posted on 31 January 2016
from William K. Black, New Economic Perspectives
We are a newly formed organization of financial sector whistleblowers dedicated to holding the elite financial leaders who led the fraud epidemics that caused the financial crisis and the Great Recession personally accountable and to helping to implement the urgent changes necessary to prevent or at least reduce the frequency and harm of future crises.
Our group has expertise in finance, banking, real estate, accounting, underwriting, economics, law, securities, criminology, regulation, and financial derivatives. We also have international expertise.
We are releasing four documents today. This first document provides the outline of our plan that would allow any newly elected President (or President Obama) to restore the rule of law and end "too big to fail" without any new legislation or rules within 60 days. The second document explains and fleshes out the outline of our 60-Day Plan. The third document is our proposal to encourage the candidates to pledge that they will not take contributions from banks (and their officers) that the federal government, after investigation, have found to have engaged in fraud or other felonies. The fourth document explains who the whistleblowers are and provides our bios and contact information.
Our group is predominately former bankers who worked at fairly senior levels for enormous financial institutions. We do not hate banks or bankers as a group. We know, however, that when elite fraud is not stopped by the regulators and the prosecutors it is likely to create a "Gresham's" dynamic. The Nobel Laureate George Akerlof was the first economist to describe this dynamic in 1970.
We can confirm Akerlof's warnings about fraud. Indeed, we can testify from personal knowledge that when bad ethics is encouraged it will over time tend to drive good ethics out of individual firms. Fraudulent senior bankers deliberately create a Gresham's dynamic within the firm and in hiring "independent" professionals in order to drive honest employees out of the bank and to suborn outside professionals that are supposed to act as external "controls" to serve instead as fraud enablers. At places like Countrywide, thousands of employees left annually because they refused to abuse their customers. Only by restoring the rule of law to Wall Street can we allow honest banks and honest bankers to dominate Wall Street.
Similarly, the financial regulatory agencies are often dominated and rendered feeble by leaders who are the products of the "revolving door" or plan to use that "door" to increase their income. We have seen first-hand how that "door" can impair once great agencies.
Our goal of restoring accountability to Wall Street is not controversial. Indeed, there is unanimity among the candidates for the presidency that accountability for Wall Street elites has disappeared and urgently needs to be restored. But that same unanimity among candidates has existed for over a decade. Beginning with DOJ's failure to prosecute the elite bankers that aided and abetted Enron's senior managers' looting and destruction of Enron in 2000-2001 - the consensus on the need to restore accountability has failed to produce accountability for elite bankers for over 15 years. Every political leader says they want to help honest bankers succeed. Nearly every political leader agrees that the "revolving door" corrupts Wall Street's regulators. The movie The Big Short has a scene at a pool that is designed to be emblematic of the public perception that the SEC (and, by extension, the other federal financial regulators, the FBI, and the DOJ) is staffed by lawyers whose goal in life is to be hired by Goldman Sachs. One of our major insights is how law enforcement priorities with regard to financial elites have become sharply perverse as the financial regulatory agencies' input to the FBI and DOJ have virtually ceased through the destruction of the agencies' criminal referral process and been replaced by misdirected law enforcement priorities pushed by the elite bankers. We propose concrete steps to return our priorities to the most damaging financial frauds, which are always led by elites.
The public and the men and women running to be President have said that they want to hold Wall Street elites accountable. Our plan provides a practical means, designed by experts with a track record of actually holding elite bankers personally accountable for their crimes and abuses, that the next president can implement without new legislation or rules to promptly restore accountability. We hope that the candidates will treat the portions of our plan that they support, and our group, as a resource to embrace in order to achieve the goals they publicly say they share with us and the American people, starting with restoring personal accountability to Wall Street.
As whistleblowers who were the subject of retaliation we have been tested in the hottest and most brutal of business and regulatory crucibles. The warnings we gave to our superiors and politicians proved correct and we were attacked because we were correct substantively and insisted on doing the right thing. We are unemployable in banking and financial regulation precisely because of these qualities. (That fact should tell our readers a great deal about how deep and widespread the problems are in finance and financial regulation.) We have members who have led the most successful financial reregulatory efforts in the United States and helped produce the most effective investigative and prosecutorial system of elite financial criminals in our history.
We have no constraints on our ability to speak the truth and we have a history of speaking truth to power. What follows is not the product of press flacks or political spinmeisters. We have the expertise and personal knowledge to explain five key facts.
Tom Miller, the Nation's longest serving state attorney general (for Iowa), was also a leader of key combined DOJ and state task forces on mortgage fraud. Industry spokesmen invariably try to get the public to believe that the banks were the victims of liar's loans, but as Miller testified before the Fed, investigations prove the opposite.
Our initial purpose is to get candidates on record on which portions of our plan they will pledge to implement. Our 60-day plan is the first of the initiatives we will place before the public and the candidates. It consists of measures that the new President can take immediately on his or her own initiative without legislative action. We ask every candidate for the presidency to indicate which specific proposals of the Whistleblower Plan they will pledge to implement. As a group, we will not endorse any candidate. We will simply give a public certification that a candidate has provided a written pledge to implement the portions of the Whistleblower's Plan that the candidate chooses to support. In the detailed description of our 60-Day Plan we set out dates on which the specific could be implemented by a new President (or President Obama) without new legislation or regulation. Those dates are illustrative of how quickly a President with the will to restore the rule of law and safety to Wall Street could do so. We are not demanding that candidates certify that they would meet that exact time schedule we set out. Our Plan can be implemented in 60 days and that would be desirable, but we realize that a new President will have many priorities and could implement our 60-Day Plan over, say, 120 days.
We unanimously support the 60-Day Plan, but our Plan is not a "take it or leave it" demand. The candidates will choose which provisions of our Plan they support and will pledge to implement. In this first document we outline the substance of the Plan. We are simultaneously releasing a longer document that explains the rationale for our Plan provisions and exactly how they can be implemented without new legislation or rules. Again, the dates that the longer document provides are designed to illustrate how quickly accountability could be restored without any news laws or rules.
We are also releasing today a campaign funding pledge that the Whistleblowers' United supports. We will make public any pledges we receive from the candidates to implement our campaign funding pledge. The fourth document we release today explains who we are and why we came together to urge the prompt implementation of the restoration of the rule of law for Wall Street.
The Whistleblowers' 60-Day Plan:
This false ethnic claim, again, leads the FBI to prioritize the fraud "mice" rather than the "lions."
Will You Support the Whistleblowers' First 60-Day Pledge?
And so we ask each presidential candidate - which portions of the Whistleblowers' 60-Day plan will you pledge to implement? We hope the candidates will commit to breaking Wall Street's power over our economy and democracy. The Whistleblowers' 60-Day plan provides any candidate with the practical steps necessary to make real the twin goals of restoring the rule of law to Wall Street and ending crony capitalism. Our goal is to offer constructive, realistic means by which the next President can achieve these twin goals.
 "Control fraud" refers to the use of the entity by the officials who control it as a "weapon" to defraud others. In finance, accounting is the fraudsters' "weapon of choice." Epidemics of accounting control fraud drove our three modern crises - the Savings and Loan debacle, the Enron-era scandals, and the most recent crisis.
This appeared originally at New Economic Perspectives 30 January 2016.
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