…The war in Iraq, with the benefit of hindsight, may have been big mistake, but there was absolutely no fraud on the part of anyone in the Bush Administration. (See below my Facebook posting and a link to a February 9, 2015 blog posting I made on this subject.) It’s the same for crisis-era bankers and the liberal Dowd links the two in that third to last sentence: the liberal lie about the financial crisis is that “Fraud….it had to be securities fraud that lured institutional investors to buy risky private MBS and other securities pre-crisis.” I have spent a lot of my time on this blog, refuting this liberal lie. These sophisticated investors, who mostly manage Other People’s Money, knew exactly what they were doing. They were lured to riskier assets and higher yields by artificially low rates for safer securities (because of the Fed’s manipulation of rates/money), by the government’s National Statistical Rating Agencies flawed ratings, by the government’s risk-based capital requirements for banks, by the government’s well-intended housing/mortgage policies, by the Fed’s “smoothing” of the economic/credit cycles and fostering of inflation expectations, etc., etc…and let’s not forget basic economic uncertainty/volatility. Fraud did not cause Congressional Democratic leaders to vote FOR the war in Iraq, nor was it the cause of the 2008 financial crisis. Fraud is a complete Red Herring for liberal politicians, our liberal administration, the Fed and other banking regulators, short sellers, and plaintiffs’ attorneys. P.S. Nearly all the big-time plaintiffs’ attorneys are liberal Democrats and they are top fund raisers for liberal Democratic politicians (who work to prevent tort reform legislation). They self-servingly believe that when something doesn’t work out, it’s not the decision makers fault, it must be someone else’s fault….especially if that someone else has deep financial pockets!”, Mike Perry, former Chairman and CEO, IndyMac Bank

”The country is now aflame with anger and disgust about politicians (e.g. “Bush Lied” about Iraq WMD) and bankers who conned trusting Americans and never got punished for it.”, Maureen Dowd, “Escape from Bushworld”, The New York Times, February 22, 2016

Mike Perry’s February 23, 2016 Related Facebook posting:

“I can’t forgive Trump for recently saying “Bush Lied” us into the Iraq War. Democratic Senators like Clinton, Kerry, Biden, Reid, Feinstein, Schumer, Edwards, Daschle, Dodd, and many others voted for the Iraq War alongside Republicans and now many have falsely claimed they were “defrauded” by the Bush Administration into their votes. It’s one thing to say, “In hindsight, we made a terrible mistake.” It’s quite another to lie about such an important historical matter. (See my blog posting below, which proves my point.) P.S. It’s exactly like the liberal lie (also not true and wholly unproven), that sophisticated institutional investors were defrauded into buying mortgage-backed and other securities before the 2008 financial crisis.”

https://nottoobigtofail.org/2015/02/09/the-dangerous-lie-that-bush-lied/

The Opinion Pages

Escape From Bushworld

Maureen Dowd

Jeb Bush with his mother, the former first lady Barbara Bush, at a rally at West Running Brook Middle School in Derry, N.H., on Feb. 4. Credit Stephen Crowley/The New York Times

LAS VEGAS — The Bushes always bristled at the “d” word. And now they don’t have to worry about it anymore.

The dynasty has perished, with a whimper. The exclamation point has slouched off.

The Bushes are leaving the field to someone they have utter contempt for: Donald Trump.

And the main emotion in Bushworld is relief. No one could bear one more day of watching Jeb get the flesh flayed off him by Trump.

With his uncanny bat-like sonar, sensing how to psychologically gauge and then gut an opponent, Trump went straight for the Bushes’ biggest bête noire: wimpiness.

The blustery billionaire painted Jeb as a “low energy” candidate with a wilting exclamation point who was desperately in need of an infusion of testosterone; a soft child of privilege who had to depend on Daddy’s friends for money and Mommy’s presence on the trail to bail him out, even as he feared using his surname on his campaign posters; an entitled wonk who pathetically tried to get more popular by taking off his rimless glasses.

When Jeb bragged during the CBS debate about “winning the lottery” by getting Barbara Bush as a mother, Trump cracked, “She should be running.” And indeed, the 90-year-old exemplar of Greenwich granite wrote the epitaph of Jeb’s campaign before it even began, noting correctly that, “We’ve had enough Bushes,” and that the same families should not be allowed to pass the White House back and forth.

Starting with 41, the family saga was the arc of bluebloods trying to seem red-blooded. They wanted what they saw as their due, as the royal family of Republican politics. But they also wanted to come across as self-made men, men who struck out south from Kennebunkport and Greenwich to make their way in the world. They all had elaborate mythologies to prove they were their own men, even as they made business deals thanks to the family name and connections, and mined Bar’s Christmas card list for donors.

The Bush men always recast themselves to woo voters. Poppy Bush shed his preppy striped watchband and pretended that pork rinds, rather than popcorn, was his favorite snack. W. acted like the heir of Ronald Reagan rather than of his own dad, who had alienated the conservative base and failed to win two terms. And Jeb tried to pep up — getting contact lenses and belatedly punching harder against Trump.

When Poppy Bush ran against Bill Clinton, he simply assumed that the public would not choose a draft-dodging womanizer over him. “His ambient reality was that a president was above all a figure of dignity and decorum,” Bush senior biographer Jon Meacham said. “Clinton went on Arsenio Hall. Bush 41 probably thought Arsenio Hall was a building at Andover.”

Just as the political ground had shifted under his father, leaving him befuddled and looking at his watch, so it shifted under Jeb, leaving him befuddled and tapping his foot.

Despite all the talk about civility, the Bushes threw out the red meat whenever they had to, from Lee Atwater and Willie Horton in ’88 to W.’s supporters whispering in 2000 that John McCain came home from Hanoi with snakes in his head, to the W. 2004 campaign strategy of encouraging gay marriage ballot initiatives to rile up the evangelicals, to Jeb spending a fortune on ads this winter eviscerating the character of the man he deemed the disloyal protégé, Marco Rubio.

Winning was always more important than gentility. That’s what happened in 2000, when the family had to pressure Jeb to help purloin Florida. In return, W. came out of his oil-painting exile to try and deliver South Carolina for Jeb.

South Carolina was the place the whole byzantine sibling rivalry drama was going to be made right. The Bushes always thought their sober and studious second son would be president, but the prodigal son shoved Jeb out of the way. Now Jeb would get his due.

Except that the inflammatory Trump, who delights in breaking the fourth wall, was perfectly happy to shatter the convention in Republican circles that W. “kept us safe,” as Jeb kept saying.

Trump stunned everyone by pointing out the obvious: W. and Condi were not on the ball before 9/11, when W. was mountain-biking and ignoring memos headlined, as Bill Maher drily put it, “Osama bin Laden is standing right behind you.” Then, after 9/11, they played right into Osama’s recruiting plans by invading and occupying two Muslim countries, instead of simply going after the guilty party, as W. had promised to do when he yelled through the bullhorn at ground zero.

