Wednesday, 22 October 2014 / TRUTH-OUT.ORG

Creative Finance: Leaving Felons in Charge of the Banks

Monday, 04 February 2013 12:55 By Paul Jay, The Real News Network | Video

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay. And welcome to this week's edition of The Black Financial and Fraud Report with Bill Black, who joins us now from Kansas City, Missouri, where he teaches economics and law at the University of Missouri–Kansas City. He's a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One.

Thanks again for joining us, Bill.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

JAY: So what caught your attention this week?

BLACK: Followups and feedback to the Frontline special The Untouchables on the failure not only to prosecute, but to even investigate the elite banksters who caused the ongoing crisis.

And so the following things have happened. Lanny Breuer, the head of the criminal division and the most outspoken proponent of too-big-to-prosecute has unexpectedly resigned. It's possible that he'd been planning it, but that wasn't public. And so people are speculating whether he's doing so in response to the heavy criticisms he received in the Frontline documentary.

And the Office of the Comptroller of the Currency responded to a written article that Frontline did in conjunction with the broadcast, and that writing quoted me—and that's what the Office of the Comptroller of the Currency focused on. They said that it was ridiculous to make a comparison between the 30,000 criminal referrals by the Office of Thrift Supervision back during the savings and loan crisis and the zero criminal referrals by the Office of Thrift Supervision in the current crisis, because that didn't count criminal referrals that the associations, the savings and loans made. Of course, savings and loans don't make criminal referrals against their CEOs, so I had a bit of fun responding to that. But the OCC response in essence says that there were no criminal referrals because there were no crimes. So, again, this is the virgin crisis theory of life.

Now, the second thing is a commentary in The Economist—of course, a generally conservative but intelligent news magazine about commerce. And it—you know, if you didn't have this, you'd have to create it in The Onion as satire. This column says that the real problem with fraud in the current crisis is the victims, right? The victims allowed themselves to be defrauded, and therefore it's important not to have prosecutions, because this way victims will learn that they have to protect themselves.

JAY: Well, I would think con men all over the world would be happy with that guideline.

BLACK: Well, as I said, it really belongs in The Onion, the satirical magazine. But no, The Economist lacks any sense of irony and actually does say that you should blame the victims of the fraud as the principle folks that you should blame out of this crisis. And the guy has this weird historical analogy to Athens back in the Peloponnesian Wars and such that is of stunning irrelevance. So I'm spending some amount of time preparing a new response to that one.

But the third one is Iglesias, who has written a column in which he said, well, it's too bad that Frontline seems to have been successful, in that the populists are winning—he calls them the "populists"—in this criticism of Geithner and Holder, the attorney general, and Lanny Breuer, still the head of the criminal division, and that we really should be probably applauding them, because it was essential, if you're going to bail out the biggest banks, that you not allow any prosecutions, because if you had allowed any prosecutions, then the banks would have been driven by prosecutions back into insolvency.

So, you see, really you have to make sure—this is even worse than blaming the victims, in a way—you have to make sure that the victims get no recovery from the frauds, because if the victims got recovery, well, the victims suffered such massive losses, roughly $20 trillion lost in wealth, that it would bankrupt the fraudulent banks. And of course we can't allow that. So we have to make sure that we have no prosecutions, because otherwise it would be illogical.

And Iglesias is not someone who is familiar with regulation or economics or finance, but he does have an undergraduate education in philosophy—he's a philosophy major. And this column, like a earlier one he did in 2001 that was somewhat similar, are remarkable in that they're utterly devoid of any discussion of ethics or what it would mean in terms of a democracy if you could have the most elite institutions gain a competitive advantage over honest institutions by fraud, become so massively large that they couldn't be closed down, and would have dominant crony capitalism power over the government that would lock in their hegemony forever, essentially.

JAY: Yeah, let me give some defense of Lenny Breuer. They were handed this—.

BLACK: That's good, because he needs a defense lawyer.

JAY: Yeah, I know. I'm an obvious likely defender of them. But the argument would go this way, that, you know, the way American economy has worked over this whole last century has given rise to a situation with these massive financial monopolies, and it is to a large extent a big confidence game, and in every sense of the word, and if you start arresting some of these CEOs, especially at a time that was so precarious in '08-'09 and is still, in reality, very precarious, even though they don't want to admit it, that you might unravel the whole financial system again, because nobody's going to trust anybody again, and it becomes chaotic, and everybody pulls their money out, and that, you know, if you're not willing to go that other step, which is to create some kind of public banking alternative, then you are left with a situation that you can't prosecute these guys, 'cause it's just too much risk to the whole global system.

BLACK: Well, as someone who actually was a defense lawyer, I would suggest continuing your current career, 'cause—. So the logic of that is that the only way to maintain trust in an institution that is fundamentally fraudulent is to make sure you never investigate and develop the facts that it is fraudulent, and if people are successfully deceived, then they will have trust in the organization.

JAY: Well, isn't that the logic that they're following?

BLACK: It is pretty close. That's what I've often said, that, like, you know, seriously, folks, your idea is that you were going to achieve financial stability by leaving the felons in charge of our largest banks. That is really creative finance.

JAY: Thanks very much for joining us, Bill.

BLACK: Thank you.

JAY: Thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Paul Jay

Paul Jay is CEO and Senior Editor of The Real News Network. As Senior Editor of TRNN Paul has overseen the production of over 4,500 news stories and is the Host of our news analysis programming. As Executive Producer of CBC Newsworld's independent flagship debate show counterSpin he produced over 2,000 shows during its 10 yrs on air. He is an award-winning documentary filmmaker with over 20 films under his belt and was founding Chair of Hot Docs!, the Canadian International Documentary Film Festival (now the largest in North America).


