March, 01 2010, 04:02pm EDT
For Immediate Release
Contact:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167
Having Consumer Protection Under Treasury 'A Sick Joke'
WASHINGTON
MarketWatch reports today: "Senate Banking Committee Chairman Christopher Dodd, D-Conn., has dropped plans for a separate, stand-alone agency to protect consumers against credit-card and mortgage fraud in a bid to restart stalled financial reform legislation."
WILLIAM K. BLACK
Black is associate professor of economics and law at the University of Missouri, Kansas City. He was a senior regulator during the savings and loan scandal and blew the whistle on prominent politicians, including House Speaker Wright and the five U.S. senators who became famous as the "Keating Five." He was the lead staffer on the successful reregulation of the S&L industry and directed the investigations that led to convictions in many of the worst S&L frauds.
He said today: "The single most positive element of the Senate reform legislation was the creation of an independent regulatory agency dedicated to consumer protection against financial abuses. The scope of those financial abuses is staggering. What the FBI rightly warned about in September 2004: an 'epidemic' of mortgage fraud that they predicted would cause a financial 'crisis' caused the housing bubble to hyper-inflate and caused the greatest loss of working class wealth in our history. The crisis also shows that protecting consumers simultaneously protects honest lenders. A 'Gresham's dynamic' caused this crisis -- lenders that engaged in accounting 'control fraud' gained an advantage over honest lenders because accounting fraud is a 'sure thing' that produces record (fictional) profits that maximize executive bonuses. George Akerlof and Paul Romer captured this dynamic in the title of their 1993 article: 'Looting: Bankruptcy for Profit.' Lenders optimize accounting fraud by lending to the least financially sophisticated borrowers on predatory terms. Despite FBI warnings and ample warnings to the Federal Reserve in hearings (mandated by Congress -- the Fed would not have even held the hearings absent that compulsion) about endemic lender fraud and predation, the Fed refused to use its authority under HOEPA to prevent the accounting fraud and predation. Worse, Treasury and the Fed have overwhelmingly perverse institutional incentives to represent the interest of the worst financial executives -- the looters -- against the interests of borrowers.
"The proposal to amend the Senate bill to place consumer protection in Treasury, rather than an independent regulatory agency with institutional incentives to protect borrowers, is a sick joke. This is not even a case of putting a fox in charge of the proverbial chicken coop -- the foxes have already slaughtered the chickens. The only reason we were successful in reregulating the S&L industry during the Reagan administration was because the Federal Home Loan Bank Board was an independent regulatory agency. The administration hated our successful reregulation, which kept the debacle from developing into a Great Recession, and would have blocked it had we not been an independent regulatory agency. Its successor administration's, the first President Bush's, first significant legislative response to the S&L debacle (the 1989 FIRREA legislation) ended the Bank Board's independent regulatory status and made its successor (OTS [Office of Thrift Supervision]) a bureau within Treasury. OTS, of course, under the second President Bush's appointees, joined its sister bureau (OCC [Office of the Comptroller of the Currency]) in becoming an anti-regulatory disgrace. The OTS went so far as to encourage a failed S&L to file false financial statements to disguise its failure. OCC spent all of its energies successfully preempting efforts by state attorneys general to protect borrowers from predatory lenders. We are now supposed to believe that the answer to the crisis is to create another Treasury bureau? To be successful, that bureau's function would have to be negating every policy of the OCC and the OTS. That, obviously, is not going to happen. Treasury will continue to represent the financial industry at the direct expense of our nation. [James] Galbraith ('The Predator State') and [Thomas] Frank ('The Wrecking Crew') explain how and why this happens.
"Independence does not guarantee effective regulation (witness the Fed and the SEC), but it is a sine qua non for effective regulation. Four things make for effective regulation -- and independence increases the chances of each element occurring. The first is leadership. This is where even independent agencies are deeply vulnerable because the president appoints their leaders. Bush, for example, appointed Harvey Pitt, the most notorious anti-regulator, as Chairman of the SEC. However, leaders can change. Bank Board Chairman Gray is an example of this process. He was a patron of deregulation but saw that it was optimizing the S&L environment for accounting fraud.
"The second requisite is power. The agency needs effective regulatory, examination, data, and enforcement authority. An independent agency is less subject to OMB's and OPM's anti-regulatory efforts that focus on these elements.
"The third necessity is to create institutional incentives that increase the odds that the agency will seek to fulfill its regulatory mission rather than being 'captured' by the industry it is supposed to regulate. The Fed, of course, is set up in exactly the wrong manner due to the regional banks. The banks dominate the organization that is supposed to regulate them. Take a look at the 'public interest' directors of the regional Fed banks if you want to have a sad laugh.