Trump held the Bushes accountable for the trumped-up war. W.’s arrogant and delusional administration pulled the wool over Americans’ eyes about the Iraq invasion, which has ended up costing us trillions and killing and maiming hundreds of thousands. Even though Poppy Bush’s circle has always assumed that Jeb was on their side, believing that the invasion was a mistake because it would shatter the Middle East, Jeb stumbled around on that question and ended up defending his brother’s indefensible war. He even shocked his father’s circle by putting out a list of foreign policy advisers for his campaign that included one of the war’s woolly-headed architects, Paul Wolfowitz.

The underlying message of Bush campaigns is always: “Trust us. We know best.” But that has been proven false.

The country is now aflame with anger and disgust about politicians and bankers who conned trusting Americans and never got punished for it. That fury has led to the rise of wildly improbable candidates in both parties. As the Bush dynasty falls, it must watch in horror knowing that it is responsible for the rise of Donald Trump.

A version of this op-ed appears in print on February 22, 2016, on page A19 of the New York edition with the headline: Escape From Bushworld.

…Too-Big-to-Fail Business (BofA), Big Government (Freddie Mac), and politically-correct, progressive not-for-profit advocacy groups working together to sustain themselves, diffuse future blame, risk, and litigation, if something goes wrong (and likely will at some point). This is crony capitalism at its “finest”, and absolutely what’s wrong with American enterprise these days!!! It sure seems like we have learned nothing post-crisis?”, Mike Perry, former Chairman and CEO, IndyMac Bank

February 22, 2016, Joe Light, The Wall Street Journal

Markets

Bank of America’s Newest Mortgage: 3% Down and No FHA

Move would skirt agency that has punished banks for errors on similar loans

Bank of America plans to unveil the program on Monday. PHOTO: NO CREDIT AVAILABLE

By Joe Light

Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans.

The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage insurance, a product to protect mortgage lenders and investors that is usually required for low-down-payment loans.

That could make the new loans cheaper than those offered through the Federal Housing Administration, the government agency that has won big settlements from banks in recent years for what the lenders describe as minor errors.

The FHA doesn’t make loans but insures lenders against default on mortgages that can have down payments of as little as 3.5% and a credit score of as low as 580, on a scale of 300 to 850. When lenders make the loan, they have to certify that everything in a loan file is accurate.

Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit.

Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014. This month, Wells Fargo & Co. said it would pay $1.2 billion to settle similar claims, joining J.P. Morgan Chase & Co., which settled in 2014, and other big lenders which have settled over the past few years. Nonbank lender Quicken Loans Inc. is currently fighting such claims.

Many big banks have pulled back sharply from FHA-insured lending in the past few years, citing the risk of being hit with penalties for minor errors. A raft of nonbank lenders have rushed in, but the banks’ retreat from the program has made it more difficult for low-income borrowers to get home loans.

“We need an alternative in the marketplace that helps creditworthy borrowers with a track record of paying debts on time,” said Bank of America managing director D. Steve Boland, who noted that “We think there are still a lot of uncertainties out there in working with FHA.”

After making a mortgage under the new program, Bank of America will sell it to Self-Help, which then sells it to Freddie Mac. If a mortgage defaults, and Self-Help isn’t able to recover the full amount owed, Self-Help takes a big chunk of the losses before Freddie Mac starts to take a loss, which lets borrowers avoid paying mortgage insurance.

Self-Help also gives counseling to borrowers who struggle to pay, which it believes will help more people avoid foreclosure.

“We believe the mortgage-lending sector is underserving families of modest means,” said Self-Help CEO Martin Eakes. Mr. Eakes said that his fund also is in talks with other large and small lenders to roll out similar programs.

Mr. Eakes said Self-Help didn’t need new funding for the Bank of America program, but in the past the organization has received funding for other loan programs from foundations, the government and companies.

Mr. Eakes is also CEO of the Center for Responsible Lending, a nonprofit advocacy group for borrowers that in the past has also asked the FHA to limit lenders’ damages for some errors.

To get the loans under Bank of America’s new program, borrowers must have a credit score of at least 660, which is higher than FHA’s requirement, and an income that is less than the area’s median.

Bank of America said that for now it is capping loan production at $500 million annually under the program and that it expects that three out of four mortgages in the new program would have otherwise been backed by the FHA.

Last year, Bank of America made $1.36 billion in FHA-backed loans, according to trade publication Inside Mortgage Finance, making it the 22nd biggest FHA lender. The bank used to be in the top 10.

Freddie and competitor Fannie Mae in 2014 said they would roll out mortgages with down payments of as low as 3% to improve mortgage availability for low-income borrowers. But because the mortgages often cost more than FHA-backed loans, the programs had little volume last year.

As lenders become more wary of the FHA program, lenders and Fannie and Freddie executives said that their programs’ volume could rise.

In October, Quicken Loans, which is in the midst of FHA-related litigation, announced a partnership with Freddie to originate more Freddie-backed low-down-payment loans.

“Many lenders, including us, are looking at the Fannie and Freddie programs as an alternative to the FHA,” said Quicken CEO Bill Emerson.

Bank of America says that for a borrower with a $150,000 mortgage, a credit score of 680 to 719 and a 3% down payment, the monthly cost of the new mortgage would be about $782. A comparable FHA borrower with Bank of America would pay $887 a month, the bank said.

The FHA has been working for months to attempt to clarify the liabilities lenders could face when making an FHA-backed mortgage, including changing the certification that lenders must make in order to limit major penalties. An FHA spokesman said that the agency plans to unveil the final version of the certification by the spring.

…By keeping them at a depressed level for so long, investors are saying they think the banks are worth more dead than alive. In that case, breaking them up could create value.”, David Reilly, “Break Up the Big Banks? Do This First”, The Wall Street Journal, February 18, 2016

“Eight years later and they still aren’t viable? I had only a few months to “turn around” my bank (at the very worst of the unprecedented 2008 financial crisis) and no government help. In fact, they made it worse.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Markets
Heard on the Street

Break Up the Big Banks? Do This First

The too-big-to-fail debate has moved beyond a simple argument over whether banks should be broken up just because of their size

By David Reilly

Break up the big banks? The market​long ago ratified the new position of Minneapolis Federal Reserve President Neel Kashkari: Yes!

But at this point in the postfinancial-crisis era, with banks far safer than they have been in years, the government shouldn’t be the lever that pries them apart. That role should fall to shareholders.

The problem: So far, they show no sign of having the power to upend the likes of Citigroup Inc. or Bank of America Corp. That needs to change.

The numbers speak for themselves: Shares of the six biggest U.S. banks are down 10% to 25% this year. More important, of the six, only Wells Fargo & Co. trades at a price that is more than its book value, or its net worth. In fact, the last time Citigroup or Bank of America traded at a price greater than their net worth was September 2008.

By keeping them at a depressed level for so long, investors are saying they think the banks are worth more dead than alive. In that case, breaking them up could create value.

But that isn’t necessarily an endorsement of the idea all big banks should be broken up simply because of their size, or that the postfinancial-crisis regulatory system isn’t working. The reality is that there is no perfect size for banks, nothing that makes them perfectly safe.

In that, Mr. Kashkari’s speech Tuesday calling for big-bank breakups missed the point. It isn’t a case of either breaking up all big banks or turning them all into utilities. Rather, it is about giving them, and their shareholders, a clear choice between the two.

