Too Big to Jail

A quick note on the subject of criminal prosecution of bankers. The excuse is the four dog defense.

As a refresher, the first part is “I don’t have a dog.” In the case of the mortgage crisis, it started with the banks claiming that trusts, derivatives, mortgage backed securities had nothing to do with the loans. Actually, they were telling at least part of the truth. It was the banks and servicers that brought the foreclosures to the door of homeowners. Then it evolved into “U.S. Bank as Trustee for [either the certificate holders or a named REMIC Trust]”. Now they have gone back to naming the bank as though there was no trust, claiming no securitization.

Part 2 is “OK I have a dog but my dog doesn’t bite.” In the courts this translates as it was “legal” because it was disclosed. In part, that is true. But the greater part of the truth is that the “mortgage-backed securities” were issued by a REMIC entity that was never funded; so the certificates were not mortgage-backed and thus did not qualify for REMIC treatment and the exemption from securities regulation did not apply, so the bankers could have and should have been jailed for criminal fraud.

Part 3 is “OK I have a dog and it does bite but it didn’t bite you.” So since the borrowers were defrauded in a different way, law enforcement failed to prosecute the Investment Banks and the officers and directors. The real reason for this is nobody in law enforcement actually took the time to study what was done. So the banks assert that maybe they broke every rule imaginable but whoever is complaining cannot show how it exactly hurt that one person. That is why the word “investigation” exists.

Part 4 is “OK I have a dog, it does bite and it did bite you but the injury is your fault. You shouldn’t have been playing with a dog you knew nothing about”. So all that advertising, mailers, door hangers and people knocking on doors luring the homeowners into these bone-headed loans at what appeared to be 2.5% counts for nothing. And all those rating agency reviews that gave AAA approval for the shares of a company that had no assets and no liabilities and no income and no expenses means that the investors and borrowers (i.e., the victims) were at fault because they were looking for something for nothing. And they should have known better. On that theory Madoff should not only be free, he should be continuing his Ponzi scheme on the theory that to stop it would damage the investors.

Here is the truth: neither the Bush Administration nor the Obama administration had any knowledge about the fraud and corruption on Wall Street other than what they were getting from their “advisers” a/k/a Wall Street insiders. So when the bankers asked for a form of informal immunity, Bush and Obama agreed. And here is another truth.

If the truth had been exposed by regulators and law enforcement the entire crash would have been vastly diminished because the investors and borrowers could have come together and mitigated the damage to both. That opportunity still exists and is still needed to mitigate the further damage from another 8 million foreclosures that the banks are hiding but which is starting to be revealed. Google it. There is only so much you can sweep under the rug. Each step of the foreclosure process is furthering the fraud, covering it up and is intended to avoid detection — all crimes.

see (http://www.americanbanker.com). The entire article may be viewed at http://www.americanbanker.com/news/law-regulation/why-too-big-to-jail-is-still-a-matter-of-debate-1076225-1.html Why ‘Too Big to Jail’ Is Still a Matter of Debate August 21, 2015 By John Heltman

Third in a series on “too big to jail”

WASHINGTON — The failure to prosecute bankers as a result of the financial crisis has sparked an ongoing debate about whether enforcement officials lacked the will to move forward with any cases—or didn’t have enough proof that any crimes had been committed.

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