Financial crisis panel urged Obama administration toprosecute top bankers

By Gabriel Black

16 April 2016

Newly released documents show that the Financial Crisis Inquiry Commission (FCIC), a governmentpanel set up in 2009 to investigate the 2008 Wall Street meltdown, referred top bankers, CEOs andex-government officials to the Department of Justice for possible criminal prosecution. Not a singleone of those named by the panel, however, has been criminally prosecuted by the Obamaadministration.

These referrals were not included in the report released to the public by the commission.

The FCIC was formed as part of the 2009 Fraud Enforcement and Recovery Act to investigate thecauses of the 2008 financial crash. The act tasked a bi-partisan group of senators and congressmenwith creating a 10-member commission composed of members outside of Congress. The FCICreported its findings to the Senate Banking Committee and House Financial Services Committee.

In the course of its investigation, the commission interviewed hundreds of key players in thefinancial and regulatory system, held public hearings, and investigated reams of documents frommajor banks and regulatory institutions. In January 2011, the FCIC issued its final 633-page report.

The World Socialist Web Site wrote at the time that the report implicates corporate executives,regulators, and politicians in the conversion of the US economy into a Wall Street casino. It ties theunethical, irresponsible, and often blatantly illegal practices of the financiers to the impoverishmentand suffering of millions.

The National Archives of the United States released the internal FCIC documents last month. Thearchive contains roughly 500,000 pages of interviews, emails, correspondence and internal FCICminutes, only a portion of which is screened and digitally accessible. These documents underscorethe role of the Obama administration in shielding the banks and their leading officials from anyaccountability for reckless forms of speculation, fraud and lawlessness that led to the deepesteconomic crisis since the Great Depression of the 1930s.

Despite voluminous evidence assembled by the panel implicating in criminal behavior leadingfigures, including the then-CEO of Citigroup Charles [source] Prince and former top Citigroupexecutive and US treasury secretary Robert Rubin, the Department of Justice refused to prosecute.

In its report, the FCIC blamed not only bankers but also regulators who abysmally failed. Ithighlighted the political dimensions of the crisis, noting, From 1999 to 2008, the financial sectorexpended $2.7 billion in reported federal lobbying expenses; individuals and political actioncommittees in the sector made more than $1 billion in campaign contributions. This inflow of bankcash to campaign coffers deprived regulators of the necessary strength and independence ofoversight necessary to safeguard financial stability.

The FCIC proceedings paralleled an investigationby the Senate Permanent Subcommittee onInvestigations into the financial crisis. TheSenate committees chairman, Senator CarlLevin, declared after releasing the committees650-page report in April of 2011 that itsinvestigation had found a financial snake pit rifewith greed, conflicts of interests andwrongdoing. He told the New York Times: Theoverwhelming evidence is that those institutionsdeceived their clients and deceived the public,and they were aided and abetted by deferentialregulators and credit ratings agencies who had conflicts of interest.

One significant part of the FCIC archive released last month that has come to light is minutes from acommission telephone conference on October 12, 2010, in which the commission voted to send 8different referrals to the Department of Justice for criminal investigation. In the minutes, details areprovided for each referral, showing that the FCIC singled out top-level executives from AmericanInternational Group (AIG), Goldman Sachs, Citigroup and UBS.

In one referral, entitled Potential Fraud and False Certifications: Citigroup, former Citigroupchairman and treasury secretary in the Clinton administration, Robert Rubin, is cited for potentialcriminal prosecution. The FCIC urges that Rubin and then-Citigroup CEO Prince be investigated forknowingly defrauding the banks investors by lying to them about the extent of Citigroups exposureto the subprime mortgage crisis in 2007. The minutes also implicate other members of the board ofdirectors, all of whom allegedly knew that the bank understated its exposure by $42 billion.

This case had been taken up by the Security and Exchange Commission in July 2010, which let thebank and its top officials off the hook, imposing only a minimal civil penalty of $75 million. The FCICtakes issue with the SEC settlement in its October 2010 referral to the Justice Department, noting,The SECs civil settlement ignores the executives running the company and Board members

responsible for overseeing it By naming only the CFO and the head of investor relations, the SECappears to pin blame on those who speak a companys line, rather than those responsible for writingit.

In another matter, entitled PotentialFraud by Goldman Sachs in Connectionwith Collateral Calls on AIG, severalGoldman Sachs employees are referredto the Justice Department for criminalprosecution for selling securities toinvestors while simultaneously bettingthat these same securities would fail. TheFCICs minutes document the fact thatthe companys top executives weredeliberately and knowingly shorting

Collateralized Debt Obligations (CDOs) exposed to the subprime mortgage bust while selling them toinvestors. This is a criminal offense.

Specifically, it names Goldman Sachs Vice-Chairman Michael Sherwood, Chief Risk Officer CraigBroderick, and Daniel Sparks, who was head of Goldman Sachs mortgage department.

In another item involving Goldman Sachs, Potential Fraud by Goldman Sachs in Connection withAbacus 2007-18 CDO, the panel names David Lehman, a managing director at Goldman, andJonathan Egol, the then-head of the banks CDO operations. Both of these figures are implicated indeliberately misleading rating agencies as part of a larger scheme to my company sell securities toinvestors against which Goldman itself was betting.

In a fourth item, Potential Fraud in AIG Investor Calls, the FCIC minutes condemn the president andchief executive of AIG, the worlds largest insurance firm at the time, Martin Sullivan. Additionally, ittargets the firms chief financial officer, Steven Bensinger, and the chief executive of AIG financialproducts, Joe Cassano, for lying to investors about losses in the companys portfolios.

In regard to UBS, the minutes include an item, Potential Fraud: False and MisleadingRepresentations about Loan Underwriting Standards by UBS and Other Issuers, which blames UBSfor misleading investors about its mortgage underwriting standards.

In an item blaming the rating agency Moodys for selectively revealing downgrades in its ratings totop Wall Street Banks, the FCIC singles out Danya Corlito, the global business manager formortgage-backed and asset-backed securities at UBS, as well as David Oman, who was in charge ofUBSs European risk division.

Rather than criminally prosecuting the leading financial players who engineered and profited fromthe subprime mortgage meltdown, Obamas Justice Department has protected them by signingsweetheart settlements with JPMorgan Chase, Bank of America, Citigroup, Deutsche Bank and othermajor banks, protecting their executives.

In March of 2013, Attorney General Eric Holder responded to questioning from Republican SenatorChuck Grassley, who noted that there had been no criminal prosecutions of financial institutions orleading executives by the Obama administration. In response, Holder stated, I am concerned that the

size of some of these institutions becomes so large that it does become difficult for us to prosecutethem, when we are hit with indications that if we do prosecuteif we do bring a criminal chargeit willhave a negative impact on the national economy, perhaps even the world economy

Holders testimony before Congress amounted to an admission that the US government considers bigUS banks and their top executives to be above the law and deliberately avoids prosecuting them forillegal activities. These new documents, which have only begun to be analyzed, further substantiatethis fact.

The author also recommends:

Above the law

[14 December 2012]

Obama administrations phony crackdown on the banks

[9 May 2014]

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