The Best Way To Rob A Bank Is To Own One
That’s the title of a new book by William K. Black, a professor of economics and law at the University of Missouri in Kansas City and the former director of the Institute for Fraud Prevention at Santa Clara University in California.
Black was a regulator around the time of the savings and loan scandal of the 1980s, a dark chapter of this country’s economic history, but it pales in comparison to the fraud in the banking industry today, he says.
Black was interviewed by PBS host and journalist, Bill Moyers.
Recounting his experience with the S & Ls, Black had accused Rep. Jim Wright (D-TX), Sens. John McCain and John Glen, Charles Keating of doing favors for the savings and loans in exchange for contributions. Keating was so enraged he sent out a memo, “Get Black, Kill Him Dead.”
Black tells Moyers that today’s Wall Street barons are what he calls “banksters” reminiscent of mobsters of an earlier generation. Without banking regulations under the Bush administration, fraud was everywhere, he says.
Moyers asks “What is fraud?”
“Fraud is deceit. I create trust in you than I betray that trust and get you to give me something of value. Fraud by the top elites is what we have,” says Black.
Black says the fraud went all the way to the CEOs and board rooms. They would make really bad loans because they pay better, Black tells Moyers. Then you grow rapidly, and then borrow a lot of money. You have guaranteed record profits that make you rich through the early years. They are guaranteed to make people rich in the short run but also make it inevitable there will be a disaster down the road, he says.
What about their accounting? The people who are supposed to do checks and balances report to the CEO, who turns them into his greatest allies by providing them with a bonus.
The problem is nobody was looking.
“You’d look at the specialty lenders who did all of their work in subprime and liars' loans that they knew they were frauds. That means you don’t check. You tell us what your income is your assets are and we believe it. You get a better deal if you inflate your assets. We know they said that to borrowers.”
Black calls them “Ninja laws”. No job, no asset verification, income or job verification.
You’re talking about huge American companies. One company produced as many losses as the entire savings and loan debacle, IndyMac. Black says in 2006 alone, it sold 80 billion of liars’ loans to other companies.
“Liars' loans are known to be extraordinarily bad but now it’s getting a Triple A rating. That’s supposed to be zero credit risk. But it has significant risk, it’s toxic. You create the fiction it has zero risk, that itself is a fraudulent exercise,” Black says.
Moyers asks if this was a systemic ponzi scheme? “Our system was a ponzi scheme. Everybody was buying a pig in a poke with a pretty pink ribbon” says Black.
Part of the problem is that after September 11, 2001, the Justice Department transferred agents to national terrorism. 500 FBI agents were removed and not replaced.
Moyers asks “Why is this happening? Black says, “Until we get the facts, it’s harder to know how bad the condition of the banks really is.”
Black blames the Obama presidency for keeping in place those in the elite institutions who engaged in or facilitated fraud, “to know who committed the fraud, whose bonuses we should recover, how much the assets are worth how much they should be sold for if a bank is insolvent." Black says we won’t know with the bank CEOs who caused the problem staying in their same jobs.
Moyers - “Are you saying that Tim Geither and others in the administration and within the banks are participating in a cover-up?”
“Absolutely because they are scared to death of a collapse,” Black says. #