Transcript

Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson. Today Bill Black returns to the program. Bill is a former bank regulator and was a central figure in prosecuting the corruption associated with the Savings and Loan Crisis of the late 1980s. He has since been a prominent voice against financial and political fraud. And in 2005, he authored the excellent book The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry.

Now, when Bill was our guest last year, we discussed how control fraud is essentially running unchecked and unpunished throughout today’s financial system. I am curious to learn from Bill if things have gotten better or worse since then.

Bill, thanks so much for returning to the program.

Bill Black: Thank you.

Chris Martenson: So for those who did not have the chance to listen to your earlier interview with us, can you just give us a brief summary of what control fraud is?

Bill Black: Yes. Control fraud is what happens when the people who are in charge of a seemingly legitimate entity use it as a weapon to defraud people. So in the financial sphere, we are mostly talking about accounting as the weapon of choice. And that is, where you overvalue assets, sometimes you undervalue liabilities. You create vast amounts of fictional income by making really bad loans if you are a lender. This makes you rich through modern executive compensation, and then it causes tremendous losses to the lender.

But there are many other forms of control fraud, such as the people who own the Pakistani building that collapsed, where they stole the property, and built it illegally, and then maintained it illegally, and it killed thousands of people.

So in addition to causing greater financial losses than all other forms of property crime combined, control fraud also maims and kills more people than blue-collar crimes do.

Chris Martenson: Now, for this to really exist it, cannot just be that a corporation is running amok. There has to be either some benign oversight on the regulatory side of things or perhaps more. Would you agree?

Bill Black: Well, I might call it maligned as opposed to benign, but yes. We have known for centuries in the economics biz that you need a rule of law. And that if you do not have a rule of law, that you create something that in modern economics we call a Gresham’s dynamic. And that is, if cheaters prosper, then market forces become perverse. And markets drive the honest people out. And this actually goes all the way back – the earliest I found this in print is Swift, over two centuries ago in Gulliver’s Travels, writing about the Lilliputians.

Chris Martenson: Interesting. How did that turn out?

Bill Black: Well, it turned out Swift had exactly the same insight that a Nobel-winning economist had in 1970. He said theft, you can use normal means to greatly reduce it if you are a person. But he has a wonderful line. He says, honesty hath no fence against fraud. And that when it occurs, it not only hurts the victim, the direct victim – the consumer, who is defrauded – but it hurts any honest business person as well. And so it is a false dichotomy of regulation versus markets. If you want effective markets, in particular effective financial markets, you need a rule of law. And that means you need a group of folks that make sure that the cheaters do not prosper. You need regulatory cops on the beat.

Chris Martenson: Well, let us talk about that part of it. since we talked in early 2012, I believe. So a bit over a year and a half ago, I have not noticed many financial prosecutions, criminal or civil. And of the fines that have been levied, they have been, let us say, rather sedate, I think compared to the enormity of the crimes. Which means the crime has paid in this case or the fraud has paid because a small portion of whatever was thieved has been clawed back. I am looking at the Libor scandal has happened since you and I talked last. We have the HSBC drug money laundering case. We have got a variety of cases. When you saw those come up, what was your reaction to those?

Bill Black: Oh, that we were too optimistic again [laughter]. You are quite right. The depth and variety of fraud, and at the absolute peak of our economy and our financial system, has been remarkable. In other words, it has proved everything that we feared. And it is quite wonderful. Your listeners, I also recommend to them, go and listen to the tapes, the actual audio tapes, of the Anglo-Irish executives.

Chris Martenson: I did listen to those. I posted those prominently. I hope people did [listen to them]. Go on; tell people what they will hear if they go there.

Bill Black: Well, first thing to remember is, they knew they were being taped [laughter].

Chris Martenson: Good point.

