American Betrayal

By John Doe

To protect the confidentiality of the innocent parties and to avoid further litigation by the wrongdoers, all names used in the book are fictitious, as is the name of the government regulatory agency. This book is the account of John Doe, MBA, CPA, whistleblower, certified examiner at the Financial Regulatory Agency. Mr. Doe has risen through the ranks in a long established professional career at the Financial Regulatory Agency spanning nearly 25 years. He headed up the Large Insured Depository Institutions program for nearly a decade leading up to the banking crisis. Agency officials removed him from the role once he made repeated disclosures to the Chairman at the agency, Ombudsman, Inspector General, and others about the deficiencies discovered in the agencys bank monitoring system. Mr. Doe currently has two formal legal complaints pending with the Office of Special Counsel and the Equal Employment Opportunity Commission.
Mr. Doe reluctantly became a whistleblower at the agency once he realized the government was a partner in enabling patterns of defective loans which sparked the recession. Like other government whistleblowers, Mr. Doe was ignored and silenced at the agency until stripped of all relevant duties without explanation after warning repeatedly that a crisis of our own design would lead to the bank failures that subsequently occurred. For example, he blew the whistle on a secrecy loophole that created a knowledge gap for risks by non-bank affiliates of consolidated bank holding companies -- the only Financial Regulatory Agency oversight of overall risks at institutions like Citigroup, Bank of America, Wachovia and Washington Mutual.
Had the government listened, billions of dollars could have been saved. Of course, the harm and disruptions the mortgage crisis caused homeowners may have been spared in part as well.
This is the inside story.

• Language: English
• Publisher: Xlibris US
• Release date: Feb 22, 2013
• ISBN: 9781479794270

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Copyright © 2013 by John Doe, Whistleblower.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

Rev. date: 02/19/2013

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Contents

Acknowledgments

Dedication

Important update

Introduction

1

Unholy Alliance

2

We Have Met the Enemy . . . And He is Us

3

Deaf When the Whistle Blows

4

Captured by the bankers

5

Where Were the Regulators?

6

A Crisis of Our Own Design

7

Whistleblower Rights Denied

8

The Government Seeks Cover

9

Dangerous to Your Health

10

Financial Regulatory Agency, Chief Violator

About the Author

Acknowledgments

This is to acknowledge all those harmed by government banking regulators, unions and watchdog cheerleaders not doing their job to protect the public. Many Americans were harmed by no fault of their own and deserve both an apology and compensation by government officials who violated their oaths to serve and protect the public. A stark review of the facts highlighted in this book exposes how the financial crisis was no accident. Nor can the crisis be blamed on a particular political party. Both Democratic and Republican White House administrations sowed the seeds that led to the financial crisis.

Most troubling, both parties have enabled the federal government and powerful banks to manipulate the evidence to protect bank regulators who failed to perform their mandated responsibilities. Dissenting views as to who is responsible for causing the financial crisis are few. Fewer yet are any accounts from within the regulatory agency corridors to shine a light on the deception and misdeeds by top regulatory officials.

There has been a lack of public forums to alert the public to the real reasons for the financial crisis and to dispel the spin coming from the media and government watchdog agencies created to prevent corruption. These organizations acted more like cheerleaders instead of looking out for the public. Elected politicians, regulators, Treasury officials, and bank lobbyists are equally blameworthy for the crisis. The financial catastrophe was a crisis of their own design within the regulatory agencies that were established to protect the public. Whistleblowers intent on alerting the public have been weeded out by officials within the regulatory agencies and have been provided no support from government watchdog authorities tasked with responsibility for protecting them.

Non-government watchdog organizations have been more bark than bite, yet take central stage in misinforming the mass media how well they are protecting whistleblowers. Public employee unions have done little to protect civil servants willing to jeopardize their career to blow the whistle on wrongdoing. Despite Congress providing the unions with authority to protect whistleblowers, there have been no success stories on this front. This accounts for the lack of expertise or lack of effort expended by the unions.

Unfortunately, all of the agencies and organizations cited are affiliated or have close connections with one another. The non-government watchdog organizations, unions, mass media and major law firms have formed an unholy alliance with the government agencies by the revolving door where personnel go from one entity to another for more lucrative pay or greater status. This unholy alliance protects influential wrongdoers and prevents meaningful reforms from being made. The alliance also allows government agencies to be corrupt and prevents whistleblowers from being heard. As the system stands, there is little hope that justice will be served. We will continue to have a corrupt system until the public can unify and sound off to demonstrate that whistleblowers need greater protections. After all, the government is to be for the people by the people. It is a travesty the public has been harmed by the hands of government as the recent financial crisis has shown.

