William Black: Stop the banks. Indict the banksters.

Wire fraud and mail fraud are extremely serious federal crimes. Thousands of people who have perpetrated fraud through the mail or through telecommunications of any sort have been sent to prison for up to 20 years.  The U.S. Department of Justice warns that prosecution of wire fraud is not always merited, however. Prosecutorial resources should not be expended where fraud is a small piddling crime. For example:

Prosecutions of fraud ordinarily should not be undertaken if the scheme employed consists of some isolated transactions between individuals, involving minor loss to the victims, in which case the parties should be left to settle their differences by civil or criminal litigation in the state courts. Serious consideration, however, should be given to the prosecution of any scheme which in its nature is directed to defrauding a class of persons, or the general public, with a substantial pattern of conduct.
What, then, should we make of the decision by the biggest banks in the United States to spew millions of lies through the mail in the zealous attempts to kick people out of their houses?  Everything about this bank fraud meets the test for serious fraud.  Not isolated.  Not between individuals.  Not involving minor losses to victims.  The victims, for the most part, cannot settle their differences by litigation because they have been put into desperate financial situations by the lenders, working hand-in-hand with the bank.  And yes, this scheme is directed to defrauding a large class of persons, and the general public is going to suffer the consequences of this "substantial pattern of conduct," namely, the large tracts of foreclosed homes in their neighborhoods. Note too, that the federal fraud statutes kick up the penalty to up to 30 years in prison "if the violation affects a financial institution."  Of course, the politicians and bank are going to argue that the increased penalty only applies if the institution is the victim. Then maybe it's time to pull out that wonderful quote by Anatole France:

The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.

In steps bank regulator/investigator William Black, into the fray.  Black is one of the few nationally prominent voices I completely trust with it comes to the conduct of banks over the past few years (and yes, decade).  Here is the solution Black offers, one that politicians are going to choke on because the banks own Congress.

S&L regulators, criminologists, and economists recognize that the same recipe that produced guaranteed, record (fictional) accounting income (and executive compensation) until 2007 produced another guarantee: massive (real) losses, particularly if the frauds hyper-inflated a bubble. CEOs who loot "their" banks do so by perverting the bank into a wealth destroying monster -- a control fraud. What could be worse than deliberately growing massively by making loans likely to default, converting large amounts of bank assets to the personal benefit of the senior officers looting the bank and to those the CEO suborns to assist his looting (appraisers, auditors, attorneys, economists, rating agencies, and politicians), while simultaneously providing minimal capital (extreme leverage) and only grossly inadequate loss reserves, and causing bubbles to hyper-inflate?

This nation's most elite bankers originated and packaged fraudulent nonprime loans that destroyed wealth -- and working class families' savings -- at a prodigious rate never seen before in the history of white-collar crime. They created the worst bubble in financial history, echo epidemics of fraud among elite professionals, loan brokers, and loan servicers, and would (if left to their own devices) have caused the Second Great Depression.

Nothing short of removing all senior officers who directed, committed, or acquiesced in fraud can be effective against control fraud. We repeat: Foreclosure fraud is the necessary outcome of the epidemic of mortgage fraud that began early this decade. The banks that are foreclosing on fraudulently originated mortgages frequently cannot produce legitimate documents and have committed "fraud in the inducement." Now, only fraud will let them take the homes. Many of the required documents do not exist, and those that do exist would provide proof of the fraud that was involved in loan origination, securitization, and marketing. This in turn would allow investors to force the banks to buy-back the fraudulent securities. In other words, to keep the investors at bay the foreclosing banks must manufacture fake documents. If the original documents do not exist the securities might be ruled no good. If the original docs do exist they will demonstrate that proper underwriting was not done -- so the securities might be no good. Foreclosure fraud is the only thing standing between the banks and Armageddon.

I should add that there are many cases where foreclosure is perfectly appropriate.  On the other hand, there are hundreds of thousands of cases where disreputable loan originators such as Ameriquest and Countrywide systematically lied to borrowers, sticking them into loans that the borrowers had no hope of paying off when the hyper-charged "adjustable rate mortgage" came into effect two or three years later.  Add in the deceitful "yield spread premiums," hidden fees and the many lies about prepayment penalties, and you've got enough fraud to fill the courts of this land for many years to come, where banks who foreclosed based on these shameful scenarios should be punished and forced to make amends to the homeowners.   That is what should happen.

