This series is an up-close-and-personal account of the heroes introduced by Eric Vaughan and Patrick Lovell’s “The Con” which took a simple but revolutionary approach to explain the epidemics of elite fraud driving the great financial crisis of 2007-2008 and continuing today.

In this episode, co-hosts Patrick Lovell, Steve Grumbine and Eric Vaughan talk with Terrie Crowley, who fought her illegal foreclosure in the courts of Chicago for 12 years through 11 judges on her own against the legal fire power of one of the largest financial firms in the world. She understood the financial system having been both a broker and realtor in her career, but she had to binge on the law for years like so many other Pro Se litigants to fight the forces of darkness that were trying to steal the most important thing in her life. Her home. Enter Nicholas Kostopoulos, a former DOJ Prosecutor out of Miami who soon learned mortgage fraud wasn’t much different than the cocaine drug cases he was prosecuting in the 1980s.

Banks make money. They don’t make mistakes. Wells Fargo strikes again.

Truth in lending? Never has a more perverted concept become our system.

Why do bank servicers enter incorrect, fraudulent data on homeowners’ documents to foreclose? It’s the insurance, stupid. What else would it be?

The New Untouchables: The Pecora Files
S2:E8 – Insurance is the Point
August 29, 2021

 

[00:00:03.350] – Terrie Crowley [intro/music]

There have been the most amazing people that would offer to stay at the house so that I could feel safe leaving, not fearing that they’re going to break in when I’m gone because that was the constant fear. I would wake up in the middle of the night wondering, am I safe? When a guy goes in and out of your driveway and flashes a gun? It’s a little intimidating.

[00:00:27.140] – Nicholas Kostopoulos [intro/music]

The government is the only thing we have against interceding between us and the big financial institutions. If you weaken the government, what do you have left? You have to go to court, but then you’re an individual going against an institution.

[00:00:51.950] – Eric Vaughan [intro/music]

In a world of elite criminals, only people of elite character can protect our system. This is The New Untouchables.

[00:01:02.680] – Patrick Lovell

Well, in our ongoing effort to provide more context and more real-life revelation of what happens in this incredibly corrupt and perverse system, Steve and Eric, our next guest is Terrie Crowley out of Chicago, Illinois. Miss Crowley is someone who has been in the system for a very long period of time. Her story is extraordinarily excruciating once you understand the details like everybody else who goes through this process. But before we get caught too much into the details of our story, let’s turn it over for an introduction. Terrie, tell us who you are and where you live in and kind of give us an overview of your experience.

[00:01:44.920] – Terrie Crowley

Well, I’m born and raised in the suburbs of Chicago, I actually live in a community called Deerfield. And I was trained, initially, I came through the financial world. I started my career on the trading floor of the Chicago Mercantile Exchange as a runner in the S & Ps and foreign currencies, and then went on to get my Series 7 and ended up working for a boutique investment banking firm all the way through the 80s.

So I went through the crash of ’87 and shortly thereafter I decided I needed a career change and then I eventually became a real estate broker in the mid-90s and enjoyed great prosperity in the real estate market selling residential and new construction. And probably around 2006, I was doing feasibility studies for some developers and I said, “Hey, guys, I don’t like the looks of this market.

I think we’re way, way, way, way over-inflated here, and I think you should approach it more conservatively.” Of course, they thought I was being negative. Turns out it was a prescient feeling. So long story short, the 2008 collapse ensued, and right at that time I ended up having two major surgeries and my insurance renewed in the middle of it.

So I don’t need to tell you about the out of pocket cost of medical expenses and fast forward to spring of 2009 when the HAMP Program came out, I decided this would be a great time for me to be proactive and see if I can recast my mortgage under the HAMP Program. And I called Wells Fargo, and initially, they said they didn’t have any information on it.

That was the first lie in April of 2009. So come August of 2009, they started telling me you have to be late on your mortgage, which was not true in order to qualify for HAMP. And being a real estate broker for all these years, I have my own personal mortgages.

[00:03:39.960] – Lovell

Can you just pause for just a second to reflect on that? Because what you just talked about is something that millions of people around the United States experienced exactly the way you have. And this is not common knowledge, considering how prevalent this was in the system. Can you slow down and tell me again what that means when they asked you to stop paying your mortgage for 90 days?

[00:04:02.320] – Crowley

Well, I asked the woman at Well Fargo, like, “What do you mean I have to be late?” I’ve never been late. I had 800 credit scores and always pay my bills on time. And she said, “Well, they’re not even going to look at your application unless you’re late on your mortgage,” which I totally didn’t understand. So I desperately wanted to get my mortgage recast.

And so I held my breath and I went late and the day after they called me and they said, “Would you like to modify your mortgage? We’ll send you an application.” And I was shocked. I’m trained in the real estate business. I understand enough of the real estate lending laws, ok, and truth in lending seemed to be on the back burner in my experience when I was in the midst of it. As soon as I filled out my first application, I immediately sent in two payments to get current and the nightmare began.

[00:04:58.270] – Lovell

Let me just quantify this specifically. They told you to stop paying for 90 days to be able to put you basically, how was it described and calibrated? Why did they make that case?

[00:05:10.980] – Crowley

Well, because they said you need to show hardship. But I had already sent them a hardship letter identifying all my surgery and medical expenses and being a real estate broker and the market was collapsed, essentially. And I had the equity in my property and credit scores and ability to pay, but I was trying to be proactive. I didn’t really understand at the time, Patrick, why they wanted me to be three months late.

But as I spoke to other people, this was a common thread. Everybody who’s being told you need to be late on your mortgage at least 90 days. And I thought that’s so bizarre. What is with the 90 days? Well, we came to find out exactly years later through discovery that at 90 days, the servicer has to represent to the investor that they’ve exhausted all necessary loss mitigation efforts.

And once they do that and that there’s no other hope left, they’re going to foreclosure, they can submit a claim on what’s called the mortgage default insurance. Mortgage default insurance from my understanding, the servicer collects up to half of the mortgage, which would basically account for the monies they would have otherwise receive had the mortgage gone to term.

So that became my understanding of what that three-month time frame was all about. But the average homeowner, they’re desperate. They’re trying to take care of themselves, be fiscally responsible, but the bank is on another wavelength altogether.

[00:06:43.780] – Lovell

Can you tell us, given that, also, can you remember, if you do recall what the kind of atmosphere the playing field was in terms of your perception of what government was actually instituting? Because at that time, we had been inundated with this knowledge or this understanding that there was going to be some government infusion to be able to process, similar to what happened after the Great Depression, even though most Americans didn’t know what happened after the Great Depression.

But this notion of modifying loans or write-downs so that the banks would have to write down the value of these homes to its current market value, which would then be able to allow any of us in that particular situation to hopefully come up with what the money was relevant to the market.

[00:07:26.320] – Crowley

Yeah, that was always my question. With the taxpayers infusing so much, trillions of dollars in the Fed stepping in to support the banks, but yet why were millions of people ending up in foreclosure? If you want to get into market, that’s a whole discussion unto itself. From my observation, the banks were fighting that tooth and nail because it wouldn’t directly impact the capital requirements at the bank.

That’s probably for another expert to talk to you more about that. But it seems pretty clear to me that one thing I know about banks, they make profits, they don’t make mistakes. So I kept asking myself, what are they up to here? How are they profiting?

And throughout the course of my ten years in litigation, and exhaustive attempts fighting these unbelievable litigators on the bank side that were going to extraordinary lengths to try and beat me on this case. And eventually, I lost, but I lost for not on the merits of my case, but on some technicalities, which was quite devastating.

[00:08:35.920] – Lovell

Well, before you go there, though, I want to turn it over just briefly to just quick comment. But let me turn this over to you, Steve, first. Given some of the information that you’ve just heard from Miss Crowley from the beginning of this odyssey that she’s going to take us through, are there any sorts of triggers that come to mind?

[00:08:54.320] – Steve Grumbine

Well, for me in particular, I think the hardest one is there’s more to reveal here. Right? You brought up the idea of the taxpayers. And just like we’re uncovering all the fraud within this model, this concept of the taxpayer dollar is the other element of this fraud, because it makes it even worse because what you find out is our taxes, especially at a federal level, are used as a brake pedal or a gas pedal for the economy, depending upon where inflation is or whether we want to spur more economic activity.

And so you find out that ultimately the federal government isn’t depending on tax dollars in any way to backstop these things. This is all about absorbing bad debts and writing them off. It’s almost like a tax in and of itself. And the taxpayer has nothing to do with this whatsoever. But they allow you to believe that when those taxes are functionally deleted.

So as you think about that, that is a whole podcast in and of itself, which we do on Macro N Cheese, but when you take that knowledge and you realize, not only could our government help every single one of these homeowners, but the fact that they chose not to and fully backstop these banks should be the ringing of the Liberty Bell.

