Bank Crimes

Here is a half hour talk by William K. Black that explains the fraud behind the financial collapse:



William K. Black teaches economics and law at the University of Missouri, Kansas City and is the author of The Best Way to Rob a Bank Is to Own One.

What really, really bothers me is that Obama has done nothing that I can see that addresses the fraud and scandals behind the financial crisis. Nothing. Nada. Zip.

That means the future will read like the past: yet another bubble and crash, followed by a bubble and crash, until the US is so destroyed by the greed of the rich that it can't get it up for another bubble.

Some facts he points out. My comments are in brackets:

• The banks didn't do any risk analysis and didn't even have the papers to describe what they were rolling up in their "securitized collateral" and they put pressure on the rating agencies to give a AAA rating to this financial paper with no data to make a rating from. [Where I come from that is a crime, but I guess Ben Bernanke, Alan Greenspan, Timothy Geithner and the band of brothers think it is just a great example of "financial engineering".]


• These kinds of white collar "accounting" crimes create more losses than all other property crimes combined. [Funny, the poor kid doing a corner store stickup will spend real time in jail, but the bank CEO are spending no time in jail, in fact they are getting tens of millions in "bonuses" because they need to be "retained" for their "skills".]


• IndyMac bank created $200 billion in liar loans. [By my rough calculation that is nearly 2 million houses sold as part of the scam.]


• At the end of this crime spree 40% of all mortgages being created were sub-prime. [I guess the regulators mis-read sub-prime for "super" prime and were tickled pink at how healthy the banking business had become.]


• He talks of the Gresham Dynamics, how bad ethics drives out good ethics. This is tied to a CEO pay scheme with big rewards to meet short term financial goals and the knowledge that the typical financial institution CEO holds his job for only 3 years. So they are under big pressure to lie, cheat, and steal their way to getting the big bonuses. [And the Obama administration initially was going to allow all bonuses and is now making noises about limiting them. Instead the Obama admin should be making a lot, a really big number, of CEOs walk the "perp" walk with handcuffs off to spend decades in jail. But Obama didn't and won't.]


• I like the way he uses the Chinese infant formula scandal as a comparison for the financial fraud in the US. Both systems are corrupt. Most US citizens are only to happy to talk about corrupt Chinese institutions. But you don't hear a lot of Americans talking about the endemic corruption in the US. This is one reason why Black's walking people through the S&L scandal, the Enron/Worldcomm/etc. scandals, and now the banking scandals.


• Black makes the point: there has been no greater destruction of working class wealth in American history.


• The moderator asks the question: "Why is Obama rescuing these people who have brought the global economy to the brink of collapse and why this sleight of hand continues with Larry Summers and Timothy Geithner declaring these banks 'healthy' despite the toxic assets on their books". Black replies "Because Obama gets his advice from people who helped create the crisis and who refuse to admit that they got anything wrong. [I would add, in addition Wall Street has bought the government -- Congress & Obama -- via their political contributions & lobbyists.]


• About 42 minutes into this video Black lists a long history of incompetence and how incompetence got you promoted. He lays out the incompetence of Geithner, Greenspan, etc.

This video merits very careful viewing. There is a lot of information here. Lots of bad news. It is depressing, but it needs to be watched.