Bill Black on why financial crime isn’t prosecuted

Bill Moyers did a great interview with Bill Black, an expert on white-collar crime and former financial regulator, on the Obama administration’s failure to prosecute financial fraud.  He sums up the situation accurately, clearly and briefly.  Here are highlights from the transcript.


WILLIAM K. BLACK:  Yeah, in baseball terms they’re batting 0.000.  But they’re not just batting 0.000, they took called strikes. They never got the bat off their shoulder and even swung.  They didn’t even try.

BILL MOYERS:  Do you remember when President Obama told “60 Minutes,” I think it was late December of 2011 that, “Some of the most damaging behavior on Wall Street…wasn’t illegal?”

BLACK: I do.

MOYERS: What did you think?

BLACK: 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 [interest rates] on over $300 trillion in [loans and financial] contracts.

A trillion is a thousand billion, right?  And then we have the foreclosure frauds where we have false affidavits [that the records were verified].  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 [during the administration of the elder George Bush].  Here, zero criminal referrals as far as we can get any public information.  So the first thing Holder should’ve done is re-establish the criminal referral process.  Because, you know, banks don’t make criminal referrals against their own CEOs.

MOYERS: Do you tell yourself, well, there is a justifiable and understandable reason why they don’t prosecute?

BLACK: 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.


BLACK Obama wouldn’t have been president but for the financial contribution of bankers.

And it’s 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 out-raise by a substantial margin political contributions from the banking industry to win that nomination.

And then out-raise 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.


BLACKJP Morgan was one of the leading, what we call [in] 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, it’s easy to produce low quality revenue.  Bad underwriting means income today and losses tomorrow.  Now, of course, it doesn’t 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 there’s a problem, well, the government will bail you out and give you massive subsidies if you’re too big of fail.  And, of course, JP Morgan is the quintessential example of too big to fail, too big to jail.


BLACKI’m representing the banks, you’re Eric Holder.  I know that you believe that I’m too big to fail and that there’ll 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 would violate all of those conditions.

So what do I want as CEO?  Of course I don’t want to go to jail and I’m happy to trade off some dollars in a fine to make sure that I never go to jail.  But I also don’t 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.

MOYERS:  Otherwise they’ll rat on me?

BLACK:  Otherwise they might rat on me.  And this immunity doesn’t have to be formal.  It’s just no cases will occur, right?  Right? Right.  So often there isn’t 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 I’ve led.

And that’s the other part of the deal.  In all of these cases, they get to keep the fraud proceeds.  That has never happened in [the] modern United States.  That is why it’s the worst strategic failure, but it’s also failure of integrity at the Justice Department and at the Obama administration.  And the [younger George] Bush administration was no better on this score.


BLACK:  There’s no threat to capitalism like capitalists.


Full Show: Too Big to Jail on Moyers & Company.

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