[Congressional Record (Bound Edition), Volume 157 (2011), Part 12]
[House]
[Pages 17695-17698]
[From the U.S. Government Publishing Office, www.gpo.gov]




                               MF GLOBAL

  The SPEAKER pro tempore. The Chair recognizes the gentlewoman from 
Ohio (Ms. Kaptur) for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, thank goodness some Americans continue to 
analyze the real causes of job loss and turmoil in our economy. While 
all eyes are on Europe, the problem just isn't in Greece.
  On October 31, U.S.-based MF Global Holdings, Limited filed for 
chapter 11. It reportedly is the eighth largest bankruptcy in U.S. 
history. Its failure, like the crash in 2008, revolves around the 
actions of money traders using slick instruments called ``credit 
derivatives.'' As analysts try to piece together what happened at MF 
Global, one word seems to keep popping up: fraud.
  I would like to include in the Record a few recent articles on the 
Wall Street perpetrators of this crisis.

                      [From Reuters, Nov. 7, 2011]

                Frustration Mounts for MF Global Clients

                        (By Lauren Tara LaCapra)

       The sudden collapse of MF Global Holdings Ltd is leaving 
     some small and independent futures traders angry and 
     frustrated.
       Customers of the bankrupt firm are starting to complain 
     about getting checks that bounced, having requests to 
     transfer funds denied and receiving inaccurate account 
     statements.
       The growing litany of woes is adding to the tasks for the 
     receiver assigned to liquidate MF Global and causing some 
     investors to voice concern about the basic plumbing of the 
     financial services system.
       Steve Meyers, an independent futures trader in Florida, 
     said he asked for $500,000 from his MF Global account to be 
     wired back to him on October 28 because he was concerned 
     about the firm filing for bankruptcy.
       The money never was wired.
       Instead, on November 2, Meyers received several checks from 
     MF Global that were dated October 28. By the time he went to 
     deposit the checks, MF Global had filed for bankruptcy on 
     October 31 and the checks were not honored for payment.
       Between himself and several clients he manages money for, 
     Meyers said he has several millions of dollars still tied up 
     with MF Global.
       ``I am sitting with hundreds of thousands of dollars in 
     returned checks,'' said Meyers. ``I just think the industry 
     has suffered irreparable damage from this.''
       Other clients of the firm led by former New Jersey Governor 
     Jon Corzine are telling similar stories.
       Chris Ries, who co-manages a commodities brokerage and 
     grain dealer in Iowa that cleared trades through MF Global, 
     said several clients had checks bounce even though they 
     deposited them before MF Global's bankruptcy on October 31.
       The situation has been made worse, he said, because 
     customers' account balances appear as though they received 
     the cash even though the checks did not clear.
       ``Eventually it may all get cleared up,'' said Ries, ``but 
     for now, accounts with bounced checks don't reflect the 
     balance that they should.''
     Missing $600 Million
       Some clients' checks were drawn on an MF Global account 
     held at a Harris Bank branch in Illinois. Harris Bank is a 
     subsidiary of Bank of Montreal.
       Jim Kappel, a spokesman for Harris, said the bank began 
     denying payment and returning checks on November 1, at the 
     direction of the bankruptcy trustee. While some checks might 
     have been dated before October 31, he said, they were likely 
     debited at a later date.
       Clients' issues with bounced checks come as MF Global and 
     its regulators continue to hunt for $600 million in client 
     money that has gone missing. It is not clear if some of the 
     bounced checks are part of the unaccounted money.
       It appears MF Global began issuing checks to customers 
     seeking funds--instead of wiring the money--as a way to buy 
     some time for the firm, which was hoping to arrange a last-
     minute sale to Interactive Brokers, some of the customers 
     say. The deal fell apart last Monday when the issue of the 
     missing customer money arose.
       A week later, regulators have yet to provide an answer on 
     what became of the missing $600 million, although some money 
     has been located in an account with JPMorgan Chase.
       Brokers who cleared through MF Global say they have been 
     allowed to move some of their money to new firms, but not all 
     of it. They have been waiting for guidance from the trustee 
     or regulators on when they will get access to all of their 
     funds.
     Frustration
       MF Global's trustee, James Giddens, had frozen 150,000 
     accounts when the firm filed for bankruptcy protection.
       On Monday, Giddens said $1.5 billion worth of client money 
     had been transferred to other firms. But the trustee and CME 
     Group Inc, which regulates futures exchanges, have held back 
     some $1 billion in customer funds as they search for the 
     missing money, angering clients who can trade again but are 
     still frozen out of their excess collateral and cash.
       ``We can understand the frustration of customers,'' Kent 
     Jarrell, a spokesman for the trustee, told Reuters. ``That is 
     why we are working around the clock to facilitate the 
     transfer and return of customer assets. Unfortunately, this 
     will take time as we conduct our independent and thorough 
     investigation and maximize the estate for all stakeholders in 
     a fair process.''
       Some traders who tried to move their money from MF Global 
     to other clearing firms or banks even before the company went 
     belly-up have also been left in the lurch.
       One independent options trader in Chicago said he placed a 
     wire request on the morning of October 28 to transfer $1.25 
     million from MF Global to JPMorgan Chase.
       The transfer never occurred.
       An MF Global representative said JPMorgan rejected the 
     transfer because of errors in the account number, the trader 
     said, but upon double-checking the wire request form he found 
     no mistakes. The funds have remained frozen at MF Global 
     since its bankruptcy, he said.
       ``We pretty much have zero clarity,'' said the trader, who 
     did not want to be identified. ``I have a feeling the wire 
     instructions probably just got lost in the turmoil.''

