- It's the American way. More for the rich. Crumbs for
the rest, and fraud as a way of life since the republic's beginning, though
hardly on today's scale. Perhaps the first prominent example was in 1792,
involving former Assistant Treasury Secretary William Duer. Appointed by
Alexander Hamilton in 1789, he left a year later to profit from insider
trading, or so he hoped.
- At the time, US bonds were junk paper. The market for
them was volatile, so profiting meant being savvy enough or tipped off
in advance to buy or sell ahead of news. As a former Treasury official,
Duer had insider information. Using leverage, it paid handsomely for a
while until too much money caused a speculative glut, an earlier type bubble
that took down much of the New York Stock Exchange when it burst, Duer
- Way over his head in debt, he, nonetheless, hung on,
expecting to beat the market but failed. Instead of getting richer, he
went bankrupt, ended up in debtors prison, and Alexander Hamilton had to
buy worthless bonds as the lender of last resort. Sound familiar?
- In 1795, Georgia sold 35 million acres of western land
to four companies for half a million dollars, less than two cents an acre
in one of America's most corrupt ever deals. By taking bribes for their
votes, every member of the legislature, except one, profited, but not for
long. Voters caught on, tossing them out next election. The fraudulent
contract was annulled. In 1802, the federal government bought the land
for $1,250,000, but it didn't end there. The Supreme Court got involved,
ruling the original deal, though flawed, was legal, forcing Congress to
award the claimants over $4 million.
- Corruption and fraud flourished during the Civil War
in the form of tainted beef and pork, shoddy blankets and uniforms, knapsacks
coming unglued in the rain, guns that blew off soldiers' fingers when firing
them, and much more, war profiteers benefitting handsomely.
- During the Gilded Age, a post-Civil War boom, men like
Rockefeller in oil, Carnegie in steel, Gould and Vanderbilt in railroads,
Morgan in banking, and others profited the way Vanderbilt explained, saying
"What do I care about the law? Hain't I got the power?" Indeed
he and others did through unscrupulous deal-making, buying off politicians,
gaining monopoly power, and as Matthew Josephson said in his book, "The
- "the ancient barons-of-the-crags - who, by force
of arms, instead of corporate combinations, monopolized strategic valley
roads or mountain passes through which commerce flowed." They, in
fact, controlled commerce and corrupt politicians they bought and sold
- In her book titled, "The History of the Standard
Oil Company," Ida Tarbell, chronicled one of many, John D. Rockefeller
and the colossus he built by circumventing laws and crushing competition
- Mark Twain and Charles Dudley Warner first coined the
term "gilded age," reflecting the rampant greed, pervasive fraud,
corruption, and speculative frenzy during America's greatest ever growth
period, creating enormous wealth and corporate power through politically
- For example, Ulysses S. Grant's administration wreaked
of graft, mismanagement, and corruption, he and his son going bankrupt
from fraudulent investments gone sour. Succeeding administrations were
also tainted by letting business entrepreneurs operate freely with little
- They took full advantage, including through insider trading,
stock manipulation, and other forms of fraud. In the late 1800s, it enriched
men like Jay Gould, James Fisk, Russell Sage, Edward Henry Harriman, JP
Morgan, and Daniel Drew, deal-maker pioneers of swindling, double-dealing,
and other forms of financial chicanery to amass fortunes, that in Drew's
case left him broke when he died in 1879, ruined by fellow manipulators.
- An earlier article continued the story with the 1913
Federal Reserve Act, giving banks money creation power, letting them more
than ever game the system fraudulently. The 1920s stock selling scandals
followed, culminating in the 1929 crash, the Great Depression, WW II, post-war
prosperity, resulting excesses, late 1960s - 70s turbulence, inflation,
the beginning of modern deregulation, neoliberalism and globalization,
what Reagan and his successors accelerated.
- Reaganomics spawned savings and loan fraud, junk bonds,
leveraged buyouts, greenmailing, Boesky, Milken, Dennis Levine, then more
crime on the order of Enron, Worldcom, Madoff, other Ponzi schemes, market
manipulation, bubbles, false accounting, phony financial products, misrepresentation,
and other scams, conspiracies, bankers plundering the Treasury, and "foreclosuregate."