Have every air raid siren going. This shows you how incredibly evil this whole plot and plan is because you came in here and the minute you said taxpayer Patrick, messaged me and said, you’re going to need to talk about this for a second.

[00:10:35.980] – Lovell

That’s a beautiful bridge, really, to what happens next in this incredible ordeal that Terrie is going to reveal to us. Terrie, I think off the top of this, can you give me just kind of an encapsulation, the amount of attorneys that you had to hire and fire, how long this process that you went through in the court system; and I know this is a lot to unpack, but in the context of that, there’s some very important details that you can reveal to us, particularly as it relates to where you just left off dual tracking, which led to false representations in Fannie Mae and then also the concealed modification offers? It’s a big question. Try to unpack that for us.

[00:11:17.490] – Crowley

Okay, so may I just address, too, the AIG factor? We bailed out AIG. AIG is the number one underwriter of mortgage insurance in the United States. Okay? So back to the insurance issue, but you have other experts that can address. Okay. So what I found was this.  I applied four times for modification, and every single modification was filled with fraud, fraud, misrepresentation, and concealment. First, there is a . . . one thing I was thinking about how to simplify this.

When people apply for a mortgage, you send them all your documentation, your income, your debt, you get all of the qualifiers in there. What you don’t know is that the bank has a whole system, a computer system that they are putting all these other data entry points into. It’s called a net present value model, and it’s provided by the treasury, in theory.

Who’s to say what kind of modifications the actual banks are making to that model? At the time that I was undergoing my modification process, Wells Fargo was under consent orders by SIGTARP, which is the Special Investigator General of the Toxic Asset Relief Program. They were told that anybody who failed that MPV model needed to be reprocessed.

Well, I had had two failures, both of which had incorrect data. For example, they input my appraisal as my property being below the value of the mortgage, which was false. They had an internal appraisal where we found a discovery that showed that the property at $135,000 in equity. So I was not upside down, but that was enough for them to create a fail. Now, why would they do that? Right?

I couldn’t understand why they wouldn’t correct the data. So I reapplied. The second application, they said I had $2300 a month in credit card debt. Well, I didn’t have any credit cards. Where the heck did they get that? I went to my credit report. And on the seventh page of my credit report, when I bought the house, I had spent $2,300 in furniture.

So somebody within the bank had to go that far into my credit report to input this false data. So it just kept continuing. So this is where it gets interesting. The third application is where the first two were never submitted, as far as we know, to Fannie Mae. So that in and of itself is fraud. The third application when they submitted to Fannie Mae, I was actually current on the mortgage.

Wells Fargo represented, this is March 2, 2010, they had given Fannie Mae a projected foreclosure date of April 1. Well, that would have been impossible under Illinois law for them to foreclose on me a month later. Fannie Mae wrote back, and they said, “The note is in a mortgage-backed security. We can’t reclass it out of the mortgage-backed security until May.

So at that time, you can put her into a modification. But in the meantime, put her in a forbearance agreement or a temporary mod,” is what was represented to me by Wells. They said I failed straight out, and then all I could have was a special forbearance agreement. Okay, so this is where the dual tracking happens. They’re telling me one thing, and they’re having a different conversation with Fannie Mae.

All Fannie Mae knows is Wells has got a projected foreclosure date of April 1. What happens in March? I signed the forbearance because I thought, “okay, this is going to get me on the pathway to modification.” In April, Wells Fargo, we found in evidence, collected a check for over $114,000. It gets processed through my account from Fannie Mae.

We found that to be extraordinarily interesting since 50% of the alleged unpaid balance of my mortgage. In May somebody called me and said, “You’ve got your paperwork,” and then they disappeared. I never heard from them again.

[00:15:17.560] – Lovell

So you’re saying that it was triggered already in the insurance while you’re in the process? Is that what I’m hearing?

[00:15:22.540] – Crowley

Yes.

[00:15:23.140] – Lovell

Okay.

[00:15:23.840] – Crowley

In litigation, Wells Fargo said, “Oh, no, no. That was not default insurance. That was a batched check for a bunch of accounts for the Hope Now project,” which is the HUD counselor program that I was involved in. They said “We only applied $150 to you.”

But then the question is, what are they doing, Wells Fargo processing a check, a corporate check received from Fannie Mae to a client count? It begs so many questions. Why are they processing corporate money through a client account? So it’s either they’re not doing proper accounting or that really was the mortgage default insurance.

[00:16:07.780] – Lovell

I’m going to give my colleague Eric a chance to tap in. And I just want to tee this question up to you, Eric, first, and then maybe see where this goes in your processing here. So, we’ve learned along the line, ok, that people get dual track, right? They’re told you got to go through this time period, which then, as we’re hearing from Terrie, is setting up a situation to trigger an actual insurance backstop on making sure these guys are going to be foreclosed.

Meanwhile, at that time, and I find it ironic that Miss Crowley is from Chicago, of course, our friend’s Jamie Dimon was in Chicago prior to this, as well as, of course, Barack Obama our ‘change we can believe in President’ that proclaimed in front of a national audience on 60 Minutes that what these guys were doing may have been unethical, but not illegal. Here we are exploring every dimension of this thing, and then we’re here suddenly, and there seems to be a motive of some sort that we didn’t fully understand before, Eric.

[00:16:59.320] – Vaughan

Right. So I just wanted to because you were drawing it together. But just for clarity sake, especially for the audience, those fraudulent inputs into your credit report, what was the purpose of those?

[00:17:12.540] – Crowley

I didn’t understand. I didn’t hear.

[00:17:14.610] – Vaughan

I’m sorry. What was the purpose ultimately, for those fraudulent inputs into your credit report?

[00:17:21.390] – Crowley

Well, the fraudulent inputs were into their data model for the net present value, and that is the basis on which you are either approved or disapproved for a mortgage modification. There are anywhere from 33 to 44 different inputs. So you supply all your data, your income, your expenses and that sort of thing. But they’re also including all these other calculations, risk premium and all this data. I’m happy to provide this for you, but the average homeowner, they’re just saying, you know, okay, how much mortgage can I afford?

And you’re believing they’re taking your data and accurately inputting it. I just ask them, on what basis are you denying me? Because I’m a real estate broker. I know I qualified for this modification. And later, Beth Stoops Jacobson, whom you guys know, came in and did a complete analysis of my file and said, “Absolutely.” And highlighted in detail the problems that happened in my case.

[00:18:24.270] – Vaughan

Now, could they have claimed the insurance if you had qualified for modification?

[00:18:31.100] – Crowley

No, no, no. See, remember that they have to represent to the servicer that they’ve exhausted all loss mitigation possibilities: that’s forbearance, it’s write-downs, it’s modification. If you didn’t qualify. So they have to go out and represent, then in fact that they’ve exhausted everything. However, in my case, we had not exhausted. I hadn’t even entered into a forbearance agreement yet.

[00:18:57.270] – Vaughan

Right. So basically, there’s a direct line between them going in and doing fraudulent inputs into your credit file and then being able to collect insurance on the back end.

[00:19:07.760] – Crowley

Right. Well, remember my property had $140,000 in equity. I mean, we’re talking about a $200,000 loan here. We’re not talking about millions of dollars. But when you think about the return on investment, it only cost them very little to foreclose on a property relative to the gains that they make.

[00:19:25.600] – Vaughan

Sure. So I mean, it seems to me that the incentive would be to try to get the insurance money, as opposed to actually helping people get into a modification.

[00:19:34.480] – Crowley

Right. Because my forbearance agreement . . . This is where it gets interesting. So at the end of my forbearance agreement, I called Wells Fargo and I said, “Well, where’s that person who told me they had the modification papers?” She goes, “Oh, no, you were denied. You can’t qualify for HAMP again. Once you’ve applied, you can’t try again,” which was also a lie.

“But we can offer you what’s called a proprietary modification.” Well, we found in records not only from Fannie Mae but from internal Wells Fargo emails and separate internal emails that I had been approved, in fact, twice. And both those were concealed. But Wells, if they were to put me in a proprietary mod, then they keep the money, the insurance money, you see.

[00:20:21.960] – Lovell

Okay, so let me chime in here because, again, Terrie is one of these particular subjects, guys, that on her own we could talk to her about straightforward for a week on this podcast and still not cover everything she actually went through.

[00:20:34.010] – Crowley

Sorry about that.

[00:20:35.620] – Lovell

It’s so extraordinarily huge. Let me just ask you a couple of straight-up questions first Terrie, just so I can establish for our audience. How many attorneys did you have to go through and why in this process?

[00:20:46.390] – Crowley

Okay, so after the fourth modification, that was a disaster. They had tried to tack on all this money. I was working with the Hope Now counselor, she said, “Terrie, I’ve been in mortgages for 18 years, never seen anything like this. You’ve got to get a lawyer.” So I did. All the real estate lawyers that I knew knew nothing about this. They’re, like, just sell the house and live to fight another day.