I ask not only that my story be heard, but that the hundreds of other government whistleblowers are heard. The government has been able to deny us justice by refusing to allow hearings in cases like mine out of the fear knowing the evidence would be available to the public. In other cases, hearings have been held, but justice has been denied due to arbitrary and capricious decisions by administrative judges who lack both ethics and respect for the law.

Dedication

This book is dedicated to the hard-working civil servants at government agencies who try their best to perform their job and to protect the public. The media does not often show the efforts taken by those employees working in the trenches, working hard every day to do what is right.

Nor do the media spotlight the brave actions by those civil servants taking brave action so that truth can be told to propel positive change by improving government and protecting the public.

If we want a government that is truly for the people by the people, we need a louder rallying cry to support those being unfairly muzzled for alarming the public. We need to rally around those frozen out by the government and its allies that take action so that the truth does not get told.

Just as importantly, we need our judicial authorities and non-government organizations that watch over our government to perform their responsibilities and be vigilant, to stop corruption and wrongdoing. All citizens play a role if we are to successfully take back our representative government. If we are to triumph, we need to inform top political leaders the importance it is for the Merit System Protection Board and the Office of Special Counsel to perform their job.

I dedicate this book to my parents who taught me not to run and hide from the truth, and to my family for knowing that love, equality, generosity and support are what matters most.

Important update

Since I made my whistleblower allegations described in this book, the regulatory agency has nearly cleaned the slate of all officials I singled out for major wrongdoing. The top official in my division has left the agency. The number two, three, and number five officials have departed as well. The one remaining culprit is my immediate supervisor. The board or top executives who made the decision to push these officials out the door had a strong incentive for taking this action. Not only does it show the agency responded to my allegations by taking disciplinary action against those responsible; it prevents these officials who left from being compelled to testify and possibly incriminate the agency should there be a trial or formal hearing.

Introduction

This book provides a rarely seen view from within a federal bank regulatory agency to show how federal regulators aided and abetted the financial crisis. To protect the confidentiality of the innocent parties and to avoid further litigation by the wrongdoers, all names other than public figures are fictitious, as is the name of the government regulatory agency. The book details step-by-step how top regulatory officials at the Financial Regulatory Agency refused to act on information I provided them before the financial crisis took hold. One can see much of the damage from the crisis could have been avoided had regulatory officials performed their assigned duties. In fact, the crisis may have been entirely prevented.

Essentially, millions of families, investors and homeowners could have been spared the harm caused by the housing downturn and mortgage crisis had there been effective oversight of not only the banks, but of the regulators, as well. Egregious acts and other wrongs committed by regulators could have been stopped years before they solidified into an evil mass to bludgeon the economy.

I should know. I headed up the large bank supervision program during the years leading up to the banking crisis. I discovered cracks in the bank supervision foundation and made repeated disclosures to the Financial Regulatory Agency chairman, ombudsman, inspector general, and others. My emails to these top officials called attention to the deficiencies discovered in the Financial Regulatory Agency’s bank monitoring and surveillance system. Despite my many calls for actions that took place for nearly a decade, those in power refused to take up my call. The judicial system, just like the financial system, favors the powerful and will do whatever it takes to drown out concerns of one standing up for what is just and right.

I have chronicled my disclosures in this book. Reluctantly, I became a whistleblower at the agency once senior officials refused to act on my findings and after I realized the government was a partner in enabling patterns of defective loans that sparked the recession. Eighteen months prior to the banks being bailed out by TARP legislation, I warned management that the largest five banks needed a minimum of $30 billion in capital immediately. I was the first to sound the alarm; however, the top regulators captured by the largest banks ignored the siren.

I was ignored and silenced by the agency until stripped of all relevant duties without explanation after warning repeatedly that a crisis of our own design would lead to the bank failures and economic downturn that subsequently occurred. This book should not be read in its entirety. My hope is that readers once they realize the scope of the problem, they stop and write their elected officials representing them in Congress. By being informed how the crisis unfolded, the public can voice its discontent.

I also encourage readers to write the benefactors and sponsors of the non-government watchdog advocacy groups to protest how these organizations operate. The public has been steam-rolled by a dysfunctional system that over time has denied most Americans the information, support and fundamental protections found in our Bill of Rights and subsequent laws enacted by Congress to protect us. The best means to reform the watchdog entities are to hit them where it matters most: their pocketbooks. The public needs to take action to be heard since elected politicians and representative government have been reluctant to take action on their own volition.