Bill Black: So this is what they are willing to say when they know they are being taped. The second thing is, the government of Ireland has had these tapes for four years, and not only never made them public, there is no evidence that they ever used them to bring an action against the bankers. So this was only broken, finally, by whistle blowers four years later. The third thing is, the bankers sound just like any other crook, except they are nastier. So there is a bunch of them. As we are speaking, there have been three of these revelations, and there may be many more. But they include the following:

So the key one is, the Anglo-Irish executives know that the bank is massively insolvent, because they have looted it. And they want to get a bailout from the Irish government so that they can keep their jobs and keep getting paid even though they have become wealthy by looting the place. So they decide to make up a number; what they need as immediate bailout, where the Irish government without looking at anything gives them over ten billion dollars [laughter]. So you might think this would be a difficult pitch. We have just looted the place. We got massive losses. And we want you to bail out the bank so that we can keep looting it. But have no fear. And they are laughing during this discussion, which is what particularly are the fingernails-on-the -blackboard aspect for many Irish people. So they say go in for a bit over about $10 billion US bucks, because we want them to know that it is a crisis and absolute urgency; they have got to give us the money without thinking. But if we ask for too much money, anywhere near the real losses, they would go, “wait a minute, this would bankrupt Ireland. Why would we do this? This would be crazy.”

And so one of the other executives asks the guy who is explaining this, where did you get the initial number? Which, as I say, is around $10 billion. And he says, oh, I did it just the way our CEO always recommends: I picked it out of my arse. And when they get eventually a bailout of the Irish government because the bailout has destroyed the entire Irish budget and Irish economy.

Then one of them starts singing deutschland deutschland über alles in the background. So the Germans are pissed, as well. And beyond that, it is just every arrogant detail, and the fact that they made it clear that they thought that the government was in their pocket.

Chris Martenson: What you are describing, besides being horrifying – I am laughing because gallows humor is cropping up for me here.

Bill Black: Exactly.

Chris Martenson: But what you are describing is a culture, then, that is so self-referential, it has kind of lost its bearings. And people often ask how did the Germans go so crazy during World War II? What happened there? Or how did certain corporate criminal actions get created where poisons are released en masse for a few extra bucks? But to me, the answer seems to be that once your culture supports those things and enshrines them, this becomes your measuring stick. We got these tapes from Anglo-Irish; as you say, they knew they were being taped. We can only project that perhaps what has not been taped is as horrifying or perhaps worse.

So what you are really describing is something that seems systemic. This is not Irish banks you are pointing your finger at. Are you saying that there is something toxic now in the financial industry?

Bill Black: Yes. And it is another example of a Gresham’s dynamic type of mechanism. And it had a name. It had two different names, but they mean the same thing. One is the regulatory “competition-in-laxity.” And the other was the “race to the bottom.” So both of these phrases were current and were actually used. And they produced what the Federal Reserve and United States, inside the agency, referred to as “Fed Right”: right-hand regulation. The Brits referred to it as the same way.

And so it is no surprise that, as bad as the United States is the epicenter of so many of these frauds as you mentioned: Libor, HSBC, Standard Chartered, and the whole misspelling, where they deliberately targeted the least sophisticated customers to rip them off to the tune of tens of billions of dollars, and did so as a matter of absolute routine, where when they do the reviews, they find over 70% of the loans were sold improperly.

Not loans; these are financial product, a supposed guaranteed form. Well, all of those things are happening in the city of London. And that is because the city of London “won” – which obviously should be in quotation marks – the race to the bottom. But that meant that everybody else in the race, like the United States, like Ireland, also ended up very close to the bottom. And this was a mechanism that destroyed effective financial regulation throughout the developed world.

Chris Martenson: And this race to the bottom, obviously this requires regulators, people in the industry, perhaps a little revolving-door action as people go back and forth. And so in thinking about this race to the bottom, I am interested then – so Dodd Frank was sold to us as the tough legislation the system needed to clear out the structural problems and get the bad actors that led to the 2008 financial crisis. How well is that bill living up to its billing at this point in your mind?

Bill Black: Oh, not at all. It was never designed to. That was all propaganda. Because, as you say, a revolving door is part of it. But the real regulatory capture, as the phrase goes, is ideological. They put in leaders; I call them the anti-regulators, who believed the regulation was the problem. Well, if the boss of the head of the regulatory agency thinks regulation is the problem, removing effective regulation is the answer and that markets are essentially perfect, well, you are going to have a self-fulfilling prophecy of disaster in those circumstances. And that is just what you got. So they never looked into what caused the crisis. So here is the first key: Banks do not make criminal referrals against their CEOs. So the only way you are going to get criminal referrals – and you are not going to get prosecutions without criminal referrals in these kinds of elite financial frauds – is if they come from somebody outside.