                              {time}  1100

  In a recent posting, attorney William Black describes the failure of 
our justice system to investigate ``accounting control fraud as a 
systemic risk that underlies the damage still being done.''
  The collapse of MF Global has garnered massive attention, partly 
because Jon Corzine sat at its helm. Mr.

[[Page 17696]]

Corzine is a former chief executive officer of infamous Goldman Sachs. 
He is also a former U.S. Senator and former Governor of New Jersey. Mr. 
Corzine's firm even held a special status as a primary dealer at the 
New York Federal Reserve. That's like the Good Housekeeping stamp of 
approval. Mr. Corzine isn't the only former government leader whose 
cozy relationship with the financial services industry is being 
publicly questioned.
  Former Speaker of this House Newt Gingrich appears to have had a 
significant financial relationship with Freddie Mac, one of the 
mortgage industry giants led by its management into financial ruin. 
Freddie Mac played a key role in the financial meltdown. As countless 
American families have lost their homes, Freddie Mac assumed the toxic 
assets that were handed to it from the banks. And it is now under 
conservatorship of the Federal Government, living off the taxpayer 
dime. Mr. Gingrich is apparently $1.8 million richer, though he claims 
he isn't sure how much Freddie paid him.
  I now see why Congress has consistently failed to investigate what 
happened at Freddie Mac along with Fannie Mae to determine exactly what 
decisions, by whom--by whom and when led to this financial ruin. I have 
a bill to do just that. H.R. 2093, the Fannie Mae and Freddie Mac 
Commission Act. It's well past time to pass it, and I invite Members to 
join me in this effort.
  The allegations against MF Global are serious. Mr. Corzine's firm had 
essentially placed a $6.3 billion bet on the sovereign debt of several 
European governments. After its most recent quarterly returns showed 
almost $200 million in losses, MF Global's stock lost 67 percent of its 
value. But this is not just a case of an investment firm being lured by 
the higher returns of riskier bonds. CME Group, Inc., who audited MF 
Global's accounts, found that Mr. Corzine's company violated key 
requirements to keep its accounts separate from its clients'. The 
details are still being sorted out, but as much as $600 million appears 
to be missing from customer accounts.
  The financial press is reporting a staggering amount of malfeasance 
in the days before MF Global filed for bankruptcy. In an apparent 
effort to buy themselves time, MF Global sent checks instead of wiring 
money. The checks turned out to be bogus. There are stories of requests 
to transfer funds being denied and even inaccurate account statements 
being issued. Even more egregious are accounts of people receiving 
bounced checks, going back and finding that their accounts were also 
altered inappropriately. If this isn't fraud, what is?
  What should concern all of us is the knowledge that fraud is not 
limited to a case here or there. In the financial services sector, 
fraud has become systemic. In 2009, the FBI testified before the House 
Judiciary Committee, ``The current financial crisis has produced one 
unexpected consequence: It has exposed prevalent fraud schemes that 
have been thriving in the global financial system. These fraud schemes 
are not new, but they are coming to light as a result of market 
deterioration.''
  This isn't the first time our country has seen a massive crime wave 
in the financial services industry. In the 1980s, it was the savings 
and loan crisis, and the FBI responded with a staff of 1,000 agents and 
forensic experts based in 27 cities. That crisis was much smaller than 
what we are seeing today, yet today the FBI only has a couple hundred 
agents able to investigate. I have a bill, H.R. 1350, that asks that 
number to be increased by 1,000. I ask my colleagues to help cosponsor 
it, and let's bring some reason and prudence back to the financial 
markets of our country and let's exact real justice for the American 
people.

