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Interview Video: William K. Black with Democracy Now Broadcast October 15.
Text from Democracy Now:
- The Dow Jones Industrial Average has topped 10,000 for the first time in a year, as JPMorgan Chase reported massive profits in the third quarter. Meanwhile, the Wall Street Journal is reporting that major US banks and securities firms are on pace to pay their employees about $140 billion this year—a record high. But on Main Street, foreclosures are also at record levels, and the official unemployment rate is expected to top ten percent. We speak to former bank regulator William Black, author of The Best Way to Rob a Bank Is to Own One.
See also:
William Black Charges Geithner, Summers & Obama With Banking Cover-Up
William K. Black: The Great American Bank Robbery
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Thank you!
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JUAN GONZALEZ: And William Black, where is the outrage? It seems to me, at this stage, with the—as the foreclosures continue to escalate in numbers, and yet we’re seeing these enormous profits less than a year after the financial crisis. There doesn’t seem to be the kind of outrage, even in Congress, that there was six months or eight months ago.
WILLIAM BLACK: There’s no palpable outrage, certainly not in Congress. The reform efforts on derivatives, for example, are a scandal. They exempt virtually all of the problem derivatives, and they’re designed to exempt it. And that’s the bill that’s introduced, and of course it’s likely to get worse with additional lobbying from the special interests.
Link the things that you’ve just been talking about. You talked about foreclosures reaching record highs. But in fact, foreclosures, relative to delinquencies, are quite low compared to historical ratios. In other words, banks have tons of folks who are not paying their mortgages on time, and they’re not foreclosing. And the reason they’re not foreclosing is, once you foreclose, you have to recognize losses under the accounting rules. And the banks gimmicked the accounting rules. They put pressure on Congress, and Congress put pressure on the accounting profession to gimmick the accounting rules now about a year ago. Now, these bonuses, of course, are paid compared to alleged profits. What happens if you understate your losses dramatically? You report much higher profits and much higher bonuses. So this is a web of fraud, in which they are getting as much as they can before the place goes to hell in a handbasket again.
AMY GOODMAN: William Black, talk about Timothy Geithner. Talk about Lawrence Summers. Talk about Obama’s inner circle and what they have to gain from this.
WILLIAM BLACK: Well, I mean, Summers, for example—you talked about Geithner’s aides and how much money they had made, and, of course, it’s absurdly large, and they’re making it typically for not doing much of anything. But they’re taking their cue from Summers, who got $5 million, roughly, for working one day a week in areas he had no expertise. So, you know, once you leave the federal service, then these interests that you were very helpful to find a way to make you spectacularly rich, and they know that that’s what’s coming in their future. That’s part of the problem.
But the bigger part of the problem, in many ways, is that they have such an ideology about the market and its ability to deal with all problems that has no basis in reality, has been exposed in this crisis as completely fictional, and yet they can’t give it up. I mean, think of yourself as one of these professors who’s been trained in the Milton Friedmanish views, and you’re in your fifties, and you’ve been saying—you know, everything you’ve said in your career is wrong. Everything you’ve learned in your career is wrong. All of your areas of expertise are wrong. Are you going to admit that? “Hi, I’ve been misleading you, and I’m sorry I caused this disaster. And by the way, I have no meaningful skills or experience.”
AMY GOODMAN: Would Alan Greenspan—
WILLIAM BLACK: It’s not going to happen.
AMY GOODMAN: —fit into that picture?
WILLIAM BLACK: Well, Alan Greenspan, of course, is doing this when he’s in his eighties and isn’t going to teach and isn’t going to do anything else. And even then, he didn’t volunteer it. He was asked pointed questions in front of Congress.
And that comes back to your point: where’s the congressional outrage there? There is some. We work with some of the progressives. You may have seen, your listeners may well have seen Representative Grayson asking very difficult questions. Representative Kaptur has certainly been on people. But that’s a tiny minority of folks within Congress. And it comes back, of course, to campaign contributions. And the Supreme Court is about to make that much worse. It’s almost certainly going to strike down the portions of McCain-Feingold that restricted corporate contributions, and it’s “Katy, bar the door.”
JUAN GONZALEZ: I’d like to ask you to go back to this issue of the foreclosures and delinquencies, which you make the point that the delinquencies are much higher. For instance, I think the delinquency rate for prime loans, not for the subprime or even the Alt-A or the more questionable loans, but for prime loans, rose to 6.41 percent in the second quarter from six percent, so that you’re getting supposedly the best loans in the home mortgage market are now at these very, very high rates of delinquency. What does this say about the future for these banks that are holding these loans?
WILLIAM BLACK: Well, it means that many of these banks are deeply insolvent and actually losing money, but they have the gimmicked accounting, so they’re able to report that they have lots of profits.
And, by the way, the other thing they’re doing is speculating like crazy and other trading activities that add absolutely nothing to economic value. So, if they’re winning, somebody’s losing. Right? They’re doing bond trading, and they’re producing allegedly billions of dollars in profits in bond trading. Well, somebody’s the counterparty and losing money. And so, there’s going to be other bad news outside the financial sector.
And again, remember, financial sector exists supposedly for one purpose—to help the real economy—and it’s taking billions out of the real economy in trading profits. So the combination of these things, both in the financial sector and in the real economy, means very bad things down the road, in terms of increased business failures, increased banking failures.
But, of course, we’re not allowing the large banks to fail. In a part of his speech that was almost completely ignored, and it’s incredibly radical, but in the right word—you know, right drift range, Geithner said twice that for the largest banks we now have a program of capital insurance—not deposit insurance, capital insurance. In other words, we’re going to stand in there and bail out the shareholders, no matter how badly management screws up the place, even if management screws it up through fraud. And that’s just an appalling change in America.
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Thank you!
