bill black on the current economic crisis

Bill Black was instrumental in successfully prosecuting a huge number of criminal bankers in the Savings and Loan crisis about twenty years ago. He shares his view on the current state of bankers’ criminality here. Note that I’m not entirely sure what he means by “liars loans” — I’m guessing home loans and fraudulently done foreclosures? ETA: liars loans are defined here.

[Audio: English; Transcript: below]

Transcript crowdsourced at gplus! Thanks in particular to Shannon Jennings

LG: This is Lou Gradowski (sp?) out here with Bill, Bill Black, about the famous legends and rumors about how you put many bankers to jail. How the hell did you manage that?

BB: Well, I was part of a group that did. Quite frankly, the agency did its part by making more than ten thousand criminal referrals. The FBI justice department did their part, we put more than a thousand elite bankers in jail, uh, convicted with a 90% conviction rate, and most of these were the top one hundred cases so these were the most elite frauds in the entire crisis.

LG: And when did this happen?

BB: This happened, basically, from about ’89 to about 1993.

LG: Wow, amazing work, amazing work. I’m surprised that something like that could even be accomplished. But if I could ask you your thoughts about this economic crisis that we’re in right now, what do you personally think caused the troubles that we’re in now?

BB: Well, first, this crisis is seventy times larger in terms of its losses. Second, it was driven by an even bigger wave of fraud than the savings and loan crisis. The savings and loan crisis, they found that in a typical large failure, fraud was invariably present. Then we went to the whole Enron era those were all frauds as well. We get to this era, we find that ninety percent of [liars] loans are fraudulent. The liars loans by 2006 are one out of every three loans made. That means roughly 2 million fraudulent loans and we find that it was the lenders who put the lie in the liars loans. Next part, that is what hyperinflated the bubble. When you get a really huge bubble and it collapses you get the great recessions and depressions. So that’s what drove this crisis, that’s what made the criminal bankers rich, and that’s what’s cost us ten million American jobs, and eleven TRILLION dollars — a trillion is a thousand billion — eleven trillion dollars loss versus a hundred and fifty billion in the savings and loan crisis. In this crisis? As I told you we’d made over ten thousand criminal referrals in the savings and loan crisis — which was one-seventieth as big. In this crisis — ZERO criminal referrals by the same agency, therefore ZERO convictions. And only as recently as 2007, a hundred and twenty FBI agents nationwide supposed to deal with four million frauds, whereas we had a thousand FBI agents just on the savings and loan crisis which, again, was one-seventieth the size.

LG: So I’m guessing you’re a fan of, um, Ben Bernanke?

BB: (Laughs) Yeah.

LG: What’s your comments about Ben Bernanke?

BB: If you want to fix the problem you gotta start always by fixing the regulators. So, you can’t fire Ben Bernanke, as the president doesn’t have that power, but he can ask for his resignation. And you gotta fire Geithner and you gotta fire Holder. Holder is the Attorney General, Geithner is the Treasury Secretary. Bernanke and Geithner were promoted, or re-inst… er, re-upped because they were failures as financial regulators, and indeed they were the most abject failures as regulators in the history of regulation.

LG: I couldn’t agree with you more, Bill Black and thank you so much for all your work. Where can we find more of it?

BB: On New Economic Perspectives, which is the blog at the University of Missouri-Kansas City economics department which is one of about four heterodox departments left in the United States of America. And you can follow us on twitter and you can follow us at @WilliamKBlack

LG: Thank you so much for your amazing work.

(Clip cuts off here.)

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One Response to bill black on the current economic crisis

  1. Laura says:

    Thank you. This was so informative. What a great guy!