Now, whistleblowers will episodically give you some information. But if you are talking about a real epidemic of fraud of the kind brought on by this regulatory race to the bottom, then it can only come from the regulatory agencies. To give you an example, in the Savings and Loan Crisis, which was less than 1/70th the size of this crisis, our single agency, the Office of Thrift Supervision, made over thirty thousand criminal referrals. If you come forward to the current crisis, vastly larger, and the Office of Thrift Supervision was supposed to regulate Countrywide, Indy Mac, WAMU, among the worst actors, that agency made zero criminal referrals.

That means you never got the investigations. That means you never found out what was actually causing the crisis. So what happens when you try to shape a bill to stop future crises where you have never figured out what caused the crisis? It is not going to work. And it is, in fact, close to the worst of all worlds. Because Dodd Frank has a number of sensible ideas in it, because it was just a shotgun where everybody that had an idea and had political power got that into the bill somewhere. So there are some good ideas. But there is no coherent theory. And, of course, there are no real regulators.

The Obama administration – well, when [Obama] was a senator, a pretty unknown senator and an African American, the chances of him winning the presidency, the nomination of the party, seemed incredibly low. In those circumstances when he was most desperately in need, the finance industry came forward. It took an enormous gamble on this relatively unknown politician and gave him more political contributions than the Republicans, which is unheard of in modern finance. And that is why – it is not the only reason, but – it was a necessary reason, to have the funding to run the campaign, to have the upset to beat Mrs. Clinton, and to beat her handily eventually and win the general election.

So what do we think, as human beings, about those people that help us in our greatest hour of need?

Chris Martenson: Well, they picked well, apparently. Because I guess they must have had some meetings where they liked what they heard, but he was certainly – Obama was saying very different things on the campaign trail compared to the record since – at least certainly in respect to the financial prosecutions which have been, I believe, the lowest on record. And that is saying something, considering that the financial crimes and losses have been the largest on record.

Bill Black: Yes, it is, and the two are directly related. If you can steal with impunity, and that’s what again, as soon as you devastate regulation – this is what people do not get, because of the need for criminal referrals, you devastate the ability to prosecute. And as soon as that happens, in our jargon, in criminology, we call that – you make it a criminogenic environment. It just means an environment where the incentives are so perverse that they are going to produce widespread crime. In this context, it is going to be widespread accounting control fraud. And we see how few ethical restraints remain in the most elite banks. That is what you were addressing earlier – the ethical issue, the culture issue – about these firms.

And again, you are looking at an underlying economic dynamic where fraud is a sure thing that will make people fabulously wealthy and where you select by your hiring, by your promotion, and by your firing for the ethically worst people at these firms that are committing the frauds. And so you have one of the largest banks in the world, HSBC, being the key ally to the most violent Mexican drug cartel, where they actually did so much business together that the drug cartel designed special boxes to put the cash in that they were laundering that fit exactly into the teller windows so that there would be no delay. This is the efficiency principle of a drug laundering.

So these banks figuratively have the blood of over a thousand people on their hands. They are willing to fund people that murder and torture and behead folks. And they are willing to do that year after year, despite warnings from the regulators that they are doing this. And the regulators are not willing to actually take serious action until there has been “true devastation.”

And people can – I can understand – very much vary their views on Iran. But HSBC and Standard Chartered deliberately and massively helped Iran escape the sanctions. So if Iran really is building a nuke, and if it really does use that nuke ever or leads to a war to try to stop that nuke, that war or that use of that nuke is very much going to be on the heads of the banking industry, as well.

Chris Martenson: So I am intrigued with what happened in that HSBC case, because as I recall, the justice department levied a fine, I thought it was relatively insignificant, given the scope of the laundering and how long it had been going on. But they came out and said pretty much that they were not going to prosecute criminally because they were worried about the systemic effects that might happen. Implying that if they somehow prosecuted a few bad actors in a giant financial institution, the whole world financial system might collapse. How did that idea get so embedded that a justice department official could come out and actually say it with a straight face?