I encourage you to write the Merit System Protection Board (MSPB) and Office of Special Counsel (OSC) to condemn past actions and to lend me and other whistleblowers your support. Both entities by law can re-open a case to address important matters that subsequently are revealed after a decision has been made. There is no statutory deadline prohibiting these entities from re-addressing a case. I have submitted a subsequent complaint to the Office of Special Counsel for reprisal and prohibited personnel practices that occurred after my previous case was decided. While it is possible that justice will prevail this next time, I am not encouraged. Perhaps, with public scrutiny and vigilance, these watchdog entities will decide to apply the law and dispense justice in the manner Congress intended.

The public can see how I have been denied justice for simply doing my assigned job to protect the public as a bank regulator. One can reference any of the examples of wrongdoing I include in this book. The financial crisis could have been avoided, or at the minimum, been diverted much earlier by regulators had they listened to my whistleblower complaints, warnings and had taken action. The financial crisis did not need to occur, nor did it need to cause such devastating damages. The crisis was due to a design of the government’s own making. It was not simply poor lending and a housing downturn that caused the crisis as the public has been told.

Whistleblowing to authorities of wrongdoing

I blew the whistle on a secrecy loophole that created a knowledge gap by regulators for risks residing in non-bank affiliates of the nation’s largest bank holding companies. The decision by managers to not address the loophole was a costly one because agency decision-makers no longer were apprised of risks not on the insured bank’s balance sheet. This created a costly information void by not being able to observe the risks increasing at the holding companies of the banks and at their non-bank affiliates and subsidiaries. By managers opting to reduce our monitoring responsibilities caused the Financial Regulatory Agency to lose our sole means to observe the overall risks at entities including Citigroup, Bank of America, Wells Fargo, Wachovia, JP Morgan Chase and Washington Mutual. The change in focus by the agency cut short reciprocal sharing of vital information with other regulatory authorities.

I protested consequences that resulted from managers: (1) unwilling to take action on discriminatory lending by the ten largest mortgage lenders; (2) not considering systemic risks when assessing bank insurance premiums; (3) not sharing analysis with the Financial Regulatory Agency chairman’s office or with other financial regulatory agencies; (4) routinely ignoring banks not complying with professional accounting standards; (5) not requiring banks to establish loss reserves for problem loans; (6) providing preferential treatment to the largest banks; (7) approving excessive compensation to bank officials upon receiving TARP bailout funds; (8) ignoring my warnings years before the crisis hit how banks were packaging and selling toxic loans to nonbank affiliates without reps and warranties; (9) allowing regional banks with poor examination ratings, in violation of policy, to acquire failed banks from the Financial Regulatory Agency; (10) ignoring age and race discrimination in personnel selections and compensation; (11) ignoring internal risk model that accurately identified financial institutions years in advance that would go on to fail; (12) not taking action for conflict of interest whereby union president, an agency lawyer in headquarters, was close friend, office neighbor, and car-pooler with opposing counsel representing agency with union complaints; and (13) allowing agency analysts and examiners to change earlier assigned risk ratings and back-dating official dates for such ratings.

As we know, some banks purposely did not provide representations or warranties to the buyer of the condition of the underlying loans to prevent future legal exposure from downstream investors once they found out they had been swindled by purchasing nonperforming or toxic loans. Make no mistake; my attestations are not the result of being an armchair quarterback. I blew the whistle on these egregious practices years before the financial crisis led to catastrophe and economic ruin to millions of families; taxpayers; the government; Financial Regulatory Agency insurance fund; and investors far and wide.

In anticipating a crisis, I warned agency officials that benign neglect of asset quality and exposure to derivatives could lead to disaster. I alerted top officials to the emerging risks years before the seeds of the crisis began to sprout. My attempts to get support from national public employee union representatives and government watch-dog groups proved unsuccessful due to politics, and lack of incentives for these groups to take on a formidable opponent as the Financial Regulatory Agency. They realize the Financial Regulatory Agency has unlimited funds and a cast of hundreds of lawyers available to take on any foe.

A plea to Chairman Bair and Vice Chairman Gruenberg

Here is a disclosure I made to outgoing Chairman Bair and to the incoming Chairman Gruenberg asking for an independent investigation of my whistleblowing complaints.

From: Doe, John

Sent: Wednesday, July 06, 2011 4:41 PM

To: Bair, Sheila C.; Gruenberg, Martin J.