I wasn’t going to let Wells Fargo steal my house. I was going to fight. And I finally found this first attorney. I have had four attorneys on my case. Okay. That does not cover all the attorneys I’ve talked to. So my first attorney filed a class action in federal court shortly after that. And several months later, Wells Fargo filed foreclosure against me using false documents. That’s a whole story. I’ve got an incredible . . . .

[00:21:36.530] – Lovell

How did you know?

[00:21:38.270] – Crowley

Well, I didn’t know. It took us in discovery to find out that they had falsified the assignment and recorded a false assignment assigning the mortgage to themselves after they filed foreclosure. So in our first counter-complaint, we said they lacked standing. So we discovered that inside the internal documents at the Lake County Property Assessor’s Office.

[00:22:02.580] – Lovell

So what is this doing to you emotionally? What does it look like . . .

[00:22:06.040] – Crowley

Oh, my god.

[00:22:06.040] – Lovell

When you go into the court system?

[00:22:07.820] – Crowley

I cannot tell you guys what I went through . . . So when I’m going through the modification process and all the way until I did a cease and desist letter, I was getting robocalls on both my phones, my cell phone, and my house phone, four to six times a day, absolute abject harassment. And finally, somebody said, “You can write a cease and desist letter.”

My property has been stalked. They’ve sent these property inspectors. I think I told you, Patrick. One guy driving in and out of our driveway, my neighbor’s driveway, and then he’s flashing a gun, like absolute intimidation. Another guy showed up at my front door Monday morning 11 o’clock, waving these papers. He’s a complete thug.

I home office so I go to the door and I said, “Who are you and what are you doing here?” He said, “I’m coming in.” I said, “No, you’re not.” He had falsely waved these papers and he said he had the right to come into my property. And it was just non-stop. It was non-stop.

[00:23:01.340] – Lovell

I just want to remind our viewers, Steve, and I want to give you a chance to comment, because if you remember from our first run on season two here, we spoke to women, specifically African American women, if you recall, from what we call the Inland Empire and Riverside County in Los Angeles. Then we had, which is just the opposite type of socioeconomic setting in Santa Barbara, California.

And as you may recall, these women were met at the end of butts of sheriff’s rifles or SWAT teams to have them removed from their properties. We got the same story in Florida. We got the same story in New York. Now we’re talking to somebody in Chicago. Steve, are you starting to see a pattern here?

[00:23:42.270] – Grumbine

Absolutely. The predation primarily on women and minorities and those seen as least capable of fighting back, although we see clearly many heroic people that were underestimated, stepped up and fought the system. God love them. But, yes, this is absolutely the game. From redlining to post redlining, we have predated on the least able to defend themselves. And it seems like the struggle continues.

[00:24:15.040] – Lovell

Well, and here we have Miss Crowley, who is somebody who came from a securities background first and then real estate, right? And to Eric’s point earlier in this broadcast, she’s somebody that you would think would see a lot of this coming straight up. And she got surprised, but she had enough bandwidth to think, “Oh, well, justice will be served once I can prove myself in the court of law,” which we believe has integrity.

And wants like everybody else, and she’s not pro se here. She’s represented by attorneys. But the disaster continues. Terrie, like I said, we could go on for days and hours and months. Please tell us how this impacted your life.

[00:24:51.540] – Crowley

Oh, it’s been . . . Okay. First of all, I do want to say that you find out who the people are in your life when you go into a situation like this. People have abandoned us. And then there have been the most amazing people that have had our back that have squared our shoulders and squared my shoulders, that offered to stay at the house so that I could feel safe leaving, not fearing that they’re going to break in when I’m gone because that was the constant fear.

I would wake up in the middle of the night wondering, “Am I safe?” When a guy goes in and out of your driveway and flashes a gun, it’s a little intimidating. I don’t live far from the police. Police had had my back, but it’s a horrible way to live. It’s a horrible way to live. But you know what I have to say that there were people that I saw along the way, like the veteran. I have to give voice for this man.

There was a young guy about in his late twenties, and we’re sitting outside the courtroom and the elevator doors open and we could hear his crutches.  And he was grunting. It’s hard to tell this story. He was grunting with every step. His body was broken from war. He was wearing the blind man glasses, and he’s approaching the courtroom door. He turns and looks at us and says, “They’re going to take my house from me today, and this is what I got for fighting for this nation.”

Those kind of situations just change you. I realized I was in a sea of people that were fighting for their lives and that I had the documents. We have over 6000 pages of documents in my record and the complete forensic outline. And my first attorney bailed to Ireland so I had to go to the court and say my attorney relocated and the Judge is like, okay.

So I get the next guy, and he did the best he could, but he imploded under the weight just of the case. And then they brought in these big, monolithic law firms, and he was just a small local lawyer. He said, “This is too big for me.” So I go to the third guy and he brings in this young, dynamic team of lawyers. I mean, these kids were fresh out of law school and were all over the case.

They worked their tails off on it. And then Beth Jacobson joined us and, surprisingly, shortly after she produces her affidavit and gives an interview for the lawyers, he withdraws from the case.

[00:27:17.050] – Lovell

Further to that, Terrie, please. Your analysis or your example of the veteran is horrific, but paint the picture of the volume of what you saw in courts during this process – 10-year process. You got to encapsulate this because we got to get Nicholas to talk about the insurance fraud from a very specific angle. But tell us what calamity you literally witnessed in this process.

[00:27:40.100] – Crowley

Well, one thing I spoke about, Patrick, is the banks have a very powerful PR machine. They were way ahead of this. People bought too much house. They’re dead beats. They’re gaming the system. They’re trying to get a free house. Well, it’s easy for them to say in the media. Now I can’t see any cameras at these chancery courts. And there were literally hundreds.

We would go in on a hearing, and there’s 200 people in this courtroom. And this is one call in one small courtroom outside of Chicago. So you’ve got 200 people sitting there fighting, hoping desperately today is not the day that they’re going to lose their house – veterans, elderly, single mothers, hard working, middle Americans. I didn’t see one dead beat in that courtroom.

I didn’t see anybody in there looking to game the system. What I saw were people that were desperate. They were full of shame. They were scared. Their kids were crying. They were downtrodden. And from my perspective, the banks walked in with these stacks of cases. They were a finetuned machine. They came in there ready to bury these people, and that’s exactly what they did.

[00:28:50.800] – Lovell

Again, that’s not an overstatement. And so I’m going to turn this over to Steve in just a second, and then we’re going to welcome in Nicholas. But I want to give you a chance here to give us one more nuclear bomb because I’ve got to ask you this question straight up after everything that you’ve experienced. Again, I want to remind the viewers if it hasn’t come through clearly because this is complicated stuff.

Over ten years of fighting for her life, for justice, from a perspective knowing that they were going to steal her house and having the courage in the wherewithal to spend, however many, countless thousands of hours and thousands of dollars and maybe tens of thousands of dollars on council that was going up against a machine that was going to bury the people on a criminal enterprise.

At the end of the day, we proved it in The Con. And yet silence. Silence from our politicians. Silence from Elizabeth Warren asking Jamie Dimon about late fees as opposed to ripping people’s houses away from them. Silence from Bernie Sanders, who wants to create a political revolution who doesn’t even know Addie Polk’s name.

Silence from Alexandria Ocasio Cortez, who wants to create a new era of hope to lift up the populations that have been buried, but no acknowledgment from any of them of a system that buried at least 50 million Americans. And that’s not hyperbole. That led to, that we know of, $29 trillion to backstop this machine in the first round, and it’s been another $30 trillion since. So from where you’re standing alone in this whole process, ten years after fact, what do people need to understand from your experience to know what’s at stake?

[00:30:33.950] – Crowley

First of all, people need to know they’re not alone and never be ashamed when you run into some hardship. There is help out there. And Patrick, to your point, I wrote, I don’t know how many letters. I made how many phone calls to the government. I was offered to potentially go appear before the Senate Banking Committee and give testimony, and my lawyers said I couldn’t do it.

In subsequent, I’ve offered, and they’ve not taken me up on it. It’s almost as if they don’t want any more detail. They know all of this. These reports have been put before them with the SIGTARP Report, the OIG report that showed the false claims on FHA. This is not uncommon, but for the average homeowner or the people out there that might be having trouble, there is help for you, and it’s extraordinarily expensive, well into the six figures for me in legal fees.

I spent everything I have, and I’m going to lose my house very shortly and we don’t know where we’re going to go. But I know that with our faith and with the people that love us, we’re going to be okay. And ultimately, you know, truth is elusive in this process. I went before eight different judges. Wells Fargo had four huge law firms fighting me that just buried us in paper. I was fighting not only the system, but I feel like the system failed us.

