By Pam Martens and Russ Martens: January 10, 2025 ~

The indefatigable Dennis Kelleher, Co-Founder and CEO of the Wall Street watchdog, Better Markets, has just released his organization’s monthly newsletter for January 2025 and it’s a humdinger.

Kelleher warns that the financial deregulators that incoming President Donald Trump has packed into his administration means “that the clock is ticking on a coming catastrophic financial crash that will likely be much worse than 2008.”

Kelleher adds that this “is not hyperbole.” He cites evidence from past financial crashes, writing:

“…there is always a lag after deregulation and the creation of artificial liquidity. That was true for ‘roaring ‘20s’ followed by the crash and Great Depression; the ‘great moderation’ of the early 2000s followed by the crash and Great Recession; the deregulation of the first Trump administration in 2017-2020 that led to the 2023 banking crisis when 3 of the 4 largest bank failures in US history happened.  Much worse is likely to happen next time.”

The potential for another great crash might explain why the Vice President for Supervision at the Federal Reserve, Michael Barr, is abandoning the ship and lowering the life raft.

Kelleher has a way with coining a phrase, writing that “Banks don’t neglect their duties, act recklessly, engage in high-risk behavior, or break the law – bankers do” – and he warns that this is going to persist “until individual bankers are meaningfully and personally punished.”

Unfortunately, as Wall Street On Parade has documented time and again, regardless of which political party holds the reins in Washington, Wall Street has been able to draw a no-law zone around its activities with a wink and a nod from the U.S. Department of Justice.

In 2016 we reported on what the PBS Program, Frontline, had revealed about the Obama administration’s Department of Justice and its handling of the investigations after Wall Street had crashed the U.S. economy and left millions of Americans out of work with foreclosure notices nailed to their front doors:

NARRATOR: Frontline spoke to two former high-level Justice Department prosecutors who served in the Criminal Division under Lanny Breuer. In their opinion, Breuer was overly fearful of losing.

FRONTLINE’S MARTIN SMITH: We spoke to a couple of sources from within the Criminal Division, and they reported that when it came to Wall Street, there were no investigations going on. There were no subpoenas, no document reviews, no wiretaps.

LANNY BREUER: Well, I don’t know who you spoke with because we have looked hard at the very types of matters that you’re talking about.

MARTIN SMITH: These sources said that at the weekly indictment approval meetings that there was no case ever mentioned that was even close to indicting Wall Street for financial crimes.

Following the 2008 crash, Congress passed legislation that created the Financial Crisis Inquiry Commission (FCIC) to investigate and report on the causes of the crash. In 2016, previously withheld documents from the FCIC’s investigation were publicly released. Senator Elizabeth Warren was aghast at what they showed.

In a 20-page letter to the Inspector General of the U.S. Department of Justice, 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 by the FCIC for potential criminal prosecution. In a separate letter, Warren asked then FBI Director James Comey for his related files.

The FCIC documents showed that it had made multiple criminal referrals of Wall Street executives to the DOJ in 2010. Warren explained the referrals as follows 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.”

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, the 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. Crittenden was the individual that was fined $100,000 by the SEC.

Not only were Citigroup’s top executives not prosecuted, but the bank was secretly receiving cumulative revolving loans totaling $2.5 trillion from the Federal Reserve from December 2007 to at least July of 2010. That information was revealed in 2011 when the Government Accountability Office (GAO) released its audit of the Fed’s bailout programs.

The Fed is not legally allowed to make loans to insolvent institutions. But in the case of Citigroup, it appears that the Fed ignored its statutory mandate. Sheila Bair, who was the Chair of the Federal Deposit Insurance Corporation (FDIC) during the 2008 crisis, confirms this point in her book, Bull by the Horns. Bair writes:

“By November [2008], 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.”

Actually, they weren’t standing by at all. The Fed was secretly propping up Citigroup with $2.5 trillion in loans – many of which were made at a fraction of one percent interest while Citigroup was charging double-digit interest rates to its struggling credit card customers.

Better Market’s Kelleher, in the organization’s current newsletter, asks and answers this question:

“How did we get here? The financial industry uses its economic power to buy political power which it then uses to increase its economic power. That just happened again in the November 2024 elections, and the financial industry is about to reap the rewards. The Trump administration is going to unleash a very dangerous juggernaut of deregulation of the financial industry.”