Subject: A plea to outgoing Chairman Bair and to incoming Chairman Gruenberg for an impartial investigation

Importance: High

Attachments: A Plea to outgoing Chairman Bair and to incoming Chairman Gruenberg.pdf

First of all, Chairman Bair, let me congratulate you for your service and for a job well done. This memo may sound to you like that best-seller on the crisis, All the Devils Are Here: The Hidden History of the Financial Crisis. Surprisingly, some of the miscreants work here, suggesting there is indeed, a hidden history to the financial crisis. I wish this were not so, however, there is no escaping the truth for me. I can attest to how several large bank officials (my supervisors) abdicated their responsibilities by not acknowledging and hiding warnings and analyses through the period leading up to the crisis and its aftermath.

If this were not enough, one can see why we have our own internal chain of blame given the lack of oversight over the affairs of our large bank supervision branch. In short, one can see how difficult it is, despite your best and strong efforts, to eradicate the deeply embedded corporate culture at the Financial Regulatory Agency that it is okay to shoot the messenger. One only needs to combine hubris or greed with poor judgment to result in a colossal failure of common sense. Unfortunately, there has been no shortage of hubris and poor judgment by those managing the large bank supervisory functions.

Writing you this letter does not come easy. I have reservations about speaking up because what I have come to learn by experience: to blow the whistle on wrongdoing at the Financial Regulatory Agency can often end in professional suicide. The protections put in place by the Financial Regulatory Agency to prevent retaliation and reprisal for providing protected disclosures has not worked as shown by stepped up retaliations against me shortly after my disclosures. While I tried to address my grievance in-house by not having union involvement, I was rebuffed and informed by executive management that I should take up any grievance with the union because that is why the Financial Regulatory Agency had a bargaining agreement.

At last resort, when I contacted the Financial Regulatory Agency’s Inspector General’s office, I was brushed away and told to take my complaint to either the union, Office of Special Counsel, or to the Merit System Protection Board. Of course, I never wished to contact these other channels, knowing how easy the matter could be remedied internally with some open dialogue with top Financial Regulatory Agency officials. Regrettably, I was never provided the opportunity to meet with any top officials. Unfortunately, none of these outside parties—due to political bias or peculiarities of the law—are equipped to effectively deal with an internal management problem at the Financial Regulatory Agency.

Therefore, despite my pleas and disclosures made to the Chairman’s office, to the Inspector General, the Ombudsman and to other officials, there has been no investigation or follow-up as I can tell. More importantly, my disclosures have resulted in retaliation and reprisal. Specifically, during the past several years I have tried to draw the attention of the chairman’s office and to the Board of Directors to the lack of accountability and abdication of responsibilities in the Financial Regulatory Agency’s large bank supervision unit and the effect this had on the agency and to others. While the creation of the new Office of Complex Financial Institutions will address some of the functional-organization issues, I remain a victim of a campaign of reprisal, evidenced by management seeking to impugn my credibility for disclosing the lapses in our large bank monitoring activities. This is evidenced by a pattern where I am subject to disparate treatment by supervisors.

My principal large bank duties as the LIDI program manager were taken away without cause by supervisors in reprisal for alerting agency officials to the gross negligence I faulted within large bank supervision. I was subject to (1) a false and trumped up letter of reprimand for unprofessional conduct; (2) received unwarranted performance reviews; and (3) denied opportunities for promotions in my work unit on numerous attempts while much less qualified and much younger individuals were selected.

I filed a grievance for non-selection in 2009 upon learning I was not selected for a position I already had been performing for five years. I also cited in the grievance that I was subject to disparate treatment, retaliation and reprisal for whistle-blowing by providing protected disclosures to the Chairman’s office, Ombudsman and Financial Regulatory Agency Inspector General. The arbitrator ruled out hearing any evidence of whistle-blowing or reprisal because the NTEU provided improper citations and did not brief the Financial Regulatory Agency beforehand. The arbitrator, however, found the Financial Regulatory Agency in violation of the collective bargaining agreement upon establishing the interview panel (headed up by the new chief in Large Banks) did not utilize structure score sheets for my interview although they did so for the candidate selected.

While the violation was not enough to rule I be promoted, the arbitrator let the agency and the union jointly come up with a remedy. The Opinion and Award entered into on June 8, 2010 between the union and agency required the agency to change how the merit system process works. The selecting official was now required to review the applications of the candidates on the roster. It was no longer permissible for the selecting official to delegate the task to the interview panel or others. Of course, one can see how the disparate treatment during the interview provides an inference, perhaps, of pre-selection. This is so, especially, if the chief were to tell the other interview panelists don’t worry about keeping score for Mr. John Doe, we don’t plan to select him.