I really do. I don’t know how I could have gotten any fair review of my case when it’s being transferred that many times. And to the average homeowner, I would say, if you don’t have the resources to fight, get out. That’s what I would tell them. Get out and get on with your life. I’m glad for the ten years I had, and I hope in some way, some small way the work that we did is meaningful for somebody because we did really care.

[00:32:27.690] – Grumbine

First, what you just said is absolutely heartbreaking to me. But you said something, and I’m blending a few other comments from other shows that we’ve done here into this one thing, and that is whenever somebody shows up in line at the supermarket with a food stamp card, there are people there looking over their shoulder judging them. No good. Do nothing. Go get a job. All this horrible, evil nastiness. Should have made better choices.

[00:33:02.260] – Crowley

Right.

[00:33:02.260] – Grumbine

You look at the student loan industry backstop by our government, just like the housing industry is doing the same thing to kids before they have their first kiss. You see families destroyed and the first instinct of so many people, and it’s not even close to being the minority. The huge amount of people are judging the small people getting crushed by the system and the system is laughing all the way to the bank.

It’s mind-blowing. We gotta do better as human beings in order to have a movement to stop this. We gotta get that garbage out of our head. We gotta get those people, and we gotta wake them up because they’re as much of a part of the problem as the people above, if not worse because it’s like crabs in a barrel. They don’t want anyone to get over. So they would rather assume someone is getting over than assume that they got torched by the system, and we’re here to change that.

[00:34:00.340] – Lovell

Let me offer this, and then we’re going to bring in Nicholas. So my hashtag recently, Steve has been #WiseUp. And I’ll tell you why. I stood in Zuccotti Park with Eric Vaughan when we made a film called Forward 13. And I basically felt like we were going to turn things around at Occupy Wall Street. And, yeah, I remember saying it myself even before I even knew it was a thing that was part of the woke culture.

I was like, it’s time to wake up. That’s been completely perverse and turned inside out and turned into a caricature of classism or identity politics, or it’s been completely demeaned to the point where you can’t get this truth out there. So what I’m trying to say to the audience, wise up, you’re a sucker if you get played in this and you think you live in the nation of liberty and justice for all when it’s serving a financial system that is literally rotted to the teeth, criminal inside and out of our court system, which is just beyond my comprehension.

We grew up hearing about this in Colombia. We heard about this growing up in Russia. Now I’m going to turn it over to Nicholas because this is an opportune time, given his background. So, Nicholas, let me tee you up on this real quick. When I first learned about you, right, we came to know each other through social media. And the first thing I was struck by was you are an expert in the DOJ office down in Miami.

You were literally going after not so much La Cosa Nostra, but as I recall, Pablo Escobar. You come out of the Department of Justice, you’re dealing with the worst criminality that there is. And tell us what you ran into, the way the system works within the system, given kind of what we’re hearing about contextualized within how power can actually corrupt the system.

[00:35:32.280] – Nicholas Kostopoulos

Well, I was in Miami with the Department of Justice. And so when you’re in Miami in the 1980s, especially as a young prosecutor, you do big drug cases because that’s what was Reagan’s task force. And I was part of that task force. But while I was in Miami prosecuting major drug dealers, I also began, this is the 80s, I began to look at mortgage fraud, bank fraud, and it was just as prevalent as the cocaine trade, basically, because in Florida you had real estate developers going crazy.

It’s the ugly side of entrepreneurialship, and you have the government at that . . . Reagan was trying to stimulate the economy so that you then have the government basically covering the risk of the banks. And that encouraged sloppiness and fraud because the banks knew there was no great risk to them if they ended up with a bad homeowner or homeowner who couldn’t afford what was being offered.

And the way that was done back in the 80s and is still done, I think, in the 90s, cause they had another round of fraud and real estate fraud in the 90s, is the no money down or low money down, a way to induce or sucker in. I guess in 2008 they use cheaper interest rates. But the whole idea is to draw in someone to the loan who is at risk from day one because they don’t qualify for whatever they’re trying to get or there’s a risk.

Now the story, as I’m listening to your other guests, Terrie, there’s another aspect of this, and that is, how do you allocate the risk whenever you have real estate being sold and . . . there’s risk being created? And the problem is that these programs are designed just to cover the risk of the bank. If there was a policy decision made that, hey, we consider the homeowner the homeowner’s risk to be the primary risk, then they would set up a whole nother regimen for how you administer this transaction.

The transaction is you have an upside down loan. She didn’t have that. But a lot of homeowners did. They’re put in a risky position. How do you administrate yourself out of that if you had an insurance program that was saying our target is covering the risk of the homeowner, that a homeowner now has lost their job, they have medical expense or whatever.

But when you have a program designed to cover the risk of the bank, then what you’re doing is outsourcing to the bank the administration of a financial problem, because you have an economy where all of a sudden real estate values are not matching up with loans and this and that, and you have a dysfunction. And now you’ve outsourced to the banks this problem and Obama tried to relieve it by trying to moderate some of the behavior of the banks.

But really, it’s not an understatement to say that Terrie is really telling people what it’s like to live under a corporate dictatorship. Once you’re in a program and the program has been outsourced to a corporation, and here the corporation has financial incentives to create conflicts of interest, then the government has outsourced it.

And now it’s up to the bank to decide how to administer and solve a macroeconomic problem, which is you’ve got millions of homeowners in the wrong financing. And you’ve gotta correct that. And what the government does is they say, “Okay, let the banks figure it out.” And she’s left to live under the governance of banks, deciding how to solve this public problem, literally living under a corporate dictatorship because they are making all the calls.

[00:39:45.800] – Lovell

Beautiful statement. And I’m so glad you made that. But can you give us some nuance and some details based on your experience, particularly as it relates to this sort of design, if you will, this elegant design of, I think, deception, but there’s an end game. There’s a way to backstop that systemic risk, isn’t there, at the very point of inception?

[00:40:06.960] – Kostopoulos

Well, the point of inception, again, if you want to think about and this is what Steve and a lot of the people on media are trying to do today is to educate people. And what they need to be educated about is risk. And all of the risk for modern day life is being put on people, on consumers, on individuals. Whereas the risk should be placed on the corporations, if they are the professionals who are transacting all of these transactions, which in the United States, real estate is one of our top industries.

So they’ve said in this public space, we’re going to let the banks run the business. But then they also say to the banks, and we’re also going to outsource to you enforcement. In other words, you are not only able to do the business, but we’re also going to cover your risk. We’re going to insure you. So you’ve turned over to the corporation, not only the business space. Where is it written in the Bible that when you buy a home, it has to be Chase Manhattan?

Why can’t you make this a public facility? But the narrative is that, no, this is private enterprise. And private enterprise should be able to be the ones who decide who gets the money, who qualifies, who gets to have a home, all this is business. But then what they’ve done worse in insurance, and then even Obama’s program is to come in and say, not only are we letting you do the business, but we’re going to cover your risk in doing business with all these people.

Whereas you could say, okay, we’re going to let you do all the loans and everything, but when it comes to hardship, people having lost their jobs, upside-down loans, we’re going to not insure you,,we’re going to insure the homeowner. And then all of a sudden instead of the bank administering the problem, you let, oh, big, bad government becomes the administrator of the problem.

And let me tell you, everybody likes to talk about the government being so bad. But had Terrie been dealing with a government agency that had been set up by Senator Warren and subject to transparency and of review, that kind of crap would not have been put up with because you would attract more public attention. It should be a publicly solved problem. And what they did is they just turned it over to the banks to solve this big economic problem.

[00:42:45.040] – Lovell

The government had the risk covered through insurance. Can you take us through from your era and walk us through how that looked like at the table.

[00:42:53.610] – Kostopoulos

Okay, well, what the government does is it says to the lender, there’s insurance here, and we Fannie Mae or FHA was a source for them. We’re going to insure in case the loan goes into default. Now, in each period, the defaults are created for different reasons. In the 80s, there was a certain financial set of problems that cause a lot of the default and then 90s.

But in 2008 what you have happening is United States is becoming a poor country. And now Terrie is not actually a poor person, but as you have your country’s coming poor and you have other costs going, hardship is created. And so anyway, when you insure the mortgage and you don’t insure the homeowner, you insure the bank. It then is the bank who is in the driver’s seat because they are the one under the mortgage insurance.

They’re the ones who are covered in the event the borrower, the homeowner, cannot make the payments or cannot live according to whatever the loan is being set up. And so then use the bank and the bank then begins to administer the problem of this particular loan without anything other than the contract, the loan contract, maybe for the homeowner by the government.

The government has turned that over to the bank and the banks making the discretionary decision as to how much hardship, how we’re going to define hardship, what we’re going to do, these crazy rules about you need to be three months in arrears, you know, that’s just setting you up. And even if that was not designed by the guys in Washington when they gave the right when they said that to the banks, when they try to give help to homeowners, you only qualify if you’re three months, but you can see one when you get that to a private institution to administer, they can begin to manipulate that.

