By Pam Martens and Russ Martens: September 15, 2016
While Elizabeth Warren attempted to deliver her keynote speech at the Democratic Convention in July, which included an unabashed endorsement of Hillary Clinton after Warren had failed to endorse Senator Bernie Sanders during the critical primary campaign, chants of “we trusted you” could be heard reverberating through the cavernous hall in Philadelphia.
Warren rose to fame challenging the corrupt practices on Wall Street. She was now aligned with a Presidential candidate who was using Wall Street’s ill-gotten gains from the customers they had fleeced to finance her path to the Oval Office. There is no doubt that this has caused significant cognitive dissonance among Warren’s constituents in Massachusetts’ – the landing site of the Pilgrims and one of the original 13 colonies.
This bit of background might help to explain why, with less than two months before the November 8 election – and Hillary Clinton running for a third Obama term, promising to continue in his footsteps – Elizabeth Warren issued two letters that draw a sharp focus on the failures of Obama’s Justice Department and FBI to prosecute the myriad criminal acts on Wall Street that led to the 2008 financial collapse. (Warren’s letters were embargoed until midnight last evening, promising a full run of the news cycle today.)
In a 20-page letter to the Inspector General of the Department of Justice, Michael E. Horowitz, Senator Warren asked for an investigation into why the DOJ had failed to indict any of the Wall Street executives that had been referred to it for potential criminal prosecution by the Financial Crisis Inquiry Commission (FCIC). In a separate letter, Warren asked FBI Director James Comey for his related files.
The FCIC released thousands of documents in March of this year, showing that it had made multiple criminal referrals to the DOJ. Warren wrote in her letter:
“A review of these documents conducted by my staff has identified 11 separate FCIC referrals of individuals or corporations to DOJ in cases where the FCIC found ‘serious indications of violations[s]’ of federal securities or other laws. Nine individuals were implicated in these referrals (two were implicated twice). The DOJ has not filed any criminal prosecutions against any of the nine individuals. Not one of the nine has gone to prison or been convicted of a criminal offense. Not a single one has even been indicted or brought to trial. Only one individual was fined, in the amount of $100,000, and that was to settle a civil case brought by the SEC.”
This particular paragraph is a Pandora’s Box by a factor of $2.5 trillion. The two individuals Warren refers to who were “implicated twice” in the FCIC’s criminal referrals are Robert Rubin, the former Treasury Secretary in the administration of Bill Clinton, who in the lead up to the crash of Citigroup in 2008 served as Executive Committee Chair of Citigroup’s Board of Directors. (After advocating for the repeal of the Glass-Steagall Act, which allowed Citigroup to own both an insured depository bank, an investment bank and brokerage firm, Rubin went straight from his post as Treasury Secretary to the Board of Citigroup, where he collected $126 million in compensation over the next decade.)
The other individual whose name appears twice is Chuck Prince, Citigroup CEO during its implosion. A third Citigroup executive’s name appears as well on the list: Gary Crittenden, the Chief Financial Officer of Citigroup at the time of its crash.
One other individual’s name should have been on this list: Ben Bernanke, the Chair of the Federal Reserve who allowed the funneling of over $2.5 trillion in cumulative, secret loans to Citigroup during the crisis – despite the fact that it was insolvent and thus not legally eligible for the loans. Citigroup was the largest bailout recipient in the crisis, notwithstanding that its share price at one point reached 99 cents.
Sheila Bair, who was head of the Federal Deposit Insurance Corporation (FDIC) during the crisis, confirms this point in her book, Bull by the Horns. Bair writes:
“By November , the supposedly solvent Citi was back on the ropes, in need of another government handout. The market didn’t buy the OCC’s [Office of the Comptroller of the Currency that supervises national banks] and NY Fed’s strategy of making it look as though Citi was as healthy as the other commercial banks…Instead, the OCC and the NY Fed stood by as that sick bank continued to pay major dividends and pretended that it was healthy.”
Congressional testimony should also be demanded from John Dugan, a former lobbyist for JPMorgan Chase and the American Bankers Association who became head of the OCC in 2005 and reigned there throughout the crisis. Dugan now heads the Financial Institutions Group at Covington & Burling, the same law firm from which Obama plucked his DOJ Attorney General Eric Holder and its head of the criminal division, Lanny Breuer.
Covington & Burling is the same law firm that fronted for Big Tobacco for four decades and was called out for its unsavory role in a famous Federal court decision.
If Senator Warren is genuinely serious about getting to the bottom of this failure to prosecute, she also needs to demand that the Federal Reserve turn over the details of those 84 secret meetings that Bernanke held during the financial crisis and New York Fed President Tim Geithner’s 29 meet and greets with Citigroup execs, including the one where Sandy Weill, creator of Citigroup, offered Geithner a job at Citigroup.
There is strong evidence that long before the public was fully aware of the teetering condition of Citigroup, the Fed was propping it up with outrageously inappropriate support. On August 20, 2007, more than a year before the collapse of Lehman Brothers, the Federal Reserve granted Citigroup an exemption that would allow it to funnel up to $25 billion from its FDIC insured depository bank, Citibank, to mortgage-backed securities speculators at its broker-dealer unit. The Federal Reserve notes in its waiver letter that the bank “is well capitalized.” (Federal Reserve Exemption to Citigroup to Loan to Its Broker-Dealer, August 20, 2007)
It’s long past the time for the U.S. Senate to stop conducting isolated, piecemeal investigations and undertake the type of in-depth hearings that the Senate held from 1929 to 1932 that led to the public’s understanding of the serial criminal activities on Wall Street that had produced the Great Depression and which led to the passage of the Glass-Steagall Act — legislation which protected this nation for 66 years until its repeal in 1999 during the Bill Clinton administration.