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Episode 114 – When The Whistle Blows with Richard Bowen
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Steve Grumbine welcomes the uncompromising and incorruptible Richard Bowen to the studio to discuss the intricate web of deception and fraud more commonly known as our private banking system. Having been at Citigroup during the mortgage crisis, he had an insider’s eye view of the stranglehold the large banks have on our country. The financial services industry is one of the largest contributors to political campaigns and there’s a revolving door between the regulatory agencies and the institutions they’re supposed to be regulating. He can only conclude that the banking lobby controls the government.
In early 2006, when Citigroup consolidated its diverse mortgage operations, Richard was given a huge promotion to the position of chief underwriter. Citigroup was purchasing $90 billion worth of mortgages a year – mortgages they did not originate but purchased from other banks and mortgage companies. He was responsible for making sure these mortgages met Citi’s policy guidelines.
And that basically was the overall job. Now Citigroup, when they purchased these mortgages, immediately turned around and sold most of them. And when they sold them, they gave their representations and warranties. They basically gave their guarantees that these met our policy guidelines … And, yet I was finding that 60 percent were defective. They did not meet our guidelines. So, silly me, I started issuing warnings. I thought it was my job.
Being a whistleblower is neither a glamorous nor rewarding position to be in, and as Richard tells his students at the University of Texas, one will pay a dear price for “blowing the whistle.” It takes a real toll professionally, personally, and physically. The most heroic acts are often thankless, and as demonstrated by our recent history regarding the treatment of whistleblowers, no good deed goes unpunished. But it must be done.
Citigroup’s handling of Richard Bowen was a story in itself. He came under surveillance and was frankly terrified, afraid to start his car without looking under the hood first. You’ll have to listen to the episode for the story. He was led a merry dance by the SEC enforcement division, who feigned interest in his reports, and the Financial Crisis Inquiry Commission, charged by Congress to investigate the financial crisis. If they find evidence of criminal wrongdoing, they are to send a criminal prosecution to the US Attorney General. This sounds like a slam dunk, given the treasure trove of documents he had submitted to the SEC.
But if you go down that list of all the witnesses, Steve, you won’t find the name Bowen. That is because the congressional commission decided that all of my testimony, everything I told them behind closed doors, everything I gave them, everything they got from the SEC, everything including my original written testimony, it all needed to stay confidential. So it was sent to the National Archives with instructions that it could not be read for five years.
Why five years? Funny you should ask. Could it have anything to do with the fact that the statute of limitations for fraud is five years?
Richard Bowen was a senior vice president at Citigroup who blew the whistle on the mortgage fraud that helped trigger the subprime mortgage crisis. He is currently a professor of accounting at the University of Texas at Dallas. His story has been featured in the docuseries, The Con, the podcast, The New Untouchables: The Pecora Files, and the 60 Minutes story, “Prosecuting Wall Street.”
www.richardmbowen.com
On Twitter: @RichardMBowen
Macro N Cheese – Episode 114
When The Whistle Blows with Richard Bowen
April 3, 2021
[00:00:03.770] – Richard Bowen [intro/music]
You have to understand if the SEC ever did turn loose of any of those documents, then they would have to fully admit that the United States government had full knowledge of the massive fraud going on at Citigroup before they bailed them out to the tune of half a trillion dollars.
[00:00:25.350] – Richard Bowen [intro/music]
This is going to continue to repeat itself because the only lessons that were learned coming out of the financial crisis was that there is no downside for doing something bad. There was no accountability. That is the lesson that was learned by all the banks.
[00:01:35.230] – Geoff Ginter [music/intro]
Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:43.060] – Steve Grumbine
All right. And this is Steve with Macro N Cheese. We are going to be talking to the $29 trillion dollar Deep Throat. This is one of the most important interviews that I’ve done at Macro N Cheese. Today, we have Richard Bowen. Richard Bowen is a whistleblower, and we are going to be taking his lived experience and transmuting an incredibly complicated and vast conspiracy into a street crime.
It’s theft, in the immutable words of Tom Murphy. Yeah, fucking a right. It’s theft, alright. Theft of people’s lives, freedom and ability to live as free citizens within the confines of what the entire purpose of the United States is presumed to be based on the principles of life, liberty, and the pursuit of happiness. Built in the preamble, Bill of Rights and Constitution, which was constructed to sever the power of elites, feudals, through separation of powers.
Instead, over the course of the last 40 odd years, we’ve seen a massive collapse of the rule of law because of the integrity of law no longer exists. It’s a facade and that’s what we’ve learned week in and week out on our podcast, The New Untouchables. Another myth of American governance is a government of, by and for the people. We know that this is no longer true, but for very few of us understand what’s actually happened to make it so and actually what the system has done to make it so.
Our audience, you, the people need to understand our financial system, the lifeblood of capitalism works in a way that has created a fictional economy based on fraud that the entire system can backstop, ensure by infusing massive government stimulus through emergencies that creates socialism for a criminal enterprise. It could take you years to fully realize the history and policy and reasons behind why things are the way they are.
But my guest today, Richard Bowen, is literally the $29 trillion dollar Deep Throat. We just hope that his truth will penetrate the universe of noise out there. And we are filled with propaganda because very few of us really understand what we’re in the midst of. Because of this, we don’t know how we got here. It’s so incredibly timely because as of now, the Supreme Court is set to hear oral arguments in a case through which the Arkansas teacher’s pension is suing Goldman Sachs for what appears to be the exact same case, I guess, represents. Welcome to the show, Richard. Thank you so much for joining me today.
[00:04:22.260] – Richard Bowen
Thank you, Steve. It’s terrific to be here.
[00:04:24.930] – Grumbine
Absolutely. So you’ve got an incredibly powerful story. I’ve had the luxury of learning about it on The New Untouchables and through the process of you doing The Con with Patrick Lovell and Eric Vaughan and Bill Black and others. So I guess before we get too far for those people that aren’t in the know of what’s going on right now, can you take an opportunity to explain who you are in terms of the control fraud that has happened in Wall Street and Citibank in particular.
[00:04:54.390] – Bowen
Well, very high-level Citigroup group consolidated all of their various mortgage operations, and I was given a huge promotion and I was responsible to make sure that the $90 billion dollars a year that they were purchasing in mortgages and immediately selling, by the way, met our credit policy. And silly me, I saw some stuff that was going on that, quite frankly, was illegal. It was actually fraud. And I started warning about it and I warned about it for a year and a half.
[00:05:30.820] – Grumbine
So, Richard, I’m interested in understanding, you have a lot of concerns regarding what the power of the banks are in society today.
[00:05:41.900] – Bowen
I have real concerns about that. First of all, I have seen in my own experience that basically the large banks have a stranglehold on our country. The financial services industry are one of the largest campaign contributors in all of the elections. There’s a constant revolving door that goes back and forth between all of the agencies and the financial institutions.
And quite frankly, I have seen through my own experience that basically the banking lobby controls our government. That’s my only way to put it. Now, obviously, we change government and time will tell with regard to the current administration. But I can personally attest to, as we may get into detail as to some of the challenges that I personally saw.
[00:06:32.880] – Grumbine
What I have experienced just in the short time I’ve been around you is that this has been a massive, end-to-end cover-up, nothing accidental about any of this. And I guess the question is, as a man of faith and a man that was involved in the banking industry, how did your faith inform your actions within the industry as you did your job?
[00:06:55.140] – Bowen
Well, I have a very deep faith. I can attribute that to my wife. And I will tell you, as I have gone through difficult times in my life, and this obviously was by far the one on the edge, I’ve prayed about it as to what I should do. Should I shut up and mind my own business and ignore my job responsibilities? Should I leave or should I try to change things? And I kept getting the message I need to stay the course. I need to do what is supposed to be done. And that’s really what has helped me persevere throughout this experience.
[00:07:32.390] – Grumbine
You say your responsibility. What exactly was your position at Citigroup and what is the job description of a chief underwriter?
[00:07:42.500] – Bowen
- In early 2006, Citigroup consolidated all of their very diverse mortgage operations. And I was given a huge promotion. I was promoted to the position of business chief underwriter. And in that position, I was responsible to make sure that the $90 billion a year of mortgages that they were purchasing from other banks and mortgage companies.
And by the way, in my area, Citigroup did not originate these mortgages. They purchased them from other banks and mortgage companies, in fact, close to a thousand other banks and mortgage companies, many hundreds. And it was my job to make sure that these met our policy guidelines. And that basically was the overall job. Now Citigroup, when they purchased these mortgages, immediately turned around and sold most of them.
And when they sold them, they gave their representations and warranties. They basically gave their guarantees that these met our policy guidelines that they were selling. And yet I was finding that 60 percent were defective. They did not meet our guidelines. So silly me, I started issuing warnings. I thought it was my job. And gosh, I sent email, I put it in my weekly report. I made committee presentations.
I even cornered people in the hallway at the water fountain. I’m not a shy guy. And this went on for about a year and a half. And during that period, the volumes kept increasing and the rates of defective mortgages increased to over 80 percent. And yet Citigroup continued to warrant in the representations and warranties that these met our policy guidelines. So this was very trying period.
[00:09:40.380] – Grumbine
It makes me wonder, Bill Black talks about the recipe for fraud and he talks about two of the four pieces though were making sure that there was an incredibly high volume of transactions. And the other one is making sure that there were very little reserves in place to support any of the defaults. Can you tell me a little bit about your experience with that particular recipe for fraud?
[00:10:05.130] – Bowen
Well, the volumes were certainly increasing dramatically, totally outstripped the personnel that were really responsible to ensure the safeguards and the credit policies were truly being monitored. And quite frankly, they were ignoring the actual underlying credit issues. So there were not setting up any reserves for these. And so that’s his recipe perfectly. It’s exactly what was happening.
[00:10:32.240] – Grumbine
So you had a team that was actually delving into this. You had loans coming in from all over the country. What was that volume like in terms of processing? Were you able to actually focus in on these things or was it just like slamming them through?
[00:10:45.440] – Bowen
Well, the way it was set up was in my largest area where we purchased and sold over $50 billion a year, we would purchase these loans one at a time, and then they would immediately turn around and sell the loans. And then ostensibly my function was set up to come in after they had been sold and take a small sample to demonstrate that we’re still meeting the credit policy.
And it was my sampling that found six months into my new job that we were not meeting our policy. Matter of fact, at that point in time, 60 percent of the loans that we sampled did not meet our policy, and yet they were sold with representations that they did meet our policy. So that’s the largest area. Many people think that all of these loans were underwritten ahead of time. No, that was not the way that Citi had set it up when I got into place.
[00:11:45.330] – Grumbine
I was one of the people that got swept up in this. We got a big loan from Countrywide. My life turned upside down in 2009, to be perfectly honest. It was July 24th, 2009, when I lost my career at Verizon. I think there’s a lot of people that are very similar to me in the sense of how this played out. Can you describe who were some of the key providers of loans at that time?
[00:12:12.710] – Bowen
Oh, we’re talking about New Century, Countrywide was obviously very large outfit. We bought a large volume of loans from Countrywide. Basically, all of the major players we would purchase loans from and the real key there for all of the mortgage companies was to make the loans and immediately sell them.
And by selling them, then they were basically foisting the responsibility of the credit and everything else on the purchaser. And that actually fit very well into Bill Black’s fraud structure – make the loans, very little in the way of credit observations when they make the loans, and immediately sell them. And don’t worry about it. And Citigroup was a concentrator.
They would purchase from all of these Countrywides and New Centuries and so forth, and then they would turn around and immediately pooled them or sell them themselves on a greater scale, and they would sell them to Fannie Mae, Freddie Mac, mortgage securitizations. And again, that was the whole key up the line. Everybody that touched and sold a made a great deal of money.
[00:13:26.530] – Grumbine
So, Richard, one of the questions I have going back to our time at The New Untouchables and The Con, Michael Winston really put it out there painfully. This guy has been through so much. What was your relationship with Michael Winston?
[00:13:41.930] – Bowen
Well, I didn’t know Michael at the time. I have since come to know Michael, we’ve actually become friends as we’ve both got involved in the docuseries The Con, which, of course, The New Untouchables is based on. And he’s a terrific guy. And quite frankly, his experience at Countrywide has cost him dearly, even on his health. And Michael is not unlike the other whistleblowers that are out there in other organizations, except he bit the bullet. He stayed the course. He refused to back down, and as a result, he paid the price.