Bill Black: Yes, that is where I started wondering whether I should get out of the biz of complaining about these things. Because I am one of the people that before that case was mocking the justice department by saying that they had a “too big to prosecute” doctrine. And I thought no one would ever admit to such a thing, and he came out and admitted it. And even sounded proud, almost. And one of the top regulatory officials in the United Kingdom – again, the epicenter of the disaster – said the same thing. And the mayor of the city of London is going full force in terms “we have got to win the competition-in-laxity” again. So they have learned absolutely nothing from this other than hey, we get more tax revenues if the banks get bigger!

So there can be no more pernicious doctrine on multiple levels. So let us think about it. First our proudest boast and to some extent our proudest reality in the United States was that we were a nation of laws. And that yes, we knew the bigger and more powerful folks always got away with more things but the end of the day there were limits. And if they were too brazen we would put even very powerful people in prison for their crimes. Now we officially say the rule of law as an asterisk. Some exceptions apply and that is anybody who is running a really big bank.

Second thing: this is absolutely perfect for crony capitalism. In fact, it is the definition of crony capitalism when the crony capitalists and their political allies can do things with impunity. So it is terrible for democracy, it is terrible for integrity, but it is also terrible for the economy. They blew up the global economy. They caused over a $10 trillion dollar loss of wealth in the United States and over a $10 trillion dollar loss of wealth in Europe. They either put directly out of jobs or prevented the jobs from being created of 20 million people in America and the Eurozone. The periphery of the Eurozone is not simply back in recession. It is in levels of unemployment that exceed the Great Depression, where they are now losing their best and brightest kids, because as soon as they graduate from college, the first substantive thing they do is make sure their passport is in good order so they can emigrate.

This is monstrously crazy and destructive, and it is stupid politically. If you actually put the crooks in jail, you would be immensely popular. We did this back in the Savings and Loan [Crisis] by making those over thirty thousand criminal referrals. And again, this is a pimple of a crisis compared to the current crisis. But back in the Savings and Loan Crisis, we got over a thousand convictions simply in the cases designated as major – not the little cases. These are the large cases, and we had over a 90% conviction rate. And we put scores of CEOs and CFOs in prison, including a former governor of the state of Illinois, for example. There are many governors of Illinois who are crooks, sadly, and one of them went into the savings and loan industry and we got him convicted there.

There are zero such elite convictions, any of the elite institutions out of this crisis, for accounting control fraud. As you say, they not only said they would not bring a criminal case against HSBC, they said they would not bring a case against any senior officer of HSBC. And if that is not crazy enough, they refuse to bring a criminal case even against former officers of HSBC who are no longer even working in the industry. Now, of course, that exposes that the rationale that this would supposedly cause a global financial crisis was ludicrous.

Chris Martenson: Well, there has to be something else at work there, obviously, and we can only guess and speculate.

Bill Black: Well, I will tell you one of the things from being a former enforcement hat: If you do not bring cases for year after year after year, it would be like a tennis player who stopped playing tournaments for ten years and never practices, and then he or she goes onto the court. What is going to happen?

Chris Martenson: It will look like me.

Bill Black: They will get crushed by the opposition. So once you have given up enforcing the laws, I can tell you this with my lawyer hat on and former enforcement hat: You fear bringing these cases because you have allowed your skills to deteriorate so badly.

Chris Martenson: So let us talk about the other side of this coin, which is the effect on the larger populace. You mentioned this criminogenic environment that exists within the corporatocracy sphere. So one of the things that I note is that people fundamentally do not trust the markets any more, for a lot of reasons. They have noted that these double standards around prosecutions occur. But there are double standards around access to data, who has got better machines, all of it.

So what is interesting to me is to watch the Dow and S&P soundly trumpeted as they meet new highs largely on the basis of the thin-air money-printing efforts of the Fed, which is nice and everything, but at the same time when you peek at the data you discover retail investors have mostly either sat on the sidelines or pulled – continued to pull away.