Yet, despite such actions, I am not a disgruntled employee because I enjoy the work of a bank analyst and care strongly about the Financial Regulatory Agency’s mission. I remain as motivated in my work today as I ever have been. I am dismayed that despite all my pleas and requests for senior officials to review my record of warnings alerting supervisors to the important events leading to the banking crisis, nobody has ever followed up. Why is that? Do we not want to know how extensive the damage was by supervisors turning a blind eye to the warnings? This is not to say that I have a hand-full of analyses and warnings that never saw the light of day because management was busy with other activities. This is to say, I provided to management and supervisors over a full economic cycle, hundreds of analyses with unambiguous warnings as to why the Financial Regulatory Agency insurance fund was in peril. Instead of acknowledging this information or providing it to the chairman’s office so that action could be taken, management and supervisors, instead, buried it under the rug.

When I questioned my supervisors as to why my warnings were never communicated to others, including executives, I was told that they did not want to subject themselves to additional questions or scrutiny by the chairman’s office. At other times, I was informed that it could not be presented to the chairman’s office because the information was not in Blackberry format which was a requirement by the chairman. Given the magnitude and seriousness of the situation, I doubt the Chairman’s Office or the public at large would agree that large bank officials performed their responsibilities by not acting because they did not want to subject themselves to questions. There is a standard of care and performance that executives are paid to follow. Shirking one’s mandated responsibilities is not one of them. This Fourth of July holiday has reminded me of my patriotic duty as a citizen and public servant to see that measures are taken to address problems I have alerted officials years earlier that remain unaddressed.

Getting agreement (consent) with you as to what happened in our Large Bank Supervisory branch is as important today as it was before if we want to prevent a similar situation in the next crisis where the regulatory response is delayed due to the lack of action and initiative by certain managers. As I have reported before, it is communication lapses and regulatory capture that are likely responsible for contributing to the crisis in much greater measure than what is commonly acknowledged. Combine this with an atmosphere where responsibility is unclear and complexity is high, it only takes one conductor or key individual to enable conditions for the train to run off the rails. We can see how a breakdown in one key supervisory area can indeed imperil the performance of the whole.

To see why this is so, one only needs to witness what occurred in 2003 with the tragedy of the space shuttle Columbia as it reentered the atmosphere. Investigators discovered that a piece of foam insulation broke off during the launch, punching a hole in the wing ultimately causing the craft to break apart once hot gases flooded into the hole. The investigation revealed that NASA did not detect the problem because it lacked the capacity to assess the situation. NASA had outsourced the design/building/launch of the shuttle to a mega-contractor and only knew what information the contractor had shared. Investigators concluded that NASA no longer had the capacity for independent judgment, and it could not know what it did not think to ask the contractors.

Sadly, this crisis was allowed to happen despite similar circumstances years earlier with the Challenger tragedy, whereby that craft exploded due to faulty rubber (o-ring) gaskets. Regrettably lives were lost in both incidents and may have been avoided with more awareness and accountability; better information and monitoring of the potential risks. This account is relevant today, as it shows parallels to the financial crisis. While the Chairman was asking the right questions, giving the proper warnings, sounding the proper warning bells and exercising her capacity for independent judgment, a fault-line was able to imperil the whole. Large Bank supervisors by failing to acknowledge or to respond to the critical information provided to them allowed the Financial Regulatory Agency to be severely compromised.

The inescapable conclusion is that without a deep change in how oversight of the Financial Regulatory Agency’s large bank examination & support branch is carried out; how the branch is managed; and unless we can change for good the culture where the messenger gets shot, we are prone to repeat the mistakes of the past. While a proven manager has now been put in place in the Office of Complex Financial Institutions, changes are not far-ranging enough. Surprisingly, acting associate director and associate director are still in a position of considerable power—in fact, the acting associate director has been elevated in his position despite showing how he fully abdicated his responsibilities over a vast number of years as the crisis played out.

While the associate director has moved to the Office of Large Financial Institutions, he, too, remains with considerable authority despite abdicating his responsibilities over many years when heading up the agency’s large bank affairs. As a minimum, in the interest of accountability and transparency, an investigation is necessary to determine the extent and reasons for what I have reported as a breach of responsibilities by these individuals. These officials ought to respond formally as to why they did not act on a series of analyses and warnings provided to them over a course of years, in fact, over a full economic cycle.