[00:14:16.750] – Grumbine
Is that the story of a whistleblower? Is that literally what we put whistleblowers through in this country? You guys are doing God’s work, and it seems like you would think that our system, which is a system of laws and by and for the people, would absolutely support you in this. But instead, it seems like it actually works against us.
[00:14:36.400] – Bowen
Steve, you obviously don’t understand the . . . If you’re a whistleblower, for example, if the top management at Citigroup had paid attention to what I was screaming about, then they would have had to have curtailed this very, very profitable business model of buying and selling mortgages. And that would have meant a significant reduction in incentive compensation that this profitable business model drove, which went into everybody’s pocket.
So there was incentive for all of management not to pay attention and to ignore and to bury anything that might threaten their ongoing incentive. And quite frankly, that played out in all of the large organizations. And as a result, the whole focus is to shut up the whistleblower, get them to be quiet, whatever it takes to get them to shut up so that they can continue the profitable operations.
[00:15:40.400] – Grumbine
As an employee and working with financial transactions, private customer information, having very heavy responsibility to make sure that you’re doing the right thing, when you’re in your job and you’re passing this information on through the process, was your boss happy that you were presenting this information? How did that play out?
[00:16:03.500] – Bowen
Well, my immediate boss was the chief underwriter and he was exceptionally supportive. He was likewise concerned about what I was finding and he would take my warnings and put his warnings on top of them and send them on to an even greater distribution list.
And then sometime in 2007, he had all of his responsibilities stripped away and he felt compelled to take early retirement. And my new boss, the new chief underwriter, was not real happy about all of these warnings that I continued to send. So, again, everybody up and down the line that’s involved with a whistleblower will pay a price, as my boss found out.
[00:16:52.880] – Grumbine
This is the stuff that just makes you crazy. People like Chelsea Manning and all the other whistleblowers throughout history and every one of them has met with a jail cell, diminished career, diminished life. What have been some of the impacts to you at this point?
[00:17:09.350] – Bowen
Oh, my gosh. First of all, I tell my students, I’m presently a professor at the University of Texas at Dallas, which is where I went after I left Citi, and I tell my students, “You will pay a price for blowing the whistle. It will take a toll on you professionally. Believe me, my career in the financial services industry is completely dead and you’ll pay a toll on it personally, even physically.”
I will tell you, I remember being in Citigroup meetings and arguing my position with regard to the crap that we were selling in mortgage loans. And I remember my stomach just being tied in knots and aching and hurting. Well, after I left Citigroup, I actually had a ruptured colon. I had to have emergency surgery. I almost died.
And the doctors agreed it’s probably stress-related. They wound up taking out part of my colon, and I had three major surgeries on them. So it will take a toll on you. Fortunately, I have a very strong family relationship and my wife was supportive throughout this. But in many instances, it takes a toll on the family.
[00:18:28.530] – Grumbine
Tell me a little bit more about that. How did your wife respond to that? I know when we have problems in our home, it always ends up bringing a lot of other problems because you’re panicked, you’re feeling scared, you’re stressed out. What was the impact to your life at home?
[00:18:44.190] – Bowen
Well, obviously, it took an impact on our standard of living. The stress is palpable. It truly was. She understood what I was doing. I went out of my way to inform my family and my children and their wives what I was doing and implicitly receiving their approval to go forward with it. But it does have a terrific strain on the family. And a matter of fact, the studies that have been published on whistleblowers, many, many wound up with the family breaking up ultimately because of this.
[00:19:19.750] – Grumbine
That’s horrible. You go to your boss, he ends up paying the price for being a part of this, your family life is in disarray. Even though you’ve got a strong faith and a strong relationship, it’s still taking a heavy toll. And then you still pressed forward. You still asked to get information. What kinds of information did you request? How were you blocked?
[00:19:40.900] – Bowen
Well, I was ignored. And no one could argue with me, Steve, with regard to what I was finding. No one could argue with me. All they could say, “Well, these are just technical exceptions that you’re measuring.” And I say, “Well, then change the policy so they’re not technical exceptions.” And, of course, they couldn’t do that.
And then obviously, when the credit cycle turned, that’s when the mortgages really started cratering very badly, because at the outset, the economy was expanding. People were cashing out mortgages on their house and living off that, and then they would refinance their house and live off of that. And it was an expansion across the board and the real estate prices were going up.
Then all of a sudden when it turned, that’s where the technical exceptions were, the loans were given to people that did not meet the credit qualifications, really started defaulting in a huge number.
[00:20:41.890] – Grumbine
I guess the follow-up to that is as you’re going through this process, you came up with an approach. What was your strategy here?
[00:20:50.280] – Bowen
Well, it’s nice to think that I had a strategy. I was doing my job. I was trying to fix it, and bits and pieces of my budget would get cut and people would promise that they would give me new data processing reports that would help fine-tune the underwriting process and identify more definitively the lenders that were selling us bad loans because we didn’t have any automated reporting that would give us this.
And inevitably, I wouldn’t get the reports that I had asked for, even though I had been promised. And then there would be all sorts of excuses why they couldn’t. And my budget was cut. But strangely, everyone else’s budget was increased and they were able to add manpower. So it was very subtle. It was a daunting process. And basically, I stayed the course.
[00:21:45.940] – Grumbine
You kept pressing to take it all the way. Can you talk about these technical issues? Sarbanes-Oxley seemed to be a key consideration. Can you explain what Sarbanes-Oxley is and how that played into your work? And as you pressed forward and deeper, how this played a part of things?
[00:22:03.970] – Bowen
Well, Sarbanes-Oxley was put together after WorldCom and Enron failed. Enron first with what really was the emphasis and the whole focus was on internal controls. Sarbanes-Oxley was written to make companies have adequate internal controls to check on the quality of everything that they were doing. And Sarbanes-Oxley also made it illegal to retaliate against whistleblowers.
By the way, no one bet any chips on that. There’s never been a prosecution on that. But also one of the provisions that they put in Sarbanes-Oxley is executive management has to swear, they have to certify every quarter that the internal controls are effective.
And I was a part of the internal control process, obviously, to make sure that we had the controls in place and we were not producing crap that was going to cause loss to the company and investors. And so that helped me stay the course. And also I use that when I finally went to the board of directors, and we haven’t gotten to that yet.
[00:23:17.200] – Grumbine
So tell me, what exactly is the feeling inside the company? Do they know you’re onto them or do you think they just don’t want to deal with you?
[00:23:26.330] – Bowen
They don’t want to deal with it. They didn’t want to pay attention. It was like the elephant in the living room and everybody that walks through won’t acknowledge the elephant, but they’ve got to step over the dung and they’ve got to go around the elephant and so forth. But nonetheless, the issue is not to recognize the elephant. And that’s exactly what was going on at Citigroup. No one wanted to give any credibility to the warnings that I was issuing, although individually they could not argue with me.
[00:24:00.350] – Grumbine
So you kept taking this up the food chain. Tell us about once you get to the top. Where are you at, right? Somebody is going to hear you, right?
[00:24:08.630] – Bowen
Well, I, as I indicated before, had been issuing warnings for about a year and a half. I had seen my boss who was supporting me, stripped of all of his responsibilities and basically forced into retirement. And I sort of knew that this might not end well for me, but I wasn’t going to give up. I figured I got one shot. Call it a Hail Mary pass.
And I read in the paper this hit all the headlines on November the 2nd, which was a Friday of 2007, that Citigroup was calling an emergency board meeting for that coming Sunday. And in the press, they speculated that at the board meeting, Robert Rubin was going to be replacing Chuck Prince, who was the chairman of the board.
[00:24:56.870] – Grumbine
Before you go further, tell us who Robert Rubin is. Folks, this is going to tie a lot of loose ends together.
[00:25:03.050] – Grumbine
Well, Robert Rubin was chief operating officer of Goldman Sachs, I believe, and then he left Goldman Sachs and became the Secretary of the Treasury under President Clinton. And then he helped lobby for the repeal of Glass-Steagall, which put some controls in place on banks.
That’s about the time that Citicorp merged with Traveler’s Life, which was an illegal merger, by the way, under Glass-Steagall, and yet they merged under a waiver from the Fed, so they had to repeal Glass-Steagall. Robert Rubin was very active in apparently lobbying for the repeal process since he was Secretary of the Treasury.
And as soon as it was apparent they were going to repeal Glass-Steagall, which they did, Robert Rubin left and joined Citigroup. And then obviously with repeal of Glass-Steagall, they could keep the merger in place and Citigroup could go forward. And he was named executive vice-chairman, I’ve forgotten exactly what the title was. But he was very high up in Citigroup.
So when I saw that he was going to be named at the board meeting on November the 4th to replace Chuck Prince as chairman of the board, I said this is my opportunity. This is how I get my warnings to the board of directors. So the next day, November 3rd, Saturday morning, sitting at my kitchen table, I drafted an email and I sent that email to Robert Rubin, who the next day was named chairman of the board.
[00:26:45.474] – Grumbine
Wow.
[00:26:46.980] – Bowen
I also sent it to the chief financial officer, the chief risk officer, and the chief auditor, because I knew under Sarbanes-Oxley they had to certify that the internal controls were effective. And in the email, I said internal controls are broken. There are huge financial losses. Well, we won’t go into the details, but suffice to say, somebody did receive my email and I was basically told not to come back.
[00:27:20.450] – Grumbine
Wow, here you are putting this stuff out there. We’ve got a guy, Robert Rubin, who is in the revolving door of government and banking, pushing to tear down the firewall between investment banking and savings and loans. And then it’s put back in the government. And once he’s done his destruction leaves and goes back to private industry to reap the rewards of it. This guy, Robert Rubin, seems like a real parasite.
[00:27:45.350] – Bowen
That’s the epitome of what I related to earlier as the revolving door, Steve.
[00:27:50.690] – Grumbine
Unbelievable. One of the things I want to talk about is the concept of reps and warranties. Creating the SEC and the 1933 Securities and Exchange Act, all this came from the Pecora Hearings. This was a big deal and it’s a key fundamental aspect of not only The New Untouchables but also The Con.
I guess my question to you is, to me, this seems like a red flag for every single human being in America, especially people that have pensions and have other investments that they’re expecting will grow old with them so that they’ll be able to be taken care of in life. It seems like these protections that were placed in there, they’re not doing their job anymore, but explain what reps and warranties even are and the purpose of the SEC and how it has failed citizens of this country.
[00:28:43.230] – Bowen
Well, back to the email, because this ties in that I sent to Robert Rubin and the executive management team. I gave them the details as to what had happened, as to the fact that the defective mortgages had increased from 60 to in excess of 80 percent, while I had been screaming about this for a year and a half.
And yet Citigroup continued to issue their reps and warrants to the purchasers of the mortgages that they were selling these to, that these mortgages met our policy guidelines. And I even called for an outside investigation. I said, “Come in here from the outside and investigate what’s going on here because everybody here already knows.”
Now the representations and warranties are where the selling company, and this is very common in the industry, the selling company being Citigroup are actually the mortgage unit within Citigroup. They basically warrant to the purchasers of these mortgages that the mortgages were originated by other banks and mortgage companies, but they were originated under substantially the same practices and policies that Citigroup followed.
And so that’s where when I went in to underwrite these, I was actually underwriting according to Citigroup’s policies, because that’s what they were warranting to everyone that was purchasing these the purchasers of these not only the mortgages but also the investment-backed securities that they met, in essence, Citigroup’s credit policy. And yet they didn’t.
[00:30:27.430] – Grumbine
You had reason to believe that the email you sent was recaptured by Citi. Why do you believe that?
[00:30:34.300] – Bowen
Oh, my gosh. Well, I sent the email, as I indicated. I actually wound up sending it Saturday afternoon, November the third. And my wife was beating me up because we had to get to a wedding that night. So what I did on that email is I indicated a blind copy to my personal email account. I knew I would want to print and read the email.
And you can’t print from the company laptop because I was using the company laptop to send it. You can print from the office, but not from outside the office. So we went to her wedding and we came back and when I came back, I went to my primary email account that I blind copied and the email wasn’t there.
