Tag Archives: Financial Crisis Inquiry Commission

Nine executives had been recommended for 2008 mortgage meltdown criminal probe by FCIC

Former Treasury Secretary and Citibank Chair Bob Rubin was cited by a special congressional panel as someone who should have been the subject of a criminal investigation for activities related to the 2008 subprime mortgage meltdown.

The Financial Crisis Inquiry Commission (FCIC) had told the Justice Department that it should open an investigation of Rubin, Treasury Secretary under President Bill Clinton, for alleged securities fraud perpetrated as a member of Citibank’s board.

Rubin was among nine executives recommended for a criminal probe by the FCIC that were cited in a letter sent Thursday from Sen. Elizabeth Warren (D-Mass.) to Justice Department Inspector General Michael Horowitz.

Warren asked the department auditor this week to look into why zero criminal inquiries were launched as a result of the FCIC recommendations, which were publicly disclosed for the first time earlier this year.

Read on.

Peter J. Wallison, member of the FCIC: New Questions About the Financial Crisis Inquiry Commission


• The report of the Financial Crisis Inquiry Commission (FCIC) is frequently cited as the authoritative source for the causes of the 2008 crisis, but its key findings are contradicted by documents in its own files that were never disclosed in its final report.

• By 2008, most mortgages in the US were subprime or otherwise weak. Of these risky loans, 76 percent were on the books of government agencies, principally Fannie Mae and Freddie Mac.

• The FCIC claimed that Fannie and Freddie bought these loans primarily because they were profitable, and not because of the government’s housing policies—particularly the affordable housing goals.

• However, the FCIC documents discussed in this paper show that Fannie and Freddie knew these loans would be unprofitable and in some cases loss-producing.

• As a government study commission, the FCIC failed in its obligation to report fairly on all the evidence it collected, not just the evidence for the story it wanted to tell.


Here is Mr. Wallison’s report. Click Read on.

The DOJ Lemon Award – Go Directly to Jail!

William K. Black, a professor of Economics and Law, UMKC, a former financial regulator and  author of The Best Way to Rob a Bank is To Own One,  and one  of our Bank Whistleblowers United (BWU) co-founders has decided we could “retire” our series of BWU Lemon Awards and permanently award  “a Lemon” award to the Department of Justice (DOJ).
In a recent Huffington Post blog, Black says “this current award is particularly close to our hearts because it involves the sworn testimony of one of our co-founders, Richard Bowen.”
I second his choice. What prompted this award were two recent revelations; one of which is the release by the National Archives of the Financial Crisis Inquiry Commission (FCIC) documents in which the criminal referrals that FCIC made to the DOJ were revealed.
You may recall I spoke of this and the National Archives release in previous posts and I addressed Citigroup’s senior leadership frauds, which were the subject of not one but two separate criminal referrals made by the FCIC; one of which was based solely on my testimony. Black points out, as did I, that to date, the mainstream press has ignored the referrals based on this testimony.

Fraud is the New Norm! So Where is the Outrage?

Well it looks as if I spoke too soon. In last week’s post, I was excited about the National Archives release of the first of many FCIC documents which had been sealed for five years, including my behind-closed-doors testimony (available here). I commented on the coincidence of this five year lockup period paralleling the statute of limitations.
And I was excited that the media had discovered and immediately jumped on the FCIC having made a referral to the DOJ for possible violations of law by Robert Rubin, quoting the March 13, Fortune Magazine article by Stephen Gandel about the referrals and Rubin’s and Citi’s involvement.
I thought this was huge, and I was particularly excited because I noted that the newly released documents that the FCIC also made a second Citigroup referral for possible violations of law, with this second referral based solely on my testimony and evidence provided to the Commission. And there was no doubt in my mind that the media would be all over this and finally justice would prevail.
Well, I was wrong.

FCIC February 9, 2011 meeting document record include 2 criminal referrals for Citi

Thank you Richard Bowen for your information and article. Now we know. there were not  only one but two criminal referrals sent to the DOJ by FCIC:

From Citi whistleblower Richard Bowen website:

But here’s the real blockbuster that Fortune and the other media have not found yet! They will, it’s there. In the records of the February 2011 business meeting it is noted that the FCIC also made a second Citi criminal referral based solely on my testimony and evidence. It is very unlikely that any other bank got two criminal referrals from the FCIC which were subsequently covered up and ignored by Attorney General Eric Holder(!) –  even though the Commission saw evidence that laws were possibly violated.

The motion for referral states:

Whereas, the Commission is instructed to refer to the Attorney General of the United States and any appropriate State Attorney General any person that the Commission finds may have violated the laws of the Unites States in relation to ( the financial crisis), and

Whereas, there have been presented to the Commissioners a memorandum concerning possible violations of the laws of the United States regarding the allegations made by Richard Bowen, and

Whereas, the Commission finds that laws of the United States may have been violated with respect to such matters

Now, Therefore, Be it Resolved that the Chairman is authorized on behalf of the Commission to forward the memorandum and accompanying exhibits to the Attorney General of the United States for further investigation and possible action.

