It was in the boardrooms and the CEO offices where the fraud began - and continues

read it (or watch it) and weep...

The Best Way To Rob A Bank Is To Own One

By Bill Moyers
Video - Audio and Transcript

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout

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TRANSCRIPT

Broadcast PBS - April 3, 2009

BILL MOYERS: Welcome to the Journal.

For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you're about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.

WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.

BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, "How do they get away with it?" Well, no one has asked that question more often than Bill Black.

The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L's in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating — after whom the senate's so-called "Keating Five" were named — he sent a memo that read, in part, "get Black — kill him dead." Metaphorically, of course. Of course.

Now Black is focused on an even greater scandal, and he spares no one — not even the President he worked hard to elect, Barack Obama. But his main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname "banksters."

Bill Black, welcome to the Journal.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: I was taken with your candor at the conference here in New York to hear you say that this crisis we're going through, this economic and financial meltdown is driven by fraud. What's your definition of fraud?

WILLIAM K. BLACK: 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.

BILL MOYERS: In your book, you make it clear that calculated dishonesty by people in charge is at the heart of most large corporate failures and scandals, including, of course, the S&L, but is that true? Is that what you're saying here, that it was in the boardrooms and the CEO offices where this fraud began?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: How did they do it? What do you mean?

WILLIAM K. BLACK: 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.

BILL MOYERS: So you're suggesting, saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans?

WILLIAM K. BLACK: Yes.

BILL MOYERS: How do they get away with it? I mean, what about their own checks and balances in the company? What about their accounting divisions?

WILLIAM K. BLACK: All of those checks and balances report to the CEO, so if the CEO goes bad, all of the checks and balances are easily overcome. And the art form is not simply to defeat those internal controls, but to suborn them, to turn them into your greatest allies. And the bonus programs are exactly how you do that.

BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me?

WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? The Bush Administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that's exactly what happened. Where would you look? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

[...]

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.

WILLIAM K. BLACK: Right, and the investment banker that — we call it pooling — puts together these bad mortgages, these liars' loans, and creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80 percent losses on these things, because of course they, in reality, are toxic waste.

BILL MOYERS: You're describing what Bernie Madoff did to a limited number of people. But you're saying it's systemic, a systemic Ponzi scheme.

WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn't even get into the front ranks of a Ponzi scheme...

BILL MOYERS: But you're saying our system became a Ponzi scheme.

WILLIAM K. BLACK: Our system...

BILL MOYERS: Our financial system...

WILLIAM K. BLACK: Became a Ponzi scheme. Everybody was buying a pig in the poke. But they were buying a pig in the poke with a pretty pink ribbon, and the pink ribbon said, "Triple-A."

and there ya have it...

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Takin' A Break

Try JibJab Sendables® eCards today!

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Read Juan Cole's "Top Ten Ways the U.S. is Turning Afghanistan into Iraq"

as i'm looking out my window at kabul's qall e-fatullah neighborhood and as disaffected as i'm feeling today anyway, i'd substitute "obama" in the headline for "u.s."... anywayz, it's worth a read...

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Yee-Ha...! Some prisoners at Bagram will come under U.S. court jurisdiction

this is good news and long, long overdue... (btw, as i type this, i am sitting at my desk in kabul, approximately 60km south of bagram...)

A federal judge ruled on Thursday that prisoners in the war on terror can use U.S. civilian courts to challenge their detention at a military air base in Afghanistan.

U.S. District Judge John Bates turned down the United States' motion to deny the right to three foreign detainees at Bagram Airfield in Afghanistan.

The U.S. Supreme Court ruled last year that detainees at Guantanamo Bay, Cuba, have the right to challenge their detention in court. But the government had argued that it did not apply to those in Afghanistan.

Bates said the cases were essentially the same and he quoted the Supreme Court ruling repeatedly in his judgment and applied the test created by it to each detainee. It is the first time a federal judge has applied the ruling to detainees in Afghanistan.

Bates considered the requests of four detainees asking to be released, but he reserved judgment on one detainee, Haji Wazir, because he is an Afghan citizen and releasing him could create "practical obstacles in the form of friction with the host country." He ordered Wazir and the government to file memos addressing those issues.

The other three detainees are from outside Afghanistan -- Fadi al Maqaleh of Yemen, Amin al Bakri of Yemen and Redha al-Najar of Tunisia.

