You see Geithner out trying to close the big powerful banks? And that Reagan administration tried to appoint two members—there were only three members running the place—so this would’ve given control to Charles Keating, the most notorious fraud in the Savings and Loans crisis, selected two individuals to run the agency that would then not regulate him.
One of them got knocked out on ambiguous political grounds and the other ones I had to blow the whistle to get him to resign in disgrace, but of course they didn’t prosecute him.
We can prosecute these frauds. The Federal Housing Finance Administration has just filed complaints saying 17 of the largest banks in America committed massive fraud—endemic fraud—and that there’s a paper trail proving that they did so.
So where is the Justice department? Why is it not indicting these clear frauds? <applause still continues in background>
When you are told no one could’ve seen this crisis coming, ask them about the subprime crisis of 1990 to 1991. It’s a trick question. As all good things do in the world of fraud, this one started in Orange County…
Audience: Hahahaha. <applauding>
William Black: ….where you had significant people making liars’ loans. Now, remember, it is the lenders who put the lies in liars’ loans, not the borrowers. We know this empirically. And we stopped that—because it was insane—as regulators.
So guess what happened? The leading folks make… making liars loans gave up their federal charter, gave up federal deposit insurance, and became a mortgage bank for the sole purpose of escaping regulation. And they changed their name. And some of you will recognize this name—to Ameriquest.
One from the audience: Yeah.
William Black: Ameriquest was the leading predatory lender that in addition to making liars loans every day… every day of the week targeted minorities to destroy that wealth that you just heard about. They targeted Latinos, they targeted Blacks, and they were caught. And they were caught three times doing this and the justice department refused to prosecute.
Instead they settled for 400 million dollars and guess what happened to the head of Ameriquest? Did he: a) resign in disgrace, b) was he indicted, or c) did we make him our ambassador to the Netherlands?
William Black: Got it and won. How hard is this to figure out? Why do you think we made him our ambassador to the Netherlands? Because he was the leading political contributor to president of the United States of America.
And that’s bad but what comes next is far worse. Remember, this is the most notorious fraud in the nation. It targets minorities. Everybody knows it does so. Two entities rushed to acquire these personnel and this business and their names—Citicorp and Washington Mutual—who become two of the most notorious frauds in all of this.
So timewise I’ll stop here but the case is, when we prosecuted, we had a ninety-percent conviction rate when they had the best criminal defense lawyers in the world and they spend money like water to protect the CEO from going to prison. So when they tell you no one can stop this, it is utter nonsense.
Leave you with these statistics: the FBI warned of this in September 2004. In open testimony, it warned expressly that there was an epidemic—I’m quoting—an “epidemic of mortgage fraud” and it predicted it would cause a financial crisis.
If that’s not enough, the industry’s own anti-fraud experts in 2006, in writing, went to every mortgage banker in America and virtually every other lender and said three things: stated income loans are an open invitation to fraudsters; the incidence of fraud in such loans is 90%, nine zero. They are all fraudulent. And third: these loans deserve the phrase—used by the industry behind closed door—they are liars’ loans because they are pervasively fraudulent.
How big did they get? Well, what did the industry do after it was warned? Did it stop making these loans? No! It massively increased the amount of these loans such that by 2006, one out of every three home loans in America was a liars’ loan.