"The fourth requirement is to develop a professional regulatory culture. This takes time, and it can be lost. The examiners and supervisors need to value expertise and be dedicated to their statutory mission. They should have no interest in party. (To this day, I do not know the political affiliations of my three regulatory colleagues that I joined in meeting with the 'Keating Five.') They must believe that (some) regulation can succeed or they will be defeated from the beginning. They must limit their use of power and avoid conflicts of interest. Good regulators do not have enemies lists even when their opponents do have such lists. Michael Patriarca (the top S&L regulator in the West) exemplified this element. His order to us with regard to Charles Keating's Lincoln Savings (the most infamous 'control fraud' of the S&L debacle) was that we would always walk 'square corners' in our regulation of that S&L and every other S&L. Self-restraint is essential, but so are two related cultural elements -- integrity and courage. Chairman Gray knew that reregulating the industry would destroy his career. Michael Patriarca persisted in recommending that Lincoln Savings be taken over even when Chairman Gray's successor (Danny Wall) made clear that he was enraged by that recommendation and even though Wall's chief of staff warned Patriarca that Keating was so powerful and vicious that 'they can get you in ways you'll never know you've been gotten.' (Note that despite a track record of unmatched regulatory success and integrity neither the Bush nor the Obama administration has appointed Patriarca as a regulatory leader or even sought his advice.)"
Black is also a white-collar criminologist. His research focuses on elite frauds ("control frauds") that control seemingly legitimate organizations and use them as "weapons" of fraud -- and the financial crises such frauds produce.
A nationwide consortium, the Institute for Public Accuracy (IPA) represents an unprecedented effort to bring other voices to the mass-media table often dominated by a few major think tanks. IPA works to broaden public discourse in mainstream media, while building communication with alternative media outlets and grassroots activists.
LATEST NEWS
Hundreds Rally in Milwaukee Against Trump Admin's 'Unprecedented' Arrest of Judge
"We reject this lawless escalation against an immigration judge who appears to be showing a commonsense and humane approach to immigrants, and stands for due process for all," said one campaigner.
Apr 26, 2025
Hundreds of people rallied in Wisconsin's largest city on Saturday to protest the Trump administration's arrest of Milwaukee County Circuit Judge Hannah Dugan on what critics called "baseless" charges of felony obstruction after she allegedly helped an undocumented immigrant evade arrest during an appearance in her courtroom.
FBI agents arrested Dugan, 65, on Friday following an investigation, accusing her of escorting an undocumented man and his attorney through her courtroom's jury door after learning that Immigration and Customs Enforcement (ICE) agents showed up to arrest him.
Protesters chanted slogans including, "No ICE, No KKK, No Fascist USA!" and "No Hate, No Fear, Immigrants Are Welcome Here!" They held signs with messages like "Liberty and Justice for All" and "Resist Fascism!"
HAPPENING NOW: A HUGE crowd of protesters march through the streets outside an FBI office in Milwaukee in support of Judge Hannah Dugan (Video: @unraveledpress.com)
[image or embed]
— Marco Foster ( @marcofoster.bsky.social) April 26, 2025 at 3:05 PM
"I have never heard of a state court judge being arrested by the federal government because she chose to control her own courtroom. This is unprecedented," Sara Dady, an immigration attorney who traveled more than 90 miles from Rockford, Illinois to attend the demonstration outside the FBI field office in Milwaukee, told the Milwaukee Journal Sentinel.
Wisconsin state Rep. Ryan Clancy (D-19) told the crowd: "The judiciary acts as a check to unchecked executive power. And functioning democracies do not lock up judges."
"I hope that we can all be as brave as Judge Dugan was," Clancy added.
Janan Najeeb, one of the leaders of the Wisconsin Coalition for Justice in Palestine, told rallygoers: "The courtroom is not a hunting ground for ICE. It is a sanctuary. When our government turns our courtrooms into traps, they are betraying the very laws that they claim to defend."
Coalition for Humane Immigrant Rights director Angelica Salas said in a statement that "in an unprecedented move against members of the judicial branch, the Trump administration is exercising authoritarianism to degrees that should alarm us all."
"We reject this lawless escalation against an immigration judge who appears to be showing a commonsense and humane approach to immigrants, and stands for due process for all, and against wanton disregard for our Constitution," Salas added.
Critics have called Dugan's arrest part and parcel of President Donald Trump's attacks on immigrants, the nation's system of checks and balances, and the rule of law.
"The Trump administration deserves zero benefit of the doubt here. It has evinced utter contempt for due process and the rule of law since inauguration day," Ryan Cooper, managing editor of The American Prospect, wrote on Friday. "It has deported numerous legal residents, most notably Kilmar Abrego García, to an El Salvador torture dungeon, and is openly disobeying a 9-0 Supreme Court decision to bring García back."