Start with size, a simplistic and arbitrary measure: True, the biggest banks have grown bigger. At the end of 2015, the big four U.S. banks had combined assets equal to 51% of total bank assets at insured institutions, according to Federal Deposit Insurance Corp. data. That compared with 44% at the end of 2006.

Consider, too, that while J.P. Morgan Chase & Co. has grown to become the biggest bank by assets, its shareholders haven’t been clamoring for a breakup. Over the past 10 years—a period that encompassed boom, bust and recovery—its shares have averaged a modest premium to its net worth.

Wells Fargo, meanwhile, has traded at an even greater premium to its book value. Yet it has been steadily expanding and is now bigger than Citi. This reflects the market’s greater comfort in Wells Fargo’s business model, based on its ability to generate returns for shareholders.

Notably, the postfinancial-crisis regulatory regime reflects this. It has been crafted to take more than size into account. So while Wells Fargo is bigger, it has a lower capital surcharge than Citi because it is less interconnected, less complex and has a far smaller derivatives book.

That makes sense. In that, the new regulatory framework, while far from perfect, has gone a long way to imposing costs on big banks based on the risks they pose to the financial system.

The flaw is that this framework hasn’t made clear what the endgame is. The implicit message of capital surcharges and other constraints is that banks of a certain size and risk profile will be treated as utilities.

But bank boards and investors aren’t exactly sure where the line lies. So banks aren’t going to rush to drastically shrink, or shed businesses wholesale, if they can’t be certain that they will be rewarded with less onerous regulation.

There is already evidence that given a choice, and the right incentives, banks will make hard decisions. J.P. Morgan is the prime example. It had been told it would be hit with a 4.5-percentage-point capital surcharge, the highest that can be levied on a systemically important financial institution. Requiring a bank to have even more capital suppresses the return on equity it can generate. The lower the return, the less a valuation premium investors are likely to award a bank.

To use size alone to determine whether Bank of America Corp. and other large U.S. banks should be broken up would be overly simplistic. PHOTO: JOHN TAGGART/BLOOMBERG NEWS

In the face of this, J.P. Morgan moved quickly. It reduced overall assets by nearly 10% in 2015—no mean feat for a $2.5 trillion balance sheet—cut $200 billion in nonoperating deposits and shed about $15 billion in illiquid assets. The result: In January, J.P. Morgan said it now only expected to be hit with a 3.5-percentage-point capital surcharge.

Of course, not everyone will be as fleet-footed as J.P. Morgan. And that is why, along with a more explicit view of the regulatory endgame, regulators also need to make it easier for shareholders to bring pressure to bear on the biggest banks. In other words, welcome in the activists.

As things now stand, the biggest banks are somewhat impervious to shareholder demands because regulators have such a big say over their businesses. Clearly, regulators can’t allow investors to do things that would deplete capital buffers, by say ramping up share buybacks. But they should show that they won’t stand in shareholders’ way if they want to demand structural changes.

The regulators have set the table for a safer, more resilient banking system. Now, shareholders should be able to pick their meal.

…The Fed’s monetary policy drove up equity prices to increase household wealth and stimulate economic recovery. But artificially high stock prices eventually have to come down. Even after the 9% fall in share prices from the recent peak in November, the price-earnings ratio of the S&P index is still more than 35% above its historical average. Fortunately the necessary financial corrections are happening when the U.S. economy is strong.”, Martin Feldstein, “The U.S. Economy Is in Good Shape”, The Wall Street Journal, February 22, 2016

Opinion

The U.S. Economy Is in Good Shape

As we shake off the effects of past Fed policy, many signs are good. But the 2016 race has seen some alarming proposals floated.

PHOTO: GETTY IMAGES

By Martin Feldstein

The American economy is in good shape, better than critics think and financial investors fear. Incomes are rising, unemployment is falling, and industrial production is up sharply. The recent steep declines in the prices of stocks and junk bonds are not the precursor of an economic downturn. Instead, they are part of the inevitable unwinding of mispriced financial assets caused by the Federal Reserve’s unconventional monetary policy.

The Fed’s monetary policy drove up equity prices to increase household wealth and stimulate economic recovery. But artificially high stock prices eventually have to come down. Even after the 9% fall in share prices from the recent peak in November, the price-earnings ratio of the S&P index is still more than 35% above its historical average.

Fortunately the necessary financial corrections are happening when the U.S. economy is strong. We are essentially at full employment, with an overall unemployment rate of 4.9% and 2.5% among college graduates. Tight labor markets are leading to increases in hourly earnings and in the producer prices of services. Total payroll employment is up more than 600,000 in the past three months, and the ratio of employment to population, which has been at very low rates for several years, is inching up.

Households are in good shape: Real disposable income is up at a 3.5% annual rate, and the total value of homes is 7% higher than a year earlier. The Congressional Budget Office and others predict that real GDP growth this year will be above 2.5%.

Although the money incomes of middle-class households have been rising very slowly for three decades, the focus on cash income is misleading. The CBO explains that once corporate and government transfers are added to market incomes, and federal taxes are subtracted, the real income after transfers and federal taxes is up 49% between 1979 and 2010 for households in the lowest income quintile (with average total incomes of $31,000 in 2010). Real income is up 40% between 1979 and 2010 for households in the middle three quintiles (with average total incomes of $60,000 in 2010).

Even that understates the true growth rates of real incomes, because government statistics don’t fully capture improvements in the quality of goods and services.

The Fed and others express concern about the potential contagion effect on the U.S. economy of weak demand in other countries. GDP is slowing in China, growing at less than 2% in Europe and declining in Japan, Russia and Brazil. Still, the drag of lower exports on our GDP in the past six months has been less than 0.25%. The dependence of U.S. growth on exports and activity in the rest of the world is easily exaggerated.

The 70% decline in the price of oil since early 2015 will eventually turn out to have a positive impact on U.S. economic growth. Until now it has caused a dramatic decline of activity in the U.S. oil industry and in related manufacturing and construction firms. But the fall in gasoline prices alone has increased annual household spending power by about $129 billion or more than $1,000 per household. Although households have temporarily plowed much of this found money into savings, we are likely to see it lead to increased consumer spending in 2016 and 2017.

Those who worry that the U.S. faces another recession often refer to the danger of an inverted yield curve—with interest rates on long-term government bonds below short-term rates. The danger reflects that, in the past, an inverted yield curve was the result of a sharp increase of short rates by the Fed to reverse rising inflation. But such a sharp increase hasn’t happened and isn’t likely to happen—even after the Fed raises short-term rates again. The yield on the 10-year Treasury note is now 1.8% while the two-year rate is 0.7% and three-month rate is 0.3%.

It would be a mistake for the Fed to abandon its December forecast of four rate increases in 2016. Monetary policy would still be very accommodative, and the federal-funds rate would still be less than the core consumer-price index inflation rate, which is now 2.2% since 12 months ago.

A decision not to raise rates in March would signal markets that the Fed fears falling share prices. The resulting sense that there is a Fed “put” could encourage financial investors to continue pouring money into equities, raising share prices again and increasing the danger of future financial instability.

