Bill Moyers of PBS interviews William Black about fraud and the financial crisis… one of Mr. Black’s key points relates to contradictory statements by Treasury Secretary Geithner… Mr. Black says… “Geithner is publicly saying that it’s going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have massive losses, and that they’re fine….”
~~~~ BILL MOYERS: Welcome to the Journal.
For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that “The Best Way to Rob a Bank Is to Own One.” In fact, the man you’re about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.
WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.
BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, “How do they get away with it?” Well, no one has asked that question more often than Bill Black….
…..WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it’s going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent, but fully capitalized. Both statements can’t be true. It can’t be that they need $2 trillion, because they have masses losses, and that they’re fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because…
BILL MOYERS: What do you mean?
WILLIAM K. BLACK:Well, Geithner has, was one of our nation’s top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he’s a failed legacy regulator.
BILL MOYERS: But he denies that he was a regulator. Let me show you some of his testimony before Congress. Take a look at this.
TIMOTHY GEITHNER:I’ve never been a regulator, for better or worse. And I think you’re right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.
Overwhelmed by regulation! It wasn’t the absence of regulation that was the problem, it was despite the presence of regulation you’ve got huge risks that build up.
WILLIAM K. BLACK: Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement.
BILL MOYERS: As?
WILLIAM K. BLACK: As president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he’s completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that’s just plain wrong.
BILL MOYERS: How is this happening? I mean why is it happening?
WILLIAM K. BLACK: Until you get the facts, it’s harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts.
BILL MOYERS: What facts?
WILLIAM K. BLACK: The facts about how bad the condition of the banks is. So, as long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?
BILL MOYERS: You–
WILLIAM K. BLACK: Taking away people’s bonuses?
BILL MOYERS: To hear you say this is unusual because you supported Barack Obama, during the campaign. But you’re seeming disillusioned now.
WILLIAM K. BLACK:Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they’re refusing to obey the law.
BILL MOYERS: In other words, they could have closed these banks without nationalizing them?
WILLIAM K. BLACK:Well, you do a receivership. No one — Ronald Reagan did receiverships. Nobody called it nationalization.
BILL MOYERS: And that’s a law?
WILLIAM K. BLACK: That’s the law.
BILL MOYERS:So, Paulson could have done this? Geithner could do this?
WILLIAM K. BLACK: Not could. Was mandated–
BILL MOYERS: By the law.
WILLIAM K. BLACK: By the law.
BILL MOYERS: This law, you’re talking about.
WILLIAM K. BLACK: Yes.
BILL MOYERS: What the reason they give for not doing it?
WILLIAM K. BLACK: They ignore it. And nobody calls them on it.
BILL MOYERS: Well, where’s Congress? Where’s the press? Where–
WILLIAM K. BLACK:Well, where’s the Pecora investigation?
BILL MOYERS: The what?
WILLIAM K. BLACK:The Pecora investigation. The Great Depression, we said, “Hey, we have to learn the facts. What caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters?” Where’s our investigation?
What would happen if after a plane crashes, we said, “Oh, we don’t want to look in the past. We want to be forward looking. Many people might have been, you know, we don’t want to pass blame. No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. And here, we’ve got a double tragedy. It isn’t just that we are failing to learn from the mistakes of the past. We’re failing to learn from the successes of the past.
BILL MOYERS: What do you mean?
WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn’t matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, “You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you’re covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn’t work. You will cause your recession to continue and continue.” And the Japanese call it the lost decade. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It’s working just as well as it did in Japan.
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.
BILL MOYERS: A.I.G. did?
WILLIAM K. BLACK:What we’re doing with — no, Treasury and both administrations. 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.
BILL MOYERS: Even though Goldman Sachs had a big vested stake.
WILLIAM K. BLACK: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he wouldn’t be allowed in civilized society.
BILL MOYERS: Yeah, like a conflict of interest, it seems.
WILLIAM K. BLACK: Massive conflict of interests.”~~~~
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