William K. Black Criticizes the Bailout Plan — Might Destroy the Obama Presidency


Regulator from the S&L Crisis opposes Geithner’s plan. Author of “The Best Way to Rob a Bank is to Own One.” 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.  

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In his book, The Best Way to Rob a Bank is to Own One (University of Texas Press 2005), “a classic.”  Paul Volcker praised its analysis: 

Bill Black has detailed an alarming story about financial – and political – corruption.  The specifics go back twenty years, but the lessons are as fresh as the morning newspaper.  One of those lessons really sticks out: one brave man with a conscience could stand up for us all.

Robert Kuttner, in his Business Week column, proclaimed: 

Black’s book is partly the definitive history of the savings-and-loan industry scandals of the early 1980s. More important, it is a general theory of how dishonest CEOs, crony directors, and corrupt middlemen can systematically defeat market discipline and conceal deliberate fraud for a long time — enough to create massive damage.

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 and kill and maim thousands. “Control fraud” is what happens when the person who controls a large company is a criminal. Enron was only the most conspicuous example of a pervasive phenomenon in corporate behaviour, says this white-collar criminologist.

The following is from Bill Moyers Journal interview:

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.

 

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