Reflections on Geithner's Hatred for Prosecuting Criminal Contributors

[Donnachaidh]

http://www.creditwritedowns.com/2011/04/reflections-on-geithners-hatred-for-prosecuting-criminal-contributors.html

In the Savings and Loan (S&L) debacle Speaker Wright became enraged at the Federal Home Loan Bank Board and the Department of Justice when he learned that the FBI was investigating 400 individuals, most of them Texans, for their possible role in the S&L control frauds that were causing the regional bubble in commercial real estate (CRE) to hyper-inflate. (Akerlof & Romer’s 1993 article – “Looting: the Economic Underworld of Bankruptcy for Profit” discussed the major contribution the S&L frauds made to expanding that regional bubble.) Legend has it that an FBI agent accidentally left the list of investigative targets with an interviewee who copied it. Whatever the truth of the legend, Speaker Wright eventually reviewed a copy of the list and noticed that it had the names of many contributors to the Democratic Party. He and several senior Democratic colleagues and a staffer responded to the list by dividing up telephone calls to the FBI, Justice Department and the Federal Home Loan Bank Board (Bank Board). Wright was enraged and concluded immediately that the investigation was politically motivated. He wanted the investigation killed.

Wright began intervening with the Bank Board on behalf of a series of Texas S&L control frauds in 1986 and 1987. He eventually held the bill to “recapitalize” the Federal Savings and Loan Insurance Corporation (FSLIC) (the “FSLIC recap” bill) hostage to extort more favorable regulatory treatment for these frauds’ CEOs. Wright’s extortion focused on preventing agency actions against three Texas executives. Each of the executives shared two traits – they had voted for President Reagan in 1980 and they were now contributing to the Democratic Party. When we met with Speaker Wright in early 1987 his primary argument was the extreme fragility of Texas’ economy. (The meeting was set up by Bob Strauss, the grand old man of Texas Democrats, as a “peace meeting.”) I was the agency’s “point man” seeking to get FSLIC recap passed. The meeting was a disaster, Wright ended up claiming (incorrectly) that the head of our agency had lied to him and let loose in a swearing tirade aimed at me.

What Wright never understood was that the most politically active Texas S&Ls were so active because they were frauds and desperately needed protection from being closed by us. In particular, we intended to use the additional funds we would receive under FSLIC recap to close the worst control frauds and those frauds were located primarily in the states with the weakest regulation and supervision. Texas was the most criminogenic environment because it had the earliest extensive deregulation and the most complete state desupervision. (The top State of Texas S&L regulator later admitted to using prostitutes provided by Vernon Savings (aka “Vermin)). Vernon was the second worst control fraud in the nation and had 96% of its loans in default when it was finally placed in receivership despite Wright’s extortion. We had been so aggressive in closing the control frauds that by early 2007 we had roughly $500 million in the FSLIC fund – to insure an (insolvent) industry with $1 trillion in liabilities. We were running on fumes. Wright knew this and knew that holding the FSLIC recap bill hostage would give him exceptional leverage over our agency. Unfortunately for Wright, the result of the failed peace meeting was that we were able to convince the head of our agency that we had to take on Speaker Wright rather than continuing to capitulate to his ever increasing extortion. Doubly unfortunately, I was assigned the task of explaining to the public how the Speaker was extorting us on behalf of frauds and endangering the public. Thereafter, he tried repeatedly to get me fired. (One of the proposed ethic charges by the independent counsel for the House ethics committee investigating Speaker Wright was those attempts.)

Speaker Wright cultivated an image designed to terrorize opponents. He was nasty, asking us to fire our top supervisor in the Texas region on the “grounds” that he Wright had heard he was a homosexual. Wright had exceptional leverage over us because we were desperately short of funds and he held our access to funds hostage. Our agency (over several of our objections) gave in to many of his demands, including terminating a civil suit against a lender who had defaulted on his debts to roughly a dozen S&Ls. At no time, however, did we even consider giving in to Speaker Wright’s desire that we back off of criminal referrals, investigations, or prosecutions.

More at the link --

[Octafish]

1. K&R and it stayed at 'zero.' Shame on all who don't appreciate William K. Black.

S&L fiasco was a dress rehearsal for the Wall Street bailout.

Both times the US taxpayer bailed out the banksters and their bosses.

Background for those new to the topic:

Know your BFEE: They Looted Your Nation’s S&Ls for Power and Profit

[Donnachaidh]

2. prolly wal streeters who should be filing, but feel they are activists here

There seems to be select writings that get unrecced and stay unrecced -- Black and Johnston are two I can think of. :shrug:

[Lasher]

3. Both times we did nothing to prevent another disaster like these two.

And nobody seems to be worried about it.

Edit: Boy, Jim Wright was some kinda corrupt! This was clear obstruction of justice.