And it seems to me, does nobody care that functioning markets require trust and broad participation? I mean, are we just going to have markets that are now engineered for and by the few? Is that where we are headed? And is anybody concerned about that at the higher levels, do you think?

Bill Black: Not enough certainly. It is certainly a shark tank. So here – I can tell you as a criminologist and as a former financial regulator, this is what you need to know about fraud: Fraud involves me, the fraudster, getting you to trust me. And then I betray your trust for my financial gain. And so there is no more destructive asset against trust than elite fraud.

So yes, we have been running a system under which the fraudsters get incredibly wealthy. And now they get incredibly wealthy and they do not even get prosecuted. And if there is a civil case, it is – actually, they will get sort of the worst of all worlds. It sounds large for propaganda purposes, but all of us in finance know it is trivial. It is often literally a week of income, where their income is massively increased by the frauds. You are quite correct. The statistics show that there has been a general withdrawal of less sophisticated investors in particular from the marketplaces. And it is because people do not trust the markets anymore.

And here is what people forget: After Lehman Brothers goes, the run that occurred was not Ma and Pa. The run that occurred that, for example, broke the buck in the money market mutual funds, that was a massive run of the most sophisticated financial players, where they were taking out hundreds of millions – or even tens of billions, in some cases – of money. In some cases, literally in microseconds. In other words, bankers no longer trusted other bankers. And when that happens, markets do not simply become inefficient; they actually lock up. And that is what happened thousands of times after Lehmans collapsed, because bankers would no longer trust other bankers’ evaluation of the assets.

And we have not even discussed derivatives to this point. Which is the not-800-pound gorilla-but-eight-trillion-ton-gorilla that is out there. So we already have the insanity of derivative trades in which both of us book a gain because we have different evaluations for the asset. So we have phenomenal paper gains that cannot be true. When the markets no longer trust each other, then those kinds of transactions do not work anymore.

So when trust is interrupted, much less eroded, in the ways I have talked about it in the derivatives market, liquidity completely dries up. Anything that functions like a market-maker collapses, and you get whole financial systems that grind to a halt. And they do not happen just a few times. It can happen in thousands of markets roughly simultaneously.

You asked me earlier about Dodd Frank, and I said it had no coherent strategic vision. And a couple of the areas in which it had no coherent strategic vision we have talked about. It did not deal with the international competition-in-laxity. It did not deal with “too big to fail.” And it did not deal with derivatives. So I would say that was strike one, strike two, strike three.

Chris Martenson: Well, I understood that it had some passing mention of derivatives, at least looking to create an OTC clearinghouse of some form, and that the lobbyists are currently working feverishly to get all of that stripped down as much as possible.

Bill Black: It is quite true that there are many provisions dealing with all the things I mentioned. None of them was designed to fix the problem. So, as you say, there is a clearinghouse idea, and as you say, in general the regulations are being gutted by the industry as we speak and have been for a year and a half. And we have not mentioned the DC circuit, which is trying to destroy virtually all effective financial regulation. But the clearinghouse would have failed.

Chris Martenson: Why is that?

Bill Black: Because the clearinghouse was, in essence, the equivalent of a market-maker, and the CDOs (collaterized debt obligations) would have still have been massively overvalued to the tune of, ballpark, at least $500 billion. You are going to have any clearinghouse with $500 billion in capital?

Chris Martenson: Maybe the Fed.

Bill Black: Exactly; that is the point. That is why the central bank, and in particular, one central bank, the Fed – and heaven knows I am no great fan of the Fed, but the Fed did save the system from a complete lockup.

Chris Martenson: Yes.

Bill Black: Now, it may have brought about the circumstances that produced the great lockup, but if you did not have the Fed – well, for example, the Swiss Central Bank could not get dollars to UBS and Credit Suisse. And the two largest banks in Switzerland probably would have failed within days. And you can imagine what that would have done to the Swiss economy. And given the importance of those two banks, you can see the domino effect that could have occurred.

