The term “criminal banksters” has become an established part of our language to refer to the people who operate the too big to fail (TBTF) multinational Wall Street banks that practice an especially virulent and destructive form of worldwide predatory capitalism in which their profits are privatized to pay multimillion dollar bonuses to their CEOs disbursing the rest to investment managers and bank shareholders while their losses are socialized. That is, covered by the United States taxpayers without their consent.
This relationship basically functions like a super efficient vacuum cleaner sucking all the wealth out of the economy and redistributing it among the wealthiest 1% of the population, and especially the top 0.1%. As such, it imperils the economy and constitutes a clear and present danger to the Rule of Law, particularly the notion of equal justice under law, the Constitution, the Bill of Rights, and democracy itself.
This parasitic relationship came into being during the Reagan Administration when regulatory oversight of the banks relaxed and disappeared as enforcement of the banking laws ended with the exception of an occasional slap on the wrist that amounted to a forgettable mosquito bite-sized chunk of money removed from a massive flow of capital cascading through a fire hose under high pressure.
Coupled with the repeal by the United States of the Glass-Steagall Act that prohibited investment banks from lending money and their development and sale of novel and exotic financial instruments based on real estate mortgage backed securities as a form of insurance with which to hedge bets in the world wide casino, the banks invented and financed a new game to play in which the sky was the limit and the risk of failure all but extinguished. Or so they thought.
This get-rich-quick scheme was founded on the belief that the real estate market in the United States was the most secure investment in the world and the surest way to insure against investment losses in the thrilling world casino was to bundle real estate mortgages together into a package and sell them as insurance. The effort to sell this “insurance” and the demand to purchase it led to a massive systemic practice of inflating real estate appraisals and rounding up and signing up warm bodies to buy real estate financed by so-called “liars loans” in which the information in the loan applications was unverified and in many instances faked by the original lenders. The mortgages securing these loans were rarely, if ever, recorded with the title as required by law. Instead, the banks invented a new recordation system called MERS, which was nothing more than an electronic spreadsheet referencing the original mortgage. Meanwhile, the mortgages, which were basically worthless, were sliced and diced, bundled and rebundled to form worthless securities that were then sold and resold as insurance to institutional and international investors. This was and continues to be the greatest Ponzi scheme in history and sooner or later the music was destined to stop and bring the market crashing down.
Why? Because it created an enormous bubble in the housing market in the form of ever higher divorced-from-reality prices such that investors eventually realized that only hot air supported the value of the real estate.
Millions of homes have been forfeited unlawfully because the banks holding the mortgages had not recorded them properly and could only show that they owned the mortgage by manufacturing fraudulent and perjured loan documents using so called robo-signers to falsely claim to be persons in authority who supposedly signed the original loan documents that no longer existed and were never recorded.
Despite having been exposed for their wrongdoing in many states, and most recently by the Massachusetts Supreme Court, the banks that are saddled with many trillions of dollars of these worthless mortgages persist in seeking the unlawful forfeiture of millions more homes.
President Obama recently said that the banks have not violated any federal laws and cannot be prosecuted.
I am calling bullshit.
The CEOs of the banks can and should be prosecuted for violating the federal RICO statute. See 18 USC 1961, et seq. The banks meet the definition of enterprises and their CEOs engaged in a pattern of racketeering activity within a 10-year period under the federal statute by committing two or more of the crimes listed in the statute, including bribery, extortion, bank fraud, securities fraud, wire fraud, and money laundering.
Each count is punishable by a sentence of up to 25 years in prison and a $250,000 fine. In addition, all proceeds obtained from the pattern of racketeering activity may be seized and forfeited by the government, which can obtain a pretrial order freezing all of the personal assets of the defendants and their banks pending the outcome of the case in order to prevent them from dissipating, transferring, or hiding the assets to prevent their recovery.
Consider the case of Michael Milliken who was indicted for RICO on 98 counts of racketeering and fraud relating to an investigation into insider trading. He was accused of using a wide-ranging network of contacts to manipulate stock and bond prices. He pled guilty to six lesser offenses rather than face spending the rest of his life in prison.
Milken’s employer, Drexel Burnham Lambert, was also threatened with a RICO indictment under the legal doctrine that corporations are responsible for their employees’ crimes. Drexel avoided RICO charges by pleading no contest to lesser felonies. While many sources say that Drexel pleaded guilty, in truth the firm only admitted it was “not in a position to dispute the allegations.” If Drexel had been indicted, it would have had to post a performance bond of up to $1 billion to avoid having its assets frozen. This would have taken precedence over all of the firm’s other obligations—including the loans that provided 96 percent of its capital. If the bond ever had to be paid, its shareholders would have been practically wiped out. Since banks will not extend credit to a firm indicted under RICO, an indictment would have likely put Drexel out of business.
I have represented people indicted in federal court for violating the RICO statute and plaintiffs in civil litigation who sued defendants under the provisions of the civil RICO statute.
I do not see any problem, other than lack of political will or a desire to profit from the illegal scheme by preventing a prosecution, that would prevent President Obama from ordering his Attorney General to commence an investigation and prosecution.
Every American, regardless of political persuasion, has a fundamental and legitimate interest in assuring that the President and his Attorney General enforce the law.
Nothing less than our livelihoods, lives, and democracy are at stake.
Cross Posted at Firedoglake/MyFDL (http://my.firedoglake.com/mason/2011/11/09/racketeer-influenced-and-corrupt-organizations-rico/) and the Smirking Chimp.