Great Leap Forward


By now you’ve heard that Citigroup admits—yet again—that it engaged in fraud. Heck, it was the business model under Bob Rubin. If you want to blame three individuals for the Global Financial Crisis, only Larry Summers and Alan Greenspan deserve more credit than Rubin.

Together they “softened-up” Congress so that it would free the Banksters, and then he ran Citi into the ground as he sucked gazillions of dollars of executive compensation out of the bank. Like all the CEOs of the biggest banks, he oversaw fraud on a scale never imagined—let alone seen—in the history of the globe.

And what did he get for all the fraud? Rich! Beyond your wildest dreams. Don’t cry for Rubin, he’ll stay rich. His bank will pay the fines–$4 billion in “real” money and another $3 billion in promised, illusory, relief to some of the people his bank screwed.

Don’t worry, Eric Holder will not prosecute actual human beings for crimes. He just wants some piddling fines paid out of shareholder value so that he can trumpet all the money he’s turning over to Uncle Sam.

You do feel rich, now, fellow American, don’t you? Four billion bucks. Sounds nice. Sounds big. Even a guy like Rubin could retire with that in the piggy bank.

Oh, wait. Citi and the other “dirty dozen” biggest global banks destroyed an estimated 10 million jobs and cost our economy $21 TRILLION. Trillion is with a capital “T”; it rhymes with “B” but it is a heck of a lot bigger than a billion.

By far the best analysis I’ve seen of Holder’s sell-out to Rubin’s Citi was by my colleague, Bill Black. You can read or hear the full interview here:

According to Bill,
“This is the latest in the way of embarrassing settlements by the Department of Justice that they’re trying to bill as if they were holding Citicorp accountable… you’ll note that there are no criminal charges in this case against the individuals or against Citicorp. And as a result of all of this, all of the individuals who became wealthy through what the Department of Justice describes as an egregious fraud that was followed by a coverup–in other words, multiple felonies–have not been charged at this point, and, frankly, there’s no indication that they’re about to be charged as well. So the people that committed the frauds get to keep all of the bonuses that were created as a result of those frauds, and it’s another disgraceful moment in the chapter of the Department of Justice…. ”

No, Holder should not get any praise. He should be fired.

Bill’s particularly peeved because Holder tried to take all the credit for uncovering the fraud; actually he was helped (or, better, pushed to take action, yelling and screaming) by an insider at Citi, who made his bank’s frauds public when he could not get Rubin to stop “egregious” fraud. Here’s Bill, again:

“Let me give you two words that you’re not going to hear in the coverage of this, and those words are Richard Bowen. Richard Bowen was the whistleblower that made all of this possible, that gave this case on a platinum platter to the Department of Justice. And today the attorney general of the United States, Eric Holder, has given a press conference in which he has never mentioned Richard Bowen’s name and has never used it as an opportunity to praise him and to ask other people to come forward and blow the whistle so that we can prevent these kind of crimes.”

Bowen had discovered evidence of monumental fraud in Citi’s securitization business. As I’ve been arguing since 2008, the mortgages put into packages for securitization did not meet the “reps and warranties”, which means the buyers got screwed. That is only one of the many, many ways that the Banksters were screwing customers on every side of their balance sheets.

Here’s Bill again:
“Richard Bowen was in charge of looking at the quality of mortgages that Citicorp was selling to Fannie and Freddie. And Richard Bowen found that 40 percent of these mortgages were being sold to us under false representations and warranties. And so he warned the senior people and asked them to fix it. They did nothing in response. Richard Bowen and his staff looked again, and the percentage of lies–again, that’s a felony–in Citicorp’s sales to Fannie and Freddie had risen to 60 percent. He became so frustrated that he CCed Robert Rubin, the former Treasury secretary of the United States of America and one of the most senior Citicorp officials on these letters of complaint. And we know what Citicorp did in response to this, because (a) the Attorney General of the United States has just said that they covered it up, and (b) we know that Richard Bowen was demoted. Virtually all of his staff was removed. I think he had one secretary reporting to him instead of an entire staff of auditors who had found this embarrassing facts….”

Bob “hear no evil, see no evil” Rubin was happy to overlook fraud so long as it lined his pockets. And what did it cost the rest of us? Bill says

“the best estimate of economists right now is that we lost $21 trillion–a trillion is a thousand billion–$21 trillion in lost productivity as a result of the Great Recession that is a direct result of this epidemic of these kinds of fraud. And we lost 10 million American jobs.”

Here’s “just the facts, ma’am” reporting of the shameful “settlement” (

“The settlement includes an agreed upon statement of facts that describes how Citigroup made representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors,” a statenent from the Justice Department reads. “Contrary to those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew had material defects.”

“Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were scrutinizing, the bank and its employees concealed these defects,” Attorney General Eric H. Holder Jr. said in a statement.

“The bank’s misconduct was egregious,” Holder Jr. stated.

“As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits,” he said

“Citigroup was also the recipient of $45 billion in government bailout funds in 2008.”

True, but as we showed, Citi continued to rake in bailout funds after 2008, feeding at the Fed’s trough for years—getting billions in the Fed’s alphabet soup of special facilities at near-zero interest rates. (See; and That $45 billion was a mere drop in the proverbial bucket.

By comparison, the $4 billion Citi is now paying Uncle Sam is barely a molecule.


windrivenJuly 16th, 2014 at 2:06 pm

I thought whistle blowers were entitled to 10% of the recovery? I wonder if Richard Bowen will ever see a penny?

benleetJuly 17th, 2014 at 1:32 am

Since 2008 the "Household Net Worth" reported by the FRB is $24.5 Trillion, rhymes with Billion, an increase of 40%, from $57 Trillion to $81.7 Trillion. In 2010 the mean average household savings was $498,000, today it's around $670,000, but the Average is very deceiving since the lower half owns but 1.1%, according to a Congressional Research Service paper from 2012. And the top 1% also tends to hide money in foreign havens free of U.S. taxes. But if the GR cost the nation $21 T, it is compensated with this asset bubble of $24.5T. Or is it? The Republican narrative as far as I can tell is that Fannie Mae and Freddie Mac were compelled to buy up subprime mortgages that banks were compelled to execute due to a Community Redevelopment Act of 1992. The government forced this stupidity on them. And $21 Trillion dollars later . . . From the Wikipedia article and AP report: "The value of American subprime mortgages was estimated at $1.3 trillion as of March 2007,[97] with over 7.5 million first-lien subprime mortgages outstanding."

L. Randall Wray L. Randall WrayJuly 17th, 2014 at 9:53 pm

Yes they ramped up the fraud–bubbles and foreclosures–to increase the concentration in the hands of Bush’s “ownership society” one-percenters.