Chris Martenson: Yes. So if the Fed prevented this lockup – and we can say that was maybe a good thing, because that could have been a little chaotic – have the underlying structural deficiencies in the system been resolved? That is a perception I hold, that the Fed was doing the “extend and pretend” program. They were thinking that if they could just hold it together long enough, native underlying growth would pick up, loan volumes would increase again, assets would be repaired, balance sheets get repaired, and somehow the plane clears a runway and is safely over the trees again. Where do you think we are in that progression? Has anything really substantially been fixed, or has it been papered over yet to return at some point?

Bill Black: Well, one crisis was fixed, in some sense. In other words, as I said, you had a liquidity crisis and the death of a whole series of markets. And when that happens, the values are going to go close to zero. And that is nuts. You cannot allow that to happen or you will have ultra-domino destruction. So yes, the Fed got past that aspect by pumping in tens of trillions of dollars over time; this lasted for some considerable time and has not actually ceased.

But no, what we have been discussing is that none of the underlying pathologies have been fixed. And since they never understood what the underlying pathologies were and because fixing the underlying pathologies requires you to get rid of any bank that is too big to fail and to replace it with smaller banks, there is no political will in any country in the world to do that. It is going to take the next crisis.

Chris Martenson: And the next crisis seems to be – well, it is already there for Greece. It is there. It seems to be for Spain, at least looking at unemployment numbers. Iceland seems to have dodged a bullet somehow. And they were the only one to take a very, very different tact here in all of this, at least as far as I understand it. Do you think Iceland could be a model for other countries to follow?

Bill Black: Well, Iceland certainly did a number of things better. What you have to understand is this is not the next crisis. This is a continuation of the existing crisis which has not been resolved. And then it is gratuitous insanity from the Austerians, who said what we really need to is to continue flogging the economy until morale improves around here.

Chris Martenson: Yes.

Bill Black: And I want to emphasize this again: The periphery of Europe is not in a second gratuitous Great Recession. It is in Great Depression levels. And by the way, France, which is not the periphery, has unemployment equivalent to what we think was the long-run average unemployment in the thirties, 1930, the Great Depression. So when we talk about Greece, Spain, and Italy, we are talking about levels that exceed what we think the Great Depression caused. And we know that youth unemployment is well over 50% in Greece and Spain, and I think it is in the 38% range or more in Italy.

So these are catastrophic numbers in terms of the immigration of your population. Now, in some ways, Iceland is a really good example because Iceland was vastly worse off than all these countries. The big three Icelandic banks were corrupt accounting control frauds of exceptional degree because of – again – of this competition-in-laxity. The Icelandic regulators were effectively cheerleaders for the industry. Their speeches are quite remarkable when you go back and look at them. These banks, these big three banks, were considered the national champions. When they created the law privatizing and creating these three banks or allowing the creation of these three banks as private entities, they deliberately sculpted the law to only exclude felons if the felony had occurred within, I think it was five years, because one of the key guys they knew was going to run one of the big banks had a felony conviction five years and three months ago.

So can you imagine sculpting legislation to let the frauds run your banks? So that by the time the big three Icelandic banks collapsed, their liabilities are ten times the GDP of Iceland.

Chris Martenson: Ouch.

Bill Black: And the losses were running roughly 60% at the banks. Which is to say they were insolvent by roughly six times the GDP of Iceland. They were growing at 50% annually. So my line is that Iceland can first thank Dick Fuld’s avaricious heart. Because Lehman Brothers does not cause the Icelandic crisis but it precipitates it. And if it had not, if you run a hypothetical where Lehman Brothers goes down two years later, then the Icelandic banks would have had liabilities roughly forty times the GDP of Iceland. And everybody in Iceland even though it is not an EU member state, has an EU passport. So you had an existential crisis in which, if this has gone on two more years, there would be no more modern nation of Iceland because all the people that could would leave with their passports, and you would have been left with thirty thousand pensioners.

Chris Martenson: Interesting. Well, if there is a solution in the Iceland story, I want to know if it can be extended. But really, I guess the key question at this point, given that since you and I have talked and certainly over the sweep of time since the Savings and Loan Crisis to current, I think the trajectory is pretty obvious. Control fraud is increasing, not decreasing. It has become so entrenched in our belief systems that the Department of Justice can talk about “too big to jail” as an operating policy of the Department of Justice, of all places. And so how does this resolve in your mind? Does this resolve with yet another crisis, but this time it has to be more forceful than the prior one? Where do the lessons get learned and applied, do you think, finally?