And it became in their interest to manipulate it so that the homeowner would then be at a disadvantage. Whereas if you made the homeowner be insured, then you would have people falling over themselves to not let that happen to them what happened to Terrie.

[00:45:28.240] – Intermission

You are listening to The New Untouchables, a podcast brought to you by a collaboration of the creators of the docuseries The Con and Real Progressives, a nonprofit organization dedicated to teaching the masses about MMT or Modern Monetary Theory. Please help our efforts and become a monthly donor at PayPal or Patreon, like and follow our pages on Facebook and YouTube, and follow us on Periscope, Twitter, and Instagram.

[00:46:23.520] – Lovell

So cut to the chase from this perspective, but this is critically important for us to understand. There was a previous way to 2008 great financial crisis. The way we set this up in The Con as we go into some general understanding that there was criminality in the savings and loan crisis prior to what became the wave in the early 2000s that were basically the Enron era frauds and then ultimately, that led to the great financial crisis of what came next.

But in this particular case, if any of us who watched, for example, Goodfellas, we know that you can torch the business after you run up the debt, and then you can collect on the insurance. That’s a long time mob trick that basically has worked for frickin’ mobs in Chicago, New York, our entire country’s history since we’ve had insurance. But you’re somebody from the Department of Justice who knows the stuff inside and out because you are an expert in being able to identify what these fraudulent situations were for the insurance. Can you kind of take us through that?

[00:47:18.910] – Kostopoulos

Well, fraud occurs anytime you have a lie. Okay. And so any time you have a misrepresentation in a financial transaction, it’s arguably a fraud. Now, there were people caught up in this situation who were not as financially stable as Terrie was, and they end up even taking greater risk. She’s an example of someone who really worst case example, a person who’s otherwise qualified is being tripped up because the bank is manipulating the system in such a way that not even she has a fighting chance.

But can you imagine other people who are not as well off as her? So the question is, whose misstatements are being judged fraud. And when the bank has been put in charge of administering the loan and deciding on how the risk is allocated, then the bank has a conflict of interest. You’re going to be screwed. And so the fraud by the bank is much worse than the fraud by any misstatement by Terrie or any homeowner.

But because the banks are being protected, the misstatements by the borrower becomes much bigger deal because they’re not insured, the banks insured. So the question becomes, whose risk is being protected? And when the lenders being protected, then he can be arbitrary. He can be unfair. He can be a thief, and it’s rigged against you because not only has his risk allocated him, but then the government allocates to them the enforcement of the loan.

They go into the court to kick you out. Whereas if the insurance was on the individual and you had not the bank the big bad guy making the decision whether to give you a hardship or not, but some government administrator, some third party, a citizens council. And so it’s a political question of whose risk is being covered. When you cover the bank’s risk, then the bank is in charge of that problem. So what you need to do and what Steve’s show is trying to do is educate people as to how you affect change at a policy level.

In here where you have an insurance program, that’s why you brought me on, the question comes down to whose risk are you insuring? Now, when I was a prosecutor, the banks were still being insured, but I went after banks because the banks were also knowingly lying. And we were able to prove that. Everybody was lying, but it was the bank who is taken care of.

So this question I have to look at a program is who’s at risk? What risk is being taken care of? Once you get the risk alignment set up, and then you set up the right administrators, then the courts should work in the favor of the person who’s covered by the risk. But when you make the lender the person who’s protected under the risk, and then they are an interested party, it’s the old thing.

You’re putting the fox in charge of the hen house. The narrative the bank is always the ones who are the professionals, and they’re the ones with the know how. And the borrowers are a bunch of working class people that don’t know crap. And I’m saying to you, if you educate them about risk, believe me, you don’t have to do much education and borrowers are people get real smart.

But that’s part of the narrative. That’s why, from a macro point of view, what Steve is always talking about is really who’s zooming whom. And that’s what you need to get across here is to change the narrative. The narrative is not that you’re a loser. The narrative is that you put the bank in charge of the hen house, and it makes you look like a loser because you’re living, as I told Terrie, she’s really a good example.

And this is how it happens in America. You can be standing next to somebody who’s living under a corporate dictatorship and your life is okay. Whereas in the Third World Countries that said corporate dictatorship with armies and every everybody. But here in America where the coup d’etat is corporate, you do it in slices. And so Terrie’s life got sliced and put into this corporate dictatorship program.

And when you are living in under a corporate dictatorship, the system is rigged against you and you can be a good person. That’s why we need to change the narrative. And if you can tell people really this is just a matter of risk allocation. In the future, when we have a crisis, pandemic, people lose jobs are the first individual, not the bank, not some institution.

Once you have your risk and your policies lined up, you would be amazed how good the government can work. This whole narrative of your shame, you’re less, is part of a larger narrative which is that the government is bad.

[00:52:37.840] – Grumbine

Yes.

[00:52:38.620] – Kostopoulos

The government is the only thing we have against interceding between us and the big financial institutions. If you weaken the government, what do you have left? You have to go to court. But then you’re an individual going against an institution. When I worked in the government and I stood up, said, “I represent the United States,” I said I was representing the people of the United States.

I wasn’t there to represent a corporation. And when you have people like me, I’m telling you, there were so many good lawyers that work for the government. And it’s insulting to me when I hear people criticize government out of hand. When you have the right policy and the right goals and the right people’s interest in mind, and you put a bunch of young lawyers in service of those people, you can do some damage.

That’s how you take power back and how we’re going to get there is incrementally, I guess. AOCs, you’re fighting incrementally. You change certain rules and this and that. Unfortunately, it’s probably going to take another crisis. But what happens is when we have the next crisis, hopefully, Steve and other people on YouTube, public education has gotten everybody’s mind straight.

So that when the next crisis comes, we seize the moment, which is instead of writing a Obama Plan, which is to rescue the banks, the next time you write the policies, you focus on the Terrie’s of the world and you build a machinery around protecting her. Let me tell you, if you did that, you would have those bankers running for the hill. What happens is the banker’s lawyers tell them, “You ain’t gonna win this fight,” and then they change their conduct.

You brought me on the show to talk about the 80s. Back then, even though Reagan was in, he still had a lot of the old machinery of government being strong. Reagan came in to weaken the government. And when you weaken the government, let me tell you, you are weakening the people in this system. Maybe not in Russia, but in our system, the government is the only thing there between you and these MFers on Wall Street.

And it’s not just Wall Street, it’s the whole real estate profession. They’re all stacked up and they’re making their money off of your losses because that’s the way the risk has been allocated.

[00:55:09.760] – Lovell

That was a fantastic closing statement from you. And we appreciate (it) Nicholas. Steve, you have some questions?

[00:55:16.000] – Grumbine

Yeah. I want to tie this all together for everyone’s edification. Nicholas has played out some really important things, and I want to give a name to some of this. And this is neoliberalism. Neoliberalism took away the concept of the public in the name of the private. Margaret Thatcher and Ronald Reagan gave us all the idea that there is no such thing as public money. There’s only taxpayer dollars.

They gave us that lie to bake in austerity. Then we sold this idea that the only good government is small government – this random thing called small government that nobody can define explain. We want a government so small that corporations can run our lives. And so basically, the small government crew, the 10th Amendment folks have whittled government down to the point where it’s just a mere shadow of itself.

And then we’ve sold the idea that only thing government can do is destroy us when the government is us. So what they’ve done to Nicholas’s point is they have socialized corporate losses and privatized individual pain. And this model shows up in every aspect of our lives. The reason why they don’t insure the individuals is because we are the engine that keeps everything going.

The more desperate we are, the more we make bad decisions. And every bad decision is somebody else’s GDP. We’re talking about non-stop revenue sucking right out of the economy into the wealthy hands. And so this is not an accident. This is a way of looking at the world – small government, render it useless. Create laws by people that don’t understand the situation ala our Congress is not equipped to do financial stuff.

They don’t understand it. They don’t understand the new digital world that we’re coming into. So these people end up relying on industry to write the laws for them. And who is industry protecting? Industry is protecting industry. And so let’s render government absolutely so small it’s useless. Let’s under fund these programs so that they automatically fail.

And then let’s say that the only solution we have is to give it over to the private sector. And they have privatized our existence down to judicial services. So this is just par for the course. This is just one more exclamation point in the case against neoliberalism.

[00:57:43.720] – Kostopoulos

These systems that are set up are doomed to fail. And it’s not because it’s impossible to administer the problem. It’s because if you put the mafia in charge of running the country where you have competing fucks and everybody’s predators. You said tax dollars. No. Eventually the taxpayers finally die out and you have a crisis.

So what I’m saying to you is if you keep beating up on people and shaming them, eventually you have a violent reaction. And what is good about your show and all the other public interest shows is to get people educated. So when the next crisis happens, the people insist that the solutions help them, not the mafia guy.

