'no more teaching to the test'. Finally, and I hope that message gets to Arne Duncan.

Maybe he did read the Senate Committee's Report, but it's also obvious that OWS's main message has been heard and maybe he needed the people to speak out.

This really is good news.

I did not see 'Inside Job', but did see 'Meltdown, The Men Who Crashed the World', which left no doubt there was fraud.

Thank you for the OP.

[JackRiddler]

11. Unfortunately a different message went to Arne Duncan

Here's what he said about the "Race to the Top" program (the extension of "No Child Left Behind&quot that throws teachers and schools into the pit and gets them into a dogfight over financial scraps:

"For less than 1 percent of what our nation spends on education each year, we’ve convinced nearly every state in the country to raise their standards for teaching and learning — the first time that’s happened in a generation."

Not so hilariously, I'd just been at a public high school meeting protesting a planned firing of all teaching personnel there and at 32 other NYC schools under a "turnaround" program! No more than 50 percent would be rehired. This was supposedly to secure "Race to the Top" funds for the city and state. The City is expected to meet the federal criteria "to raise standards for teaching and learning," which under Race to the Top and in the Bloomberg "reform" philosophy means strict, arbitrary, irrelevant "performance evaluations" of teachers based on year-to-year changes in standardized test scores. If this cannot be forced on the teachers' union, the "turnaround" goes forward. The children are the hostages.

In other words, the above means we've conned every state in the country to adopt counter-productive standards (and privatize much of the education dollar) by dangling a carrot in the form of minor grants. In direct contradiction to this claim:

"Teachers matter. So instead of bashing them, or defending the status quo, let’s offer schools a deal. Give them the resources to keep good teachers on the job, and reward the best ones. (Applause.) And in return, grant schools flexibility: to teach with creativity and passion; to stop teaching to the test; and to replace teachers who just aren’t helping kids learn. That’s a bargain worth making. (Applause.)"

So stop setting up a carrot-and-stick program to incentivize adoption of evaluation measures that force teachers to teach to the test!

[JackRiddler]

12. bump for morning readers

[_ed_]

14. This should have been done in 2008

What was he waiting for? Holder could have set this up on his first day in office. He doesn't / didn't need Congress.

I don't believe a word of this until I see a Wall St asshole in a three piece suit doing the perp walk.

Shit, even Reagan prosecuted banksters during the S&L scandal.

[JackRiddler]

15. Of course, of course. Like the president...

I'm parsing my words carefully. All I'm really saying in this thread is that at least he's dispensed rhetorically with the pernicious myth that crimes aren't actionable, or that all of the pre-2008 fraud exploited legal loopholes and you can't do anything about it, etc..

If you want to be cynical, be my guest: statutes of limitation are closer than ever, as has been pointed out, so maybe now it's safe to talk like a populist while raking in campaign cash from some of the same people who should be the first ones in the dock. Maybe there is real substance here. As the song on this site usually goes, there is some difference from the Republicans!

It will be great if there is prosecution of the chief Wall Street criminals, just as it would have been good if Guantanamo was shut down as promised.

It's partly up to the movements for justice to raise the pressure in the months ahead. Shouldn't have to be this way, but that's how it is.

[_ed_]

16. Agree

I'm not impressed in the least until I see an actual prosecution begin.

[alp227]

18. nov. 2009 executive order established financial crimes task force.

Obama creates task force to fight financial crime

[JackRiddler]

19. What has it done since?

There are several ways to interpret your posting of this news story from 2009.

[kentuck]

21. Is there a reason...?

...We would need to wait for 3 years? In an election year, it looks like an election ploy.

[librechik]

24. hmmm- I wonder where Obama's going to get the money for that?

sounds like another place for Repubs to put on the brakes and make Obama beg for it then kick him in the teeth for asking. Nice idea, though.

[JackRiddler]

26. Sorry, I have to ask.

Is your comment meant to describe a) a serious possibility, that Congress will prevent the Justice Department from contributing funds from its already existing budget toward setting up a prosecutorial office jointly with the New York State AG, or b) as a sarcastic rendering of the probable excuse if this thing turns out to be another initiative that goes nowhere?

[librechik]

28. a) of course. It's their specialty. It's why there have been no Wall Street investigations to speak

[bvar22]

25. Excellent Compilation! DURec, Kick, AND a Bookmark.

Well Done!
I am Bookmarking for later reference.

Like most here, I was delighted to hear this from the podium last night,
but am always suspicious of Campaign Season Jailhouse Conversions.



You will know them by their WORKS,
not by their rhetoric.
[font size=5 color=green][center]Solidarity99![/font][font size=2 color=green]
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[JackRiddler]

30. Thank you bvar!

[JackRiddler]

31. bump for next-day readers

[JackRiddler]

32. More than half a year later, has this come to anything?

Is it any less relevant that the biggest criminals receive the biggest rewards, and remain in power?