  The Virgin Crisis: Systematically Ignoring Fraud as a Systemic Risk

                         (By William K. Black)

       One of the most revealing things about this crisis is the 
     unwillingness to investigate whether ``accounting control 
     fraud'' was a major contributor to the crisis. The refusal to 
     even consider a major role for fraud is facially bizarre. The 
     banking expert James Pierce found that fraud by senior 
     insiders was, historically, the leading cause of major bank 
     failures in the United States. The national commission that 
     investigated the cause of the S&L debacle found:
       ``The typical large failure [grew] at an extremely rapid 
     rate, achieving high concentrations of assets in risky 
     ventures. . . . [E]very accounting trick available was used. 
     . . . Evidence of fraud was invariably present as was the 
     ability of the operators to ``milk'' the organization.'' 
     (NCFIRRE 1993) Two of the nation's top economists'' study of 
     the S&L debacle led them to conclude that the S&L regulators 
     were correct--financial deregulation could be dangerously 
     criminogenic. That understanding would allow us to avoid 
     similar future crises. ``Neither the public nor economists 
     foresaw that [S&L deregulation was] bound to produce looting. 
     Nor, unaware of the concept, could they have known how 
     serious it would be. Thus the regulators in the field who 
     understood what was happening from the beginning found 
     lukewarm support, at best, for their cause. Now we know 
     better. If we learn from experience, history need not repeat 
     itself' (George Akerlof & Paul Romer. ``Looting: the Economic 
     Underworld of Bankruptcy for Profit.'' 1993: 60).
       The epidemic of accounting control fraud that drove the 
     second phase of the S&L debacle (the first phase was caused 
     by interest rate risk) was followed by an epidemic of 
     accounting control fraud that produced the Enron era frauds.
       The FBI warned in September 2004 that there was an 
     ``epidemic'' of mortgage fraud and predicted that it would 
     cause a financial ``crisis'' if it were not contained. The 
     mortgage banking industry's own anti-fraud experts reported 
     in writing to nearly every mortgage lender in 2006 that:
       ``Stated income and reduced documentation loans speed up 
     the approval process, but they are open invitations to 
     fraudsters.'' ``When the stated incomes were compared to the 
     IRS figures: [90%] of the stated incomes were exaggerated by 
     5% or more. [A]lmost 60% were exaggerated by more than 50%. 
     [T]he stated income loan deserves the nickname used by many 
     in the industry, the `liar's loan''' (MARI 2006).
       We know that accounting control fraud is itself 
     criminogenic--fraud begets fraud. The fraudulent CEOs 
     deliberately create the perverse incentives that that suborn 
     inside and outside employees and professionals. We have known 
     for four decades how these perverse incentives produce 
     endemic fraud by generating a ``Gresham's'' dynamic in which 
     bad ethics drives good ethics out of the marketplace.
       ``[D]ishonest dealings tend to drive honest dealings out of 
     the market. The cost of dishonesty, therefore, lies not only 
     in the amount by which the purchaser is cheated; the cost 
     also must include the loss incurred from driving legitimate 
     business out of existence.'' George Akerlof (1970).
       Akerlof noted this dynamic in his seminal article on 
     markets for ``lemons,'' which led to the award of the Nobel 
     Prize in Economics in 2001. It is the giants of economics who 
     have confirmed what the S&L regulators and criminologists 
     observed when we systematically ``autopsied'' each S&L 
     failure to investigate its causes. Modern executive 
     compensation has made accounting control fraud vastly more 
     criminogenic than it once was as investigators of the current 
     crisis have confirmed.
       ``Over the last several years, the subprime market has 
     created a race to the bottom in which unethical actors have 
     been handsomely rewarded for their misdeeds and ethical 
     actors have lost market share. . . . The market incentives 
     rewarded irresponsible lending and made it more difficult for 
     responsible lenders to compete.'' Miller, T. J. (August 14, 
     2007). Iowa AG.
       Liar's loans offer what we call a superb ``natural 
     experiment.'' No honest mortgage lender would make a liar's 
     loan because such loans have a sharply negative expected 
     value. Not underwriting creates intense ``adverse 
     selection.'' We know that it was overwhelmingly the lenders 
     and their agents that put the lies in liar's loans and the 
     lenders created the perverse compensation incentives that led 
     their agents to lie about the borrowers' income and to 
     inflate appraisals. We know that appraisal fraud was endemic 
     and only agents and their lenders can commit widespread 
     appraisal fraud. Iowa Attorney General Miller's 
     investigations found:
       ``[Many originators invent] non-existent occupations or 
     income sources, or simply inflat[e] income totals to support 
     loan applications. Importantly, our investigations have found 
     that most stated income fraud occurs at the suggestion and 
     direction of the loan originator, not the consumer.''
       New York Attorney General (now Governor) Cuomo's 
     investigations revealed that Washington Mutual (one of the 
     leaders in making liar's loans) developed a blacklist of 
     appraisers--who refused to inflate appraisals. No honest 
     mortgage lender would ever inflate an appraisal or permit 
     widespread appraisal inflation by its agents. Surveys of 
     appraisers confirm that there was widespread pressure by 
     nonprime lenders and their agents to inflate appraisals.
       We also know that the firms that made and purchased liar's 
     loans followed the respective accounting control fraud 
     ``recipes'' that maximize fictional short-term reported 
     income, executive compensation, and (real) losses. Those 
     recipes have four ingredients:

