Citizen Action Monitor

Under Obama “Yes, we can” has become “Well, actually we’re not even going to try”—Wm. Black

No 306 Posted by fw, October 20, 2011

“If he [Obama] continues this way, it’s conceivable the Republicans will nominate someone so bad that he will be reelected, but he will destroy the effectiveness of his administration and do tremendous damage to the nation.” —William Black

In a wide-ranging interview yesterday on America’s pre-eminent news-line to the truth — Democracy Now William K. Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City, and former financial regulator, didn’t pull any punches in his scathing indictment of, among other things — fraudulent CEOs; successive administrations “deregulating everything”;  GW Bush’s financial wrecking crew; Obama’s failure to prosecute elites; liars’ loans; disregard of 2004 warning of mortgage fraud; Supreme Court’s perverted “corporate personhood” decision; incompetence of Geithner, Holder, and Bernanke; student loans disaster; and risk that Obama’s re-election would inflict further “tremendous damage to the nation.”

When invited to comment on the Occupy Movement, Black points out that four “pretty consistent themes are developing . . . not just nationwide, but worldwide” – taking on dangerous financial institutions; holding fraudsters at the top accountable; creating jobs now; and resolving the foreclosure mess.

These topic are covered in greater depth in the excerpts below from my edited version of a transcript of the Black’s interview, Former Financial Regulator William Black: Occupy Wall Street a Counter to White-Collar Fraud, aired on Democracy Now, October 19, 2011. I’ve added sub-headings and topical links to external information sources. And following the transcript is an embedded video of the interview.

Former Financial Regulator William Black: Occupy Wall Street a Counter to White-Collar Fraud, Democracy Now, October 19, 2011

Those at the very top perpetrated this crisis by betraying our trust in them

We’ve got to stop this dynamic that’s producing recurrent, intensifying crises. I mean, this one has devastated the nation. The next one would probably be equivalent to the Great Depression. And part of that answer—but only part of it—is to hold the folks accountable, especially the most elite, who caused this crisis. And they did it through fraud, and they did it through fraud in what we call the “C-suites” —the CEOs, the COOs — so, the absolute top.

Fraud is when you use deceit to steal something from someone. And so, the essence of fraud is, I get you to trust me, and then I betray that trust for gain. And as a result, there’s no more effective acid against destroying trust than fraud, particularly at the elite levels. And when you destroy trust, you destroy economies, families, democracies.

“Deregulate everything” was the mantra of those that led us down the path to financial ruin

Well, it’s, you know, quite remarkable. It actually, of course, begins in the Carter administration with very substantial deregulation, although I would say of a better sort. I mean, most people don’t think trucking should be heavily regulated, and that’s the type of thing he deregulated. By the Reagan administration, they were—deregulate everything, at the worst possible circumstances, when you had no one looking. And the result was a disaster. It was the savings and loan crisis, at least the second phase of it. And if it had not been contained, it would have been at least a trillion-dollar crisis.

It was contained despite the Reagan administration, and despite a lot of prominent Democrats, as well, who were very heavily in the same camp. So we acted against the wishes of the administration, against the wishes—a majority of the House co-sponsored a resolution saying don’t re-regulate—the Keating Five—many people remember those five senators—most of the media, what the political scientists considered the third most powerful trade association in America. And by the way, that’s why I have a message of hope. If we could succeed in those circumstances, it’s far easier to succeed now.

There was no accountability because “Bush’s wrecking crew stopped making criminal referrals”

It all starts with the regulators, which is why it’s all not started here, because we have, of course, the wrecking crew, Bush’s wrecking crew, what [journalist] Tom Frank called them, in charge, and they stopped making criminal referrals. So our agency, in the savings and loan crisis, made over 10,000 criminal referrals to the FBI. That same agency, in this crisis, made zero criminal referrals. If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions. So, in the peak of the savings and loan crisis, we had a thousand FBI agents. This crisis has losses 70 times larger than the savings and loan crisis. And the savings and loan crisis, when it happened, was considered the largest financial scandal in U.S. history. So we’re now 70 times worse. And as recently as 2007, we had 120 FBI agents—one-eighth as many FBI agents for a crisis 70 times larger. And they looked not at the big folks, but almost exclusively at the little folks.

And Obama “has done absolutely nothing to reestablish the criminal referral process”

We’ve been living for some years in the time of President Obama, and he has done absolutely nothing to reestablish the criminal referral process. And as a result, there are virtually no prosecutions of any elites. When people tell you this crisis couldn’t have been stopped—I’ll give you two simple things. First, these liars’ loans that caused this crisis—and it’s overwhelmingly lenders that put the lie in liars’ loans—they were big in 1990 and 1991. We killed them by regular regulatory means and stopped a crisis for a decade. Our successors—I mean, how hard is it to figure out that something called a “liar’s loan” shouldn’t be allowed? This was not tough.

The second thing is, the FBI warned, in open testimony in the House of Representatives, picked up by the national media, in September 2004, that there was an epidemic of mortgage fraud and predicted it would cause a financial crisis—their exact words. And the regulators did nothing, because you had the Alan Greenspans of the world and the Harvey Pitts of the world, who were selected because they were the leading opponents of effective regulation in America. Well, you know, you create a self-fulfilling prophecy of regulatory failure, and then turn around and say, “Well, you can’t trust the government. It fails.”

