Bill Black does not mince words

His latest screed indites Holder and company for failing to even recognize that fraud - primarily via liars' loans - was a large cause of the Great Recession, let alone investigate and prosecute the miscreants.

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.