In a recent post, I mentioned the McCuistion Television Program, six part series on the financial crisis that I and several of our Bank Whistleblowers United team, (Michael Winston, William Black and I), participated in.
Michael and I, along with Rashad Abdel-Khalik, PhD: Professor of International Accounting at the University of Illinois and C.R. “Rusty” Cloutier: MidSouth Bancorp, Inc, Founding President and CEO, joined host Dennis McCuistion in the third in the series which just recently aired, part two, of “What Really Caused the 2008 Financial Crisis?”
Our fellow panelists had diverse experiences and viewpoints. However we were in agreement on several key points including that the crisis was caused by more than just lowered underwriting standards. In fact, while that was a contributor, it was also a convenient excuse. The seven largest banks involved, the Too Big To Fail, committed fraud, and walked away.
Michael addressed the lack of accountability in a reference to the “balance of consequences” – people do what they are rewarded for, not what they are punished for. He asked, ”But what if the incentive system rewards you for doing the wrong thing and punishes you for doing the right thing?” And that’s what happened. From regulators to appraisers to bankers, all of whom contributed to the breakdown in our financial systems.
As I mentioned, the TBTF went way beyond the lowered standards set by Fannie Mae, Freddie Mac and FHA which were mandated by Congress in the spirit of “affordable housing.” Yes, these entities enabled the fraud by telling banks they would buy mortgages’ from the large banks as long as the banks themselves certified that the loans they were selling at least met these lowered standards. However, banks were rewarded for fraudulently representing the quality of the loans sold. And they took advantage at the expense of smaller banks and the taxpayers themselves.
And this same fraud continued with fraudulent representations made to the purchasers of private mortgage securitizations.
We have to ask, was the 2008 financial crisis a systemic embracing of loopholes that allowed for deliberate fraud? And does the TBTF have a stranglehold, still, in their manipulation of government through regulations that are allowing them to become bigger, more powerful and more controlling? It looks as if Wall Street did, in fact, manipulate our system through regulations that were written by them and then passed into law by Congress.
The lack of accountability has resulted in greed and corruption that still gets rewarded at our expense.
The McCuistion TV episode can be viewed by following the link here.
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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