The American economy does face long-term problems. High on my list is the large and growing national debt, rising from less than 40% of GDP before the recession to 75% now and heading to more than 85% in 10 years. That would require devoting 30% of personal income-tax revenue to pay interest on the national debt, with more than half of that going to foreign bondholders. The education system for most K-12 students falls short of global standards, and we fail to provide useful education and training for many high-school graduates. The country needs to address these problems in the coming decade.

But the big uncertainties that now hang over our economy are political, with presidential candidates threatening to raise taxes, increase fiscal deficits and pursue antibusiness policies. Removing those uncertainties could stimulate growth after this year’s election.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor at Harvard and a member of the Journal’s board of contributors.

…“It’s obviously been a difficult couple of years for him,” said Austin Bonner, who was a co-editor on the Georgetown Law Journal with Mr. Warren, and now works for a law firm in Washington. “But he handled it amazingly well. I can’t speak for him, but his case has certainly changed my views of the legal system. This has really taught me a lot about the power of the prosecutor and has made me think differently about my own criminal cases.”….“The prosecutor has more control over life, liberty and reputation than any other person in America,” according to Robert H. Jackson, the former Supreme Court justice.”, James B. Stewart, “A Deal in the Dewey Case Still Leaves Troubling Questions”, The New York Times, February 19, 2016

“I would never have read an article like this, nor blogged about it, before being inappropriately sued civilly by the SEC and FDIC, where they made false allegations. Our country is going to miss Justice Scalia! Here’s a related point that isn’t mentioned in this outstanding article: I feel strongly that the federal government should not be able to sue individuals civilly. Most, even relatively wealthy ones, don’t have anywhere near the financial resources to properly defend themselves against our government’s unlimited resources and therefore, they are almost always forced to settle. As a result, the facts and truth are never fully heard and decided in a court of law. I think that’s un-American and might also violate individual rights under the Constitution. Why? Today, civil enforcement actions can have almost as much negative affect on a person’s life, liberty, and reputation (and therefore ability to make a living) as a criminal matter. That’s why I feel strongly that the government should only be able to sue institutions civilly and must charge individuals with crimes, where the burden of proof is higher and where those who cannot afford legal counsel are provided with one.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Business Day

A Deal in the Dewey Case Still Leaves Troubling Questions

Common Sense

By JAMES B. STEWART

Zachary Warren, with his mother, Christie Warren, leaving Manhattan Criminal Court after an arraignment in March 2014. Credit Carlo Allegri/Reuters

At the end of 2008, during the depths of the global financial crisis, two top officials at the law firm Dewey & LeBoeuf invited a young colleague, Zachary Warren, to dinner at Del Frisco’s, a Midtown Manhattan restaurant. Mr. Warren was 24 years old, a couple of years out of Stanford and headed to law school at Georgetown in the fall.

Over steaks and red wine, the group discussed the troubled state of Dewey’s business. Though Mr. Warren’s title was “client relations manager,” his unenviable job was to prod partners to get their clients to pay their bills. He knew next to nothing about accounting.

In what seems a classic case of being in the wrong place at the wrong time, that dinner precipitated a chain of events that imperiled Mr. Warren’s legal career and could have landed him in jail.

In March 2014, two years after Dewey collapsed in bankruptcy and long after Mr. Warren had left the firm, he was indicted on multiple felony counts for what the Manhattan district attorney, Cyrus R. Vance Jr., called “a massive effort to cook the books.” By then, his co-defendants — the firm’s top lawyers and administrators — had trouble remembering who Mr. Warren was.

District Attorney Cyrus R. Vance Jr. of Manhattan. Mr. Vance’s office dropped the charges against Mr. Warren this week. Credit Brian Harkin for The New York Times

This week Mr. Vance’s office essentially dropped the case, agreeing that Mr. Warren will face no charges as long as he obeys the law for a year and completes 350 hours of community service. He will not face disbarment and is free to continue his legal career.

Mr. Vance deserves credit for ending Mr. Warren’s ordeal, and his lawyers said Mr. Warren, now 31, is “deeply grateful.” (They said Mr. Warren himself could not comment, since he remains under the government’s scrutiny for another year.)

But given the flimsy evidence of any wrongdoing by Mr. Warren that surfaced during the long Dewey & LeBoeuf trial of three other law firm officials that ended in a hung jury in October, the real question is why Mr. Warren was charged in the first place.

“The prosecutor has more control over life, liberty and reputation than any other person in America,” according to Robert H. Jackson, the former Supreme Court justice.

It’s a point Mr. Vance has said he has taken to heart. In a speech to the New York City Bar Association just after Dewey & LeBoeuf collapsed, he said, “an investigation may uncover outrageous immorality and mounds of suspicion; but when investigative work up until trial fails to produce convincing evidence of guilt, we should not proceed — regardless of any public pressure to move ahead.”

But convincing evidence of guilt seems to have been missing from Mr. Warren’s case from the beginning. Charges against the firm’s former chairman, Steven H. Davis, were also dismissed in another deferred prosecution agreement after no one at trial testified that Mr. Davis knew about, ordered or condoned any fraudulent practices. (Mr. Vance has said his office plans to retry the two other defendants, Stephen DiCarmine, the firm’s former executive director, and Joel Sanders, its former chief financial officer.)

The events involving Mr. Warren — the steak dinner and several subsequent business meetings — were also covered at the trial, and the evidence against Mr. Warren seemed equally flimsy. No one testified that Mr. Warren had expressed any concern or awareness that what he or his bosses were doing to try to meet the firm’s end-of-year financial targets might be wrong.

Throughout the case, Mr. Warren’s lawyers emphasized that Mr. Warren didn’t think he was doing anything wrong, and had no reason to think so. He was only trying to get clients to pay their bills. After the steak dinner, he went back to the office and spent nearly the entire night contacting partners and clients around the globe. Indeed, Mr. Warren was so confident he had nothing to worry about during the investigation that he didn’t even take a lawyer with him to his interview with prosecutors.

It is a truism that ignorance of the law is no defense, but to be convicted, defendants in criminal cases must have an intention or knowledge of wrongdoing, known in the law as mens rea, the Latin phrase for “guilty mind.” This happens to have been a lifelong theme of Justice Antonin Scalia, who worried that the requirement, long a bedrock of Anglo-American criminal law, was being eroded by overzealous prosecutors, vaguely worded criminal statutes and judge-made criminal law.

In a statement on the agreement with Mr. Warren, Joan Vollero, a spokeswoman for Mr. Vance, said prosecutors “are confident that, had this case proceeded to trial, we would have met our burden of proof.” Nonetheless, “we believe today’s outcome is the fair and appropriate resolution at this juncture.”

But the test should not be whether prosecutors can win. Rather, as Mr. Vance has acknowledged, it should be whether justice is being served. Ms. Vollero declined to comment beyond the statement.

Still, for Mr. Warren it’s a happy ending of sorts, one that his friends say vindicates a faith in the American legal system that was intermittently shaken during his two-year prosecution.