Bill Black: Yes, we think that it is only in extremists that you completely discredit these folks. Again a word of hope: If you looked back in 1986, you would have thought the situation was hopeless, right? We were under the Reagan administration, the great friends of deregulation. There were virtually no prosecutions at that point. The industry was still out of control in many key aspects. Texas bubble was still raging. The Arizona bubble was raging and such. And all the prominent politicians were lined up against us. You create your own ability to change things when you speak truth to power and when you start bringing the actions. For one thing, you put stuff in the public record.

So every time we brought an enforcement action, a prosecution, a civil lawsuit, all kinds of facts were in the public record where journalists could quote them without fear of libel or slander actions. And after you start doing that a hundred times, well, then you have generated thousands of stories nationally, locally, regionally. And eventually the public goes wait a minute; this sounds a whole lot like the ones before. Maybe there is some kind of generic problem here. We knew we had won back in the Savings and Loan Crisis, even though virtually everybody started out against us. When Anunzio, one of the most senior members of Congress, a Democrat from Chicago and one of the closest allies of the control fraud, started wearing a button that was literally six inches in diameter that said Jail the S&L Crooks, it was pure cynicism on his part, but it showed how much we had reversed the political winds.

So I still hope that the Elizabeth Warrens of the world are standing up and that someone will arise in the regulator ranks. What is harder is that we were an independent regulatory agency, and so they could not fire us anywhere near as easily. They have gotten rid of most of the independent regulatory agencies in banking and replaced them – well, the Fed was always obviously an ally of the banks. But the OCC, the Office of the Comptroller of the Currency, the Office of Thrift Supervision before it was folded into the OCC, these are bureaus within the Treasury. So they were controlled by the Geitners of the world. And before them, the Paulsons of the world. So they were rendered ineffective and engaged in this competition-in-laxity.

But you could still have someone from the FDIC, which actually has very broad authority. Or you could have a member of the Fed. The Fed actually has tremendous power and enormous resources. And so if some member of the Fed actually took regulation and supervision seriously and took fraud seriously, they could also produce the studies that would document the enormous role of fraud. And consider that, coming from the Fed.

So are these things likely to happen? No. That is why we think it is going to be the next crisis. But it could happen.

Chris Martenson: But it could. And as you mentioned a while back, and it has been a mystery to me, it seems like there is enormous popular advantage to this to a politician. This would be a very popular sort of a movement.

Bill Black: It is. You are doing the right thing, often for the right reasons, and the public loves that, absolutely loves that. I mean, if Obama had taken this route, he would have been reelected in a way like FDR was reelected. But he very consciously chose not to emulate FDR, and his model, he has always stated it, was Ronald Regan.

Chris Martenson: Interesting.

Bill Black: So we got Ronald Regan.

Chris Martenson: Yes, we did; under very different circumstances. So, back to the future, I guess.

Bill Black: Only on finance. I am not saying that Obama is just like Reagan in other spheres, but in finance it is very similar.

Chris Martenson: Yes, we are talking in the financial sphere. And it was a complete mystery to me why there was zero daylight between his policies and his predecessors’. It seemed like there was such a consummate political advantage to be gained.

Bill Black: Oh, they were working so well. Why would you want to change?

Chris Martenson: I guess. Well, that is all the time we have for today. It has been fascinating. I could go on forever.

People are going to want to follow your work more closely. Where would they do that?

Bill Black: New economic perspectives.

Chris Martenson: Neweconomicperspectives.org?

Bill Black: That is the blog of UMKC Economics.

Chris Martenson: Fantastic. And there are some good postings there, including a topic we did not have a chance to get to, but you have been having a very interesting public, shall I call it a disagreement, with a Nobel Laureate economist. And I would invite people to go look at that, because really, where flog policies can result in great economic harm and public harm, it just seems like that is something we should be having an open discussion about. And I saw that happening at your blog there. So that is good work as well there. So I would invite people to check that out.

Bill, thank you so much for your time today.

Bill Black: Thank you. Take care.