And if you start realigning, what she’s living under is a corporate dictatorship. It happened without tanks coming in, without, you know, typical third world dictatorships. No, in America dictatorships are invisible. They are created by corruption in Congress. The way you set up the insurance program, you allocate the risk to the consumer. You protect the lenders, and then you allocate to the lenders, the administration of the problem.

Well, under the next crisis, as we did back in FDR’s days is you allocate the risk to the banks. You allocate the risk to other people. And your first priority is the homeowner. And this is where the media is so important is that you need to educate people. You don’t need to pull out a rifle. I actually I’m not a Trumpster at all. I’m a very anti-Trump guy.

But you can understand the furor of the middle class people who have lost everything because they’ve been victimized by this system. And then they don’t understand what’s victimized it. And so maybe they don’t have to understand it as well as Yanis Varoufakis understands it, but they need to understand. And this is what they do is where the risk is;  whose risk is being covered.

And when Terrie has medical problems or someone loses a job, you don’t have to be a Princeton graduate to know that risk is yours. And you don’t have to be a Princeton graduate to know when someone puts together a program, it’s covering your butt.

[01:00:16.260] – Crowley

This to the point that you guys are making. I think one of the things I said to Patrick before today was that what I noticed . . . This is in transcript in my case. The judge actually said, “I don’t know what I’m looking at. I didn’t know that I was going to be expected to read Encyclopedia Britannica.” And it’s like, “Oh, I’m sorry your honor.”  I’m going to ask you to read the documents, but it was over their head.

I think that when-after the 2008 collapse there was a whole new arena of law that emerged. And with the volume of cases that were going through these courtrooms, and you’ve got a Congress that’s just completely inundated with all of these, the reports, the criminality, and the fraud, and the deception, and the bait and switch, and the dual tracking, yada, yada.

People are writhing and screaming, and the judges are seeing people by the thousands. I mean, the amount of paperwork that was going through, they didn’t have time. [inaudible 01:01:15] We saw a famous in the white God case of 7th Circuit where wide out of sued Wells Fargo in class action. The lower court said, “What are you talking about that the bank lied here. Ridiculous.”

She threw out the case. So then it goes up to the 7th Circuit. They dig in and they reprimanded and send it back down for trial when the case eventually settled. But even the judges, they really didn’t have the education. So to Nicholas’s point, government can be very useful. But I really don’t understand how they were not able. I remember calling the FBI and saying, “I’ve got documents that show criminal fraud, potential criminal fraud,” and they wouldn’t talk to me, and I couldn’t figure it out.

Why wouldn’t they talk to me? I’m like, I’ve got these documents. Well, by rumor, I heard that after the National Mortgage Settlement Agreement, they were not to touch these cases, especially if they were in litigation. So I think there’s a huge learning curve here that needs to happen, to Nicholas’s point. The public needs to be educated that the government can be supportive. But when you have judges that say, quote, “I don’t know what I’m looking at.” It’s a problem.

[01:02:25.750] – Kostopoulos

Let me just finish by saying I did these cases, and I completely agree with you that they seem extremely complicated and they are complicated. And I used to spend a lot of my time with juries just explaining the system because the typical defense of a lender or a real estate professional is “I did not understand it was fraud. I was doing what everybody else was doing.”

And so you have to explain to a jury enough background so that you can prove that person’s lying.  And to prove that without them admitting or without using an X-ray to prove criminal intent, you have to educate people. Okay, so I fully can see the complexity of that. But what I’m saying is the complexity is the result of giving to them to enforce this problem.

But you can make them very simple by the way you write the insurance program  – who’s protected and the transparency. Education should be the number one thing for homeowners. Before you buy anything, someone should take you to the side, a lawyer or somebody explain to you as well as they explained to the banks all of the risk. But they don’t do that because that’s not how the risk is allocated.

But I’m saying to you one last remark on this, they believed the earth was the center of the universe before they decided though the sun was the center. You can’t believe how complex it was to do astronomy because you had such a defective design. And then the complexity was trying to cover up this complexity. It does not have to be as complex as it is.

The complexity is a sign of how rigged it is and how you have to twist the truth in order to make it work for the lender. But if you set out very clear and this is the role of government, and the role of government is to help the person. So one thing I would do is every time you make a loan, you have to certify that that borrower has been given for one hour counseling, so you don’t have mysteries.

And that’s what I used to do with my juries is demystify things. Mystery always works in favor of the guy above you because it’s not so mysterious to them because they’ve got a hundred law firms advising them. The mystery is to the little people because they’re confronted with something that’s unnecessarily complicated.

And it’s made complicated because you’re trying to thread a needle and let the banks be the beneficiaries, the law enforcement, the everything. When you call the FBI up and you try to present your cases the reason they don’t touch them, well there’s a lot of reasons. You know, I was there. I was one of the few prosecutors that would take these cases because I invested the time to learn how you do it.

But looking back at it wasn’t because I was Superman. It was because I had taken the time to learn. And then I started using the system for the benefit of the little guy. Back to your point. When you go to DOJ or somebody else and they say it’s too complicated, that is a sign that it’s rotten. And it’s been designed to be complicated. If you go to the FBI and say someone just came and stole money out of my wallet, that’s pretty simple.

That’s how the mortgage program should be set up. It should be that simple. If you can prove a lie has been made to you, even if the lie doesn’t go to the ultimate truth, you make the risk on them. You just have automatic things where you just pound ’em. Bank, you made one lie about this thing. Yeah, but the lie wasn’t about her value of her house. I’m not responsible for the appraiser.

We don’t care. We’re allocating the risk. You are the one if you lie about anything. So right there is an example of how you can make it very simple. You go to the FBI and say, “Hey, this bank lied to me about sending me a notice that I didn’t get or they did something with your credit. That would be the triggering event. Then that’s a very simple case for the FBI. And the FBI would take that case all day long.

But instead, what you left with is proving that the bankers have criminal intent, fraudulent intent. And it’s hard to prove fraudulent intent especially if you’re a little person. In a typical fraud case, you spend three-quarters of your case explaining what the fraud is and that this person who’s benefiting from the fraud knew it was fraudulent. That is very complicated.

And that’s why this complexity you’re up against and everybody else is up against, it should not be so complicated. So on the next crisis, when we finally do regain some authority, when you have enough educated people to demand, just stay, just demand simplicity, transparency and simplicity, then you can set up a system where it’s not rigged in their favor.

And so having just a simple lie be enough for the bank to lose all their money. Watch how quickly all of a sudden it gets cleaned up. Because when you do that, you’re putting all the risk on the lender for the fraud, and not on you.

[01:08:07.200] – Vaughan

So it requires, like, not only that, but it also requires having the people who would be enforcing, regulating, and enforcing, pointing in the right direction. For instance, HOEPA theoretically could have made sure that the company that initiated the loan was going to be the one ultimately responsible, and that would have maintained all the way through the chain of title.

And that could have cleared up an awful lot of stuff. However, HOEPA can only come into effect if the Fed, at the time Alan Greenspan, enforced it. And so it’s getting the enforcement side in. And even with that on the regulatory regime, one of my favorite, like, horrible anecdotes that we collected for The Con was when it was asked of, I think if somebody from the Office of the Comptroller of the Currency was contacting Chris Swecker and the FBI at the time in order to ask him, “How do you even make a criminal referral?”

So when you have regulators who don’t even know how to deal with criminal referral, you know that they’re pointed in the wrong direction. And this goes all the way back in the 90s under Clinton and executed by Gore, the entire reinventing government issue. And a lot of what I hear you talk about, Nicholas, what I keep on thinking in my head is how at that time that’s about when government was told that the industry is the client, not the American people.

[01:09:38.600] – Kostopoulos

Yeah.

[01:09:39.740] – Vaughan

And I think that that’s a telltale sign of exactly what you’ve been talking about. And so I think that a lot of what you said it really makes a lot of things fall into place as far as, like, how the rest of the government ended up being set up to protect the industry, not the individual.

[01:09:56.500] – Kostopoulos

Imagine a world where when you go to make a loan on your home, home loans, not business loans, not everything else, but you’re going to carve out from private business and put it into the public domain, getting a loan for your home. That is no longer the province of banks. We’ve decided because it’s such a delicate problem and it affects people’s health.

Really, in Terrie’s case, it became a matter of public health crisis. So you decide as a society that on that one, we’re going to say the Federal Reserve is the banker. And now we’re going to set up a public bank and they’re going to take your loan application. And so, oh, well gosh, you’re going to put the government now back into the business of making loans.

I’m telling you, I would rather that system and take that and work on making that work for ten years and see what you end up with rather than the 50 years of the banks being in charge of that. And let me tell you, talk about active citizenship. When you have homeowners with a piece of the pie there, they’re going to insist on confidence.

