- What is the truth about this financial collapse? How about fraud and blatant criminality? Bill Moyers interviews William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Professor Black offers his analysis of what went wrong and his critique of the bailout. Excerpts :
BILL MOYERS: Is it possible that these complex instruments were deliberately created so swindlers could exploit them?
WILLIAM K. BLACK: Oh, absolutely. This stuff, the exotic stuff that you’re talking about was created out of things like liars’ loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That’s why it’s toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it’s scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I’m quoting Fitch, the smallest of the rating agencies, “the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined.”
WILLIAM K. BLACK:There were two really big things, under the Clinton administration. One, they got rid of the law that came out of the real-world disasters of the Great Depression. We learned a lot of things in the Great Depression. And one is we had to separate what’s called commercial banking from investment banking. That’s the Glass-Steagall law. But we thought we were much smarter, supposedly. So we got rid of that law, and that was bipartisan. And the other thing is we passed a law, because there was a very good regulator, Brooksley Born, that everybody should know about and probably doesn’t. She tried to do the right thing to regulate one of these exotic derivatives that you’re talking about. We call them C.D.F.S. And Summers, Rubin, and Phil Gramm came together to say not only will we block this particular regulation. We will pass a law that says you can’t regulate. And it’s this type of derivative that is most involved in the AIG scandal. AIG all by itself, cost the same as the entire Savings and Loan debacle.
BILL MOYERS: What did AIG contribute? What did they do wrong?
WILLIAM K. BLACK: They made bad loans. Their type of loan was to sell a guarantee, right? And they charged a lot of fees up front. So, they booked a lot of income. Paid enormous bonuses. The bonuses we’re thinking about now, they’re much smaller than these bonuses that were also the product of accounting fraud. And they got very, very rich. But, of course, then they had guaranteed this toxic waste. These liars’ loans. Well, we’ve just gone through why those toxic waste, those liars’ loans, are going to have enormous losses. And so, you have to pay the guarantee on those enormous losses. And you go bankrupt. Except that you don’t in the modern world, because you’ve come to the United States, and the taxpayers play the fool. Under Secretary Geithner and under Secretary Paulson before him… we took $5 billion dollars, for example, in U.S. taxpayer money. And sent it to a huge Swiss Bank called UBS. At the same time that that bank was defrauding the taxpayers of America. And we were bringing a criminal case against them. We eventually get them to pay a $780 million fine, but wait, we gave them $5 billion. So, the taxpayers of America paid the fine of a Swiss Bank. And why are we bailing out somebody who that is defrauding us?
BILL MOYERS: Yeah. 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?
WILLIAM K. BLACK: Absolutely.
BILL MOYERS: You are.
WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? 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.
BILL MOYERS: But what might happen, at this point, if in fact they keep from us the true health of the banks?
WILLIAM K. BLACK: Well, then the banks will, as they did in Japan, either stay enormously weak, or Treasury will be forced to increasingly absurd giveaways of taxpayer money. We’ve seen how horrific AIG — and remember, they kept secrets from everyone.
- Wall Street Journal reports :
General Motors Corp. is teaming with Segway Inc., maker of the upright, self-balancing scooters, to build a new type of two-wheeled vehicle designed to move easily through congested urban streets. The machine, which GM says it aims to develop by 2012, would run on batteries and use wireless technology to avoid traffic backups and navigate cities.
The struggling auto maker, surviving on a government lifeline, is looking to generate enthusiasm for its increasingly uncertain future ahead of the New York auto show this week. GM has slashed product-development programs, advertising and spending on auto-show events. But it will take to the streets of Manhattan on Tuesday to show off a prototype of the vehicle, called PUMA, for Personal Urban Mobility and Accessibility.
The Segway Personal Transporter was launched with considerable hype eight years ago but practical issues prevented the scooter from becoming a mass-market product, including its relatively high cost and restrictions on its use in many jurisdictions.
GM is betting PUMA’s more car-like traits — an enclosed compartment and top speed of 35 miles per hour — will lead to better results. GM didn’t say how much the machines would cost, but research chief Larry Burns said owners would spend one-third to one-fourth of the cost of a traditional vehicle.
PUMA would have a range of about 35 miles. GM said it aims to use so-called vehicle-to-vehicle technology to avoid traffic problems and potentially have it navigate itself through city streets.
- The Big Con Job continues. Is the Treasury department and FedRes working for Americans or private banksters? The banksters have ‘owned’ the US government for many many many years. Draw your own conclusions!
- Aaron Task of TechTicker reports :
The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.
He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program’s failings go way beyond such technical issues. “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: “’If we lie and they believe us, all will be well.’ It’s Orwellian.”
The former regulator is extremely critical of Geithner, calling him a “failed regulator” now “adding to failed policy” by not allowing “banks that really need desperately to be closed” to fail. (On Saturday, Geithner said on Face the Nation, if banks need “exceptional assistance” in the future “then we’ll make sure that assistance comes with conditions,” including potentially changing management and the board, but did not say they’d be shut down.)
Black says the stress test must also be viewed in the context of Geithner’s toxic debt plan, which he calls “an enormous taxpayer subsidy for people who caused the problem.” The fact bank stocks have been rising since Geithner unveiled his plan is “bad news for taxpayers,” he says. “It’s the subsidy of all history.”
- The great toxic asset plan fraud continues. It bailouts all the banks and let many financial institutions make alot of money. But taxpayers get to foot the bill. The reality is, these banks are dead. The toxic derivatives they are holding amounts to multi trillions of dollars each. It means Quantitative Easing will destroy the USD.
- George Soros comments in the Guardian UK :
Billionaire investor George Soros has warned that bailing out banks could turn them into “zombies” that suck the lifeblood of the American economy, which he predicted is in for a “lasting slowdown”. He also cautioned that the recent rise in global stockmarkets is a “bear market rally because we have not yet turned the economy around”.
His gloomy verdict weighed on Asian stockmarkets today, alongside a report that the International Monetary Fund now estimates that the toxic debts racked up by banks and insurers could spiral to $4tn (£2.7tn).
Soros said he does not expect the US economy to recover until next year at the earliest. “The recovery will look like an inverted square root sign,” he said. “You hit bottom and you automatically rebound some, but then you don’t come out of it in a V-shaped recovery or anything like that. You settle down, step down.”
Soros stressed that restoring health to the “basically insolvent” banking system and the housing market is key to any recovery. The public-private investment funds introduced to rid US banks of bad debts will work but won’t be enough to recapitalise the banks so they can start lending again, he said.
“What we have created now is a situation where the banks will be able to earn their way out of a hole but by doing that, they are going to weigh on the economy,” Soros said. “Instead of stimulating the economy, they will draw the lifeblood, so to speak, of profits away from the real economy in order to keep themselves alive.”
Analysts agreed that the financial system remains a problem and thought recent optimism that the worst may be over was overdone. “The market’s stance on banks had been too optimistic recently,” said Nagayuki Yamagishi, a strategist at Mitsubishi Securities in Tokyo. “Some large US banks have already passed stress tests, but others haven’t, and given that results are coming up soon, this simply reignited investor uncertainty.”
- International Argentine analyst and writer Adrian Salbuchi analyses the New World Order. What is it? Who are the people involved? Which powerful organizations are driving us to world government? He gives us a concise but clear overview the New World Order and :
- Trilateral Commission
- Council of Foreign Relations
- Bilderberger Group
- Royal Institute of International Affairs (RIIA)
- This shadow government is really run by private organizations behind the scenes. They decide who gets elected and what policies should be implemented. Their tentacles reach out to all key institutions in the world including the mass media. See also :
Salbuchi – Global Financial Collapse