Tonight on Bill Moyers' Journal: Bill Black, the future of Media and Earth Day

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http://www.pbs.org/moyers/journal/index-flash.html


April 23, 2010

On Thursday, April 22, President Barack Obama made the case for increased regulation of the financial industry in a televised speech at Cooper Union in New York City. It was widely billed as President Obama's chance to harness the momentum behind reforming Wall Street and move forward the bills being considered in the House and Senate. Those measures face stiff opposition from most of the Republican Party and an army of lobbyists from Wall Street who have the ear of members of Congress on both sides of the aisle.

William K. Black thinks President Obama didn't acknowledge a key component in the financial crisis that the bills before Congress won't address — fraud. A former regulator who helped crack down on massive fraud during the savings and loan crisis in the 1980s, Black tells Bill Moyers on THE JOURNAL that, despite evidence of fraud at the top banks, prosecutions seem far away. "If you go back to the savings and loan debacle, we got more than a thousand felony convictions of the elite. These are not, you know, tellers or something. We today have zero convictions, zero indictments, zero arrests of any of the elite, non-prime lenders that, through their fraud, drove this crisis."

The Case Against Goldman Sachs

On Friday April 16, the U.S. Securities and Exchange Commission seemed to agree, charging Goldman Sachs with fraud in its representation of collatoralized debt obligations (CDOs) to its investors. At the heart of the case is whether Goldman Sachs was completely honest with potential investors about how the portfolio of CDOs was chosen. The SEC alleges that Goldman Sachs didn't acknowledge that the portfolio was assembled with the help of hedge fund manager John Paulson, who was planning on betting against the portfolio. Black explained why it could be a criminal matter:
It has nothing to do with the buyer being dumb. Any buyer would have wanted to know that this portfolio was set up to fail. That would have been material information within the language of the securities laws. And they were not only not told that, they were told the opposite, that it was picked so that it would succeed. That, if it's true, is a misrepresentation, or in English, a lie. And that would establish securities fraud. And that, by the way, is a felony, not just a civil wrong.

Biography

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri — Kansas City (UMKC). He was the executive director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the Federal Savings and Loan Insurance Corporation (FSLIC), senior vice president and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" — frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

[malaise]

1. Thanks

K &R

[malaise]

2. Kick

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3. Black says Bush's wrecking crew is still in place

says criminal charges will have to follow. He also says too many Goldman men are in this administration and seem afraid to use the word fraud.
This is must see TV.

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5. James Galbraith said the same thing -- among others

http://www.washingtonsblog.com/2010/04/well-known-economist-says-economists.html

Thursday, April 22, 2010
Economist James Galbraith: Economists Should Move into the Background, and "Criminologists to the Forefront"

University of Texas economics professor James K. Galbraith previously said that fraud caused the financial crisis:

You had fraud in the origination of the mortgages, fraud in the underwriting, fraud in the ratings agencies.

Senator Kaufman said last month:

Fraud and potential criminal conduct were at the heart of the financial crisis.

Congresswoman Marcy Kaptur says that there was rampant fraud leading up to the crash (see this and this).

TARP overseer Elizabeth Warren suspects fraud as the cause of the crisis.

Yves Smith has shown that fraud largely caused the subprime crisis.

Janet Tavakoli says that rampant fraud and Ponzi schemes caused the financial crisis.

According to economist Max Wolff:

The securitization process worked by "packag(ing), sell(ing), repack(aging) and resell(ing) mortages making what was a small housing bubble, a gigantic (one) and making what became an American financial problem very much a global" one by selling mortgage bundles worldwide "without full disclosure of the lack of underlying assets or risks."

Buyers accepted them on good faith, failed in their due diligence, and rating agencies were negligent, even criminal, in overvaluing and endorsing junk assets that they knew were high-risk or toxic. "The whole process was corrupt at its core."

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6. I agree with him

Send those who committed fraud to prison. I don't know why they're allowing these criminals to walk.

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7. Discomfort at the Club, no doubt. nt

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4. K&R for Bill Moyers.

His LAST show will be next week, April 30th.
He is retiring.
I will miss him.
We are losing one of the very BEST.
:cry:

[lordsummerisle]

8. Bill Moyers retiring

SUCKS big time. I can't imagine Friday evenings without him.