April 7, 2009
PARALLEL UNIVERSE: Bill Black: Madoff Was a Piker When It Comes to Ponzi Schemes
America's Big Banks Are the Ponzi Champs
By David M. Kinchen
Huntingtonnews.net Editor
Bank robber Willie Sutton (1901-1980) is famously credited with saying he robbed banks because "that's where the money is." In his 1976 autobiography he denied saying it, saying the "credit belongs to some enterprising reporter who apparently felt a need to fill out his copy...If anybody had asked me, I'd have probably said it..it couldn't be more obvious."
William K. Black undoubtedly said "The Best Way to Rob a Bank Is to Own One," the title of a book he wrote in 2005 and published by the University of Texas Press. I came across an interview of Bill Black by Bill Moyers, posted on Alternet on April 6 (link to story: http://www.alternet.org/workplace/135161/moyers_journal%3A_maddoff_was_a_piker_--_america%27s_big_banks_are_a_far_larger_fraudulent_ponzi_scheme/).
Bill Black may not be as famous a name as Willie Sutton, but he made his bones as a tough regulator in the massive savings and loan scandal in the late 1980s, which included the fraud perpetrated by Arizona S&L owner Charles Keating, aided and abetted by the so-called "Keating Five" -- which included U.S. Senators John McCain and John Glenn.
Black told Moyers that the current financial meltdown came from big bankers making "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."
Black blames lack of tough regulation -- or any regulation at all -- during the George W. Bush administration. Regulators didn't perform the basics of their jobs and the few that did were ignored, he says. "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," Black told Moyers.
Black told Moyers -- and I really, really recommend reading the entire interview -- that bankers deliberately set out to make "liars' loans": "Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets."
Personally, I've never been able to figure out how to get a liars' loan, because all of the lenders I dealt with in California and West Virginia demanded strict verification of employment, income and debt. This is still the policy with most smaller and medium sized banks, but it wasn't the case with a lender called IndyMac.
Black said that IndyMac, which specialized in making liars' loans, "produced as many losses as the entire Savings and Loan debacle...In 2006 alone, it sold $80 billion dollars of liars' loans to other companies. $80 billion."
Moyers said that 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."
Moyers adds that Black, who supported Barack Obama in last November's election -- it would be difficult for him to support McCain! -- is now criticizing the Obama administration's approach to this gigantic banking Ponzi scheme: "The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson's firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn't want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG. Where Congress said, 'We will not give you a single penny more unless we know who received the money.' And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.
As I said, read the entire interview and weep. Bill Black should be put in charge of cleaning up the nation's financial stables. I admired him two decades ago when I was covering real estate for the Los Angeles Times during the S&L scandal -- which hit California particularly hard -- and I still admire him. If there were any sanity inside the Beltway, Bill Black would be where Geithner is now.
One final paragraph from Black about Treasury Secretary Timothy Geithner and virtually all the others in DC allegedly working on solving the banking crisis: "They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think 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. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong."
Share This Story:
Make HNN Your Homepage (IE Users Only)
PARALLEL UNIVERSE: Bill Black: Madoff Was a Piker When It Comes to Ponzi Schemes
America's Big Banks Are the Ponzi Champs
By David M. Kinchen
Huntingtonnews.net Editor
Bank robber Willie Sutton (1901-1980) is famously credited with saying he robbed banks because "that's where the money is." In his 1976 autobiography he denied saying it, saying the "credit belongs to some enterprising reporter who apparently felt a need to fill out his copy...If anybody had asked me, I'd have probably said it..it couldn't be more obvious."
William K. Black undoubtedly said "The Best Way to Rob a Bank Is to Own One," the title of a book he wrote in 2005 and published by the University of Texas Press. I came across an interview of Bill Black by Bill Moyers, posted on Alternet on April 6 (link to story: http://www.alternet.org/workplace/135161/moyers_journal%3A_maddoff_was_a_piker_--_america%27s_big_banks_are_a_far_larger_fraudulent_ponzi_scheme/).
Bill Black may not be as famous a name as Willie Sutton, but he made his bones as a tough regulator in the massive savings and loan scandal in the late 1980s, which included the fraud perpetrated by Arizona S&L owner Charles Keating, aided and abetted by the so-called "Keating Five" -- which included U.S. Senators John McCain and John Glenn.
Black told Moyers that the current financial meltdown came from big bankers making "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."
Black blames lack of tough regulation -- or any regulation at all -- during the George W. Bush administration. Regulators didn't perform the basics of their jobs and the few that did were ignored, he says. "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," Black told Moyers.
Black told Moyers -- and I really, really recommend reading the entire interview -- that bankers deliberately set out to make "liars' loans": "Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets."
Personally, I've never been able to figure out how to get a liars' loan, because all of the lenders I dealt with in California and West Virginia demanded strict verification of employment, income and debt. This is still the policy with most smaller and medium sized banks, but it wasn't the case with a lender called IndyMac.
Black said that IndyMac, which specialized in making liars' loans, "produced as many losses as the entire Savings and Loan debacle...In 2006 alone, it sold $80 billion dollars of liars' loans to other companies. $80 billion."
Moyers said that 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."
Moyers adds that Black, who supported Barack Obama in last November's election -- it would be difficult for him to support McCain! -- is now criticizing the Obama administration's approach to this gigantic banking Ponzi scheme: "The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson's firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn't want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG. Where Congress said, 'We will not give you a single penny more unless we know who received the money.' And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.
As I said, read the entire interview and weep. Bill Black should be put in charge of cleaning up the nation's financial stables. I admired him two decades ago when I was covering real estate for the Los Angeles Times during the S&L scandal -- which hit California particularly hard -- and I still admire him. If there were any sanity inside the Beltway, Bill Black would be where Geithner is now.
One final paragraph from Black about Treasury Secretary Timothy Geithner and virtually all the others in DC allegedly working on solving the banking crisis: "They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think 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. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, 'We just can't let the big banks fail.' That's wrong."
Share This Story:
Make HNN Your Homepage (IE Users Only)