I had my email configuration set up such as that I had a secondary email account that was linked to my phone that I could go and check email. And I had instructed my primary email to make a copy of all of the email that I receive and put it in my secondary email. So I went to the secondary email and it was there, but it wasn’t in the primary email.
And there’s only one explanation for that, and that is that it was recalled. And also, I remember from the recall process in email that it can be recalled only if it is marked unread. So quite frankly, it scared the crap out of me because when I found that, I knew it had been recalled and I knew then that the only copy of that email outside of Citigroup, Citigroup had received a message that it had been successfully recalled. And it just really scared me.
So I basically called my son and he and his wife came over and I gave him the copy, stressed how urgent this was, and keep this in a safe place if something happens to me. Now, I also documented that, Steve, that it was recalled when I was interviewed by the Financial Crisis Inquiry Commission, and we haven’t even gotten to that yet. I told them about it. And it’s actually captured in my interview notes that the Financial Crisis Inquiry Commission made. So this is not something I just made up.
[00:32:55.180] – Grumbine
Well, my heart’s beating through my chest just thinking about this. That’s terrifying. You also were approached, if I’m not mistaken, by the associate general counsel of Citi. What was that all about?
[00:33:07.210] – Bowen
Well, after I had sent my email, I didn’t hear anything that entire weekend. And then I received an email from an associate general counsel of Citigroup, I think, on that following Tuesday. And actually, he called me and said, “We got your email. We’re taking it seriously. Don’t call us. We’ll call you. Goodbye.” And that was it.
And I wound up sending him two more emails, one in later November and one in December, saying, “Please contact me. There’s risk to the shareholders, to the company. You’ve got to understand the details.” And no one called me back until after the beginning of the year and then it was into the next year when I was stripped of my responsibilities and told not to come back.
[00:34:07.590] – Intermission
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[00:34:43.110] – Grumbine
Wow. It’s absolutely insane. What were some of the thoughts going through your head at that time? Just hearing about it. It’s got me terrified. What was it like?
[00:35:06.570] – Bowen
Well, it was that. It was terrifying, quite frankly. I did what they do in the movies. Whenever I’d go out to start my car, I wouldn’t start it until I looked under the hood and underneath it. And quite frankly, at one point in time, we were under surveillance and we saw some other cars there. And actually, the epitome of this came when this same assistant general counsel that I had dealt with before.
Finally, after I was stripped of my responsibilities and told not to come back, I decided I needed some legal representation at this point. And I referenced around and I found an attorney and the attorney called me on my cell phone. I was at the office and we arranged to meet and it was a short conversation. He introduced himself and we agreed to meet at a restaurant late that afternoon.
And almost as soon as I had hung up from him, I received a call on my cell phone from the same associate general counsel. And he was yelling at me. He was screaming at me. And believe me, we’d had some other conversations and he was always great to talk with and very congenial. He said, “I want every document you have. Anything.”
And I said, “Look, I don’t have lots of documents. So you come take my computer. It’s all on my computer. It’s the company’s laptop anyway.” So it was actually more than just a coincidence. I came to find out that he contacted me immediately after I was called by my attorney on my cell phone.
[00:36:45.940] – Grumbine
Indeed. So you ended up going to the SEC. What ended up happening?
[00:36:52.070] – Bowen
Well, I had filed a complaint with my attorney. I filed a Sarbanes-Oxley complaint, which the legislation makes available to you. If you have been retaliated against for whistleblowing, then you can file a complaint. And you actually, it has a procedure for filing that. And included in that complaint was my Rubin email.
And quite frankly, this, I think, went all the way up and the SEC became aware of my email and my complaint. And so they called me, they wanted me to testify, and so I did testify behind closed doors for two days in July of 2008. But before I even got there, Steve, I put together a thousand pages of documents of all of the warnings that I issued. I still had my laptop. They hadn’t taken it from me yet.
And I put out over a thousand pages of all the warnings that I had been issuing and all of the reports that indicated that what I was saying was true. And I sent that to the SEC. And so when I got to the SEC and we started going through all of this and this was with a number of their prosecutors from their enforcement division, they got really excited and they said, “Mr. Bowen, we are going to pursue this.”
And then they actually followed up with my former boss that had been canned and he basically confirmed everything that I had told them. And then three months later, we had the bank bailouts where Citigroup was bailed out to the tune of basically half a trillion dollars worth of capital and guarantees, plus they were given another two and a half-trillion dollars, ultimately in secret low-interest loans by the Fed. And at the end of all this, the United States government-owned 36 percent of the largest bank in the world.
[00:39:05.400] – Grumbine
That’s absolutely insane. So, I guess, my question to you, I can’t even imagine being involved in this, much less being the guy driving through this. You were interviewed by the Financial Crisis Inquiry Commission. What happened there?
[00:39:22.610] – Bowen
Well, in that instance, again, Congress chartered the Financial Crisis Inquiry Commission and they actually charged the commission to investigate the financial crisis, and if they find evidence of criminal wrongdoing, then they are to send a criminal prosecution to the attorney general of the United States. And they had gotten hold of my Sarbanes-Oxley complaint that I had given the SEC, as well as the Rubin email, and they asked me to come in and talk to them.
And we actually scheduled a time to come in on February the 27, 2010. And before I even got there, though, I had told them over the phone about this treasure trove of documents, the thousand pages of documents that I’d given the SEC. And by the way, the SEC refuses to release those to anyone. And as a matter of fact, there have been many requests of even journalists under the Freedom of Information Act, and the SEC has refused to release any of those documents with the official excuse that they are confidential in Citigroup trade secrets.
So, quite frankly, I guess that includes the fraudulent representations which I had printed off the SEC’s own website where they had registered the mortgage-backed securities. I guess that Citigroup trade secrets apply even to those which were obviously off the public website. But in any event, yeah, this is sort of getting an aside, but the Financial Crisis Inquiry Commission, before I even got there, they sent two of their investigators over to the SEC and they dug through for two days the thousand pages of documents that I had given the SEC. So when I got there, they already knew the story, but I told it to them anyway and I gave them some additional stuff, and now you want to know what happened?
[00:41:34.550] – Grumbine
Oh, absolutely.
[00:41:38.860] – Bowen
Well, I told you the SEC had gotten excited. Well, the FCIC got excited and they said, “Mr. Bowen, this is very, very compelling. We may ask you to testify in an open hearing.” And I said, “Well, OK.” And sure enough, on March the 22nd, I received an email from them asking me to testify in an open hearing on April the 7th. And this is where it really gets interesting.
They told me both in the letter and inside conversations, besides my presentation, which was going to be carried on national television to give them written testimony. And they told me I could have up to 30 pages of testimony and they told me even what they wanted me to include in that, you know, the damning evidence that I had given the SEC and I had told them about.
And they wanted me to submit that by March the 29th. They even told me, again what to put in the testimony. So I put that testimony together and sent them on the 29th, my 28-page written testimony, just as they had requested. But when they got that, Steve, the next day. I mean, I mailed it to them. When they got it the next day, they said, “Yeah, Bowen, yeah, we know what we told you, you could have 30 pages, but we have decided that it is too long and we will tell you exactly what to take out of your written testimony.”
And with that, they went through and told me to take out much of the damning stuff that they had originally told me to put in. And they further told me that these edits were not optional. If I didn’t make the edits, then I could possibly be taken off the witness list. In which case, Steve, you’ve got to understand, I had a very onerous confidentiality agreement with Citigroup, but Citigroup had specifically exempted me from that confidentiality agreement to testify before the congressional commission. I could tell them anything, but if I wasn’t allowed to testify before the commission, then I could never tell anyone anything without jeopardizing my family.
[00:44:17.860] – Grumbine
Wow.
[00:44:18.520] – Bowen
I spent an entire night on prayer on this thing, Steve, and I made the decision that it’s better to get something in writing than nothing. So I made the edits. And I sent them my edited 20-page testimony, I think, on April the 1st, and that became my official testimony. They put it on their website the night before the hearing.
[00:44:42.970] – Grumbine
My goodness. I understand the decision you made. You were going to have no opportunity to testify whatsoever if you didn’t do this. I guess my question is, going back to that original board meeting and you knew the minutes of that board meeting and the transition to Rubin as chief executive were held from the public until 10 years after they became available to the National Archives. Can you explain why and what was so important about the meeting notes?
[00:45:14.220] – Bowen
Well, when the commission went out of business, they sent all of their records over to the National Archives with instructions that they could not be read for five years. They were basically sealed for five years. Now, let me digress for just a second. I am going to come back to that. The congressional commission went out of business.
And when they were going out of business in early 2011, there were interviews with Angelides, the chairman, and others, and they said, “We vow transparency. We want the American people to know what we learned in all of our interviews.” And you can actually go to their website. And at the time, they put on their website a list of all of the witnesses, the hundreds of witnesses that they had interviewed.
And you can go down that list and you can click on a name and you can download the complete transcript, everything they told the commission. You can actually click on another button and download the mp3 file, listen to it on your treadmill. Now, that is transparency.
[00:46:23.250] – Grumbine
Yes.
[00:46:24.180] – Bowen
But if you go down that list of all of the witnesses, Steve, you won’t find the name Bowen. That is because the congressional commission decided that all of my testimony, everything I told them behind closed doors, everything I gave them, everything they got from the SEC, everything including my original written testimony, it all needed to stay confidential.
So it was sent to the National Archives with instructions that it could not be read for five years. And by the way, I’ve been asked, why five years? I don’t know, I guess it’s probably just a coincidence that the five years is a statute of limitations for fraud. Right? Right. So you were asking about the Citigroup minutes.
These were included in all of the documents that were sent to the National Archives. And even though the National Archives is making those public and has said they are public, they have refused to put a lot of their documents on their public website. So in any event, with Patrick Lovell and Eric Vaughan, and some crew from filming The Con, we went to the National Archives to look at those minutes.
And just found some fascinating stuff that went on in that November 4th board meeting. First of all, remember, Rubin was made chairman of the board. Well, as it turns out, he was made chairman of the board, but it wasn’t effective until the next day. And immediately after the board meeting, the director’s audit committee met because they had to approve the statement that was going to be made, the representation and warranty under Sarbanes-Oxley, that the internal controls were effective.
And at that board meeting, obviously, Rubin was not there. He wasn’t chairman yet. But the chief financial officer, the chief auditor and the chief risk officer were all at that board meeting. And it was represented in the board meeting to the audit committee that there had been no changes that had taken place since the last board meeting, knowing they had all received my email the day before. So basically, they lied to the directors audit committee to get that approved.
[00:49:02.780] – Grumbine
That’s just insane. For folks that are listening to this, this is a lot of technical details, but for regular people, the fraud that was perpetrated on all of us during the great financial crisis, these are the people that were trying to save us. Dick Bowen is a hero. How many people committed suicide from losing their homes? How many people lost everything?
The very real effect of this is not in this elite criminality that goes on within our government and in our financial institutions. It’s the people at the bottom that are being left out of this. And we’re giving you these details and they’re very interesting. But in reality, we know what happened, and yet it’s been covered up. The deep details elude the average person.
[00:49:50.260] – Bowen
No, you’re right.
[00:49:51.530] – Grumbine
I want to get back to the story here, but I wanted to make that point because how does this affect me? Well, it affects you because all of your assets has been backstopped by these fraudulent loans to bail themselves out, but they leave us in the shadows.
[00:50:07.580] – Bowen
Well, let me tie a ribbon around that director’s audit committee. This is going back to the earlier discussion when I told you that I knew that my email had been recalled. That was done to give the chief financial officer, the chief auditor, and the chief risk officer plausible deniability that they had never received my email.
[00:50:32.230] – Grumbine
Wow. What exactly do you think they altered? What did they hide and why?
[00:50:37.650] – Bowen
They basically hid the real dirty details of my testimony. And by the way, I was ready to tell them everything. I was waiting on any question to actually spill the beans. And the issue was no one really asked me any relevant question. For example, when I testified, I held up my Rubin email, and I told them that I had warned all of these members, including David Bushnell, who was the chief risk officer.