(The FCIC February 9, 2011 meeting document record is available here,  page 3 and pages 63-65)

Richard Bowen testifies about fraud and corruption at CitiGroup before the Federal Crisis Inquiry Commission.


Now We Know — The DOJ Ignored Two FCIC Citi Criminal Referrals!

Several items have recently hit the press regarding the financial crisis of 2008 which could lead to further investigation of what actually happened and who is responsible.
One that has me excited is the National Archives releasing the first of many documents of the Financial Crisis Inquiry Commission (FCIC) which have been sealed for five years!!!
The media is already picking up on this and noted that the FCIC  made a criminal referral for Robert Rubin, et al. in September of 2010. They discovered that “Rubin reportedly blessed the increased risk taking at Citi … Their direct exposures to subprime bonds were $55 billion according to the Commission. The FCIC staff notes say that “based on FCIC interviews and documents obtained during our investigation, it is clear that CEO Chuck Prince and Robert Rubin … knew this information.”
Fortune goes on to say, Prince and Rubin, were made aware of Citi’s exposure “no later than September 9, 2007.” Yet later that fall, “they told analysts that the bank’s exposure to subprime was just $13 billion, reporting it as 76% less than what actually was.”
But here’s the real blockbuster that Fortune and the other media have not found yet! They will, it’s there.

Interview of Robert Rubin by the Financial Crisis Inquiry Commission

Some interesting material. Full transcript below:


Interview – ROBERT RUBIN

MR. GREENE: On the record.

Good morning, Mr. Rubin. My name is Tom Greene. I am the executive director of the Financial Crisis Inquiry Commission. We are conducting an interview this morning in support of our mission, which is a statutory one, to investigate the causes of the financial crisis of 2007, 2008, arguably through 2010, but certainly in those key years.

You are not under oath today, but since it is a federal investigation there are provisions of the federal code that apply. 18 USC, Section 8001, indicates that truthfulness is the right answer here, which I am sure you would do anyway, but I do need to forewarn you.

In the event that any of my questions are not clear, stop me and ask me to make them clearer if at all possible. If you want to take a break, don’t be shy, let me know. I understand you have some back issues, so if you need to stand up, we understand that is something you may need to do and we will certainly take that into account as we proceed.


Q Let’s start initially with a little bit of background on you. Obviously you have had a stellar career at Goldman Sachs. Briefly, what were the top two orthree achievements from your perspective of your time at Goldman?

Robert Rubin: Achievements of mine or theirs?

Q Yours.

Robert Rubin: Mine? That is an interesting question. I don’t think of it that way.

I don’t know that I had any particular outstanding achievements. I started there in the risk arbitrage area, and for a variety of reasons became a  partner at a very early age.

And then after several years of  doing that, I began to take on a managerial  responsibility more broadly for trading activities, and then as time went on I just  became more and more senior.

And then at about the mid-1980s — no, I will go back one step further. In roughly 1980 or ’81, Goldman made the only acquisition it made during the entire time I was there. It bought J. Aaron, which was commodity trading and then eventually became currency trading and energy trading. And it turned out to be very troubled, although we hadn’t realized it when we bought it, so about six months in they asked me to take responsibility for it.

And what I did was to set up a process with a bunch of the younger people who knew about the business, because I certainly didn’t know very much about it, and they developed a plan to go forward which turned out to be extremely successful. And so that turned around, not because of me but because of them. And then about the mid-1980s, John White had left in 1984 as co-senior partner, so Steve Friedman and I became the co-COOs.

At that point Goldman had begun to get a little bit, a little set in its ways, and Steve and I felt that if we didn’t change,that we could fall by the wayside, gradually, but nevertheless fall by the wayside, and so we initiated a very dynamic strategic focus, and the consequence I think was a lot of change at Goldman that was very constructive.

And then I became co-CEO in December 1990, I guess, when John Weinberg decided to retire, and then I left Goldman to go to the Treasury.

Q Just to follow up on that, what was the nature of the strategic focus you and your co-CEO developed?

Robert Rubin: We felt at the time that others had become more innovative than we had in finding ways to do what clients needed to do in what was then the earlier stages, but nevertheless an occurrence, early stages of a globalizing economy, so we felt that we needed to be more innovative.

We felt that we needed to expand abroad, we felt that we should begin — I guess we had already begun to some extent, but expand our private equity and real estate areas. And then we felt very strongly that there was a tremendous opportunity to build an asset management business which would provide regular fees that weren’t dependent on the cycles of the market; to some extent affected by, but not as dependent on cycles in the market as our trading activities.

Then we also we also, or the firm had a whole array of processes for dealing with reviewing people and advancing people or not advancing people, one thing or another. We felt that a lot more could be done in that area, and so we moved further into that realm, if you will, of reviewing people regularly, and extended that not only to the non-partners but to the partners.