“It’s obviously been a difficult couple of years for him,” said Austin Bonner, who was a co-editor on the Georgetown Law Journal with Mr. Warren, and now works for a law firm in Washington. “But he handled it amazingly well. I can’t speak for him, but his case has certainly changed my views of the legal system. This has really taught me a lot about the power of the prosecutor and has made me think differently about my own criminal cases.”

Not everyone caught in a prosecutor’s sights is as fortunate as Mr. Warren. Five other low-level former Dewey & LeBoeuf employees pleaded guilty to charges and agreed to testify. None were lawyers, so they did not face the risk of disbarment, and prosecutors agreed not to seek any jail time. Several testified that at the time, they did not believe they were doing anything wrong. They may have concluded that it was easier and less costly to accept a blemish on their record than fight the charges.

Many impoverished and disadvantaged defendants have even fewer resources to fight prosecutors’ accusations. While Mr. Warren does not come from a wealthy family, both of his parents are prominent lawyers with wide contacts in the profession. His mother is a professor at William & Mary Law School and his father is a retired California state judge.

Mr. Warren is a product of elite schools and clerked for a federal trial court judge. He then landed a prestigious clerkship on the United States Court of Appeals for the Sixth Circuit.

Prominent lawyers took up Mr. Warren’s cause. One former chairman of a large Manhattan firm told me that Mr. Warren’s prosecution had generated widespread concerns within the New York bar, and that he had conveyed that concern to Mr. Vance.

Mr. Warren’s lawyers had a long list of witnesses willing to testify to their client’s integrity. Among them was J. Frederick Motz, the federal judge in Baltimore for whom Mr. Warren clerked. “I think the world of Zach,” Judge Motz told me this week. “Had the case gone to trial, I would have happily testified to his reputation for truthfulness.”

Before he was indicted, Mr. Warren had a job offer from the prestigious law firm Williams & Connolly in Washington, perhaps best known for its work in white-collar criminal defense cases. But as a matter of policy, the firm rescinded the offer after the government charged Mr. Warren.

He was initially disappointed, but the decision may have had a silver lining. Mr. Warren went to work for a smaller Pittsburgh firm willing to overlook his status as a criminal defendant. “He made the most of it,” Ms. Bonner, the Washington lawyer, said. “He was in court, on his feet, taking depositions. Most junior associates can only dream of that kind of experience.”

This week, Williams & Connolly renewed its job offer, and Mr. Warren accepted.

A version of this article appears in print on February 19, 2016, on page B1 of the New York edition with the headline: Dewey Deal Still Leaves a Question.

…Clearly, the government doesn’t understand basic statistics; things like statistically-valid sampling techniques and probably didn’t care to, because they so easily used their awesome power to force settlements and avoid the facts and the truth, which will emerge in a court of law. I bet they thought Quicken would just “roll-over” too? All the much larger banks had. I sure hope Quicken stays the course with its righteous fight! It’s not about them, it is about having a government every American (and American firm) can count on, believe in and trust, without regard to which persons and/or party is in control of the Executive Branch of our government.”, Mike Perry, former Chairman and CEO, IndyMac Bank

“When it’s time to fight the case filed by the government, Quicken Loans will point out that the company wrote about 250,000 FHA loans from 2007 to 2011, the years covered by the lawsuit. The government subpoenaed files on 322 specific loans. Of those, government auditors decided to look at 116 that had defaulted, and said 55 (47 percent) had “defects” or mistakes. The government then extrapolated that and determined that 47 percent of some large portion of Quicken Loans’ portfolio contained fraud. The company said that math is flawed.”, “Quicken Loans is stepping up its fight against government lawsuit over mortgage fraud”, Teresa Dixon Murray, The Plain Dealer, February 16, 2016

Quicken Loans is stepping up its fight against government lawsuit over mortgage fraud

By Teresa Dixon Murray, The Plain Dealer
on February 16, 2016 at 8:30 AM, updated February 17, 2016 at 2:22 PM

Plain Dealer file photo

…This still doesn’t mean that many or all of the smaller banks couldn’t fail at the same time (creating the same economic effect as a handful of big banks failing), if the government banking regulators force them all to be the same and make the same business decisions on lending and investment and liquidity. We need lot’s of different banks, with lot’s of different lending and investment strategies and we need regular bank failures (with the government backing insured depositors) that don’t all occur at the same time in the economic cycle. That’s what happens in most healthy, free-market capitalistic industries. Banks shouldn’t be any different.”, Mike Perry, former Chairman and CEO, IndyMac Bank

February 16, 2016, Binyamin Appelbaum, The New York Times

Fed’s Neel Kashkari Says Banks Are ‘Still Too Big to Fail’

By BINYAMIN APPELBAUM

Neel Kashkari at a California Republican Party event in 2014. On Tuesday he outlined a number of potential options for restraining large banks. Credit Stephen Lam/Reuters

WASHINGTON — During the 2008 financial crisis, Neel Kashkari worked tirelessly to save the nation’s largest banks. As a senior Treasury Department official in the George W. Bush and Obama administrations, he helped those banks grow larger than ever.

On Tuesday, he said it was time to think about breaking them up.

“I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy,” Mr. Kashkari said at the Brookings Institution, delivering his first public speech as the new president of the Federal Reserve Bank of Minneapolis.

He described the threat of another crisis that might force the government to bail out large banks, as it did in 2008, as a rare instance of a clear and preventable problem.

“The question is whether we as a country have the courage to actually take action now,” he said.

Mr. Kashkari’s remarks caused a stir in Washington. Such views have become relatively common at both ends of the political spectrum — providing fuel for the presidential campaigns of Senator Bernie Sanders, Democrat of Vermont, and Donald Trump, a Republican — but Mr. Kashkari is a moderate Republican and a former employee of Goldman Sachs.

“There are lines in your speech I can imagine a Bernie Sanders or Elizabeth Warren saying,” David Wessel, a former economics editor at The Wall Street Journal who moderated the Brookings event, told Mr. Kashkari during a panel discussion after the speech. “It’s not what one expects from a Goldman Sachs Republican.”

Mr. Kashkari, who joined the Minneapolis Fed in January after a postcrisis stint at the investment management firm Pimco and an unsuccessful run for governor of California, responded that he was calling things as he saw them. He said his views on financial regulation were shaped by the crisis, convincing him that strong, simple safeguards are the most sensible.

“If I’m not willing to stand up and share my concerns, then I wouldn’t be doing my job,” he said.

Other Fed officials are divided over the adequacy of postcrisis reforms. Eric S. Rosengren, president of the Federal Reserve Bank of Boston and an influential voice on regulatory issues, said in a recent speech that the government had made “substantial progress.” He said new regulation had reduced both the probability and the cost of a large-bank failure.

Donald L. Kohn, who worked with Mr. Kashkari during the crisis as the Fed’s vice chairman, said after the speech that he had greater confidence than Mr. Kashkari in the 2010 Dodd-Frank Act, which grants regulators new powers to constrain and, if necessary, dismantle large banks.

“I think the new regime, once it’s fully in place, probably will work,” he said.