And then right after I testified, Bushnell testified. And throughout all of his presentation and Q&A, there was never one question from the commissioners about the email that I had held up and I had talked about sending to him. So this was complicit all the way around with regard to the congressional commission not really wanting this information to be known and the details of what had gone on to be known.
[00:51:41.880] – Grumbine
So in the end, the reason the SEC couldn’t make public your testimony was what they said to Bill Cohen of The New York Times, who did an op ed. What was the response? What was the hit to The New York Times? I don’t get it. What was that all about?
[00:51:57.240] – Bowen
Well, Bill Cohen wrote a full page op ed in The New York Times about my experience. And I laid out everything that had happened. This was published, I think, in July of 2013 in a Sunday edition. And in that, I told him everything that I had been telling you. It didn’t capture everything, my being forced to change my testimony and so forth and so on. It’s actually in there.
And some of the details of the people involved are in there. And then Bill Cohen had also attempted to go to the SEC and get copies of the thousand pages that I had given the SEC and they refused even under the Freedom of Information Act, which Bill Cohen had used. They refused to provide it saying it was confidential in Citigroup trade secrets.
So the SEC was complicit in this whole thing. Of course, you have to understand, if the SEC ever did turn loose of any of those documents, then they would have to fully admit that the United States government had full knowledge of the massive fraud going on at Citigroup before they bailed them out to the tune of half a trillion dollars.
[00:53:16.580] – Grumbine
This is just one act of fraud. Had they unveiled themselves to that, how quickly would this house of cards fallen? They would have been putting themselves in jail.
[00:53:27.830] – Bowen
No, you’re right. You are absolutely right.
[00:53:31.130] – Grumbine
Let’s bring it to current here. So these shady deals that have been going on behind the scenes to backstop this criminal streaming enterprise has been going on for a very long time. Bill Black has talked about several chapters of this fraud game being a key factor in the savings and loan crisis up until present. And it’s really not just a domestic US thing. There’s a lot of this kind of control fraud on a global scale.
[00:53:58.800] – Bowen
And Steve, this is going to continue to repeat itself, because the only lessons that were learned coming out of the financial crisis was that there is no downside for doing something bad. There was no accountability. That is the lesson that was learned by all the banks.
[00:54:18.270] – Grumbine
Wow. In The Con, they showed pictures of pensioners that had lost everything, the collapse with these mortgage-backed securities. People were losing everything. It wasn’t just houses. This had seeped into the entire system.
[00:54:32.370] – Bowen
And just to contrast this, Bill Black was involved in the SNL crisis. He was one of the chief regulators then. In the banking and SNL crisis that resulted in a loss of actually, relatively speaking, a very small amount. And the US government, the Department of Justice actually convicted over a thousand senior bankers for what went on in the SNL crisis.
In the most recent financial crisis, which has cost us estimated to be in excess of $24 trillion dollars, that financial crisis is a hundred times worse than the damages caused by the banking and SNL crisis. That crisis, we have had zero prosecutions basically coming out of that of senior financial executives. Now, you compare that to the thousand that they prosecuted successfully in the previous crisis. So there is a willful desire not to find accountability.
[00:55:40.200] – Grumbine
I think it’s important to note that Goldman Sachs is being taken before the Supreme Court regarding the Arkansas teacher retirement system, $19.5 billion, despite their repeated public assurances that it was being vigilant about avoiding conflicts of interest. The Trump-created conservative Supreme Court has to take a look at this.
And it will be very interesting now that conservatives have a six/three majority, how that will actually play out, because we know the control fraud is not a partisan game. It’s not a bug in the system. It is the system. And you are the guy that could have helped blow the lid off of this. What do you think about the position of Goldman Sachs in this Arkansas teacher retirement system case before the Supreme Court today?
[00:56:32.220] – Bowen
Well, in reading a little bit about what’s in the press on that, I am not an attorney, nor do I play one on TV. But basically, the case, as I understand it, revolves around how much you can rely on representations and warranties. And I will tell you, it’s very reminiscent, just like the investors are suing Goldman Sachs, as well as the holders of the bond securities.
Citi’s bondholders and securities actually sued Citi. And in fact, I’m very familiar with that because I was actually called to testify to give a deposition in that case. I testified for an entire day in a huge room full of attorneys representing plaintiffs and Citigroup and Citigroup wound up settling that. I actually gave this deposition in 2012. Citi settled the case for $730 million the next year.
[00:57:36.780] – Grumbine
Pennies.
[00:57:37.500] – Bowen
But because it was settled, I received an order from the judge saying that everything was sealed. I am prohibited from ever telling anyone specifically what I told in my deposition with regard to Citigroup. Now, I assure you I wouldn’t lie to them. So you may assume that they were told basically what we’re talking about today. But the mistake, quite frankly, that was made by Goldman Sachs is they didn’t settle this thing.
If they could have settled it, then everything is sealed. It’s just like that $7 billion settlement Citi made with the Department of Justice. Everything was sealed. The millions of pages of documents were sealed after that. And quite frankly, I’ve often said those settlements were nothing but payments of extortion to the Department of Justice to steal the evidence. So the public will never know how widespread and pervasive this was.
[00:58:35.760] – Grumbine
I’m going to ask you another question. And this to me is basically what I think is the most important thing. Aside from the fact that you’ve got pensions falling apart, Bernie Sanders talked about the criminality of Wall Street, that the Wall Street business model was fraud, and he stopped talking about it. Have you ever talked to anyone in the political arena, your information for them to do anything with it? And if so, what did they do with it?
[00:59:04.910] – Bowen
Well, first of all, in 2014, Bill Black and I visited with Elizabeth Warren’s staff. We did not meet Elizabeth Warren and we explained what was going on and they were very interested because obviously Senator Warren sat on the banking commission and we’re trying to get the government to investigate what went on. Let me digress for just a second because I will tie this back together.
We mentioned that all of the records went to the National Archives, including everything that I gave them with instructions they had to be sealed for five years. Well, in March of 2016, the National Archives started releasing all of their documents. And I got on their public website and started rooting through all of the documents that were there.
And I discovered that the Financial Crisis Inquiry Commission actually made a criminal referral, as they were instructed to do by Congress. And that criminal referral was based solely upon my testimony and evidence. And they sent that to the attorney general, Eric Holder. And I thought, holy smokes. Well, I was doing a program in May of 2016 up in Washington.
And I went by Elizabeth Warren’s office with my attorneys because I was still trying to get a congressional investigation. And I talked again to her senior investigative staff. I never met Elizabeth Warren, so I don’t want to represent that I did. And I gave them, again, my history. And I said, “And look at this. I just discovered this. The congressional commission actually made a criminal referral based solely upon my testimony and evidence.”
And they said, “Well, that’s very interesting. Mr. Bowen. Thank you very much for coming by.” Well, two months later, it hit all of the headlines that Elizabeth Warren had instructed her investigative staff to go through all of the records released by the National Archives. And they discovered that the congressional commission actually made 11 criminal referrals and sent all of that evidence and the criminal referrals to the attorney general, Eric Holder, who basically sat on them for five years while the statute of limitations ran out.
[01:01:30.530] – Grumbine
This man is a traitor to the people, a cover-up for the oligarchs that screw our nation on a daily basis, ridiculous. How many people are still celebrating the godliness of Barack Obama and Eric Holder has somehow been able to maintain some sort of an esteemable view. These people have materially harmed millions of families, the people that are supposed to be our champions.
This is so important because without bringing this to a head, we will always have to worry about losing everything. The system is dog eat dog to begin with. Capitalism is based on competition no matter who you are, and there’s not an ounce of humanity baked into it. And these people have a responsibility to take this information and do something with it. Do you feel like anybody will actually do anything with it? What do you think it will take to get this stuff to be acted upon?
[01:02:27.410] – Bowen
We’ve got to wake the public up, Steve. The public needs to demand action. And quite frankly, we have a new administration and I’ll give them the benefit of the doubt at this point. But up to this point in time, as I said before, the large banks have a stranglehold on this country. And the only way they have kept that stranglehold is by keeping the public in the dark.
[01:02:50.750] – Grumbine
I’ve got to ask this question. Was Joe Biden not Barack Obama’s vice president? Did he not get briefed by Eric Holder? I find it fascinating that this man did not have explicit knowledge of what was going on, especially given Joe Biden’s long career as a Wall Street front. The man has done nothing but backstop bankruptcy laws to hurt regular people to allow Wall Street to run roughshod on us.
I’ve not seen any evidence whatsoever that would suggest that he has ever fought a day for humanity. He has always been protecting Wall Street. So this seems like it would have been something he may have been in on or at least knowledgeable of. Would you say it’s far-fetched that he would not have known what Holder was doing?
[01:03:36.830] – Bowen
Steve, I have no idea.
[01:03:38.990] – Grumbine
I’m speculating, but it doesn’t take much to see a vice president who has clearance, who, Barack Obama was clearly getting briefed because he came out and spoke on it. And so, you know, Eric Holder was talking to him. You don’t have to own this. I’ll own this part.
I find it fascinating that the president of the United States, the man sitting in the Oval Office today, did not have explicit knowledge of what was going on during the administration. He served two terms as vice president. I think that a reasonable person could deduce that he was involved or at least had knowledge. Would you give me that much?
[01:04:15.350] – Bowen
I can’t argue with you.
[01:04:18.530] – Grumbine
Well, I want to thank you. First of all, your story is one that rivets me. Second of all, it is a story of what I consider to be a hero. You had material harm potentially at your doorstep. You were checking your car to see if it was going to blow up on you. I mean, my goodness sakes. So it takes real courage. And in your case, it takes real faith to press through what seems like an impossible situation.
And while you weren’t successful necessarily in terms of bringing it down, I give you all the credit in the world for being successful and being a man of integrity and fighting, and the fights, not over, because we’re going to help you. We’re trying. Folks, if you’re listening to this podcast and you’re not moved to action, I don’t know what more it will take.
Right now, our country is trapped in a fraud of epic proportions and it has been baked into our entire financial system. Our Federal Reserve has served the purpose of backstopping criminal behavior. It takes their bad debts and it rolls them off through quantitative easing. It changes the shape of that debt. Doesn’t print money. What they’re doing is they’re doing debt swaps.
They’re taking their bad debt and they’re writing it off on the back end. The Federal Reserve, there’s no issue with them holding that debt. They just write it off. But these companies that commit this fraud, they’re the ones that still stay afloat. But the people like you who have materially been harmed by the fraud of Wall Street that are in and out of the government and back down into Wall Street and you are struggling to pay your electric.
We had to fight to get pandemic payments. They literally said, we’re going to get away with this and there’s nothing you can do about it. My friends in the MMT community, my friends that are in the progressive activist community, and my friends that are independent and conservative that listen to this program, you need to speak out on this.
Guys like Dick Bowen should not be on their own. We need to give them air cover and we need to make sure that we bring this criminal enterprise down. Dick, thank you so much for joining me today. I look forward to working with you in the future.
[01:06:26.210] – Bowen
Steve, I enjoyed it. Thank you for what you’re doing.
[01:06:29.120] – Grumbine
Absolutely. This is Steve Grumbine, Dick Bowen, Macro N Cheese, we’re out of here.
[01:06:39.620] – Ending credits
Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
Mentioned in the podcast:
FCIC Testimony of David Bushnell (sworn Testimony of David Bushnell, Former Chief Risk Officer, Citigroup Inc. to the Financial Crisis Inquiry Commission)
FCIC Testimony of Richard Bowen (Bowen’s edited sworn testimony released by the FCIC)
Bowen FCIC Testimony April 7 2010 DRAFT_1 (Bowen’s original sworn written testimony released into the public domain by the National Archives)
Dick Bowen’s e-mail to Robert Rubin et al.
National Archives Bowen Legal Opinion (letter from the National Archives advising public release of records)
Citigroup Board Meeting Nov 4 2007 (reproduction of meeting minutes from the National Archives)
Citigroup Board Audit and Risk Management Committee Nov 4 2007 (meeting minutes from the National Archives)
25 Times Whistleblowers Changed History
Follow Richard on Twitter @RichardMBowen
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Steve Grumbine welcomes the uncompromising and incorruptible Richard Bowen to the studio to discuss the intricate web of deception and fraud more commonly known as our private banking system. Having been at Citigroup during the mortgage crisis, he had an insider’s eye view of the stranglehold the large banks have on our country. The financial services industry is one of the largest contributors to political campaigns and there’s a revolving door between the regulatory agencies and the institutions they’re supposed to be regulating. He can only conclude that the banking lobby controls the government.