Some of the warnings and work I provided to supervisors which went unacknowledged; not acted on and not communicated to others

In 2006, I showed why there was a need for the Financial Regulatory Agency to make vast changes to the newly implemented Risk-based deposit premium system for large banks; by not relying on agency ratings; creating a complexity indicator so that large and complex banks pay an assessment based upon their contributory risk to the fund; changing the discretionary CAMELS weights; and bringing the LIDI analyses within the assessment framework. I was admonished and ridiculed by both the associate director and acting associate director for providing my comments and analysis to the Division of Insurance & Research in 2006. Ironically, we now know that had my suggestions been adopted the Financial Regulatory Agency could have reaped potentially billions of dollars in additional revenue from insurance assessments each year. My other suggestions from my 2006 analysis of the large bank assessments are being addressed in the proposed changes underway today (in July 2011).

I take pride in my work and the work accomplished agency wide. I was the first one in the Division of Supervision in February 2006 (first in the Financial Regulatory Agency, too, from what I can tell) to push for and show how the Financial Regulatory Agency could capture unique complexity risk by the largest banks to the insurance fund. I laid out an analytical process for assigning a complexity score to the largest banks which would determine what it pays for deposit insurance. I submitted a methodology with indicators to ascertain the additional risk a bank had, along with its relationship with affiliated companies and parent company.

In October 2006, I showed supervisors why agency ratings were problematic to the Financial Regulatory Agency and why we needed to incorporate, instead, macro-prudential factors, such as market-derived and economic factors (GDP growth, EPS growth, S&P returns) to our joint large bank/deposit pricing model. I laid out a framework to incorporate my suggestions into both the large bank monitoring (LIDI) program and the premium pricing assessment system.

In July 2006, I cautioned supervisors that the LIDI redesign efforts were heading astray under the direction of the Financial Regulatory Agency resident examiner at Wachovia. I cautioned how the real strength of the LIDI (large bank) monitoring process was having an analysis and rating assessment done on a combined company approach and not as an individual, insured entity. I also emphasized how the program could be improved by including more market-based signals to the LIDI analyses. Sadly, my pleas went ignored. In July 2006, I took exception with Wachovia Bank having a better LIDI rating (second best possible) than Wells Fargo Bank or Citibank, NA. I was rebuffed.

In November 2006, I urged supervisors to have case managers and resident examiners provide in their LIDI analysis details as to how their banks were adapting to the (a) inverted yield curve, (b) to competition for deposits, and (c) to the reported slow-down in Commercial Real Estate and mortgage lending. I discussed why we needed details on the strategic focus by the banks on these three particular issues. Again, my supervisors chose to ignore my suggestions and never asked others to provide the necessary information.

I prepared an analysis comparing CAMELS assigned by primary regulators at June 30, 2006 for all subsidiary banks of the LIDIs (greater than $10 billion in combined assets). I showed that State nonmember banks had a significantly higher distribution of 1 CAMELS composite ratings than ratings assigned by other regulators. The Financial Regulatory Agency was nearly twice as lenient in providing 1 ratings with 60% assigned a 1, which was nearly two-times the rate assigned by the OCC or Federal Reserve. The only message I got back from my supervisors was don’t do such comparisons since it would only cause others to ask embarrassing questions.

In 2006 and 2007 I showed how the top 6 banks were vastly undercapitalized. A year prior to TARP, my analysis showed how the top 6 banks were deficient with respect to loan loss valuation reserves, at a minimum, of $30 billion. I analyzed why Citigroup should not be allowed to pay golden parachutes to its departing executives upon accepting TARP capital, although it turns out that management in my unit did provide concurrence to the Federal Reserve that such payments could be made.

In 2006, I analyzed how Washington Mutual Bank was using improper accounting to handle its sales of toxic loans. Just as importantly, I also showed in 2006 how WaMu was not providing representations and warranties to the condition of the toxic loans sold to a non-bank affiliate of Citigroup. As we know, the lack of adequate representations and warranties has resulted in untold damages to investors, in the many billions of dollars. Unbelievably, each one of these findings and suggestions went unacknowledged by supervisors. When I pointed out why the accounting transactions were not appropriate, I was brushed away with a wink and smile.

In November 2007, I pointed out to supervisors the need for disclosure of Strategic risk and Reputation risk in the LIDI (large bank) Executive Summaries. In December 2007 I discussed how our