[[Page 17697]]


       1. Grow like crazy
       2. By making (or purchasing) poor quality loans at a 
     premium yield
       3. While employing extreme leverage, and
       4. Providing only grossly inadequate allowances for loan 
     and lease losses (ALLL) against the losses inherent in making 
     or purchasing liars loans
       Firms that follow these recipes are not ``gamblers'' and 
     they are not taking ``risks.'' Akerlof & Romer, the S&L 
     regulators, and criminologists recognize that this recipe 
     provides a ``sure thing.'' The exceptional (albeit fictional) 
     income, real bonuses, and real losses are all sure things for 
     accounting control frauds.
       Liar's loans are superb ``ammunition'' for accounting 
     control frauds because they (and appraisal fraud) allow the 
     fraudulent mortgage lenders and their agents to attain the 
     unholy fraud trinity: (1) the lender can charge a substantial 
     premium yield, (2) on a loan that appears to relatively lower 
     risk because the lender has inflated the borrowers' income 
     and the appraisal, while (3) eliminating the incriminating 
     evidence of fraud that real underwriting of the borrowers' 
     income and salary would normally place in the loan files. The 
     government did not require any entity to make or purchase 
     liar's loans (and that includes Fannie and Freddie). The 
     states and the federal government frequently criticized 
     liar's loans. Fannie and Freddie purchased liar's loans for 
     the same reasons that Merrill, Lehman, Bear Stearns, etc. 
     acquired liar's loans--they were accounting control frauds 
     and liar's loans (and CDOs backed by liar's loans) were the 
     best available ammunition for maximizing their fictional 
     reported income and real bonuses.
       Liar's loans were large enough to hyper-inflate the bubble 
     and drive the crisis. They increased massively from 2003-
     2007.
       ``[B]etween 2003 and 2006 . . . subprime and Alt-A [loans 
     grew] 94 and 340 percent, respectively.
       The higher levels of originations after 2003 were largely 
     sustained by the growth of the nonprime (both the subprime 
     and Alt-A) segment of the mortgage market.'' ``Alt-A: The 
     Forgotten Segment of the Mortgage Market'' (Federal Reserve 
     Bank of St. Louis 2010).
       The growth of liar's loans was actually far greater than 
     the extraordinary rate that the St. Louis Fed study 
     indicated. Their error was assuming that ``subprime'' and 
     ``alt-a'' (one of the many misleading euphemisms for liar's 
     loans) were dichotomous. Credit Suisse's early 2007 study of 
     nonprime lending reported that roughly half of all loans 
     called ``subprime'' were also ``liar's'' loans and that 
     roughly one-third of home loans made in 2006 were liar's 
     loans. That fact has four critical implications for this 
     subject. The growth of liar's loans was dramatically larger 
     than the already extraordinary 340% in three years reported 
     by the St. Louis Fed because, by 2006, half of the loans the 
     study labeled as ``subprime'' were also liar's loans. Because 
     loans the study classified as ``subprime'' started out the 
     period studied (2003) as a much larger category than liar's 
     loans the actual percentage increase in liar's loans from 
     2003-2006 is over 500%. The first critical implication is 
     that it was the tremendous growth in liar's loans that caused 
     the bubble to hyper-inflate and delayed its collapse.
       The role of accounting control fraud epidemics in causing 
     bubbles to hyper-inflate and persist is another reason that 
     accounting control fraud is often criminogenic. When such 
     frauds cluster they are likely to drive serious bubbles. 
     Inflating bubbles optimize the fraud recipes for borrowers 
     and purchasers of the bad loans by greatly delaying the onset 
     of loss recognition. The saying in the trade is that ``a 
     rolling loan gathers no loss.'' One can simply refinance the 
     bad loans to delay the loss recognition and book new fee and 
     interest ``income.'' When entry is easy (and entry into 
     becoming a mortgage broker was exceptionally easy), an 
     industry becomes even more criminogenic.
       Second, liar's loans (and CDOs ``backed'' by liar's loans) 
     were large enough to cause extreme losses. Millions of liar's 
     loans were made and those loans caused catastrophic losses 
     because they hyper-inflated the bubble, because they were 
     endemically fraudulent, because the borrower was typically 
     induced by the lenders' frauds to acquire a home they could 
     not afford to purchase, and because the appraisals were 
     frequently inflated. Do the math: roughly one-third of home 
     loans made in 2006 were liar's loans and the incidence of 
     fraud in such loans was 90%. We are talking about an annual 
     fraud rate of over one million mortgage loans from 2005 until 
     the market for liar's loans collapsed in mid-2007.
       Third, the industry massively increased its origination and 
     purchase of liar's loans after the FBI warned of the 
     developing fraud ``epidemic'' and predicted it would cause a 
     crisis and then massively increased its origination and 
     purchase of liar's loans after the industry's own anti-fraud 
     experts warned that such loans were endemically fraudulent 
     and would cause severe losses. Again, this provides a natural 
     experiment to evaluate why Fannie, Freddie, et alia, 
     originated and purchased these loans. It wasn't because ``the 
     government'' compelled them to do so. They did so because 
     they were accounting control frauds.
       Fourth, the industry increasingly made the worst 
