The Congressman is quite correct that the Fed refused to act even though it had data that showed that 90% of liars loans were fraudulent. They refused to use their authority under the statue which existed since 1994, and which included the shadow sector. The Ban All Liars Loan. Right? Why? Well, because the President of the United States, a Democrat, appointed Alan Greenspan, an Ayn Rand disciple, to run the Federal Reserve. Of course that was President Clinton that did that. It was President Clinton who cut the FDIC staff by more than three quarters. It was President Clinton who cut the Office of Thrift Supervisions staff by more than half. It was President Clinton who left the Republican leadership in charge of the OTS for, as an acting person for 4 and one-half years doing absolutely nothing. All of the appointees that the Congressman is talking about to have failed to implement vigorously these regulations are appointees of President Obama. So if it isnt the massive contributions, what the heck is it? Right? Weve just gone through the biggest crisis in 75 years. Weve just figured out that we had gotten it right previously, with things like Glass-Steagall, and we still have broken up 0 and we have prosecuted 0. And I know w whole lot, as does the Congressman, about prosecutions, because we got over 1,000 felony convictions in much tougher cases. Much tougher cases than these would be. In the savings and loan debacle, against the best criminal defense lawyers in the world, where they were representing CEOs and will spend a corporations money like water to keep the guy out of jail. And we got a 90% conviction rate with hyper prioritized cases against the absolute most elite defendants. Were talking about through 1990, end of 1993.
we could look at the history when the Clinton administration came in, it shut down the prosecutions of savings [inaud] loans. And you can look at Hillarys economic advisors who are the same old folks who are the ones that destroyed Glass-Steagall, who are the ones that created the regulatory black hole that the Congressman was talking about in those financial derivatives, the commodities modernization act in 2000. So, and you can look at who Bernie Sanders picks in terms of his advisers on regulatory matters.
You have to get rid of the fraudulent leadership. And I thought thats where he was going with the discussion of Goldman Sachs. One of the terrible things, weve talked about the fact that nobody gets prosecuted, but on top of that, there has been one, and exactly one, fairly senior executive, who has actually had to pay money out of their own pocket in a civil suit brought by the government. And of course its a woman from Bank of America, Alright? So all the other executives have gotten off with, and made wealthy by the fraud proceeds and the bonuses and such. And they havent lost their jobs. So its far worse a failure than simply the failure to prosecute. And even very conservative people, like the president of the New York Fed, are now talking routinely about the corrupt culture of Wall Street. So youre absolutely right that we have to start with the fraud. You have to get rid of the leadership. And we have the tools in the Justice Department but also at the regulatory agencies to do exactly that through removal and prohibition actions. In addition to those thousands of successful felony prosecutions, we had well over 4,000 successful enforcement actions. Indeed, I was one of the enforcement heads in all of this. So youre right, youve got to get rid of the fraudulent people who are running these places, and youve got to get honest people in. Second step is break up- even if theyre honest; you simply cannot have institutions of the size that when they fail- and again they will fail, its just a matter of time for any individual bank until it will fail over a broad historical spectrum. And when youre dealing with 25 of them the probability of when the next one will fail within the next decade or so is really very high. You cannot have that. We have seen why you cannot have that. And weve seen that theyre treated as too big to jail. And weve seen the enormous political power that arises from this. And weve seen that these places are too big to manage. So its a win, win, win for efficiency, for honesty, for the restoration of an effective democracy to break them up. When you do that with honest leadership, then Bernie is quite correct. You tell them, Youve got 5 years to shrink. Youre the experts in running the place, you figure out how to shrink. Thats how Id do it, how we in fact did do it as regulators, and thats certainly been my advice to Bernie.
Im a banker in part by background so I certainly see honest bankers as being a very useful function. But the dishonest bankers, the best from economists is that the- through the course of the Great Recession, we will lose 24.3 billion dollars in GDP. We lost 9.3 million American jobs and 5 million that were not created. Latino college-educated households lost over 70% median of their wealth. Black households with head of household with a college degree or beyond lost over 60% of their net worth on again a median figure. So there are staggering loses because of all this and in economic terms, the banks systemically misallocated capital. Which is the opposite of what theyre supposed to do. And you know that because thats what creates bubbles. And while it is true that small units can create lots of problems, its only because they work for big units. In other words, the Merrill Lynch folks that created so many of the financial derivatives that blew up- well yes, that subsection may have had only 600 employees, but the only reason they were able to function is because they were part of Merrill Lynch. Otherwise they couldnt have done any of those deals. And by the way, they sold overwhelmingly to Merrill Lynch as well. We call it eating your own cooking. So I think that Senator Sanders actually has a pretty sophisticated understanding of these things. Hes gone to advisors to build on it. I would say the New York Daily News, which thought after all that he was the Mayor of Vermont, was more confused and by the way was wrong, when Senator Sanders gave his statements about the role of the treasury and the Fed on breaking up these institutions. He was correct and the New York Daily News was incorrect. So again, these are things that nobody has to scream, nobodys screaming during any of this. There are better ways to do all of these things. And the sad thing is, President Obama had a unique political opportunity like FDR had. And as I said, not a single one of these institutions has been broken up, not a single one of the executives has been prosecuted. If you dont think its a corrupting influence of money and power, what do you think it is?
Bank Whistle Blowers United, a non-partisan group, has detailed proposals on how to change a lot of things that would be very useful.
a massive amount of loans for houses that mortgages that everyone knew that people would never be able to pay, and they were packaged, and then the rating agencies called them triple A even though anyone that looked at them knew that even half the documents hadnt even been signed properly. this happens for reasons. Its not inherent in capitalism. Its because we have changed the structure and the incentives systems by moving away from true partnerships, by moving to these compensation systems that act functionally as bribes. I urge you not to think that having a public bank solves the problems that were talking about more generally. Because you can look all around the world at public banks and see that they are frequently corrupted by their local or national politicians. And Brazil and Malaysia,
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William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of “control fraud” frauds in which the CEO or head of state uses the entity as a “weapon.” Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae’s former senior management.
— source therealnews.com