All four of the detainees in this case were captured outside Afghanistan but have been held at the airfield for six years or more. Bates wrote that the determination to hold them as enemy combatants is part of a process even more inadequate at Bagram than it is at Guantanamo.

the detention center at bagram, mostly due to distance, has been much less in the public eye than guantánamo although, as the last line in the snippet above states, the process at bagram is "even more inadequate" than at guantánamo... all of these extra-legal hell-holes need to come under the careful eye of the u.s. justice system and it's about time it's happening...

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Juan Cole on the new Israeli Foreign Minister

it ain't pretty...

Avigdor Lieberman, the Moldovan night club bouncer, is now foreign minister of Israel. The world has had a lot of fun laughing at the pronouncements of Iranian President Mahmoud Ahmadinejad, who stands falsely accused of threatening to wipe Israel off the face of the map. But Ahmadinejad has protested that it would be wrong to kill large numbers of civilians.

In contrast, Lieberman has threatened to wipe at least two countries, Egypt and Palestine, off the map. Monstrously, he suggested bombing the Aswan Dam, which would have the effect of murdering all 80 million Egyptians and sweeping them into the Mediterranean in a vast continental African tsunami.

Lieberman promptly announced on assuming office that the Mideast peace process is dead. Well, at least we have an outbreak of frankness.

Whereas Ahmadinejad was humiliated by Columbia University president Lee Bollinger on his visit to that university, which provoked public protests, Lieberman's acceptance into the Israeli government has been greeted mildly and he was allowed to come to the Brookings Institution and meet with Bill and Hillary Clinton. Lieberman is an Central/Eastern European ultra-nationalist in the mold of Slobodan Milosevic and Jorg Haider, and it is shameful that he was allowed into the government and more shameful that this travesty has passed without a peep in the civilized world.

i suggest that you go read the complete post on professor cole's weblog to get the full picture of lieberman's outrageous, deeply offensive, and seriously disturbing past pronouncements...

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The corporate state - grab your pitchforks and be unruly

william greider talking with bill moyers, bill moyers journal via alternet...

WILLIAM GREIDER: What we ought to be seeking, the goal of reform, and government aid, is creating a new financial and banking system, of many more, thousands more, smaller, more diverse, regionally dispersed banks and investment firms. That's first obligation is to serve the economy and serve society. Not the other way around. What the administration's approach may be doing is consecrating too big to fail, for starters. Which, of course, everybody in government denied was the policy until the moment arrived. And secondly, and this will sound extreme to some people, but I came to it reluctantly. I fear what they're doing, not intentionally, but in their design is setting the crown for a corporate state.

BILL MOYERS: A corporate state?

WILLIAM GREIDER: A corporate state. And by that I mean a rather small but very powerful circle of financial institutions the old Wall Street banks, famous names. But also some industrial corporations that bought banks. Or General Electric, which is already half of big financial capital, GE Capital. And that circle will be our new Wall Street club. Too big to fail. Yes, watched closely by the Federal Reserve and others in government, but also protected by them. And that's a really insidious departure. To admit that and put it into law. And then think of all those thousands of smaller banks. How are they going to perform against these behemoths that have an inside track to the government spigot? And for just ordinary enterprise in general? Before you even get to the citizens. How are citizens supposed to feel about that? And I-- my point is, in this situation, with if the leading banks and corporations are sort of at the trough, ahead of everybody else in Washington, they will have the means to monopolize democracy. And I mean that literally. Some of my friends would say, hey, that already happened.

BILL MOYERS: Yeah, the corporate state is here.

WILLIAM GREIDER: The corporate state is here. And I'd say, let's not argue over that. The fact is, if the Congress goes down the road I see them going down, they will institutionalize the corporate state in a way that will be severely damaging to any possibility of restoring democracy. And I want people to grab their pitch forks, yes, and be unruly. Get in the streets. Be as noisy and as nonviolently provocative as you can be. And stop the politicians from going down that road. And let me add a lot of politicians need that to be able to stand up. Our President needs that to be able to stand up.

as some have pointed out, and rightfully so, getting "unruly" carries risks of its own, namely setting the stage for repressive crackdowns under the guise of "maintaining social order"... taking to the streets might just be walking into a trap... just sayin'...

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