Mr. Kashkari said the cost of large crises underscored the importance of minimizing risk. “It’s not simply the cost of the bailout,” he said. “It’s the economic damage that’s inflicted across society.”

He said the Minneapolis Fed would begin a research effort to consider “more transformational measures” the government could pursue, and that he hoped to publish a proposal by the end of the year. Asked by reporters whether he had consulted the Fed’s chairwoman, Janet L. Yellen, or other officials, he responded, “I’m looking forward to getting their feedback.”

Mr. Kashkari outlined a number of potential options for restraining large banks, although he emphasized that the list was not intended to be comprehensive.

The first and most familiar is forcing large banks to break into smaller pieces, the approach favored by Mr. Sanders, who released a statement on Tuesday saying he was “delighted” by the speech.

Big banks argue they play a unique role in the global economy, and that foreign rivals would take up the slack. They also say big banks are stronger in some ways, and that regulations are adequate.

“Breaking up the U.S.-based global financial institutions would ensure that one of the United States’ most competitive global industries serving companies small and large is turned over to banks based outside the United States,” said John Dearie, acting chief executive of the Financial Services Forum, which represents the interests of large financial firms.

Alternatively, the government could limit risk-taking by increasing the share of funding banks must raise in the form of capital rather than borrowed money. Mr. Kashkari compared this to the safeguards imposed on nuclear power plants, where failure is regarded as unacceptable. Anat R. Admati, a Stanford finance professor, is a leading proponent of this approach.

A third, broader approach would impose a tax on borrowing throughout the financial system, reducing risk-taking not just by banks but a wide range of other financial intermediaries. The role of banks in the financial system has declined over time, and many experts regard the rest of the financial system, relatively less regulated, as a more likely source of future crises.

Critics of both the second and third approaches argue that economic growth requires risk-taking, and preventing risk-taking by banks will shift activity to less regulated sectors.

Mr. Kashkari said that limiting the risks posed by large banks could allow the government to ease regulation of smaller banks. He also took a pre-emptive shot at the banking industry, noting the “endless objections” its lobbyists have raised to proposals for stronger regulation.

“We need to move before we as a society have forgotten the lessons of ’08,” he said.

A version of this article appears in print on February 17, 2016, on page B1 of the New York edition with the headline: Federal Reserve Executive Says Banks ‘Are Still Too Big to Fail’.

…“What central bankers are doing now feels like a Jedi trick,” said Albert Edwards, global strategist for Société Générale in London. “Everyone is in a currency war and inflation expectations are collapsing.” In other words, drastic steps by central bankers in Europe, Japan and China to keep their currencies weak and exports strong may not only be counterproductive in terms of stimulating global growth — someone has to buy all those Chinese and Japanese goods — but has other consequences as well. Negative interest rates, for example, are not only bad for bank profits and lending prospects, they can also make savers more fearful, hampering the central aim, which is to get people to spend, not hoard. All of which can lead to a global recession.”, Landon Thomas Jr., “Swedish Bank Move Creates a Global Shudder”, The New York Times, February 12, 2016

“Could it be any clearer that these central bankers (central planners of money and rates), including the Fed, don’t know their ass from a hole in the ground?” P.S. My dad loved to say that last part.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Swedish Bank Move Creates a Global Shudder

By LANDON THOMAS Jr.

The New York Stock Exchange on Thursday, when the Dow fell 1.6 percent and the Standard & Poor’s index fell 1.2 percent. Credit Justin Lane/European Pressphoto Agency

What if the bazooka is shooting blanks?

Since the financial crisis, it has been gospel for many investors that some combination of actions by central banks — bond buying, bold promises or flirtations with negative interest rates — would be enough to keep the global economy out of recession.

But investors’ distress over the latest volley by a major central bank, the surprise decision on Thursday by the Swedish central bank to lower its short-term rate to minus 0.50 percent from minus 0.35 percent, has heightened fears that brazen actions by central bankers are now making things worse, not better.

Global stock markets sank, the price of oil plunged to a 13-year low and investors fled to safe haven instruments like gold and United States Treasury bills.

Markets generally embrace conviction and run away from indecision — which is what many see in the policy making of some of the large central banks these days.

The Swedish central bank, the Riksbank, for example, has been criticized in the past for prematurely raising rates, and Thursday’s rate cut was opposed by two bank deputies.

At the European Central Bank, Jens Weidmann, the head of the powerful German Bundesbank, remains at odds with the president, Mario Draghi, in terms of how loose the central bank’s policies should be.

And in the United States, the Federal Reserve is seen by some market participants to be wavering in its commitment to higher rates in light of the market turmoil.

Speaking to Congress, Janet L. Yellen, the chairwoman of the Fed, sought to dispel the notion that interest rates might be headed anywhere but up.

“We will meet in March, and our committee will carefully deliberate about what impact these developments have had,” she said, referring to turmoil in the markets.

On Thursday, the benchmark Standard & Poor’s 500-stock index closed down 1.2 percent, after falling as much as 2.3 percent earlier in the day. The Dow Jones industrial average fell 1.6 percent to 15,660.18. Earlier, European stocks declined sharply. Stocks in Frankfurt closed down 2.9 percent and stocks in London fell 2.4 percent.

Japanese markets continued the sell-off on Friday, with the Nikkei 225 index down as much as 5.3 percent midday.

The price of crude oil slipped to $26.21. Gold rose to $1,247.90 an ounce, and the yield on the benchmark 10-year Treasury note fell to 1.66 percent, from 1.67 on Wednesday.

The move by the Swedish central bank was intended to counter the dual threat of deflation and an appreciating currency, which poses a threat to the country’s export-driven economy.

But many investors saw the rate cut as smacking of desperation and the latest sign that global central bankers are moving toward a round of competitive devaluations — also known as currency wars — as a way to stimulate their economies.

“What central bankers are doing now feels like a Jedi trick,” said Albert Edwards, global strategist for Société Générale in London. “Everyone is in a currency war and inflation expectations are collapsing.”

In other words, drastic steps by central bankers in Europe, Japan and China to keep their currencies weak and exports strong may not only be counterproductive in terms of stimulating global growth — someone has to buy all those Chinese and Japanese goods — but has other consequences as well.

Negative interest rates, for example, are not only bad for bank profits and lending prospects, they can also make savers more fearful, hampering the central aim, which is to get people to spend, not hoard.

All of which can lead to a global recession.

A perma-bear like Mr. Edwards is always in possession of a multitude of negative economic indicators to prove his thesis, which, in his case, is a fall of 75 percent in the S.&P. 500 from its peak last summer.

Some are obvious and have been highlighted by most economists, like the increasing interest rates on corporate bonds in the United States — both investment grade and junk.

But he also pointed to a recent release from the Fed that showed that loan officers at United States banks said that they had been tightening their loan standards for two consecutive quarters.

“You tend to see that in a recession,” Mr. Edwards said.

His prediction of a so-called deflationary ice age is still considered a fringe view of sorts, although he did say that a record 950 people (up from 700 the year before) attended his annual conference in London last month.

Still, the notion that the global economy has not responded as it should to years of shock policies from central banks is more or less mainstream economic thinking right now.