In early 2006, when Citigroup consolidated its diverse mortgage operations, Richard was given a huge promotion to the position of chief underwriter. Citigroup was purchasing $90 billion worth of mortgages a year – mortgages they did not originate but purchased from other banks and mortgage companies. He was responsible for making sure these mortgages met Citi’s policy guidelines.
And that basically was the overall job. Now Citigroup, when they purchased these mortgages, immediately turned around and sold most of them. And when they sold them, they gave their representations and warranties. They basically gave their guarantees that these met our policy guidelines … And, yet I was finding that 60 percent were defective. They did not meet our guidelines. So, silly me, I started issuing warnings. I thought it was my job.
Being a whistleblower is neither a glamorous nor rewarding position to be in, and as Richard tells his students at the University of Texas, one will pay a dear price for “blowing the whistle.” It takes a real toll professionally, personally, and physically. The most heroic acts are often thankless, and as demonstrated by our recent history regarding the treatment of whistleblowers, no good deed goes unpunished. But it must be done.
Citigroup’s handling of Richard Bowen was a story in itself. He came under surveillance and was frankly terrified, afraid to start his car without looking under the hood first. You’ll have to listen to the episode for the story. He was led a merry dance by the SEC enforcement division, who feigned interest in his reports, and the Financial Crisis Inquiry Commission, charged by Congress to investigate the financial crisis. If they find evidence of criminal wrongdoing, they are to send a criminal prosecution to the US Attorney General. This sounds like a slam dunk, given the treasure trove of documents he had submitted to the SEC.
But if you go down that list of all the witnesses, Steve, you won’t find the name Bowen. That is because the congressional commission decided that all of my testimony, everything I told them behind closed doors, everything I gave them, everything they got from the SEC, everything including my original written testimony, it all needed to stay confidential. So it was sent to the National Archives with instructions that it could not be read for five years.
Why five years? Funny you should ask. Could it have anything to do with the fact that the statute of limitations for fraud is five years?
Richard Bowen was a senior vice president at Citigroup who blew the whistle on the mortgage fraud that helped trigger the subprime mortgage crisis. He is currently a professor of accounting at the University of Texas at Dallas. His story has been featured in the docuseries, The Con, the podcast, The New Untouchables: The Pecora Files, and the 60 Minutes story, “Prosecuting Wall Street.”
www.richardmbowen.com
On Twitter: @RichardMBowen
Macro N Cheese – Episode 114
When The Whistle Blows with Richard Bowen
April 3, 2021
[00:00:03.770] – Richard Bowen [intro/music]
You have to understand if the SEC ever did turn loose of any of those documents, then they would have to fully admit that the United States government had full knowledge of the massive fraud going on at Citigroup before they bailed them out to the tune of half a trillion dollars.
[00:00:25.350] – Richard Bowen [intro/music]
This is going to continue to repeat itself because the only lessons that were learned coming out of the financial crisis was that there is no downside for doing something bad. There was no accountability. That is the lesson that was learned by all the banks.
[00:01:35.230] – Geoff Ginter [music/intro]
Now, let’s see if we can avoid the apocalypse altogether. Here’s another episode of Macro N Cheese with your host, Steve Grumbine.
[00:01:43.060] – Steve Grumbine
All right. And this is Steve with Macro N Cheese. We are going to be talking to the $29 trillion dollar Deep Throat. This is one of the most important interviews that I’ve done at Macro N Cheese. Today, we have Richard Bowen. Richard Bowen is a whistleblower, and we are going to be taking his lived experience and transmuting an incredibly complicated and vast conspiracy into a street crime.
It’s theft, in the immutable words of Tom Murphy. Yeah, fucking a right. It’s theft, alright. Theft of people’s lives, freedom and ability to live as free citizens within the confines of what the entire purpose of the United States is presumed to be based on the principles of life, liberty, and the pursuit of happiness. Built in the preamble, Bill of Rights and Constitution, which was constructed to sever the power of elites, feudals, through separation of powers.
Instead, over the course of the last 40 odd years, we’ve seen a massive collapse of the rule of law because of the integrity of law no longer exists. It’s a facade and that’s what we’ve learned week in and week out on our podcast, The New Untouchables. Another myth of American governance is a government of, by and for the people. We know that this is no longer true, but for very few of us understand what’s actually happened to make it so and actually what the system has done to make it so.
Our audience, you, the people need to understand our financial system, the lifeblood of capitalism works in a way that has created a fictional economy based on fraud that the entire system can backstop, ensure by infusing massive government stimulus through emergencies that creates socialism for a criminal enterprise. It could take you years to fully realize the history and policy and reasons behind why things are the way they are.
But my guest today, Richard Bowen, is literally the $29 trillion dollar Deep Throat. We just hope that his truth will penetrate the universe of noise out there. And we are filled with propaganda because very few of us really understand what we’re in the midst of. Because of this, we don’t know how we got here. It’s so incredibly timely because as of now, the Supreme Court is set to hear oral arguments in a case through which the Arkansas teacher’s pension is suing Goldman Sachs for what appears to be the exact same case, I guess, represents. Welcome to the show, Richard. Thank you so much for joining me today.
[00:04:22.260] – Richard Bowen
Thank you, Steve. It’s terrific to be here.
[00:04:24.930] – Grumbine
Absolutely. So you’ve got an incredibly powerful story. I’ve had the luxury of learning about it on The New Untouchables and through the process of you doing The Con with Patrick Lovell and Eric Vaughan and Bill Black and others. So I guess before we get too far for those people that aren’t in the know of what’s going on right now, can you take an opportunity to explain who you are in terms of the control fraud that has happened in Wall Street and Citibank in particular.
[00:04:54.390] – Bowen
Well, very high-level Citigroup group consolidated all of their various mortgage operations, and I was given a huge promotion and I was responsible to make sure that the $90 billion dollars a year that they were purchasing in mortgages and immediately selling, by the way, met our credit policy. And silly me, I saw some stuff that was going on that, quite frankly, was illegal. It was actually fraud. And I started warning about it and I warned about it for a year and a half.
[00:05:30.820] – Grumbine
So, Richard, I’m interested in understanding, you have a lot of concerns regarding what the power of the banks are in society today.
[00:05:41.900] – Bowen
I have real concerns about that. First of all, I have seen in my own experience that basically the large banks have a stranglehold on our country. The financial services industry are one of the largest campaign contributors in all of the elections. There’s a constant revolving door that goes back and forth between all of the agencies and the financial institutions.
And quite frankly, I have seen through my own experience that basically the banking lobby controls our government. That’s my only way to put it. Now, obviously, we change government and time will tell with regard to the current administration. But I can personally attest to, as we may get into detail as to some of the challenges that I personally saw.
[00:06:32.880] – Grumbine
What I have experienced just in the short time I’ve been around you is that this has been a massive, end-to-end cover-up, nothing accidental about any of this. And I guess the question is, as a man of faith and a man that was involved in the banking industry, how did your faith inform your actions within the industry as you did your job?
[00:06:55.140] – Bowen
Well, I have a very deep faith. I can attribute that to my wife. And I will tell you, as I have gone through difficult times in my life, and this obviously was by far the one on the edge, I’ve prayed about it as to what I should do. Should I shut up and mind my own business and ignore my job responsibilities? Should I leave or should I try to change things? And I kept getting the message I need to stay the course. I need to do what is supposed to be done. And that’s really what has helped me persevere throughout this experience.
[00:07:32.390] – Grumbine
You say your responsibility. What exactly was your position at Citigroup and what is the job description of a chief underwriter?
[00:07:42.500] – Bowen
- In early 2006, Citigroup consolidated all of their very diverse mortgage operations. And I was given a huge promotion. I was promoted to the position of business chief underwriter. And in that position, I was responsible to make sure that the $90 billion a year of mortgages that they were purchasing from other banks and mortgage companies.
And by the way, in my area, Citigroup did not originate these mortgages. They purchased them from other banks and mortgage companies, in fact, close to a thousand other banks and mortgage companies, many hundreds. And it was my job to make sure that these met our policy guidelines. And that basically was the overall job. Now Citigroup, when they purchased these mortgages, immediately turned around and sold most of them.
And when they sold them, they gave their representations and warranties. They basically gave their guarantees that these met our policy guidelines that they were selling. And yet I was finding that 60 percent were defective. They did not meet our guidelines. So silly me, I started issuing warnings. I thought it was my job. And gosh, I sent email, I put it in my weekly report. I made committee presentations.
I even cornered people in the hallway at the water fountain. I’m not a shy guy. And this went on for about a year and a half. And during that period, the volumes kept increasing and the rates of defective mortgages increased to over 80 percent. And yet Citigroup continued to warrant in the representations and warranties that these met our policy guidelines. So this was very trying period.
[00:09:40.380] – Grumbine
It makes me wonder, Bill Black talks about the recipe for fraud and he talks about two of the four pieces though were making sure that there was an incredibly high volume of transactions. And the other one is making sure that there were very little reserves in place to support any of the defaults. Can you tell me a little bit about your experience with that particular recipe for fraud?
[00:10:05.130] – Bowen
Well, the volumes were certainly increasing dramatically, totally outstripped the personnel that were really responsible to ensure the safeguards and the credit policies were truly being monitored. And quite frankly, they were ignoring the actual underlying credit issues. So there were not setting up any reserves for these. And so that’s his recipe perfectly. It’s exactly what was happening.
[00:10:32.240] – Grumbine
So you had a team that was actually delving into this. You had loans coming in from all over the country. What was that volume like in terms of processing? Were you able to actually focus in on these things or was it just like slamming them through?
[00:10:45.440] – Bowen
Well, the way it was set up was in my largest area where we purchased and sold over $50 billion a year, we would purchase these loans one at a time, and then they would immediately turn around and sell the loans. And then ostensibly my function was set up to come in after they had been sold and take a small sample to demonstrate that we’re still meeting the credit policy.
And it was my sampling that found six months into my new job that we were not meeting our policy. Matter of fact, at that point in time, 60 percent of the loans that we sampled did not meet our policy, and yet they were sold with representations that they did meet our policy. So that’s the largest area. Many people think that all of these loans were underwritten ahead of time. No, that was not the way that Citi had set it up when I got into place.
[00:11:45.330] – Grumbine
I was one of the people that got swept up in this. We got a big loan from Countrywide. My life turned upside down in 2009, to be perfectly honest. It was July 24th, 2009, when I lost my career at Verizon. I think there’s a lot of people that are very similar to me in the sense of how this played out. Can you describe who were some of the key providers of loans at that time?
[00:12:12.710] – Bowen
Oh, we’re talking about New Century, Countrywide was obviously very large outfit. We bought a large volume of loans from Countrywide. Basically, all of the major players we would purchase loans from and the real key there for all of the mortgage companies was to make the loans and immediately sell them.
And by selling them, then they were basically foisting the responsibility of the credit and everything else on the purchaser. And that actually fit very well into Bill Black’s fraud structure – make the loans, very little in the way of credit observations when they make the loans, and immediately sell them. And don’t worry about it. And Citigroup was a concentrator.
They would purchase from all of these Countrywides and New Centuries and so forth, and then they would turn around and immediately pooled them or sell them themselves on a greater scale, and they would sell them to Fannie Mae, Freddie Mac, mortgage securitizations. And again, that was the whole key up the line. Everybody that touched and sold a made a great deal of money.
[00:13:26.530] – Grumbine
So, Richard, one of the questions I have going back to our time at The New Untouchables and The Con, Michael Winston really put it out there painfully. This guy has been through so much. What was your relationship with Michael Winston?
[00:13:41.930] – Bowen
Well, I didn’t know Michael at the time. I have since come to know Michael, we’ve actually become friends as we’ve both got involved in the docuseries The Con, which, of course, The New Untouchables is based on. And he’s a terrific guy. And quite frankly, his experience at Countrywide has cost him dearly, even on his health. And Michael is not unlike the other whistleblowers that are out there in other organizations, except he bit the bullet. He stayed the course. He refused to back down, and as a result, he paid the price.
