William Black, the author of The Best Way to Rob a Bank is to Own One, was in New York last week for a conference at the John Jay College of Criminal Justice to answer the question "How did they get away with it."
Now Black won a reputation as the senior regulator who cracked down on banks in the savings and loan crisis of the 1980s ,so he knows what he's talking about. His interview by Bill Moyers last week on PBS was extremely disturbing and damning.
Hat tip Rod Dreher, Williamm K. Black, The government is lying to us.
Black goes on to say how can we justify not having a first-rate, nonpartisan investigation finding out why this happened and how it can be prevented. Why aren't we having that? Because, he says, the government literally doesn't want to know, or rather, doesn't want the public to know. Black alleged that the government is lying about the bank losses to maintain artificial public confidence. Moyers pinned him down on this point, asking if he really did believe that the Obama administration is intentionally deceiving the public.
Black: "Absolutely. Because they are scared to death of a collapse. ... I think they are sincerely just panicked: 'We cannot let big banks fail.'"
And if they keep lying about it? Black says banks will stay enormously weak, and the government will continue "obscene giveaways of taxpayer money."
You can watch the interview here and read the transcript.
Here are a few excerpts:
Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.
It begins in the boardrooms and the CEO offices and this is how they do it.
Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.
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Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.
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This stuff, the exotic stuff that you're talking about was created out of things like liars' loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That's why it's toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it's scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I'm quoting Fitch, the smallest of the rating agencies, "the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined."
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Black said it was more than a financial crisis, it was a moral crisis, a fundamental lack of integrity. In the Savings and Loan crisis only about 10% of the CEOs engaged in fraud.
So, 90 percent of them were restrained by ethics and integrity. So, far more than law or by F.B.I. agents, it's our integrity that often prevents the greatest abuses. And what we had in this crisis, instead of the Savings and Loan, is the most elite institutions in America engaging or facilitating fraud.