The Occupy Movement is guided by “four big common themes” that serve as goals

I don’t speak for that movement, and indeed they don’t have official spokespersons with clear plans. So that part is true. They think of that as one of the great strengths of democracy now, right? That things bubble up, and they have different ideas. However, if you look, not just nationwide, but worldwide, you will see some pretty consistent themes developing. And those themes include:

1) [taking on dangerous financial institutions] — we have to deal with the systemically dangerous institutions, the 20 biggest banks that the administration is saying are ticking time bombs, that as soon as one of them fails, we go back into a global crisis. Well, we should fix that, right? There’s no reason to have institutions that large. That’s a theme.

2) [holding fraudsters at the top accountable] — accountability is a theme, that we should keep—put these felons in prison, and there’s no action on that

3) [creating jobs now] — we should get jobs now, and

4) [resolving the foreclosure mess] — we should deal with the foreclosure crisis.

So those are four very common themes that you can see in virtually any of these protest sites. And they have asked me, for example, to come to New York to talk about some of these things. So, I think, over time, you won’t necessarily have some grand written agenda, but you’ll have, as I say, increasing consensus. And it’s a very broad consensus. It’s not left, it’s not right; it’s not Republican, it’s not Democrat.

Americans must fight Supreme Court’s perverted corporate personhood decision

Well, I mean, one of my hats is I’m a lawyer. And it’s bad law. And so, one of the best ways to change this is simply to appoint better justices to the Supreme Court. And this is a five-four decision, so one justice could make an enormous amount of difference. It goes all the way back to the civil right era, civil rights amendments after the Civil War. Those amendments were supposed to, of course, protect the freed men and women. They were quickly perverted by the Supreme Court, which is a really ultra-right-wing, pro-slavery group for most of our history, into saying we’re not going to protect the slaves—freed slaves very much, but we are going to protect corporations. And so they interpreted the 14th Amendment and 15th Amendment, in particular, as giving due process rights to corporations as persons. Over time, they extended that under First Amendment cases that said they have not the same rights, but substantial rights that need to be protected in the First Amendment. And now they’ve gone whole hog in Citizens United and produced an atrocity. Right? In a country that was already overwhelmed with corporate influence, they said all the restraints, essentially, are off, and you have almost complete constitutional protection to do anything. And so, the domination by corporations, and in particular by finance, which is now the biggest funder of both parties, is going to grow very substantially, unless we fight back.

Latest obscene move — Federal Reserve puts American taxpayers on hook for untold billions of bad derivatives

Well, I’ve, by the way, just written one myself, 15 minutes before coming here, on Bank of America, because it just broke yesterday that affiliates of Bank of America—this is Merrill Lynch—with really bad derivatives, has been allowed by the Federal Reserve to transfer perhaps many billions, or perhaps even trillions—we don’t know—of these derivatives to Bank of America, which is where we come in as a federal guarantee, and it puts us on the hook as the government. This is obscene public policy, the kind that would have never been permitted in our era. And now, under a Democratic president that rails about excess influence and not putting the taxpayers at risk, that’s exactly what they’re doing.

Obama promotion of failed regulators Geithner and Bernanke leaves America with ineffective regulation

So, the story on the regulatory side, we had the leading failed regulator in a Federal Reserve Bank, Geithner, and they promoted him to Treasury secretary. We had the leading failed regulator in America, Bernanke, and he was reappointed. So that—and most of the wrecking crew were left on as temporary folks, so most of the wrecking crew is still in place. We have almost no effective regulation, and it’s showing up. They hid the losses by changing the accounting rules through congressional extortion of the Financial Accounting Standards Board. And these problems don’t go away. They just fester, and they pop up three years later. And they’re going to keep popping up until we start telling the truth.

“Student debt is a grand disaster in America”

In terms of the student debt, this is a grand disaster in America. The one thing that you want for—almost everybody agrees with—for an international competitiveness, for simply just for our kids, is simply to have free public education, and that anybody with a talent, where it makes sense for them to go to university, should go to university and not be a debt slave for the rest of their lives. So this is insane public policy that is crushing the nation. We can change it at any time. It’s a perfect win-win in a Great Recession, because you want to spend to get out of the recession, anyway. So that’s one of the things we should spend on. And the fact that we’re [not] doing it shows just how insane the policy paralysis has become.

Fire Geithner and Holder and ask for Bernanke’s resignation

Well, Geithner should be fired, because you can fire him. Holder, who is the Attorney General, should be fired. They need to be replaced. The other folks running the banking regulatory agencies can be replaced by effective [acting appointments]. You don’t have to go through the confirmation process to jumpstart that. Bernanke, you can’t fire, but you can ask for his resignation, and it’s long since time to ask for his resignation. And, you know, you can give him a nice ceremony and have him go.

Under Obama “Yes, we can” has become “Well, actually we’re not even going to try”

No, it’s not where we’re headed, and that’s a grave disappointment to folks who thought that—well, someone campaigned saying, “Yes, we can.” And now it’s become, “Well, actually we’re not even going to try,” on the prosecutorial side. Right? So, if he continues this way, it’s conceivable the Republicans will nominate someone so bad that he will be reelected, but he will destroy the effectiveness of his administration and do tremendous damage to the nation.


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