     conceivable loans that maximized fictional short-term income 
     and real compensation and losses. Making (or purchasing) 
     liar's loans that are also subprime loans means that the 
     originator is making (or the purchaser is buying) a loan that 
     is endemically fraudulent to a borrower who has known, 
     serious credit problems. It's actually worse than that 
     because lenders also increasingly added ``layered'' risks (no 
     downpayments and negative amortization) in order to optimize 
     accounting fraud. Negative amortization reduces the 
     borrowers' short-term interest rates, delaying delinquencies 
     and defaults (but producing far greater losses). Again, this 
     strategy maximizes fictional income and real losses. Honest 
     home lenders and purchasers of home loans would not act in 
     this fashion because the loans must cause catastrophic 
     losses.
       To sum it up, the known facts of this crisis refute the 
     rival theories that the lenders/purchasers originated/bought 
     endemically fraudulent liar's loans because (a) ``the 
     government'' made them (or Fannie and Freddie) do so, or (b) 
     because they were trying to maximize profits by taking 
     ``extreme tail'' (i.e., an exceptionally unlikely risk). The 
     risk that a liar's home loan will default is exceptionally 
     high, not exceptionally low. The known facts of the crisis 
     are consistent with accounting control frauds using liar's 
     loans (in the United States) as their ``ammunition of 
     choice'' in accordance with the conventional fraud ``recipe'' 
     used that caused prior U.S. crises.
       It is bizarre that in such circumstances the automatic 
     assumption of the Bush and Obama administrations has been 
     that fraud isn't even worth investigating or considering in 
     connection with the crisis. It is as if millions of liar's 
     loans purchased and resold as CDOs largely by systemically 
     dangerous institutions are an inconvenient distraction from 
     campaign fundraising efforts. Instead, we have the myth of 
     the virgin crisis unsullied by accounting control fraud. 
     Indeed, contrary to theory, experience, and reality, the 
     Department of Justice has invented the faith-based fiction 
     that looting cannot occur.
       Benjamin Wagner, a U.S. Attorney who is actively 
     prosecuting mortgage fraud cases in Sacramento, Calif., 
     points out that banks lose money when a loan turns out to be 
     fraudulent. ``It doesn't make any sense to me that they would 
     be deliberately defrauding themselves,'' Wagner said. 
     Wagner's statement is embarrassing. He conflates ``they'' 
     (referring to the CEO) and ``themselves'' (referring to the 
     bank). It makes perfect sense for the CEO to loot the bank. 
     Looting is a ``sure thing'' guaranteed to make the CEO 
     wealthy. ``Looting'' destroys the bank (that's the 
     ``bankruptcy'' part of Akerlof & Romer's title) but it 
     produces the ``profit'' for the CEO. It is the deliberate 
     making of masses of bad loans at premium yields that allows 
     the CEO to profit by looting the bank. When the top 
     prosecutor in an epicenter of accounting control fraud 
     defines the most destructive form of financial crime out of 
     existence he allows elite fraud to occur with impunity.
       As embarrassing as Wagner's statement is, however, it 
     cannot compete on this dimension with that of his boss, 
     Attorney General Holder. I was appalled when I reviewed his 
     testimony before the Financial Crisis Inquiry Commission 
     (FCIC). Chairman Angelides asked Holder to explain the 
     actions the Department of Justice (DOJ) took in response to 
     the FBI's warning in September 2004 that mortgage fraud was 
     ``epidemic'' and its prediction that if the fraud epidemic 
     were not contained it would cause a financial ``crisis.'' 
     Holder testified: ``I'm not familiar myself with that [FBI] 
     statement.'' The DOJ's (the FBI is part of DOJ) preeminent 
     contribution with respect to this crisis was the FBI's 2004 
     warning to the nation (in open House testimony picked up by 
     the national media. For none of Holder's senior staffers who 
     prepped him for his testimony to know about the FBI testimony 
     requires that they know nothing about the department's most 
     important and (potentially) useful act. That depth of 
     ignorance could not exist if his senior aides cared the least 
     about the financial crisis and made it even a minor priority 
     to understand, investigate, and prosecute the frauds that 
     drove the crisis. Because Holder was testifying in January 
     14, 2010, the failure of anyone from Holder on down in his 
     prep team to know about the FBI's warnings also requires that 
     all of them failed to read any of the relevant criminology 
     literature or even the media and blogosphere.
       In addition to claiming that the DOJ's response to the 
     developing crisis under President Bush was superb, Holder 
     implicitly took the position that (without any investigation 
     or analysis) fraud could not and did not pose any systemic 
     economic risk. Implicitly, he claimed that only economists 
     had the expertise to contribute to understanding the causes 
     of the crisis. If you don't investigate; you don't find. If 
     you don't understand ``accounting control fraud'' you cannot 
     understand why we have recurrent, intensifying financial 
     crises. If Holder thinks we should take our policy advice 
     from Larry Summers and Bob Rubin, leading authors of the 
     crisis, then he has abdicated his responsibilities to the 
     source of the problem. ``Now let me state