Within the International Monetary Fund, which has been regularly downgrading global forecasts over the last year, economists have begun to express concern that the growth problems of large emerging markets like China, Brazil, Turkey and South Africa are going to persist for the long term.

Increasing levels of debt and the inability of governments in these countries to put in place long-lasting reforms, especially at the private sector level, will keep growth rates much lower than they should be.

That could mean that this convergence with developed economies that emerging market bulls have long predicted could face quite a long delay and perhaps, in some cases, not even materialize.

The well-known bond investor William H. Gross of Janus Capital took up this theme in his latest investment essay, arguing that there was no evidence to show that the financial wealth (and increased levels of debt) created by a long period of extra-low interest rates would spur growth in the real economy.

As proof, he cited Japan’s persistent struggles to grow despite near-zero interest rates; subpar growth in the United States; and emerging market problems in China, Brazil and Venezuela.

“There is a lot of risk in the global financial marketplace,” Mr. Gross said in an interview on Thursday. “It is incumbent on me to focus on safe assets now.”

For the time being at least, investors seem to agree. Over the last few days they have been pouring money into exchange-traded funds that track gold stocks and United States Treasury bills.

Riskier securities like emerging market stocks; European banks, where fears over bad loans are growing; and high-yield corporate bonds have suffered.

Low oil prices, cheap Chinese exports and negative interest rates may smell like recession to some, but economists with a more optimistic bent see these trends as a tremendous gift to the consumer.

Charles Dumas, the chief economist for Lombard Street, an independent research house based in London says that consumers in Europe and the United States will not hoard their gains but instead spend them on houses, cars and other items.

“This idea that consumers are not spending is just wide of the mark,” Mr. Dumas said. Perhaps the full effect won’t be felt immediately, he added, but over time it will.

The world’s central bankers certainly hope he is right.

A version of this article appears in print on February 12, 2016, on page B2 of the New York edition with the headline: New Fear That Central Banks Are Hindering Global Growth.

…In a discussion with Goldman Sachs Group Inc. executives and some of its asset-management clients in October 2013, she spoke sympathetically about the financial industry, according to an attendee. Asked about the poisoned national mood toward Wall Street, Mrs. Clinton didn’t single out bankers or any other group for causing the 2008 financial crisis. Instead, she effectively said, “We’re all in this together, we’ve got to find our way out of it together,” according to the attendee. Mrs. Clinton has said she would look into releasing the contents of her talks, many of which were transcribed by a stenographer that she requested be present. Her team is reviewing transcripts from dozens of speeches to assess potential pitfalls of releasing them to the public, people close to Mrs. Clinton said. Some in the Clinton camp are concerned that comments not just about Wall Street, but also on the health-care law and foreign leaders could be taken out of context in an election season, they added. A campaign spokesman declined to comment on whether transcripts would be released.”, Anupreeta Das and James V. Grimaldi, “Hillary Clinton’s Wall Street Talks Were Highly Paid, Friendly”, The Wall Street Journal, February 12, 2016

“More of the truth being revealed every day! Hillary doesn’t really believe the false, liberal narrative (Bernie Sanders/Elizabeth Warren/Phil Angelides) that “greedy and reckless bankers/Wall Street” were the primary cause of the 2008 financial crisis. If she did, she wouldn’t have made “friendly comments”, like the one above and she wouldn’t have accepted their speaking fees or spoke to them. She is not stupid and I believe she would have been very concerned about ethics/appearances, knowing she was going to run for President in the near future.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Politics Election 2016

Hillary Clinton’s Wall Street Talks Were Highly Paid, Friendly

Democratic presidential candidate has been criticized by rival Bernie Sanders for her ties to financial sector

Lloyd Blankfein, chairman and chief executive of Goldman Sachs, left, greets former Secretary of State Hillary Clinton in New York in 2014. PHOTO: STEPHEN CHERNIN/AGENCE FRANCE-PRESSE/GETTY IMAGES

By Anupreeta Das and James V. Grimaldi

In the two years between resigning as secretary of state and launching her presidential campaign, Hillary Clinton personally received $4.1 million in fees from financial institutions for closed-door talks that attendees described as friendly and light.

Today, the speeches have become an issue in her campaign. Vermont Sen. Bernie Sanders, her rival in the Democratic primary, has repeatedly attacked her ties to Wall Street, including her large speech fees.

Most of Mrs. Clinton’s comments steered clear of anything that could become controversial in her fight for the Democratic nomination, say people who attended some of these events or were briefed on them. She didn’t often talk about the financial crisis, but when she did, she almost always struck an amicable tone, according to these people.

In some cases, she thanked the audience for what they had done for the country, the people said. One attendee said the warmth with which Mrs. Clinton greeted guests bordered on “gushy.”

In a discussion with Goldman Sachs Group Inc. executives and some of its asset-management clients in October 2013, she spoke sympathetically about the financial industry, according to an attendee. Asked about the poisoned national mood toward Wall Street, Mrs. Clinton didn’t single out bankers or any other group for causing the 2008 financial crisis. Instead, she effectively said, “We’re all in this together, we’ve got to find our way out of it together,” according to the attendee.

Mrs. Clinton has said she would look into releasing the contents of her talks, many of which were transcribed by a stenographer that she requested be present. Her team is reviewing transcripts from dozens of speeches to assess potential pitfalls of releasing them to the public, people close to Mrs. Clinton said.

Some in the Clinton camp are concerned that comments not just about Wall Street, but also on the health-care law and foreign leaders could be taken out of context in an election season, they added.

A campaign spokesman declined to comment on whether transcripts would be released.

Mr. Sanders, in his attacks on Mrs. Clinton, has questioned why firms such as Goldman paid her $225,000 a speech. When asked at a CNN event last week to explain why she was paid these sums, Mrs. Clinton said, “I don’t know, that’s what they offered.”

The fees and other details were negotiated on behalf of Mrs. Clinton by the Harry Walker Agency, a speakers’ bureau that represented her. The agency didn’t respond to a request for comment. Mrs. Clinton’s profile page was missing from its website as of last week.

Democratic presidential candidate Hillary Clinton, center, greets attendees during a primary night event in Hooksett, N.H., on Tuesday. PHOTO: DANIEL ACKER/BLOOMBERG NEWS

Beginning in early 2013, after leaving the State Department, Mrs. Clinton embarked on a two-year speaking career, making $21.7 million from about 100 speeches to universities, economic clubs, trade groups, investment banks, private-equity firms and several Canadian entities.

About one in five dollars that Mrs. Clinton collected while giving speeches from February 2013 to April 2015 came from banks and financial institutions.

She spoke at three client conferences hosted by Goldman Sachs; twice at Deutsche Bank AG; once each at events organized by Morgan Stanley, Bank of America Corp. and UBS; and also at gatherings hosted by private-equity firms KKR & Co., Apollo Management Holdings LP and GTCR LLC.

The Goldman alternative investments conference, where she also addressed the 2010 Dodd-Frank financial-overhaul law, was one of the few times Mrs. Clinton directly addressed questions about the financial crisis when speaking to Wall Street firms, according to people familiar with the matter. She said Dodd-Frank was working, but that there were ways it could be strengthened, the people said.