[00:14:16.750] – Grumbine
Is that the story of a whistleblower? Is that literally what we put whistleblowers through in this country? You guys are doing God’s work, and it seems like you would think that our system, which is a system of laws and by and for the people, would absolutely support you in this. But instead, it seems like it actually works against us.
[00:14:36.400] – Bowen
Steve, you obviously don’t understand the . . . If you’re a whistleblower, for example, if the top management at Citigroup had paid attention to what I was screaming about, then they would have had to have curtailed this very, very profitable business model of buying and selling mortgages. And that would have meant a significant reduction in incentive compensation that this profitable business model drove, which went into everybody’s pocket.
So there was incentive for all of management not to pay attention and to ignore and to bury anything that might threaten their ongoing incentive. And quite frankly, that played out in all of the large organizations. And as a result, the whole focus is to shut up the whistleblower, get them to be quiet, whatever it takes to get them to shut up so that they can continue the profitable operations.
[00:15:40.400] – Grumbine
As an employee and working with financial transactions, private customer information, having very heavy responsibility to make sure that you’re doing the right thing, when you’re in your job and you’re passing this information on through the process, was your boss happy that you were presenting this information? How did that play out?
[00:16:03.500] – Bowen
Well, my immediate boss was the chief underwriter and he was exceptionally supportive. He was likewise concerned about what I was finding and he would take my warnings and put his warnings on top of them and send them on to an even greater distribution list.
And then sometime in 2007, he had all of his responsibilities stripped away and he felt compelled to take early retirement. And my new boss, the new chief underwriter, was not real happy about all of these warnings that I continued to send. So, again, everybody up and down the line that’s involved with a whistleblower will pay a price, as my boss found out.
[00:16:52.880] – Grumbine
This is the stuff that just makes you crazy. People like Chelsea Manning and all the other whistleblowers throughout history and every one of them has met with a jail cell, diminished career, diminished life. What have been some of the impacts to you at this point?
[00:17:09.350] – Bowen
Oh, my gosh. First of all, I tell my students, I’m presently a professor at the University of Texas at Dallas, which is where I went after I left Citi, and I tell my students, “You will pay a price for blowing the whistle. It will take a toll on you professionally. Believe me, my career in the financial services industry is completely dead and you’ll pay a toll on it personally, even physically.”
I will tell you, I remember being in Citigroup meetings and arguing my position with regard to the crap that we were selling in mortgage loans. And I remember my stomach just being tied in knots and aching and hurting. Well, after I left Citigroup, I actually had a ruptured colon. I had to have emergency surgery. I almost died.
And the doctors agreed it’s probably stress-related. They wound up taking out part of my colon, and I had three major surgeries on them. So it will take a toll on you. Fortunately, I have a very strong family relationship and my wife was supportive throughout this. But in many instances, it takes a toll on the family.
[00:18:28.530] – Grumbine
Tell me a little bit more about that. How did your wife respond to that? I know when we have problems in our home, it always ends up bringing a lot of other problems because you’re panicked, you’re feeling scared, you’re stressed out. What was the impact to your life at home?
[00:18:44.190] – Bowen
Well, obviously, it took an impact on our standard of living. The stress is palpable. It truly was. She understood what I was doing. I went out of my way to inform my family and my children and their wives what I was doing and implicitly receiving their approval to go forward with it. But it does have a terrific strain on the family. And a matter of fact, the studies that have been published on whistleblowers, many, many wound up with the family breaking up ultimately because of this.
[00:19:19.750] – Grumbine
That’s horrible. You go to your boss, he ends up paying the price for being a part of this, your family life is in disarray. Even though you’ve got a strong faith and a strong relationship, it’s still taking a heavy toll. And then you still pressed forward. You still asked to get information. What kinds of information did you request? How were you blocked?
[00:19:40.900] – Bowen
Well, I was ignored. And no one could argue with me, Steve, with regard to what I was finding. No one could argue with me. All they could say, “Well, these are just technical exceptions that you’re measuring.” And I say, “Well, then change the policy so they’re not technical exceptions.” And, of course, they couldn’t do that.
And then obviously, when the credit cycle turned, that’s when the mortgages really started cratering very badly, because at the outset, the economy was expanding. People were cashing out mortgages on their house and living off that, and then they would refinance their house and live off of that. And it was an expansion across the board and the real estate prices were going up.
Then all of a sudden when it turned, that’s where the technical exceptions were, the loans were given to people that did not meet the credit qualifications, really started defaulting in a huge number.
[00:20:41.890] – Grumbine
I guess the follow-up to that is as you’re going through this process, you came up with an approach. What was your strategy here?
[00:20:50.280] – Bowen
Well, it’s nice to think that I had a strategy. I was doing my job. I was trying to fix it, and bits and pieces of my budget would get cut and people would promise that they would give me new data processing reports that would help fine-tune the underwriting process and identify more definitively the lenders that were selling us bad loans because we didn’t have any automated reporting that would give us this.
And inevitably, I wouldn’t get the reports that I had asked for, even though I had been promised. And then there would be all sorts of excuses why they couldn’t. And my budget was cut. But strangely, everyone else’s budget was increased and they were able to add manpower. So it was very subtle. It was a daunting process. And basically, I stayed the course.
[00:21:45.940] – Grumbine
You kept pressing to take it all the way. Can you talk about these technical issues? Sarbanes-Oxley seemed to be a key consideration. Can you explain what Sarbanes-Oxley is and how that played into your work? And as you pressed forward and deeper, how this played a part of things?
[00:22:03.970] – Bowen
Well, Sarbanes-Oxley was put together after WorldCom and Enron failed. Enron first with what really was the emphasis and the whole focus was on internal controls. Sarbanes-Oxley was written to make companies have adequate internal controls to check on the quality of everything that they were doing. And Sarbanes-Oxley also made it illegal to retaliate against whistleblowers.
By the way, no one bet any chips on that. There’s never been a prosecution on that. But also one of the provisions that they put in Sarbanes-Oxley is executive management has to swear, they have to certify every quarter that the internal controls are effective.
And I was a part of the internal control process, obviously, to make sure that we had the controls in place and we were not producing crap that was going to cause loss to the company and investors. And so that helped me stay the course. And also I use that when I finally went to the board of directors, and we haven’t gotten to that yet.
[00:23:17.200] – Grumbine
So tell me, what exactly is the feeling inside the company? Do they know you’re onto them or do you think they just don’t want to deal with you?
[00:23:26.330] – Bowen
They don’t want to deal with it. They didn’t want to pay attention. It was like the elephant in the living room and everybody that walks through won’t acknowledge the elephant, but they’ve got to step over the dung and they’ve got to go around the elephant and so forth. But nonetheless, the issue is not to recognize the elephant. And that’s exactly what was going on at Citigroup. No one wanted to give any credibility to the warnings that I was issuing, although individually they could not argue with me.
[00:24:00.350] – Grumbine
So you kept taking this up the food chain. Tell us about once you get to the top. Where are you at, right? Somebody is going to hear you, right?
[00:24:08.630] – Bowen
Well, I, as I indicated before, had been issuing warnings for about a year and a half. I had seen my boss who was supporting me, stripped of all of his responsibilities and basically forced into retirement. And I sort of knew that this might not end well for me, but I wasn’t going to give up. I figured I got one shot. Call it a Hail Mary pass.
And I read in the paper this hit all the headlines on November the 2nd, which was a Friday of 2007, that Citigroup was calling an emergency board meeting for that coming Sunday. And in the press, they speculated that at the board meeting, Robert Rubin was going to be replacing Chuck Prince, who was the chairman of the board.
[00:24:56.870] – Grumbine
Before you go further, tell us who Robert Rubin is. Folks, this is going to tie a lot of loose ends together.
[00:25:03.050] – Grumbine
Well, Robert Rubin was chief operating officer of Goldman Sachs, I believe, and then he left Goldman Sachs and became the Secretary of the Treasury under President Clinton. And then he helped lobby for the repeal of Glass-Steagall, which put some controls in place on banks.
That’s about the time that Citicorp merged with Traveler’s Life, which was an illegal merger, by the way, under Glass-Steagall, and yet they merged under a waiver from the Fed, so they had to repeal Glass-Steagall. Robert Rubin was very active in apparently lobbying for the repeal process since he was Secretary of the Treasury.
And as soon as it was apparent they were going to repeal Glass-Steagall, which they did, Robert Rubin left and joined Citigroup. And then obviously with repeal of Glass-Steagall, they could keep the merger in place and Citigroup could go forward. And he was named executive vice-chairman, I’ve forgotten exactly what the title was. But he was very high up in Citigroup.
So when I saw that he was going to be named at the board meeting on November the 4th to replace Chuck Prince as chairman of the board, I said this is my opportunity. This is how I get my warnings to the board of directors. So the next day, November 3rd, Saturday morning, sitting at my kitchen table, I drafted an email and I sent that email to Robert Rubin, who the next day was named chairman of the board.
[00:26:45.474] – Grumbine
Wow.
[00:26:46.980] – Bowen
I also sent it to the chief financial officer, the chief risk officer, and the chief auditor, because I knew under Sarbanes-Oxley they had to certify that the internal controls were effective. And in the email, I said internal controls are broken. There are huge financial losses. Well, we won’t go into the details, but suffice to say, somebody did receive my email and I was basically told not to come back.
[00:27:20.450] – Grumbine
Wow, here you are putting this stuff out there. We’ve got a guy, Robert Rubin, who is in the revolving door of government and banking, pushing to tear down the firewall between investment banking and savings and loans. And then it’s put back in the government. And once he’s done his destruction leaves and goes back to private industry to reap the rewards of it. This guy, Robert Rubin, seems like a real parasite.
[00:27:45.350] – Bowen
That’s the epitome of what I related to earlier as the revolving door, Steve.
[00:27:50.690] – Grumbine
Unbelievable. One of the things I want to talk about is the concept of reps and warranties. Creating the SEC and the 1933 Securities and Exchange Act, all this came from the Pecora Hearings. This was a big deal and it’s a key fundamental aspect of not only The New Untouchables but also The Con.
I guess my question to you is, to me, this seems like a red flag for every single human being in America, especially people that have pensions and have other investments that they’re expecting will grow old with them so that they’ll be able to be taken care of in life. It seems like these protections that were placed in there, they’re not doing their job anymore, but explain what reps and warranties even are and the purpose of the SEC and how it has failed citizens of this country.
[00:28:43.230] – Bowen
Well, back to the email, because this ties in that I sent to Robert Rubin and the executive management team. I gave them the details as to what had happened, as to the fact that the defective mortgages had increased from 60 to in excess of 80 percent, while I had been screaming about this for a year and a half.
And yet Citigroup continued to issue their reps and warrants to the purchasers of the mortgages that they were selling these to, that these mortgages met our policy guidelines. And I even called for an outside investigation. I said, “Come in here from the outside and investigate what’s going on here because everybody here already knows.”
Now the representations and warranties are where the selling company, and this is very common in the industry, the selling company being Citigroup are actually the mortgage unit within Citigroup. They basically warrant to the purchasers of these mortgages that the mortgages were originated by other banks and mortgage companies, but they were originated under substantially the same practices and policies that Citigroup followed.
And so that’s where when I went in to underwrite these, I was actually underwriting according to Citigroup’s policies, because that’s what they were warranting to everyone that was purchasing these the purchasers of these not only the mortgages but also the investment-backed securities that they met, in essence, Citigroup’s credit policy. And yet they didn’t.
[00:30:27.430] – Grumbine
You had reason to believe that the email you sent was recaptured by Citi. Why do you believe that?
[00:30:34.300] – Bowen
Oh, my gosh. Well, I sent the email, as I indicated. I actually wound up sending it Saturday afternoon, November the third. And my wife was beating me up because we had to get to a wedding that night. So what I did on that email is I indicated a blind copy to my personal email account. I knew I would want to print and read the email.
And you can’t print from the company laptop because I was using the company laptop to send it. You can print from the office, but not from outside the office. So we went to her wedding and we came back and when I came back, I went to my primary email account that I blind copied and the email wasn’t there.