"The ongoing mass layoffs of federal workers and outright dismantling of legislatively mandated agencies being carried out by Elon Musk and DOGE is blatantly unconstitutional," Cooper added, referring to the Department of Government Efficiency.
Among those pushing back against Dugan's arrest are Wisconsin Circuit Judge Monica Isham, who wrote in an email to other judges: "Enough is enough. I no longer feel protected or respected as a judge in this administration. If there is no guidance for us and no support for us, I will refuse to hold court."
"I have no intention of allowing anyone to be taken out of my courtroom by ICE and sent to a concentration camp, especially without due process as BOTH of the constitutions we swore to support require," Isham added. "If this costs me my job or gets me arrested, then at least I know I did the right thing."
Keep ReadingShow Less
DOJ Memo Shows Trump Admin Ordered ICE to Conduct Warrantless Home Invasions
"There's no Alien Enemies Act exception to the Fourth Amendment," said one law professor.
Apr 26, 2025
The U.S. Department of Justice dubiously invoked a centuries-old law in directing immigration agents to carry out home invasion searches without warrants, an internal memo revealed.
USA Today—which obtained a copy of the March 14 memo issued by the office of U.S. Attorney General Pam Bondi—reported Friday that the Trump administration ordered Immigration and Customs Enforcement (ICE) to pursue suspected members of the Venezuelan gang Tren de Aragua into homes, sometimes without warrants, under the Alien Enemies Act (AEA).
The 1798 law has been invoked to deport hundreds of undocumented immigrants—the majority of whom have no criminal records in the United States—many of whom have been sent to the Terrorism Confinement Center (CECOT), a notorious super-maximum security prison in El Salvador, regardless of their nationality.
According to the memo:
As much as practicable, officers should follow the proactive procedures above—and have an executed warrant of apprehension and removal—before contacting an alien enemy. However, that will not always be realistic or effective in swiftly identifying and removing alien enemies... An officer may encounter a suspected alien enemy in the natural course of the officer's enforcement activity, such as when apprehending other validated members of Tren de Aragua. Given the dynamic nature of enforcement operations, officers in the field are authorized to apprehend aliens upon a reasonable belief that the alien meets all four requirements to be validated as an alien enemy. This authority includes entering an alien enemy's residence to make an AEA apprehension where circumstances render it impracticable to first obtain a signed notice and warrant of apprehension and removal.
The Trump administration's controversially broad interpretation of the AEA and questionable criteria for targeting immigrants has led to the arrest and wrongful deportation of individuals including makeup artist Andry José Hernández Romero and Kilmar Abrego García, both of whom were sent to CECOT. The Trump administration is defying a U.S. Supreme Court order to facilitate Abrego García's return to the United States.
Earlier this month, the ACLU and allied groups sued to block the Trump administration's AEA deportations, arguing that "no one should face the horrifying prospect of lifelong imprisonment without a fair hearing, let alone in another country."
On Friday, U.S. District Judge David Briones ordered ICE to free a Venezuelan couple detained in El Paso under the AEA, finding that the government "has not demonstrated they have any lawful basis to continue detaining" the pair. Briones also warned ICE to not deport anyone else it is holding as an alleged "alien enemy" in West Texas.
Lee Gelernt, the ACLU's lead counsel in cases challenging use of the AEA, told USA Today: "The administration's unprecedented use of a wartime authority during peacetime was bad enough. Now we find out the Justice Department was authorizing officers to ignore the most bedrock principle of the Fourth Amendment by authorizing officers to enter homes without a judicial warrant."
Monique Sherman, an attorney at the Rocky Mountain Immigrant Advocacy Network, expressed alarm over the DOJ memo.
"The home under all constitutional law is the most sacred place where you have a right to privacy," Sherman told USA Today. "By this standard, spurious allegations of gang affiliation means the government can knock down your door."
As Georgetown University Law Center professor Steve Vladeck
said, "There's no Alien Enemies Act exception to the Fourth Amendment."
Keep ReadingShow Less
Cancer Patient Among 3 American Children Deported by ICE
A Trump-appointed judge ordered a hearing in the case of a 2-year-old girl based on his "strong suspicion that the government just deported a U.S. citizen with no meaningful process."
Apr 26, 2025
Federal immigration authorities deported three U.S. citizen children on Friday—including one with cancer who was reportedly expelled without medication—in a move that critics and one judge appointed by President Donald Trump said was carried out without due process.