So don’t go for this boogeyman that you can’t have public facility, you can’t make capital that’s available for homeownership be a public domain issue so that you’re not making the loan from Chase Manhattan, but you’re making it straight from the Federal Reserve that’s set up for Fannie Mae. You’re dealing directly with Fannie Mae, and then everything is set up to protect you. And then if you’re a lying, cheating homeowner, then you should be prosecuted and you should lose your home.

But you don’t have these worlds that exist of corporate domination where the bank who’s got all kinds of conflicts of interest is making all the decisions on what’s best for you, or what kind of borrower you should be. So what I’m suggesting is talk about game theory. It’s how you set up the game. Once the game is set up, it’s already stacked against you if you’re the homeowner, because who is your advocate?

Terrie is trying to go to the FBI and make the FBI her advocate. Well, good luck, because the FBI is also doing terrorism. It’s also doing everything else. No, there should be a homeowner’s advocate. So if you had, in this imaginary world, you would also have an office set up of homeowner advocacy.

And I’m telling you, I bet there’s probably no smarter public interest group than homeowners. I bet you within ten years, that public facility would work better than Chase Manhattan in terms of administering home loans.

[01:12:57.440] – Lovell

Nicholas, you hit some incredibly important points. Of course, Terrie, everything that you brought to the table here from your experience is so important for people to relate to that they’ve lived through that they know that there’s others who have experienced. We got to bring out of the woodwork the people who are ashamed into thinking that their lives are now not valuable because they were forced to feel that way because they got thrown into a system that they didn’t realize how corrupt it was.

That’s the whole purpose of this educational process through The Con and so forth. But I want to tap into a couple of things that you just said, Nicholas. So, the FBI think of this, Steve, and what Nicholas just said, they’re not your advocate, right? They’re the top law enforcement agency in the United States, but they’re not the people’s advocate. And with this beautiful that you said that because it’s really about resources in this case, right?

Because we learned from Chris Swecker, like Bill Black said, actually on Paul Jay on another podcast that what happened to me when I called Chris Swecker, the former director of investigations of the FBI who put together a nationwide dragnet to end mortgage fraud. He knew this thing soup to nuts. He just didn’t understand the securitization fraud at that stage of the game, or at least not to the level that he understood the mortgage fraud.

But he knew the money was being financed somehow and it was going somewhere. But what we had at that time period during the Bush administration was former AG Anthony Gonzalez, who literally allocated more money during the Bush administration to go after porn than he did mortgage fraud. Then put this in this context from this perspective. We had 911.

So you have all these resources going into terrorism to try to prevent the attack on the American people that we saw have a horrific effect during 911, of course. But let’s compare and contrast. And I’m not trying to delineate the deaths of people that have served in Afghanistan and Iraq since then and so on and so forth. But on paper, the amount of people that have been devastated by our financial system through deception and owning government, like you just pointed out, if people don’t understand the aligned risk here, this is what we throw into episode three in a giant way.

Wall Street used to have aligned interest. They were on the hook for the partnerships. Everybody had to invest and know what the other partner was doing otherwise it would destroy the whole firm. But then what we learned on this process is, you know what they changed? They were able to get away with creating a situation where A – they got to play with other people’s money. And then B- they got to offload the risk on the government.

And then meanwhile, they point at everybody and they say, “You guys created this, that Terrie Crowley was smart enough to outsmart Wall Street. And Terrie Crowley was smart enough to be able to pull the biggest financial crime in history. And everybody who Terrie Crowley constitutes because what were they doing? We were taking the bait. We took the bait for what we all dream of if we’re going to have families.

American homeownership, that we’re supposed to be qualified for, that we’re supposed to literally have jobs and income and all of those types of things to get us the appropriation or the opportunity to get into housing and so forth. And we could talk about this in a million different directions. But what was part of this, Steve, this revelation, if you will, from Terry is A – the judiciary is not going to uphold the laws on behalf of the citizens. She talked about truth in lending.

There’s all sorts of civil rights laws that are there to protect people from being lied to in transactions first and foremost. Were those ever upheld? No. Second of all, these guys can lie, steal, and deceit their way to managing volume based on what we show in episode three, which we call perverse incentives because of modern executive compensation. What does that mean? That means control fraud, Steve.

That’s control fraud. The CEO can work with perverse incentives to get down to the very base level to hire what, guys who are flipping burgers one day that get into a situation where they could find everybody who would ever want to get into a house and push them without any understanding of the professional process of underwriting, of what the value of the home is.

The whole thing was manipulated soup to nuts. It’s so mind-blowing to understand that they could do it simply through incentives. This is what Bill Black’s been teaching us all along. Steve, you have an incentive where you had to create enough volume per month to maintain your job, or they get rid of you. The way that it’s worked out was they literally have 50 sales executives.

They’d cycle through 47 of them, and they’d keep their top three superstars who were doing what? Lying, stealing, and cheating every which way. And then here guess what? What did we learn last time? Is . . . What did we hear from Beth Jacobson? She was a broker, not outside broker. She was hired by Wells Fargo. She was hired by Wells Fargo, which management from the CEO down taught them, “Look, we’re gonna create subprime loans.

We’re gonna take people who actually are prime candidates, right? Particularly in African American communities,  and we’re going to force them because of what we call high yield spread premium, we’re gonna put them into subprime loans because we can get those things approved. And they get it off the books. They had every technique under the sun to be able to lie, steal, and cheat their way at the table.

Why? Because they knew the risk was going to be on the government because of what Nicholas is telling us here. Because of what Terrie had found out in the end, because of all of the semantics and all of this insanity in the courts that they were gonna get paid 100 cents on the dollar of what their investment risk was after they actually securitized this stuff in what? Just through actual tranches, through the mortgage-backed securities?

No, it was through collateralized debt obligations. It was through CDO squared. It was through derivatives that plowed through the entire world. Okay. And then winds up. We’ve got the Supreme Court happening right now looking at Goldman Sachs, looking at this case between Goldman Sachs and something that’s very important to you, Steve, the Teachers Pension of Arkansas and Pipe Fitters and Plumbers of America, their retirement portfolio.

Their pensions were being, by people placed in the system, right, managers of these things were operating with Goldman Sachs to put into these loans that they then shorted and destroyed. And guess what the Supreme Court is doing right now? They’re listening to this case on behalf of Goldman Sachs. Why? Because they’re saying, “hey, how are you going to prove this in a class action?”

They’re saying, “what constitutes actual fraud upon the market?” Guess what they weren’t doing in this process, Steve? They weren’t looking into these details that were unfolding today. Between the Registry of Deeds, between these situations that we’re hearing from the victims themselves, and to hear a former acting DOJ member who understands fraud soup to nuts, Steve, what society are we actually living in?

[01:19:34.360] – Grumbine

We’re living in a dystopian one right now. I think the big takeaway to answer your question goes back to something Nicholas said. And that is, who is the government serving? It’s serving corporations, the interests of banks, the interest of the risk holder, which is the one that are building all their laws around to protect them from that risk.

And that leaves you and me out in the cold. We have no advocate. We have no protection, and it’s by design. And I think that is the big takeaway. We have each other. Our government right now, the laws, the regulations have all been structured to take away any kind of safety net from the people who own these homes and lose these homes to the banks and to these other predators.

And BlackRock is in the business of buying up houses around the country to become the renter of last resort and ultimately at an even grander scale than we’ve ever seen before in position to once again destroy Jane and Joe public. And I think it’s a terrifying proposition.

[01:20:45.760] – Kostopoulos

Well, I would just like to end my part of this by saying that I was not being critical of the FBI when I said Terrie went to them and they couldn’t help her. I worked with the FBI, and they were some of the best people I ever worked with. It says that the way the system is set up, the FBI is having to deal with a mountain of paper when you bring it to them and a system that allows them and they throw up their arms because, Terrie, they don’t understand it either.

And so who is understanding it? The only one understanding it is the one who’s running Disneyworld, who’s sitting there pulling all the levers because it’s complicated that way in order for them to win. Why is it so complicated when you deal with the Mafia? Because there’s so many unwritten rules.

[01:21:36.820] – Crowley

And the difficult part is as a non-lawyer woman going up into this and very male-dominated world, and how dare I? Who am I to show them the actual documentary evidence? Two of my former lawyers, after exhaustively arguing with them, you have to look at the documents. They didn’t believe me.

They both sat down and they looked at me and they said, “Oh, my God, how many people has this happened to? Oh, my God.” They couldn’t believe it. So it’s breaking through that denial system, too. And FBI is a great organization. I’m not disparaging them. They just were unable to help me in the way that I would have hoped they could have.

[01:22:23.060] – Grumbine

Underfunded, undertrained. Bill Black said there’s some 2000 different industries, and there’s only but a sliver of those folks that are trained to handle this kind of fraud. And it’s not the individual’s fault. The system has been set up specifically to render it impotent to solve anything. That’s by design.