I had my email configuration set up such as that I had a secondary email account that was linked to my phone that I could go and check email. And I had instructed my primary email to make a copy of all of the email that I receive and put it in my secondary email. So I went to the secondary email and it was there, but it wasn’t in the primary email.
And there’s only one explanation for that, and that is that it was recalled. And also, I remember from the recall process in email that it can be recalled only if it is marked unread. So quite frankly, it scared the crap out of me because when I found that, I knew it had been recalled and I knew then that the only copy of that email outside of Citigroup, Citigroup had received a message that it had been successfully recalled. And it just really scared me.
So I basically called my son and he and his wife came over and I gave him the copy, stressed how urgent this was, and keep this in a safe place if something happens to me. Now, I also documented that, Steve, that it was recalled when I was interviewed by the Financial Crisis Inquiry Commission, and we haven’t even gotten to that yet. I told them about it. And it’s actually captured in my interview notes that the Financial Crisis Inquiry Commission made. So this is not something I just made up.
[00:32:55.180] – Grumbine
Well, my heart’s beating through my chest just thinking about this. That’s terrifying. You also were approached, if I’m not mistaken, by the associate general counsel of Citi. What was that all about?
[00:33:07.210] – Bowen
Well, after I had sent my email, I didn’t hear anything that entire weekend. And then I received an email from an associate general counsel of Citigroup, I think, on that following Tuesday. And actually, he called me and said, “We got your email. We’re taking it seriously. Don’t call us. We’ll call you. Goodbye.” And that was it.
And I wound up sending him two more emails, one in later November and one in December, saying, “Please contact me. There’s risk to the shareholders, to the company. You’ve got to understand the details.” And no one called me back until after the beginning of the year and then it was into the next year when I was stripped of my responsibilities and told not to come back.
[00:34:07.590] – Intermission
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[00:34:43.110] – Grumbine
Wow. It’s absolutely insane. What were some of the thoughts going through your head at that time? Just hearing about it. It’s got me terrified. What was it like?
[00:35:06.570] – Bowen
Well, it was that. It was terrifying, quite frankly. I did what they do in the movies. Whenever I’d go out to start my car, I wouldn’t start it until I looked under the hood and underneath it. And quite frankly, at one point in time, we were under surveillance and we saw some other cars there. And actually, the epitome of this came when this same assistant general counsel that I had dealt with before.
Finally, after I was stripped of my responsibilities and told not to come back, I decided I needed some legal representation at this point. And I referenced around and I found an attorney and the attorney called me on my cell phone. I was at the office and we arranged to meet and it was a short conversation. He introduced himself and we agreed to meet at a restaurant late that afternoon.
And almost as soon as I had hung up from him, I received a call on my cell phone from the same associate general counsel. And he was yelling at me. He was screaming at me. And believe me, we’d had some other conversations and he was always great to talk with and very congenial. He said, “I want every document you have. Anything.”
And I said, “Look, I don’t have lots of documents. So you come take my computer. It’s all on my computer. It’s the company’s laptop anyway.” So it was actually more than just a coincidence. I came to find out that he contacted me immediately after I was called by my attorney on my cell phone.
[00:36:45.940] – Grumbine
Indeed. So you ended up going to the SEC. What ended up happening?
[00:36:52.070] – Bowen
Well, I had filed a complaint with my attorney. I filed a Sarbanes-Oxley complaint, which the legislation makes available to you. If you have been retaliated against for whistleblowing, then you can file a complaint. And you actually, it has a procedure for filing that. And included in that complaint was my Rubin email.
And quite frankly, this, I think, went all the way up and the SEC became aware of my email and my complaint. And so they called me, they wanted me to testify, and so I did testify behind closed doors for two days in July of 2008. But before I even got there, Steve, I put together a thousand pages of documents of all of the warnings that I issued. I still had my laptop. They hadn’t taken it from me yet.
And I put out over a thousand pages of all the warnings that I had been issuing and all of the reports that indicated that what I was saying was true. And I sent that to the SEC. And so when I got to the SEC and we started going through all of this and this was with a number of their prosecutors from their enforcement division, they got really excited and they said, “Mr. Bowen, we are going to pursue this.”
And then they actually followed up with my former boss that had been canned and he basically confirmed everything that I had told them. And then three months later, we had the bank bailouts where Citigroup was bailed out to the tune of basically half a trillion dollars worth of capital and guarantees, plus they were given another two and a half-trillion dollars, ultimately in secret low-interest loans by the Fed. And at the end of all this, the United States government-owned 36 percent of the largest bank in the world.
[00:39:05.400] – Grumbine
That’s absolutely insane. So, I guess, my question to you, I can’t even imagine being involved in this, much less being the guy driving through this. You were interviewed by the Financial Crisis Inquiry Commission. What happened there?
[00:39:22.610] – Bowen
Well, in that instance, again, Congress chartered the Financial Crisis Inquiry Commission and they actually charged the commission to investigate the financial crisis, and if they find evidence of criminal wrongdoing, then they are to send a criminal prosecution to the attorney general of the United States. And they had gotten hold of my Sarbanes-Oxley complaint that I had given the SEC, as well as the Rubin email, and they asked me to come in and talk to them.
And we actually scheduled a time to come in on February the 27, 2010. And before I even got there, though, I had told them over the phone about this treasure trove of documents, the thousand pages of documents that I’d given the SEC. And by the way, the SEC refuses to release those to anyone. And as a matter of fact, there have been many requests of even journalists under the Freedom of Information Act, and the SEC has refused to release any of those documents with the official excuse that they are confidential in Citigroup trade secrets.
So, quite frankly, I guess that includes the fraudulent representations which I had printed off the SEC’s own website where they had registered the mortgage-backed securities. I guess that Citigroup trade secrets apply even to those which were obviously off the public website. But in any event, yeah, this is sort of getting an aside, but the Financial Crisis Inquiry Commission, before I even got there, they sent two of their investigators over to the SEC and they dug through for two days the thousand pages of documents that I had given the SEC. So when I got there, they already knew the story, but I told it to them anyway and I gave them some additional stuff, and now you want to know what happened?
[00:41:34.550] – Grumbine
Oh, absolutely.
[00:41:38.860] – Bowen
Well, I told you the SEC had gotten excited. Well, the FCIC got excited and they said, “Mr. Bowen, this is very, very compelling. We may ask you to testify in an open hearing.” And I said, “Well, OK.” And sure enough, on March the 22nd, I received an email from them asking me to testify in an open hearing on April the 7th. And this is where it really gets interesting.
They told me both in the letter and inside conversations, besides my presentation, which was going to be carried on national television to give them written testimony. And they told me I could have up to 30 pages of testimony and they told me even what they wanted me to include in that, you know, the damning evidence that I had given the SEC and I had told them about.
And they wanted me to submit that by March the 29th. They even told me, again what to put in the testimony. So I put that testimony together and sent them on the 29th, my 28-page written testimony, just as they had requested. But when they got that, Steve, the next day. I mean, I mailed it to them. When they got it the next day, they said, “Yeah, Bowen, yeah, we know what we told you, you could have 30 pages, but we have decided that it is too long and we will tell you exactly what to take out of your written testimony.”
And with that, they went through and told me to take out much of the damning stuff that they had originally told me to put in. And they further told me that these edits were not optional. If I didn’t make the edits, then I could possibly be taken off the witness list. In which case, Steve, you’ve got to understand, I had a very onerous confidentiality agreement with Citigroup, but Citigroup had specifically exempted me from that confidentiality agreement to testify before the congressional commission. I could tell them anything, but if I wasn’t allowed to testify before the commission, then I could never tell anyone anything without jeopardizing my family.
[00:44:17.860] – Grumbine
Wow.
[00:44:18.520] – Bowen
I spent an entire night on prayer on this thing, Steve, and I made the decision that it’s better to get something in writing than nothing. So I made the edits. And I sent them my edited 20-page testimony, I think, on April the 1st, and that became my official testimony. They put it on their website the night before the hearing.
[00:44:42.970] – Grumbine
My goodness. I understand the decision you made. You were going to have no opportunity to testify whatsoever if you didn’t do this. I guess my question is, going back to that original board meeting and you knew the minutes of that board meeting and the transition to Rubin as chief executive were held from the public until 10 years after they became available to the National Archives. Can you explain why and what was so important about the meeting notes?
[00:45:14.220] – Bowen
Well, when the commission went out of business, they sent all of their records over to the National Archives with instructions that they could not be read for five years. They were basically sealed for five years. Now, let me digress for just a second. I am going to come back to that. The congressional commission went out of business.
And when they were going out of business in early 2011, there were interviews with Angelides, the chairman, and others, and they said, “We vow transparency. We want the American people to know what we learned in all of our interviews.” And you can actually go to their website. And at the time, they put on their website a list of all of the witnesses, the hundreds of witnesses that they had interviewed.
And you can go down that list and you can click on a name and you can download the complete transcript, everything they told the commission. You can actually click on another button and download the mp3 file, listen to it on your treadmill. Now, that is transparency.
[00:46:23.250] – Grumbine
Yes.
[00:46:24.180] – Bowen
But if you go down that list of all of the witnesses, Steve, you won’t find the name Bowen. That is because the congressional commission decided that all of my testimony, everything I told them behind closed doors, everything I gave them, everything they got from the SEC, everything including my original written testimony, it all needed to stay confidential.
So it was sent to the National Archives with instructions that it could not be read for five years. And by the way, I’ve been asked, why five years? I don’t know, I guess it’s probably just a coincidence that the five years is a statute of limitations for fraud. Right? Right. So you were asking about the Citigroup minutes.
These were included in all of the documents that were sent to the National Archives. And even though the National Archives is making those public and has said they are public, they have refused to put a lot of their documents on their public website. So in any event, with Patrick Lovell and Eric Vaughan, and some crew from filming The Con, we went to the National Archives to look at those minutes.
And just found some fascinating stuff that went on in that November 4th board meeting. First of all, remember, Rubin was made chairman of the board. Well, as it turns out, he was made chairman of the board, but it wasn’t effective until the next day. And immediately after the board meeting, the director’s audit committee met because they had to approve the statement that was going to be made, the representation and warranty under Sarbanes-Oxley, that the internal controls were effective.
And at that board meeting, obviously, Rubin was not there. He wasn’t chairman yet. But the chief financial officer, the chief auditor and the chief risk officer were all at that board meeting. And it was represented in the board meeting to the audit committee that there had been no changes that had taken place since the last board meeting, knowing they had all received my email the day before. So basically, they lied to the directors audit committee to get that approved.
[00:49:02.780] – Grumbine
That’s just insane. For folks that are listening to this, this is a lot of technical details, but for regular people, the fraud that was perpetrated on all of us during the great financial crisis, these are the people that were trying to save us. Dick Bowen is a hero. How many people committed suicide from losing their homes? How many people lost everything?
The very real effect of this is not in this elite criminality that goes on within our government and in our financial institutions. It’s the people at the bottom that are being left out of this. And we’re giving you these details and they’re very interesting. But in reality, we know what happened, and yet it’s been covered up. The deep details elude the average person.
[00:49:50.260] – Bowen
No, you’re right.
[00:49:51.530] – Grumbine
I want to get back to the story here, but I wanted to make that point because how does this affect me? Well, it affects you because all of your assets has been backstopped by these fraudulent loans to bail themselves out, but they leave us in the shadows.
[00:50:07.580] – Bowen
Well, let me tie a ribbon around that director’s audit committee. This is going back to the earlier discussion when I told you that I knew that my email had been recalled. That was done to give the chief financial officer, the chief auditor, and the chief risk officer plausible deniability that they had never received my email.
[00:50:32.230] – Grumbine
Wow. What exactly do you think they altered? What did they hide and why?
[00:50:37.650] – Bowen
They basically hid the real dirty details of my testimony. And by the way, I was ready to tell them everything. I was waiting on any question to actually spill the beans. And the issue was no one really asked me any relevant question. For example, when I testified, I held up my Rubin email, and I told them that I had warned all of these members, including David Bushnell, who was the chief risk officer.
And then right after I testified, Bushnell testified. And throughout all of his presentation and Q&A, there was never one question from the commissioners about the email that I had held up and I had talked about sending to him. So this was complicit all the way around with regard to the congressional commission not really wanting this information to be known and the details of what had gone on to be known.