[[Page 17698]]

     at the outset what role the Department plays and does not 
     play in addressing these challenges'' [record fraud in 
     investment banking and securities].
       ``The Department of Justice investigates and prosecutes 
     federal crimes. . . .''
       ``As a general matter we do not have the expertise nor is 
     it part of our mission to opine on the systemic causes of the 
     financial crisis. Rather the Justice Department's resources 
     are focused on investigating and prosecuting crime. It is 
     within this context that I am pleased to offer my testimony 
     and to contribute to your vital review.'' Two aspects of 
     Holder's testimony were preposterous, dishonest, and 
     dangerous.
       ``I'm proud that we have put in place a law enforcement 
     response to the financial crisis that is and will continue to 
     be is aggressive, comprehensive, and well-coordinated.''
       DOJ has obtained ten convictions of senior insiders of 
     mortgage lenders (all from one obscure mortgage bank) v. over 
     1000 felony convictions in the S&L debacle. DOJ has not 
     conducted an investigation worthy of the name of any of the 
     largest accounting control frauds. DOJ is actively opposing 
     investigating the systemically dangerous institutions (SDIs).
       Holder's most disingenuous and dangerous sentence, however, 
     was this one:
       ``Our efforts to fight economic crime are a vital component 
     of our broader strategy, a strategy that seeks to foster 
     confidence in our financial system, integrity in our markets, 
     and prosperity for the American people.'' Yes, the 
     ``confidence fairy'' ruled at DOJ. It is the rationale now 
     for DOJ's disgraceful efforts to achieve immunity for the 
     SDIs' endemic frauds. The confidence fairy trumped and 
     traduced ``integrity in our markets'' and ``prosperity for 
     the American people.'' Prosperity is reserved for the SDIs 
     and their senior managers--the one percent.

                          ____________________