U.S. Immigration and Customs Enforcement's (ICE) New Orleans field office deported the American children—ages 2, 4, and 7—along with their undocumented mothers, one of whom is pregnant. The ACLU said that both families were held incommunicado following their arrests, and that ICE agents refused or failed to respond to efforts by attorneys and relatives who were trying to contact them.
The ACLU said that one of the children has a rare form of metastatic cancer and was deported without medication or consultation with their treating physician, despite ICE being notified about the child's urgent condition. This follows last month's ICE deportation of a family including a 10-year-old American citizen with brain cancer.
Disappearing mothers and toddlers, denying them access to lawyers, deporting them without due process - this is not what a democracy does to its citizens and families and to their kids.
[image or embed]
— Vanessa Cardenas (@vcardenas.bsky.social) April 25, 2025 at 6:48 PM
According to court documents, the 2-year-old New Orleans native—identified as V.M.L.—was brought by her mother, Jenny Carolina Lopez Villela, to a routine immigration appointment in the Louisiana city on Tuesday when they were arrested.
A habeas petition filed on Thursday states that ICE New Orleans Field Office Director Mellissa Harper told V.M.L.'s desperate father on a phone call that he could try to pick the girl up but would likely be arrested, as he is undocumented. The petition argues that Harper was detaining V.M.L. "in order to induce her father to turn himself in to immigration authorities."
On Friday, U.S. District Judge Terry Doughty—a Trump nominee—ordered a May 16 hearing in Monroe, Louisiana based on his "strong suspicion that the government just deported a U.S. citizen with no meaningful process."
"It is illegal and unconstitutional to deport, detain for deportation, or recommend deportation of a U.S. citizen," Doughty wrote, citing relevant case law. "The government contends that this is all OK because the mother wishes that the child be deported with her. But the court doesn't know that."
The ACLU argued that ICE's actions "represent a shocking—although increasingly common—abuse of power," adding that the agency "has inflicted harm and jeopardized the lives and health of vulnerable children and a pregnant woman. The cruelty and deliberate denial of legal and medical access are not only unlawful, but inhumane."
When historians reflect on this regime, cruelty will be the word most often used to define it. www.nytimes.com/2025/04/25/u...
[image or embed]
— Robert Reich (@rbreich.bsky.social) April 26, 2025 at 6:44 AM
Teresa Reyes-Flores of the Southeast Dignity not Detention Coalition said in a statement Friday: "ICE's actions show a blatant violation of due process and basic human rights. The families were disappeared, cut off from their lawyers and loved ones, and rushed to be deported, stripping their parents of the chance to protect their U.S. citizen children."
Immigration Services and Legal Advocacy legal director Homero López Jr. said that "these deplorable actions demonstrate ICE's increasing willingness to violate all protections for immigrants as well as those of their children."
"These types of disappearances are reminiscent of the darkest eras in our country's history and put everyone, regardless of immigration status, at risk," he added.
The Trump administration—whose first-term immigration policies and practices included separating children from their parents and imprisonment in concentration camps—is once again under fire for its anti-immigrant agenda.
The U.S. Supreme Court recently blocked the deportation of undocumented Venezuelans under the Alien Enemies Act of 1798 and has also ordered the administration to facilitate the return of Kilmar Abrego García, a Salvadoran man wrongfully deported to a notorious prison in his native country. On Wednesday, a Trump-appointed judge ordered the administration to take action to return another Salvadoran deported to the same prison.
In a scathing ruling Friday, U.S. District Judge David Briones ordered ICE to free a Venezuelan couple dubiously held in El Paso under the Alien Enemies Act, finding that the government "has not demonstrated they have any lawful basis to continue detaining" the pair. Briones also warned ICE to not deport anyone else it is holding as an alleged "alien enemy" in West Texas.
ICE overreach and abuses—which include wrongful detention of U.S. citizens, arrests of green-card holders who defend Palestine, and warrantless home searches—have fueled renewed calls for the agency's defunding.
ICE abducted a man with a learning disability leaving a hospital after a medical emergency asking for help. They didn’t care that he was a U.S. citizen. They just lied and said he wasn’t. This isn’t “border security.” It’s white supremacy. popular.info/p/us-citizen...
[image or embed]
— Melanie D’Arrigo (@darrigomelanie.bsky.social) April 23, 2025 at 4:38 AM
"A government agency that sequesters and deports vulnerable mothers with their U.S. citizen children without due process must be defunded, not rewarded with an additional $45 billion to continue at taxpayers' expense," Mich P. González, a founding partner of Sanctuary of the South—which provides legal aid to immigrants—said Friday.
"These families were lawfully complying with ICE's orders and for this they suffered cruel and traumatic separation," González added. "If this is what the Trump administration is orchestrating just three months in, we should all be terrified of what the next four years will bring."
Keep ReadingShow Less
Most Popular