More often, Mrs. Clinton was asked about her four-year term as secretary of state, with people in the financial community curious to know what she thought of foreign leaders, U.S. foreign policy and whether she planned to run for president in 2016, said people familiar with the matter.

In April 2013, Mrs. Clinton was invited by Morgan Stanley to speak to clients of its fixed-income business at a conference dinner at the Library of Congress. During a 20-minute question-and-answer session, Thomas Nides, a Morgan Stanley vice chairman who had just returned to the bank after working as Mrs. Clinton’s deputy in the State Department, lobbed what people familiar with the session described as gentle questions at his former boss.

Mrs. Clinton recounted the events leading to the capture of Osama bin Laden, among other topics. At the end of the event, she posed for photographs with attendees, as stipulated in her contract. Little was said about the financial crisis, according to people familiar with the conversation. The bank paid her $225,000.

Although some of her paid speeches were open to the public, those she made to financial firms were confidential. The contracts sent around by Mrs. Clinton’s agency to these and other firms usually included extensive stipulations. They barred audio and video recordings, as well as broadcasts.

High-profile political speakers often ban recordings, but Mrs. Clinton was unusual in requiring that a stenographer be present to record and transcribe her remarks. In these cases, she had the sole right to distribute the transcripts.

Many of the events hosted by the financial firms were moderated discussions or Q&A sessions; in some, Mrs. Clinton typically made prepared remarks before taking questions from the audience.

In late October 2013, she sat down for an evening Q&A with Lloyd Blankfein, chief executive of Goldman Sachs. The audience at the Ritz-Carlton, Dove Mountain, right outside Tucson, Ariz., was mostly technology entrepreneurs and senior Goldman executives. Mr. Blankfein started out by asking Mrs. Clinton for a “survey of the world,” according to an attendee and a person briefed on the matter.

She told the audience how world leaders often asked her why politics in the nation’s capital had become so gridlocked, saying it was hurting the U.S.’s reputation abroad.

…In other words, free markets (capitalism) didn’t set bank capital standards, the government did through its banking regulators at the FDIC, Fed, and OCC. And as former Fed Chairman Greenspan said in his post-crisis paper, “The Crisis” (I am paraphrasing from memory here)….”we deliberately set bank capital standards at a level that would not cover the once-or-twice in a century banking crisis and therefore, the sovereign (our government) would need to step in and recapitalize the banks in those times.” In other words, private bankers followed the bank capital rules set by the government’s “banking/financial experts”, who had decades of institutional experience and scores of Ph.D. economists on their staffs. Pre-crisis, these private bankers and their bank’s board, shareholders, and creditors, rationally assumed that these “government experts” knew far more about prudent bank leverage/capital requirements than they did. And the “government banking experts” had a huge amount of “skin in the game”; they were insuring/guaranteeing trillions in system-wide U.S. deposits. Clearly, with the benefit of hindsight, these “government banking experts,” were terribly wrong. Private banks (and also the FDIC insurance fund, FHA insurance fund, and Fannie and Freddie) were massively under-capitalized pre-crisis. And according to recent articles I have read, the world’s Too Big to Fail Banks (including those in the U.S.) still need today over a trillion dollars of additional capital; mostly subordinated debt that would convert to equity in a crisis. (See second excerpt below.) How in the world, given these facts/truths, could individual private bankers following their “government experts” leverage/capital rules, be blamed for being inadequately capitalized pre-crisis? P.S. By the way, it was the FDIC’s own fault, as an insurer/guarantor, that its deposit insurance fund (DIF), became insolvent during the crisis, not private bankers. It was obvious on its face, given the late 1980’s/early 1990’s past insolvencies of BIF/SAIF (DIF in this posting) and the significant growth in banking and federally-insured deposits since that time, that the DIF was severely undercapitalized. It’s one thing for our government’s “banking experts” to be massively wrong, in hindsight, about bank capital levels. It’s another though to have the FDIC, DIF, and other government “banking experts” perpetuate a false-narrative, that hides and distorts their overarching role and inappropriately and falsely blame private bankers, like myself. The truth is emerging though, here and elsewhere. Apparently, Democratic Presidential candidate Hillary Clinton said in her private speeches to Wall Street and bankers, something like “we are all in this together”; in essence acknowledging that the liberal view is a populist lie (for votes) and that it was a system-wide financial crisis (with well-intended government’s significant involvement in creating and monitoring the system) and not the fault of individual banking institutions, like mine, who were following the rules of the system.”, Mike Perry, former Chairman and CEO, IndyMac Bank

My Response Above to this February 2016 Mortgage Newsletter Excerpt:

“I received this note from a banking regulator: “Hi Rob – It’s nitpicking, but I want to make sure that you realize that the only parties who have lost money in modern American bank failure have been stockholders, some holders of subordinated debt, uninsured depositors, and FDIC’s Deposit Insurance Fund (DIF). The U.S. government has not lost a penny since FDIC’s formation in 1933. The DIF took some big hits in the recent crisis, but was replenished by premiums assessed on all banks. To the extent that premiums are assessed on deposits, I guess you could argue that the general public pays for bank failures, but it is not a cost that is paid directly, and not paid via taxation per se – thus stronger bank capital protects the DIF and uninsured depositors.””

 Another Relevant Excerpt from February 2016 Mortgage Industry Newsletter:

“Turning to banking news, the Financial Stability Board (FSB) is based in Basel and its global regulators quietly set the tone for the biggest banks in the world. It has been toiling away on new guidelines on how to prevent banks from becoming “too big to fail.” Each designated country generates its own implementation process, but the result looks a lot like what the gatekeepers in Basel had recommended. FSB regulators still want the largest banks to raise $1.19 trillion by 2022 in debt instruments. These banks should maintain sizable cushions able to absorb losses when a financial crisis is looming on the horizon. Regulators remember too vividly what happened in 2008, when taxpayers were obliged by their government to bail out banks. In the future, the cost of the banks’ failure would be supported by its investors, not the general public.  Eight U.S. banks are affected by the new guidelines: JPMorgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, BNY Mellon, and State Street. These banks will all have to issue debt that could be used to defray losses in times of crisis. These debt instruments will cover losses when a bank’s equity is wiped out and regulators will avoid a potential panic caused by a domino effect. So-called Total Loss Absorbing Capital (TLAC) of the banks will need to equal 16% of their assets in 2019 and 18% by 2022. The FSB recommendations are designed to make the banking industry safer. But will it affect the dynamics of lending for every institution? Sure it will. New types of debts will command higher interest rates – let’s hope those don’t include agency MBS. Banks will find them more expensive, so they will be inclined to lend less. Anyone working in a bank knows that banks today have better cushions in reserve and more commercial loans outstanding than they had before the financial crisis. Consider that the avalanche of debt coming from the big 8 may reduce the money available for community banks who are also trying to raise capital. This could create high transaction costs although the new standards are designed to make sure the largest banks have enough capital to absorb losses if the bank fails in order to protect against further contagion in the broader financial system.”