There are many exemplary American’s doing everything they can to expose the reality of our current financial crisis. Here, I would like to highlight William K. Black.
You must watch William Black’s recent appearance on Bill Moyers Journal:
Moyer: Why are they firing the president of GM and not firing the head of the all these banks that are involved?
Black: There are two reasons: 1.) they are much closer to the bankers. These are people from the banking industry and they have a lot more sympathy. In fact, they’re outright hostile to auto workers as you can see. They want to bash all of their contracts, but when they get to banking they say, “Oh! Contracts! Sacred!” But the other element of your question is, we don’t want to change the bankers because, if we do, if we put honest people in who didn’t cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up, and the cover up is…
Moyer: Cover up? That’s a serious charge. Who’s covering up?
Black: Geithner is covering up, just like Paulson did before him. Geithner is publicly saying that it is going to take two trillion, a trillion is a thousand billion, two trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they are not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need two trillion because they have massive losses and that they’re fine. These are all people who have failed. Paulson failed. Geithner failed. They were all promoted because they failed. Not because they may have succeeded.
Moyer: What do you mean?
Black: Well, Geithner was one of our nation’s top regulators during the entire subprime scandal that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig-in-the-poke stuff happened under him. So in his phrase about legacy assets, well he was a failed legacy regulator.
Moyer: To hear you say this is unusual because you supported Barrack Obama during the campaign last year, but you’re seeming disillusioned now.
Black: Well, certainly, in the financial sphere I am. I think first the policies are substantively bad, second I think they completely lack integrity, third they violate the rule of law. This is being done, just like Secretary Paulson did it, in violation of the law. We adopted a law after the savings and loan crisis called the “Prompt Corrective Action Law” and it requires them to close these institutions and they are refusing to obey the law.
Moyer: In other words, they could have closed these banks without nationalizing them?
Black: Well, you do a receivership. Nobody… Ronald Reagan did receiverships and nobody called it nationalization.
Moyer: And that’s the law?
Black: That’s the law.
Moyer: So Paulson could have done this? Geither could do this?
Black: Not could. Was mandated.
Moyer: By the law?
Black: By the law.
Moyer: This law you’re talking about?
Moyer: What’s the reason they give for not doing it?
Black: They ignore it. And nobody calls them on it.
Moyer: Well, well, where’s congress? Where’s the press?
Moyer: Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration with the banks are engaged in a cover up to keep us from knowing what went wrong?
Moyer: You are?
Black: Absolutely. Because they are scared to death. Alright. They are scared to death of a collapse. They are afraid that if they admit the truth that many of the large banks are insolvent, they think that Americans are a bunch of cowards and that we’ll run screaming to the exits and we won’t rely on deposit insurance. And by the way, you can rely on deposit insurance. And it’s foolishness. Alright. Now, it may be worse than that. You may impute more cynical motives, but I think they are sincerely just panicked about we just can’t let big banks fail. That’s wrong.
Moyer: So how did they get away with it?
Black: I don’t know whether we’ve lost our capability of outrage or whether the cover up has been so successful that people just don’t have the facts to react to it.
Black: Now, going forward. Get rid of the people that have caused the problems. That’s a pretty straightforward thing as well. Why would we keep CEOs and CFOs and other senior officers that have caused the problems? That’s facially nuts. That’s our current system. So stop that. The current system. We’re hiding the losses instead of trying to find out the real losses. Stop that because you need good information to make good decisions. Alright. Follow what works instead of what’s failed. Start appointing people who have records of success instead of records of failure. That would be another nice place to start. There are lots of things we can do. Even today. As late as it is. Even though they’ve had a terrible start to the administration, they could change and they could change within weeks. And by the way, the folks who are the better regulators, they’ve paid their taxes so you can get them through the vetting process quicker.
The entire interview is fantastic and potentially historic. Please go have a look.
If I could add anything to what Black had to say, I would strongly encourage everyone, including Black, to look beyond mortgages. As dire as Black makes the situation appear, this situation we find ourselves in is much worse than even that because the problems are not confined to mortgages. Every single form of debt imaginable experienced the same lax underwriting standards that were seen in mortgages, e.g. credit cards, auto loans, student loans, residential mortgages, commercial mortgages, corporate bonds and even government bonds experienced the same wreckless behavior. All forms of debt were bundled into pools and resold to pension funds, mutual funds, hedge funds, and university endowments after receiving the AAA stamp from the ratings agencies. The problem is beyond the scope of the adminstration to handles with any policy other than massive simultaneous, even globally coordinated, receivership of all major banks.