[00:51:41.880] – Grumbine
So in the end, the reason the SEC couldn’t make public your testimony was what they said to Bill Cohen of The New York Times, who did an op ed. What was the response? What was the hit to The New York Times? I don’t get it. What was that all about?
[00:51:57.240] – Bowen
Well, Bill Cohen wrote a full page op ed in The New York Times about my experience. And I laid out everything that had happened. This was published, I think, in July of 2013 in a Sunday edition. And in that, I told him everything that I had been telling you. It didn’t capture everything, my being forced to change my testimony and so forth and so on. It’s actually in there.
And some of the details of the people involved are in there. And then Bill Cohen had also attempted to go to the SEC and get copies of the thousand pages that I had given the SEC and they refused even under the Freedom of Information Act, which Bill Cohen had used. They refused to provide it saying it was confidential in Citigroup trade secrets.
So the SEC was complicit in this whole thing. Of course, you have to understand, if the SEC ever did turn loose of any of those documents, then they would have to fully admit that the United States government had full knowledge of the massive fraud going on at Citigroup before they bailed them out to the tune of half a trillion dollars.
[00:53:16.580] – Grumbine
This is just one act of fraud. Had they unveiled themselves to that, how quickly would this house of cards fallen? They would have been putting themselves in jail.
[00:53:27.830] – Bowen
No, you’re right. You are absolutely right.
[00:53:31.130] – Grumbine
Let’s bring it to current here. So these shady deals that have been going on behind the scenes to backstop this criminal streaming enterprise has been going on for a very long time. Bill Black has talked about several chapters of this fraud game being a key factor in the savings and loan crisis up until present. And it’s really not just a domestic US thing. There’s a lot of this kind of control fraud on a global scale.
[00:53:58.800] – Bowen
And Steve, this is going to continue to repeat itself, because the only lessons that were learned coming out of the financial crisis was that there is no downside for doing something bad. There was no accountability. That is the lesson that was learned by all the banks.
[00:54:18.270] – Grumbine
Wow. In The Con, they showed pictures of pensioners that had lost everything, the collapse with these mortgage-backed securities. People were losing everything. It wasn’t just houses. This had seeped into the entire system.
[00:54:32.370] – Bowen
And just to contrast this, Bill Black was involved in the SNL crisis. He was one of the chief regulators then. In the banking and SNL crisis that resulted in a loss of actually, relatively speaking, a very small amount. And the US government, the Department of Justice actually convicted over a thousand senior bankers for what went on in the SNL crisis.
In the most recent financial crisis, which has cost us estimated to be in excess of $24 trillion dollars, that financial crisis is a hundred times worse than the damages caused by the banking and SNL crisis. That crisis, we have had zero prosecutions basically coming out of that of senior financial executives. Now, you compare that to the thousand that they prosecuted successfully in the previous crisis. So there is a willful desire not to find accountability.
[00:55:40.200] – Grumbine
I think it’s important to note that Goldman Sachs is being taken before the Supreme Court regarding the Arkansas teacher retirement system, $19.5 billion, despite their repeated public assurances that it was being vigilant about avoiding conflicts of interest. The Trump-created conservative Supreme Court has to take a look at this.
And it will be very interesting now that conservatives have a six/three majority, how that will actually play out, because we know the control fraud is not a partisan game. It’s not a bug in the system. It is the system. And you are the guy that could have helped blow the lid off of this. What do you think about the position of Goldman Sachs in this Arkansas teacher retirement system case before the Supreme Court today?
[00:56:32.220] – Bowen
Well, in reading a little bit about what’s in the press on that, I am not an attorney, nor do I play one on TV. But basically, the case, as I understand it, revolves around how much you can rely on representations and warranties. And I will tell you, it’s very reminiscent, just like the investors are suing Goldman Sachs, as well as the holders of the bond securities.
Citi’s bondholders and securities actually sued Citi. And in fact, I’m very familiar with that because I was actually called to testify to give a deposition in that case. I testified for an entire day in a huge room full of attorneys representing plaintiffs and Citigroup and Citigroup wound up settling that. I actually gave this deposition in 2012. Citi settled the case for $730 million the next year.
[00:57:36.780] – Grumbine
Pennies.
[00:57:37.500] – Bowen
But because it was settled, I received an order from the judge saying that everything was sealed. I am prohibited from ever telling anyone specifically what I told in my deposition with regard to Citigroup. Now, I assure you I wouldn’t lie to them. So you may assume that they were told basically what we’re talking about today. But the mistake, quite frankly, that was made by Goldman Sachs is they didn’t settle this thing.
If they could have settled it, then everything is sealed. It’s just like that $7 billion settlement Citi made with the Department of Justice. Everything was sealed. The millions of pages of documents were sealed after that. And quite frankly, I’ve often said those settlements were nothing but payments of extortion to the Department of Justice to steal the evidence. So the public will never know how widespread and pervasive this was.
[00:58:35.760] – Grumbine
I’m going to ask you another question. And this to me is basically what I think is the most important thing. Aside from the fact that you’ve got pensions falling apart, Bernie Sanders talked about the criminality of Wall Street, that the Wall Street business model was fraud, and he stopped talking about it. Have you ever talked to anyone in the political arena, your information for them to do anything with it? And if so, what did they do with it?
[00:59:04.910] – Bowen
Well, first of all, in 2014, Bill Black and I visited with Elizabeth Warren’s staff. We did not meet Elizabeth Warren and we explained what was going on and they were very interested because obviously Senator Warren sat on the banking commission and we’re trying to get the government to investigate what went on. Let me digress for just a second because I will tie this back together.
We mentioned that all of the records went to the National Archives, including everything that I gave them with instructions they had to be sealed for five years. Well, in March of 2016, the National Archives started releasing all of their documents. And I got on their public website and started rooting through all of the documents that were there.
And I discovered that the Financial Crisis Inquiry Commission actually made a criminal referral, as they were instructed to do by Congress. And that criminal referral was based solely upon my testimony and evidence. And they sent that to the attorney general, Eric Holder. And I thought, holy smokes. Well, I was doing a program in May of 2016 up in Washington.
And I went by Elizabeth Warren’s office with my attorneys because I was still trying to get a congressional investigation. And I talked again to her senior investigative staff. I never met Elizabeth Warren, so I don’t want to represent that I did. And I gave them, again, my history. And I said, “And look at this. I just discovered this. The congressional commission actually made a criminal referral based solely upon my testimony and evidence.”
And they said, “Well, that’s very interesting. Mr. Bowen. Thank you very much for coming by.” Well, two months later, it hit all of the headlines that Elizabeth Warren had instructed her investigative staff to go through all of the records released by the National Archives. And they discovered that the congressional commission actually made 11 criminal referrals and sent all of that evidence and the criminal referrals to the attorney general, Eric Holder, who basically sat on them for five years while the statute of limitations ran out.
[01:01:30.530] – Grumbine
This man is a traitor to the people, a cover-up for the oligarchs that screw our nation on a daily basis, ridiculous. How many people are still celebrating the godliness of Barack Obama and Eric Holder has somehow been able to maintain some sort of an esteemable view. These people have materially harmed millions of families, the people that are supposed to be our champions.
This is so important because without bringing this to a head, we will always have to worry about losing everything. The system is dog eat dog to begin with. Capitalism is based on competition no matter who you are, and there’s not an ounce of humanity baked into it. And these people have a responsibility to take this information and do something with it. Do you feel like anybody will actually do anything with it? What do you think it will take to get this stuff to be acted upon?
[01:02:27.410] – Bowen
We’ve got to wake the public up, Steve. The public needs to demand action. And quite frankly, we have a new administration and I’ll give them the benefit of the doubt at this point. But up to this point in time, as I said before, the large banks have a stranglehold on this country. And the only way they have kept that stranglehold is by keeping the public in the dark.
[01:02:50.750] – Grumbine
I’ve got to ask this question. Was Joe Biden not Barack Obama’s vice president? Did he not get briefed by Eric Holder? I find it fascinating that this man did not have explicit knowledge of what was going on, especially given Joe Biden’s long career as a Wall Street front. The man has done nothing but backstop bankruptcy laws to hurt regular people to allow Wall Street to run roughshod on us.
I’ve not seen any evidence whatsoever that would suggest that he has ever fought a day for humanity. He has always been protecting Wall Street. So this seems like it would have been something he may have been in on or at least knowledgeable of. Would you say it’s far-fetched that he would not have known what Holder was doing?
[01:03:36.830] – Bowen
Steve, I have no idea.
[01:03:38.990] – Grumbine
I’m speculating, but it doesn’t take much to see a vice president who has clearance, who, Barack Obama was clearly getting briefed because he came out and spoke on it. And so, you know, Eric Holder was talking to him. You don’t have to own this. I’ll own this part.
I find it fascinating that the president of the United States, the man sitting in the Oval Office today, did not have explicit knowledge of what was going on during the administration. He served two terms as vice president. I think that a reasonable person could deduce that he was involved or at least had knowledge. Would you give me that much?
[01:04:15.350] – Bowen
I can’t argue with you.
[01:04:18.530] – Grumbine
Well, I want to thank you. First of all, your story is one that rivets me. Second of all, it is a story of what I consider to be a hero. You had material harm potentially at your doorstep. You were checking your car to see if it was going to blow up on you. I mean, my goodness sakes. So it takes real courage. And in your case, it takes real faith to press through what seems like an impossible situation.
And while you weren’t successful necessarily in terms of bringing it down, I give you all the credit in the world for being successful and being a man of integrity and fighting, and the fights, not over, because we’re going to help you. We’re trying. Folks, if you’re listening to this podcast and you’re not moved to action, I don’t know what more it will take.
Right now, our country is trapped in a fraud of epic proportions and it has been baked into our entire financial system. Our Federal Reserve has served the purpose of backstopping criminal behavior. It takes their bad debts and it rolls them off through quantitative easing. It changes the shape of that debt. Doesn’t print money. What they’re doing is they’re doing debt swaps.
They’re taking their bad debt and they’re writing it off on the back end. The Federal Reserve, there’s no issue with them holding that debt. They just write it off. But these companies that commit this fraud, they’re the ones that still stay afloat. But the people like you who have materially been harmed by the fraud of Wall Street that are in and out of the government and back down into Wall Street and you are struggling to pay your electric.
We had to fight to get pandemic payments. They literally said, we’re going to get away with this and there’s nothing you can do about it. My friends in the MMT community, my friends that are in the progressive activist community, and my friends that are independent and conservative that listen to this program, you need to speak out on this.
Guys like Dick Bowen should not be on their own. We need to give them air cover and we need to make sure that we bring this criminal enterprise down. Dick, thank you so much for joining me today. I look forward to working with you in the future.
[01:06:26.210] – Bowen
Steve, I enjoyed it. Thank you for what you’re doing.
[01:06:29.120] – Grumbine
Absolutely. This is Steve Grumbine, Dick Bowen, Macro N Cheese, we’re out of here.
[01:06:39.620] – Ending credits
Macro N Cheese is produced by Andy Kennedy, descriptive writing by Virginia Cotts, and promotional artwork by Mindy Donham. Macro N Cheese is publicly funded by our Real Progressive Patreon account. If you would like to donate to Macro N Cheese, please visit patreon.com/realprogressives.
Mentioned in the podcast:
FCIC Testimony of David Bushnell (sworn Testimony of David Bushnell, Former Chief Risk Officer, Citigroup Inc. to the Financial Crisis Inquiry Commission)
FCIC Testimony of Richard Bowen (Bowen’s edited sworn testimony released by the FCIC)
Bowen FCIC Testimony April 7 2010 DRAFT_1 (Bowen’s original sworn written testimony released into the public domain by the National Archives)
Dick Bowen’s e-mail to Robert Rubin et al.
National Archives Bowen Legal Opinion (letter from the National Archives advising public release of records)
Citigroup Board Meeting Nov 4 2007 (reproduction of meeting minutes from the National Archives)
Citigroup Board Audit and Risk Management Committee Nov 4 2007 (meeting minutes from the National Archives)
25 Times Whistleblowers Changed History
Follow Richard on Twitter @RichardMBowen