- Bill Black: Our System Is So Flawed That Fraud Is Mathematically Guaranteed (Peak Prosperity, May 25, 2013):
[Chris lost his voice this week due to illness, so we were unable to record a new podcast. So while Chris recuperates, enjoy this excellent discussion from the archives with Bill Black, recorded a year ago, on the pervasive control fraud within our current financial system. ~ Adam]
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
~ Frederic Bastiat
Bill Black is a former bank regulator who played a central role in prosecuting the corruption responsible for the S&L crisis of the late 1980s. He is one of America’s top experts on financial fraud. And he laments that the U.S. has descended into a type of crony capitalism that makes continued fraud a virtual certainty while increasingly neutering the safeguards intended to prevent and punish such abuse.
In this extensive interview, Bill explains why financial fraud is the most damaging type of fraud and also the hardest to prosecute. He also details how, through crony capitalism, it has become much more prevalent in our markets and political system.
A warning: There’s much revealed in this interview that will make your blood boil. For example, the Office of Thrift Supervision. In the aftermath of the S&L crisis, this office brought 3,000 administration enforcement actions (a.k.a. lawsuits) against identified perpetrators. In a number of cases, they clawed back the funds and profits that the convicted parties had fraudulently obtained.
Watch Taibbi and Black discuss Geithner’s legacy and the issues behind the government’s Wall Street bailout, originally aired on January 11, 2013:
- Taibbi: Geithner is ‘the architect of too big to fail’ (The Raw Story, Jan 12, 2013):
The legacy of outgoing U.S. Treasury Secretary Tim Geithner will be simple, said Rolling Stone contributing editor Matt Taibbi on Friday — and unflattering.
“He’s the architect of “too big to fail,” Taibbi told Democracy Now hosts Amy Goodman and Juan Gonzalez. ” When this all blows up — and it’s going to blow up, for sure, because things can’t continue the way they are right now — people are going to look back in history, and they’re going to say, “Who was to blame for this?” And Timothy Geithner is going to be the guy who designed this entire system.”
Complete administrations should have been fired a long time ago:
Even firing complete administrations would not solve the problem, because they are all only puppets of the elitists that OWN governments (all big parties), the Federal Reserve, other central banks, the big corporations and the mass media worldwide.
Added: 25. October 2010
The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers’ trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce.
The FASB’s new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional “income” and “capital” at the banks.
The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.
Tags: AIG, Bank of America, Banking, Barack Obama, Ben Bernanke, Congress, Derivatives, Derivatives market, Economy, Fed, Federal Reserve, Foreclosures, Global News, Mortgage crisis, Mortgages, Obama administration, Politics, Timothy Geithner, U.S., William Black
Prof. William Black scorched everyone with his testimony on the failure of Lehman Brothers before the House Financial Services Committee today. His prepared remarks can be found here (PDF).
CHAIRMAN KANJORSKI: And now we’ll hear from Mr. William K. Black, Associate Professor of Economics and Law, the University of Missouri, Kansas City School of Law. Mr. Black.
BILL BLACK: Members of the Committee, thank you.
You asked earlier for a stern regulator, you have one now in front of you. And we need to be blunt. You haven’t heard much bluntness in hours of testimony.
We stopped a nonprime crisis before it became a crisis in 1991 by supervisory actions.
We did it so effectively that people forgot that it even existed, even though it caused several hundred million dollars of losses – but none to the taxpayer. We did it by preemptive litigation, and by supervision. We broke a raging epidemic of accounting control fraud without new legislation in the period of 1984 through 1986.
Legislation would’ve been helpful, we sought legislation, but we didn’t get it. And we were able to stop that because we didn’t simply consider business as usual.
Lehman’s failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001, and that is with their subprime and liars’ loan operations.
Lehman was the leading purveyor of liars’ loans in the world. For most of this decade, studies of liars’ loans show incidence of fraud of 90%. Lehmans sold this to the world, with reps and warranties that there were no such frauds. If you want to know why we have a global crisis, in large part it is before you. But it hasn’t been discussed today, amazingly.
Financial institution leaders are not engaged in risk when they engage in liars’ loans – liars’ loans will cause a failure. They lose money. The only way to make money is to deceive others by selling bad paper, and that will eventually lead to liability and failure as well. Continue reading »
Every bailout only increased the problems the US will have to face in the future. The bailout money just went to Wall Street and did nothing for the people.
Another one of the nation’s largest lenders has filed for bankruptcy. On the brink for months, CIT filed for Chapter 11 protection on Sunday.
The prepackaged plan allows CIT to restructure its debt while trying to keep badly needed loans flowing to thousands of mid-sized and small businesses. The plan keeps CIT’s operations alive and makes it possible for the company to exit bankruptcy by year’s end.
But here’s the bad news: While senior debt holders will only lose 30% of their investment, we, the U.S. taxpayer, will lose the entire $2.3 billion we lent the company this summer.
William Black, professor at the University of Missouri-Kansas City School of Law is dumbfounded. “We put ourselves on the hook in a completely inept way where we lose first. We lose entirely as the taxpayers.”
Black, a former top federal banking regulator, blames Treasury Secretary Timothy Geithner for negotiating such a bad deal on behalf of the American public.
His argument goes as follows:
The government was in no way obligated to lend the struggling CIT money and, in fact, initially refused to provide it bailout funds. More importantly, being the lender of last resort, the government should have guaranteed we’d be the first to get paid if CIT eventually filed Chapter 11. By failing to do so, “it’s like he [Geithner] burned billions of dollars again in government money, our money, gratuitously,” says Black. Continue reading »