January 29, 2013. New York. Four years after America’s self-induced 2008 economic collapse, not one single individual has gone to jail for the fraud, theft, perjury and treason that was seemingly perpetrated from one end of Wall Street to the other. PBS and Frontline recently looked back to find out why no one’s been brought to justice. Here’s what they found out. Watch the full video here.
Asst. AG Lanny Breuer is consistently blamed for refusing to investigate banks over the economic collapse.
The one-hour documentary titled ‘The Untouchables’ examines not only the crimes that led to the 2008-2009 economic collapse, but the criminals as well. Investigators chase down the individuals at the center of the massive fraud. But in a long-awaited turn of events, producers turn the cameras on those individuals who were responsible for protecting America at the time and who still refuse to bring any of the thousands of perpetrators to justice.
The documentary begins with the words, “In 2009, Wall Street bankers were on the defensive. The great American mortgage bubble had burst. The economy was in ruins. And Wall Street bankers were being blamed. Bankers admitted they had miscalculated. But they were also worried they could be held criminally liable for fraud.” The report goes on to detail America’s hope that the incoming Obama administration would get to the bottom of the mess. As Barack Obama promised on the campaign trail, “I’ll name names.” But it never happened.
As the video details, “With a new administration arriving in Washington, bankers and their attorneys expected investigations, and at least some prosecutions.” But they never came. Frontline went straight to the source to find out why – Assistant Attorney General and Chief of the Criminal Division at the Justice Department, Lanny Breuer.
“I am personally offended by much of what I’ve seen,” Breuer attempted to explain, “I think there was a level of greed, a level of excessive risk taking in this situation that I find abominable and I find very upsetting. But that is not what makes a criminal case. What makes a criminal case is that I can prove beyond a reasonable doubt, every element of a crime.”
Lack of effort
Taking issue with Lanny Breuer’s explanation, Frontline spoke to a number of Washington and Wall Street attorneys and criminal prosecutors. The consensus feeling is that the Obama administration and its Justice Department didn’t even try to investigate or indict the Wall Street criminals.
“The Justice Department failed. They have not done what needed to be done,” former NY Attorney General Eliot Spitzer told Frontline, “They didn’t ever try to bring together one coherent narrative, laying out the entirety of the story, against one of the major players, and demand sanctions that are meaningful. That, to me, is what has been fundamentally lacking.”
Inside the bubble
Some argue that Wall Street executives have been arrested. But others insist that drugs, prostitution, bribery, tax evasion and insider trading that had nothing to do with the economic collapse, don’t count. In reality, the global economic collapse of 2009 was mainly caused by the US housing collapse of 2008. PBS and Frontline go inside one of the half dozen firms at ground zero – Countrywide Financial.
Describing how mortgage originating giants like Countrywide followed orders from investment banks like Goldman Sachs, JP Morgan, Citigroup, Bear Stearns and Lehman Brothers, one expert explained, “This is totally about what went on on Wall Street. It was, in fact, Wall Street going out into California and saying ‘Hey, just put the mortgages together. Don’t worry whether they’re good or not. You get a fee. I’ll take them. I’ll bundle them up. I’ll sell them off to somebody else. I’ll make my money on that. And whatever happens to the mortgages doesn’t really matter.’”
As Frontline reporters reveal, law enforcement officials had in fact arrested, prosecuted and convicted numerous people and companies in connection to the fraud that led to the housing and economic collapse. But, as researchers reveal, they were all small-time companies. And in the majority of instances, authorities actually took the opposite opinion, jailing the defrauded homeowner instead of the deceitful mortgage originator. Wall Street bankers however, have been much more elusive.
The trail to those who made fortunes from the economic collapse – Wall Street’s biggest banks – begins with the small town mortgage originators. Before the housing bubble, local banks were America’s mortgage originators. They knew the people, the properties and they held the loans, putting the solvency of their own bank on the line over their quality. But when Wall Street entered the mortgage industry, small town banks exited.
Companies with names like Countrywide Financial that existed solely to find people wanting to borrow large amounts of money sprouted up all over America. Running late-night TV commercials, they found the hopeful and desperate homeowners. Attempting to disconnect themselves from fraud, these companies hired contractors to review samplings of each batch of mortgages to insure their quality. Flown out to fancy hotels in places like Las Vegas, Los Angeles and south Florida, these auditors-for-hire describe party atmospheres where supervisors overruled the objections of underwriters on questionable mortgages.
That was the first red flag that was ignored. Lowly mortgage underwriters, none of which got rich on the housing bubble, flagged tens of thousands of bad mortgages, almost all of which were ignored by either the underwriting companies, the mortgage originating firms that hired them, or both.
Frontline went straight to one of the banks most deeply involved in the alleged fraud – Citigroup. “My name is Richard Bowen. I was with Citigroup and I was a Senior Vice President and Business Chief Underwriter in the Commercial Lending Group,” one former bank executive began his interview, “And the overall operations I had privy over involved about $90 billion dollars a year of mortgages we were purchasing from other mortgage companies.”
“I had responsibility to make sure that those mortgages met our credit policy guidelines,” he told a Congressional hearing, “We found that approximately 60 percent of the loans did not meet our policy.” Proving that banks like Citigroup were knowingly buying worthless mortgages and reselling them as investment grade products, the Citigroup Vice President says, “The volumes increased through 2007. And the rate of defective mortgages increased from 60 percent to in excess of 80 percent.”
For those looking for a ‘smoking gun’, Citigroup’s Bowen gives us one, at least in this one particular instance. Watching his bank buy and resell $72 billion in worthless mortgages each year, the Citigroup Chief Underwriter did what he was supposed to do – he alerted a number of his supervisors, including one high-ranking, powerful, Wall Street and Washington insider.
‘On November 3, 2007, Bowen wrote an email to four senior Citibank executives,’ the PBS documentary narrator details, ‘including Board Chairman and former Secretary of the Treasury Robert Rubin.’
“I actually included in that email my cell phone, told them I was available this weekend, to please call me,” Citigroup’s Richard Bowen tells Frontline, “And in that email, I also requested an outside investigation. And in December, I sent another email. And I said please contact me. You need to know the details behind this. There are risks to the company.”
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The Wall Street Untouchables – PBS
Watch The Untouchables on PBS. See more from FRONTLINE.
The 53-minute PBS documentary continues on, detailing other individual examples and the trail leading to the tops of other Wall Street banks and powerful Washington insiders. More importantly, it brings forth examples of resistance within the Justice Department to prosecute crimes perpetrated by employees and executives of big banks. As investigators demonstrate, hollow promises by President Obama and well-intentioned Committees in Congress have no effect when the FBI, SEC, Eric Holder, Lanny Breuer and the Justice Department refuse to prosecute.
Watch the full video above or at PBS.org.
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