- Involved is massive fraud, forged documents, fabricated
and backdated ones, perjury, lost paperwork, and false affidavits causing
millions of mortgage defaults, evicting owners after seizing their properties
- Fraudulent Foreclosures
- William K. Black is a lawyer, academic, former S &
L regulator, and author of the book titled, "The Best Way to Rob a
Bank Is to Own One: How Corporate Executives and Politicians Looted the
S & L Industry." He and Economics Professor L. Randall Wray also
co-wrote an article titled, "Foreclose on the Foreclosure Fraudsters,
Part I: Put Bank of America in Receivership," saying:
- Overwhelming evidence shows "the entire foreclosure
process is riddled with fraud, (yet) President Obama refuses to support
a national moratorium," making him conspiratorially complicit in a
huge scandal, ravaging millions of homeowners lawlessly. Protecting bankers,
not victims, is policy, so coverup and denial of systemic fraud persists.
- Moreover, "despite our pleas the FBI has continued
its 'partnership' with the Mortgage Bankers Association (MBA)....the trade
association of the 'perps.' It created a ridiculous....definition of 'mortgage
fraud,' (saying) lenders - who (created them) - are the victims. The FBI"
plays ball. It's why no one's been prosecuted nor likely will be, except
perhaps some lower level officials taking the rap for their bosses, top
executives continuing to profiting hugely by scamming innocent victims
hung out to dry.
- In fact, criminal CEOs "looted with impunity, were
left in power, and were granted their fondest wish when Congress....extorted
the professional Financial Accounting Standards Board (FASB) to turn the
accounting rules in a farce." It let banks "refuse to recognize
hundreds of billions of losses, (produce fake) 'income' and 'capital,'
" so fraudsters got richer than ever.
- Black and Wray want it stopped by "prompt corrective
action," halting foreclosures until corrective steps are taken and
"financial institutions that committed widespread fraud (are put)
in receivership," replacing their bosses with honest, competent, officials,
if any can be found at a time of unbridled, anything goes greed.
- Along with Goldman Sachs, JPMorgan Chase, Citigroup,
and Wells Fargo, Bank of America tops the list, criminal enterprises, operating
with government complicity. Besides B of A's other chicanery, its books
wreak with "many billions of dollars of fraudulent loans originated
by Countrywide," its 2009 acquisition.
- Countrywide is symbolic of industry practice, selling
"hundreds of thousands of fraudulent loans through false reps and
warranties," most then illegally foreclosed. Like other mortgage scammers,
it "victimized hundreds of thousands of people and hundreds of"
counterparties, causing massive amounts of losses, homeowners, of course,
hit hardest. In fact, Countrywide "defrauded more people, at a greater
cost, than any entity in history."
- But other mortgage lenders contributed their share as
part of a giant con game against the public from which they keep profiting,
scooping up foreclosed properties on the cheap, then defrauding new unwary
buyers when they resold - properties they don't own because the entire
scheme is fraudulent. It means evicted owners are entitled to their homes
- As analyst Bob Chapman explains:
- "The fraud committed by the foreclosure mills, at
the behest of the banks, puts all foreclosures into question and even the
status of those homeowners who are currently paying their mortgages. That
means if (they) all stop paying their mortgages, they could end up owning
their homes. This is a mega crisis far bigger that Bear Stearns and Lehman,"
but even bigger ones are coming after years of systemic fraud, the extent
of which is staggering.
- As for housing says Chapman:
- "Foreclosures are now one in 12. Four years ago
it was 1 in 100. For sure home prices have not bottomed. It could be the
mortgage market is dead and all the bondholders are sunk." If true,
the nation's "financial structure is close to collapse."
- Countrywide did its share to cause it. According to Black
and Wray, its top executives were "infamous," yet B of A made
them senior leaders, and administration officials "trivialize (their)
criminality," refusing to hold them and others accountable for obvious
reasons. Because they, and earlier administrations, helped engineer the
housing bubble since the mid-1990s. Though now deflating, victims continue
- So instead of fixing the problem and aiding homeowners,
it festers, grows, and lets "too big to fail" systemically dangerous
institutions (SDIs) get bigger, creating greater than ever risks. As a
result, we're literally "rolling the dice with disaster every day,"
world economies held hostage by powerful banks.
