Being a whistle-blower is not what an individual strives to be. It comes with strings attached, yet the “errors” some employers make leaves no room for silence.
Alayne Fleischmann, recently of JP Morgan Chase, is another example of employee observation of their company’s wrongdoing – and the need to report what is egregious wrong doing. Labeled the $9 billion witness, her story closely parallels mine. It is disturbing to read, as it points out that in spite of the awareness of the mortgage fiasco, the major banks are still not being held accountable.
It’s not news that the major banks in this country, working hand in hand with Fannie Mae and Freddie Mac, granted substandard mortgage loans to subprime borrowers, which led to the 2008 financial debacle. The combination of perverse management incentives, contract underwriter and haphazard investigating, lowered standards and waffling on guarantees that went with the purchasing and repackaging of substandard home loans into mortgage securities was an outright recipe for disaster.
Yet what could be considered as fraud was not. Banks got their wrists slapped. Taxpayers paid and in many cases the bank themselves were able to take write-offs for their ‘mistakes”. When the inevitable “crash” came, the perpetrators were not held accountable. Instead the Department of Justice (D.O.J) negotiated incredible settlement agreements with the major bank’s responsible. Chase, Citigroup and Bank of America paid big fines, but nowhere close to the losses involved. And the investors losing money on the mortgage securities did not get a penny of the settlements.
Eric Holder, the outgoing Attorney General, may be encouraging whistle-blowers to come forward but the evidence still remains that one should do so with caution. The reward for speaking up about the wrongdoing comes with a penalty – your job, the possibility of future employment in your profession,,and fear of what comes next. You did the right thing, and yes, there are consequences.
The D.O. J may be wrapping up final settlements but at what cost? Massive corruption cover ups at a small price – small compared to the huge destruction, which greed and corruption allowed. Banks have knowingly sold high risk loans as low risk securities with little regard for the consequences
And frankly with so little “punishment,” why not take the risk for such high rewards. It’s not accountability which is rewarded, it’s greed! Industry-wide underwriting problems may have been a consequence of the boom era market. However, my concern lies with the continuation of this cycle. If Fannie and Freddie get their way and standards are lowered, we will go down that path again, and pay for that lesson again, as human nature hasn’t changed all that much in a few short years.
Whistle-blowing is not the answer. In the past, those of us who caught and spoke out against the fraud in-house, made headlines, lost our jobs and signed confidentiality statements – even testified and gave substantial evidence, as I did, to no avail.
We are repeatedly told our big banks are too big to let fail.
Are they also too crooked to let fail?
And, doesn’t it seem odd that government is helping by burying the evidence?
If the D.O.J. is not bringing wrong doers to real justice, are they instead encouraging future greed and corruption by not holding company’s involved feet to the fire? To date there is little doubt that the D.O.J has tried to avoid disclosure and prevent public scrutiny of their sweetheart deals. In some instances settlements aren’t even being called fines.
In the process of this so-called justice, employees are laid off to defray the legal costs involved, the banks “look” good , their stock price goes up and the government disposes a bank’s liability without the public being aware. And the Citigroups, Goldman Sachs and JP Morgan Chases stay in the game, at the taxpayer and employees like Ms. Fleischmann’s and my expense.
Eric Holder encourages whistle blowing and says he wants evidence, while at the same time arguing that “special” care needs to be taken when investigating the big banks, so the world economy is not upset. Two sets of rules, one for the little guy and one for the supersize? We reward the bad banks so they don’t go under?
In a recent blog post, I referred to Eric Holder’s speech at NYU. His attitude seemed to indicate that bad things just happen. And, how can you place blame when the people responsible may in fact not be responsible at all? They just found themselves in difficult circumstances.
He states, ”Responsibility remains so diffuse and top executives so insulated, that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual.” Mr. Holder conveniently forgets that it is the top tier who sets the stage for corporate culture and its ethics or lack thereof.
Looks as if we go down this path, the government itself is saying: go for it!
Hey, fellow taxpayer, hope we have the deep pockets to pay for all of this!
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.