[01:22:46.300] – Vaughan

Contrary to how it was during the S&Ls, all the criminal referrals come from the industry now, not from the regulatory agencies. And so if the FBI is getting a call, they’re getting a call from a bank, not from a regulatory agency who’s working on behalf of the people.

[01:23:03.260] – Lovell

That’s a terrific point in light of what just happened this week, that it shocked me when I learned this, Eric. So we in a separate thread, Steve, are connected to amazing journalists to an operation called the Consortium of Investigative International Journalists. They did the Panama Papers, for example. They just unloaded in September what they call FinCEN Files, right?

This is built on suspicious activity reports within the banks themselves that are supposed to be turned over to the FBI and then also the DOJ right for prosecution. What does this mean? We have, and this going back to you, Nicholas, in the 80s, it’s amazing how this whole thing works.

You’ve got cartels, you got oligarchs, you got Putin throwing all of these, like, ill-gotten gains from all of these different criminal societies all around the world, and they’re flushing them into our system, our financial system, which literally constitutes what we call shadow banking. You guys remember what Hillary Clinton was talking about in 2016

[01:23:58.590] – Kostopoulos

Oh, yeah.

[01:23:59.400] – Lovell

When she talked about shadow banking? That’s where the problem is. Well, that’s where “Mrs. get a bunch of fees from Goldman Sachs” thought it was okay to at least declare in a shadow way what the shadow system is. But here’s the point of what Eric just pointed out. There’s a woman, Miss Edwards, right now from the Treasury Department. Okay.

She went to our friends, these journalists that we’re going to have on this program, both a gentleman by the name of Jason Leopold out of Los Angeles. He’s been in vice for a very long time. Michael Hudson, who wrote the book on “The Monster,” which was Ameriquest going back to the very beginning of this and Roland Arnall.

And ultimately, what she revealed was this whole system, right. This whole can of worms of money laundering, money laundering from international, the worst, it could be Al Qaeda for all we know. Right? And ultimately, right this very moment, Merrick Garland’s Department of Justice, in a new administration, somebody who we thought were going to shift away from all of the madness that we saw with William Barr and Trump and to all the crowds who think that was the worst of the worst.

Well, you forgot that Eric Holder was working to create this entire situation that we’re in the midst of. It’s like one virus leads to another that’s worse than the other. And here’s the final point. They’re silencing whistleblowers in the industry. They’re sending her to prison in August. So you got three things happening simultaneously right now.

So this is what I need all of the people out there in the world to understand. The 2008 great financial crisis isn’t history. It’s our system. This is what we’re talking about. Liberty and justice for all, equality of laws, all of these things do not exist because of what Nicholas just told us. The assignment of risk is not aligned with our, we the people’s interest, which means that government isn’t of we the people. It’s aligned with the corporate oligarchs, which Nicholas just described is Mafiosa.

He knows who has taken out the biggest drug pins in the entire planet. He knows. And he’s a guy from the Department of Justice in the past, and what he’s done since is telling you this is criminal. Okay, so now, in conclusion, Steve, knowing what you know about flow of money, about everything else, what do you want your listeners and quite frankly, the world to pay attention to as you start to build your knowledge base of this?

[01:26:17.400] – Grumbine

I wanted to say this whole thing has been a huge learning experience for me. I understand macroeconomics from an operations manual. I understand how the Fed works. I understand how banking works. But these particular efforts, people see them in very narrow ways. What we’re doing is we’re pulling it all together. It’s all mesh. And being able to see it, it’s almost breathtaking.

I don’t know how you come up with this system without it being intentional. And that, by definition is criminal. They’re working against us. This is treason. This is Benedict Arnold’s treason. You’re talking about an enemy of the state. This is the real enemy, not people over there in the Middle East. This is in our own backyard up in New York City and wherever else these cretins are hiding in the shadows.

So I think that it is very important coming out of this, for me anyway, to make sure that people understand that without seeing this for what it is, a system, it’s got real levers. We’re seeing those levers in place. We’re seeing whose interests are being protected and we’re seeing who’s being left as fuel for the system.

I think it’s important for our listeners and viewers to understand that without us uniting behind ending this, killing corruption, this fraud model, that if we don’t focus on that, not only is there no Green New Deal, there is no Medicare for All, because all of those things are influenced by the same lobbyists and the same monied interests that keep writing laws for the financial sector. This is the neoliberal model.

And if you don’t get on board with this, it doesn’t matter how many signs you hold up at the protest, and it doesn’t matter how many airline miles you racked up going to the protest. If we don’t end corruption, there won’t be any of that stuff.

[01:28:24.270] – Lovell

One way or the other, we’re not crazy. We’ve done the work. We know the stuff inside and out. Two films influenced me at the beginning of this process. I’m a guy from the 80s. I grew up in the 90s. I love independent film. Two films that really influenced me back in the day was Kevin Spacey in The Usual Suspects when he said, “the greatest trick the devil ever played was to convince the world he didn’t exist.”

And for me, that led to my invocation of Ezekiel Rollins, which is a character played by Denzel Washington in Devil in a Blue Dress when he says, “I got tired of them pissing on my head, telling me it was rain. They must have thought I was some kind of new fool.” Look, guys, I’m not a fool. Terrie’s not a fool. Nicholas comes from the system.

He knows we’ve been played, and my brother in arms in terms of intellectually, Eric Vaughan always summarized it, I think, brilliantly long before we ever even got on this journey, when we were just postulating what it was that we thought we were dealing with. And he wrote a treatment that I thought was still to this date, probably the most brilliant treatment I have ever read.

He called this the new aristocracy. It’s aristocracy, my friends. It’s a criminal aristocracy. It’s history. It’s how it goes when we, the citizens of this people, do not have the wherewithal and the knowledge and the influence and the conviction and the courage to right the wrongs of corruption.

Then if you just look at history as a guide, guys, it doesn’t get better until we do. And your pain and suffering, please don’t allow it to be for naught. You gotta come together, and you gotta galvanize with us because we’ve gotta create a civil rights-like revolution to purge corruption from our midst because if we don’t, this country is dead. It already is.

[01:30:00.120] – Kostopoulos

Well, I would end by saying, when you have a hen house, just ask yourself, who do you want to guard it?  Other hens or the fox? And if you let the fox guard the henhouse, you’re just asking for trouble. And so that’s why you should not put in the hands of the financial community so much authority. Let them do what they’re good at, but like Steve was saying, the taking away of regulations, when you do that, you effectively are surrendering control to the private interests.

So whenever someone who is larger than $50 million a year comes to you and complains about regulation, that should be suspicious right there, because regulations are there for a reason. Yes, we don’t want regulation on small business people. Make it easier for small business people. But when a big company comes to you, when the fox comes to you and complains about the regulations on the hen house, beware.

They’re there for a reason. That’s why Roosevelt was courageous enough to take on his own class and said, “you know what? We’re going to regulate the hell out of you. We’re going to decapitate you,” effectively or almost. That’s where a lot of the fight has to be today in the streets. But it’s got to be directed at Congress. They’ve got to rewrite the laws, and that’s where a lot of the action is.

And that’s why the Terrie Crowleys should be there on the Hill. You should run for office, Terrie. I’m not kidding you. There should be more people like yourself running for office at every level because we need more hens running the show, not more foxes. So when they come in and complain about regulations, you should be suspicious of that. And what we’ve fallen into this narrative is regulations are all the same, and they’re all bad.

Well, I’m sorry. When I’m up in a plane and they say, do not open this door because you will suck all the oxygen out of the airplane, that’s a regulation that’s pretty good. And so when someone comes and says, “No, I don’t want that regulation. I have a mask on my face. I don’t care about the regulation that protects the rest of the plane.” If I was running the FBI, I would have Terrie Crowley as a consultant.

[01:32:38.920] – Lovell

Right. Dick Bowen should be head of the SEC and so on and so forth.

[01:32:42.590] – Kostopoulos

Yes!

[01:32:42.590] – Lovell

There’s no question about that. And so on that note, thank you, guys, for your time. Nicholas, thank you for your expertise.

[01:32:48.760] – Kostopoulos

Nice meeting with you, Terrie.

[01:32:50.080] – Crowley

Thanks, nice meeting you as well.

[01:32:51.560] – Kostopoulos

Thank you both for talking to me.

[01:32:54.540] – Grumbine

Absolutely. Thank you all very much.

[01:32:59.840] – Ending credits

The New Untouchables is produced by Andy Kennedy, descriptive writing by Rose Ann Rabiola Miele, and promotional artwork by Cristina of Paradigms and Revolutions Design Group. The New Untouchables is publicly funded by our Real Progressives Patreon Account. If you would like to donate to the New Untouchables, please visit patreon.com/realprogressives.

Mentioned in the podcast:

Series 7 License

AIG

SIGTARP

Hope Now Alliance

Hope Now

Forward 13

HOEPA

Michael Hudson

Michael Hudson The Monster

FinCen Files

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