- The obvious solution is avoided, placing B of A and other
insolvent banks in receivership, breaking them up, replacing and prosecuting
their culpable officials, and restructuring a dysfunctional system into
a workable one, excluding predatory banks.
- In her extraordinary book, "Web of Debt," and
regular writing, Ellen Brown explains how, again in her October 21 article
titled, "Repairing a Dysfunctional Banking System," saying:
- Stopping financial predators depends on "turning
banking into a public utility, one that advances the credit of the community,"
not third party criminal enterprises pretending to be legitimate. Today,
it's worse than ever, Brown quoting Ann Pettifor, a fellow of the London-based
New Economics Foundation, saying:
- "(T)he banking system is now fully dysfunctional.
It has failed in its primary purpose: to act as a machine for lending into
the real economy. Instead (it's) become a borrowing machine....from the
real economy, and then refusing to lend, except at high rates of interest,"
effectively "lobotom(izing) the real economy."
- As a result, it's being wrecked. Unemployment and poverty
keep rising, and millions of homeowners are losing their most precious
asset, mostly by criminal fraud. "Our homes," says Brown, "have
become pawns in a great pawn shop run for the benefit of large institutional
investors and the banks that profit from them. Our (securitized) sliced
and diced houses are the chips moved around in a global casino," the
model having "crashed against the hard rock of hundreds of years of
state real estate law (with) requirements" banks haven't met, and
can't meet "if they are to comply with the tax laws for mortgage-backed
- The name of the game is fraud, outright categorical massive
theft because that's how the system is structured. Banks aren't creating
credit responsibly. They're, in fact, "vacuuming up our own money
and lending it back to us at higher rates," usurious ones on credit
cards. They're "sucking up our real estate and lending it back to
our pension (and) mutual funds at compound interest. The result is a mathematically
impossible pyramid scheme," inherently prone to fail.
- It's flawed, fraudulent, and essential to replace, Brown
proposing a "public credit solution" through publicly-owned banks
- "a public utility operated for the benefit of" communities
nationwide, they, in turn, returning profits to the locales where they
were generated, not to a Wall Street crime syndicate.
- Since 1919, North Dakota has been the precedent-setting
model as the nation's only state-owned bank, the BND. Sustained by its
distinctiveness and strength, it's been a credit machine, delivering productive
financial services for agriculture, commerce and industry, what no other
state can match because they don't have state-owned banks, but easily could.
- Earlier, Brown explained that the BND:
- "chiefly acts as a central bank, with functions
similar to those of a branch of the Federal Reserve," but not disadvantaged
in the system it and giant banks control and manipulate to their advantage.
- In contrast, BND is an independent public bank, 100%
state-owned, operating in the public interest. It also "avoids rivalry
with private banks by partnering with them." Local banks do most lending.
BND participates in their loans, shares risk, "buy(s) down the interest
rate and buy(s) up loans, thereby freeing up banks to lend more,"
as part of a continuing prosperity-creating virtuous circle.
- Year after year it works, freeing North Dakota from today's
credit crisis and worst of the economic downturn. It's a win-win for the
state, its agriculture, commerce, industry, entrepreneurial startups, students,
homebuyers needing loans, and virtually anyone in the state able to qualify.
- Compared to predatory banks, state-owned ones have enormous
advantages. They don't answer to Wall Street, don't pay outrageous salaries
and bonuses, don't speculate in derivatives or other high-risk investments,
return handsomely on equity, and deliver prosperity, lifting all boats
fairly. It thus begs the question why other states aren't run like North
Dakota, currently "rated AA and recently returned a 26% profit to
the state," producing credit for economic growth. As Brown explained:
- When community-owned banks like North Dakota's create
profit-generating credit, "the result can be a functional, efficient
and sustainable system of finance," compared to the rest of the country's
broken one, hostage to predator bank scams, double-dealing, and other forms
of flimflam, robbing millions of homeowners of their properties.
- North Dakota's model is a workable alternative, a public
ownership way for everyone, lifting all boats fairly and equitably, instead
of bilking the many for the few, and wrecking America in the process.
- Stephen Lendman lives in Chicago and can be reached at
firstname.lastname@example.org. Also visit his blog site at sjlendman.blogspot.com
and listen to cutting-edge discussions with distinguished guests on the
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