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Creative Finance: Leaving Felons in Charge of the Banks

Monday, 04 February 2013 12:55 By Paul Jay, The Real News Network | Video

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay. And welcome to this week's edition of The Black Financial and Fraud Report with Bill Black, who joins us now from Kansas City, Missouri, where he teaches economics and law at the University of Missouri–Kansas City. He's a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One.

Thanks again for joining us, Bill.

BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.

JAY: So what caught your attention this week?

BLACK: Followups and feedback to the Frontline special The Untouchables on the failure not only to prosecute, but to even investigate the elite banksters who caused the ongoing crisis.

And so the following things have happened. Lanny Breuer, the head of the criminal division and the most outspoken proponent of too-big-to-prosecute has unexpectedly resigned. It's possible that he'd been planning it, but that wasn't public. And so people are speculating whether he's doing so in response to the heavy criticisms he received in the Frontline documentary.

And the Office of the Comptroller of the Currency responded to a written article that Frontline did in conjunction with the broadcast, and that writing quoted me—and that's what the Office of the Comptroller of the Currency focused on. They said that it was ridiculous to make a comparison between the 30,000 criminal referrals by the Office of Thrift Supervision back during the savings and loan crisis and the zero criminal referrals by the Office of Thrift Supervision in the current crisis, because that didn't count criminal referrals that the associations, the savings and loans made. Of course, savings and loans don't make criminal referrals against their CEOs, so I had a bit of fun responding to that. But the OCC response in essence says that there were no criminal referrals because there were no crimes. So, again, this is the virgin crisis theory of life.

Now, the second thing is a commentary in The Economist—of course, a generally conservative but intelligent news magazine about commerce. And it—you know, if you didn't have this, you'd have to create it in The Onion as satire. This column says that the real problem with fraud in the current crisis is the victims, right? The victims allowed themselves to be defrauded, and therefore it's important not to have prosecutions, because this way victims will learn that they have to protect themselves.

JAY: Well, I would think con men all over the world would be happy with that guideline.

BLACK: Well, as I said, it really belongs in The Onion, the satirical magazine. But no, The Economist lacks any sense of irony and actually does say that you should blame the victims of the fraud as the principle folks that you should blame out of this crisis. And the guy has this weird historical analogy to Athens back in the Peloponnesian Wars and such that is of stunning irrelevance. So I'm spending some amount of time preparing a new response to that one.

But the third one is Iglesias, who has written a column in which he said, well, it's too bad that Frontline seems to have been successful, in that the populists are winning—he calls them the "populists"—in this criticism of Geithner and Holder, the attorney general, and Lanny Breuer, still the head of the criminal division, and that we really should be probably applauding them, because it was essential, if you're going to bail out the biggest banks, that you not allow any prosecutions, because if you had allowed any prosecutions, then the banks would have been driven by prosecutions back into insolvency.

So, you see, really you have to make sure—this is even worse than blaming the victims, in a way—you have to make sure that the victims get no recovery from the frauds, because if the victims got recovery, well, the victims suffered such massive losses, roughly $20 trillion lost in wealth, that it would bankrupt the fraudulent banks. And of course we can't allow that. So we have to make sure that we have no prosecutions, because otherwise it would be illogical.

And Iglesias is not someone who is familiar with regulation or economics or finance, but he does have an undergraduate education in philosophy—he's a philosophy major. And this column, like a earlier one he did in 2001 that was somewhat similar, are remarkable in that they're utterly devoid of any discussion of ethics or what it would mean in terms of a democracy if you could have the most elite institutions gain a competitive advantage over honest institutions by fraud, become so massively large that they couldn't be closed down, and would have dominant crony capitalism power over the government that would lock in their hegemony forever, essentially.

JAY: Yeah, let me give some defense of Lenny Breuer. They were handed this—.

BLACK: That's good, because he needs a defense lawyer.

JAY: Yeah, I know. I'm an obvious likely defender of them. But the argument would go this way, that, you know, the way American economy has worked over this whole last century has given rise to a situation with these massive financial monopolies, and it is to a large extent a big confidence game, and in every sense of the word, and if you start arresting some of these CEOs, especially at a time that was so precarious in '08-'09 and is still, in reality, very precarious, even though they don't want to admit it, that you might unravel the whole financial system again, because nobody's going to trust anybody again, and it becomes chaotic, and everybody pulls their money out, and that, you know, if you're not willing to go that other step, which is to create some kind of public banking alternative, then you are left with a situation that you can't prosecute these guys, 'cause it's just too much risk to the whole global system.

BLACK: Well, as someone who actually was a defense lawyer, I would suggest continuing your current career, 'cause—. So the logic of that is that the only way to maintain trust in an institution that is fundamentally fraudulent is to make sure you never investigate and develop the facts that it is fraudulent, and if people are successfully deceived, then they will have trust in the organization.

JAY: Well, isn't that the logic that they're following?

BLACK: It is pretty close. That's what I've often said, that, like, you know, seriously, folks, your idea is that you were going to achieve financial stability by leaving the felons in charge of our largest banks. That is really creative finance.

JAY: Thanks very much for joining us, Bill.

BLACK: Thank you.

JAY: Thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Paul Jay

Paul Jay is CEO and Senior Editor of The Real News Network. As Senior Editor of TRNN Paul has overseen the production of over 4,500 news stories and is the Host of our news analysis programming. As Executive Producer of CBC Newsworld's independent flagship debate show counterSpin he produced over 2,000 shows during its 10 yrs on air. He is an award-winning documentary filmmaker with over 20 films under his belt and was founding Chair of Hot Docs!, the Canadian International Documentary Film Festival (now the largest in North America).


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