Continue ReadingWilliam Black: Stop the banks. Indict the banksters.

The Center for Inquiry responds to the claims made by Paul Kurtz

Until May 18, 2010, Paul Kurtz was a member of the boards of the the Center for Inquiry, the Council for Secular Humanism and the Committee for Skeptical Inquiry. He was also the Editor in Chief of CSH’s flagship publication, Free Inquiry. On May 18, 2010, these three organizations announced that Kurtz had resigned from each of these boards and as Editor in Chief. At my request, Kurtz agreed to an interview, which I published here at Dangerous Intersection on October 2, 2010. On the day I published Kurtz' interview, I invited the Center for Inquiry to respond. A few days later, I was contacted by Ron Lindsay, President and CEO of CFI. Lindsay agreed to an interview of the same general format (both of these were written interviews and both were guided by about 20 questions from me. What follows is my interview with Ron Lindsay: EV: What attracted you to join CFI? Briefly describe your association with CFI. RL: For over 25 years, the Center for Inquiry or its affiliates have been an important part of my life. (CFI itself was not founded until 1991.) In 1983 or 1984, I became acquainted with the Council for Secular Humanism and its publication, Free Inquiry. (Paul Kurtz had contacted me about representing the Council in a church-state lawsuit.) Once I became familiar with the Council, I found myself in agreement with the approach that the organization took on key issues. In particular, I agreed that religion should not be spared from critical examination and that it was important to develop and foster a humanistic ethics, that is, a naturalistic ethics based on human interests. I’ve considered myself a secular humanist, as well as an atheist, ever since. I did volunteer legal work for the Council and CFI over the next 20 years or so. I also had about a dozen articles published in Free Inquiry and was listed as a contributing editor or senior editor. I also served on the board of directors for the Council for roughly four years. (I believe I served from 1988 until 1992 or 1993.) In March or April of 2006, Paul Kurtz contacted me regarding the opening of CFI’s Washington, D.C. office, and he asked me to assist the office in its work. I told him that might be difficult because I was in the process of leaving my law firm to take an in-house position with a corporation, and the corporation probably would not permit pro bono work for CFI or its affiliates. Paul then asked me to consider working for CFI as its in-house lawyer. We both understood that CFI could not pay me anywhere near what I would earn elsewhere, but I decided to accept this offer because of my commitment to the work of the organization. I thought that at this point in my life—I was 53 at the time—, I could sacrifice income to pursue an opportunity to work full-time on causes to which I was personally dedicated. I worked in the D.C. office starting in July of 2006, and Paul Kurtz then promoted me to various positions. First, he made me a vice president; he then appointed me to CFI’s Executive Committee; and finally, he appointed me to the position of executive director for the Council for Secular Humanism. I did not request any of these positions, so presumably these appointments reflected Paul Kurtz’s confidence in my abilities and my dedication to secular humanism. Then, on or about June 26, 2008, the board of directors (including Paul Kurtz) offered me the position of president and CEO. I have held this position since that time. -- EV: Why is Paul Kurtz no longer a Board member of CFI, CSH, or CSI? Why is he no longer editor-in-chief of Free Inquiry? RL: Paul Kurtz voluntarily resigned from his positions with CFI and all its affiliates, including his position as editor-in-chief of Free Inquiry. His email announcing his resignation from these positions stated that he was resigning because he believed he did not have any “effective authority in these organizations.” His resignation announcement made no reference to being placed under duress. Any suggestion that Paul Kurtz was forced to resign or was “expelled” is without factual support. No one who has made such a claim has ever provided any specifics regarding who supposedly pressured Paul Kurtz to resign, what pressure was applied, when the pressure was applied, and so forth. The myth of Paul Kurtz’s expulsion or ouster from CFI is just that: a myth that does not withstand critical examination. -- EV: Do you contest the accuracy of any of the facts asserted by Mr. Kurtz in his interview? RL: Yes. Virtually all of Paul Kurtz’s answers in his interview contain serious inaccuracies. I will highlight a select portion of them here. [More . . . ]

Continue ReadingThe Center for Inquiry responds to the claims made by Paul Kurtz