• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Is Obama Getting Serious About Bank Fraud?

    Bill Black: Are Pres. Obama's new measures effective or window dressing? -   February 19, 12
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


    Share to Facebook Share to Twitter

    I support the Real News Network because of their bravery, integrity, informative and educational - David Pear
    Log in and tell us why you support TRNN


    William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. 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. 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.


    Is Obama Getting Serious About Bank Fraud?PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington.

    In President Obama's recent State of the Union speech, he appeared to come out swinging against Wall Street and financial institutions that committed abuses and fraud that led to the crisis in 2008 and continue. Here's a little bit of what he had to say.


    PRES. BARACK OBAMA: And I will not go back to the days when Wall Street was allowed to play by its own set of rules. So if you are a big bank or financial institution, you're no longer allowed to make risky bets with your customers' deposits. You're required to write out a living will that details exactly how you'll pay the bills if you fail, because the rest of us are not bailing you out ever again.


    JAY: Now joining us to assess whether these proposals from President Obama seem to be effective and meaningful is William Black. William is associate professor of economics and law at the University of Missouri–Kansas City, author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.


    JAY: So, Bill, President Obama says that banks are no longer to be able to take risks with your money, and they're going to have a living will. So they're not going to be too big to fail, 'cause, he says, we're not bailing you out again. So are we really now protected from all these things that triggered the 2008 crisis?

    BLACK: No, you're not protected from any of those things. And it's because both parties refuse to protect us against either of those things. So let's take it in pieces.

    Of course they're using other people's money, because that's what banks do. They use other people's money. So our money is still at risk. The major issue is with regard to the systemically dangerous institutions. These are about the 20 largest banks in the United States, and maybe about 15 outside the United States. And the administration is telling us that as soon as the next one fails—and it's a question of when, not if—it will cause a global, systemic financial crisis.

    So the fairly obvious question we asked was: why would you allow that? Why wouldn't you get rid of the 20 largest banks' systemic danger? And it turns out that is not particularly hard to do, because these banks are massively too big to be efficient. In other words, we've got a tremendous win-win-win.

    JAY: Well, the argument that they're giving is that this "living will" thing works out a method that if a bank is on the verge of going down, they've already worked out the steps for going bankrupt and dealing with what this—consequences would be, and so there wouldn't be the systemic effect that it had 2008. But, I mean, one, I don't understand, if the bank's big enough, any living will big—that's really going to be deal with it. But the problem is, when these things happen, it happens—like, a whole sector goes into trouble. It's not, like, just one bank.

    BLACK: The living will is the stupidest idea. It is a complete—the Russians would call it a maskirovka. It's just a mask for what's really happening. And that's for the reasons you talked about, plus more.

    First, we've never been able to predict the exact failure mechanism of any crisis. You know, no one can tell you on what day Lehman Brothers is going to fail and how this is going to take the mutual funds to break the bank—the buck and cause a major run, and thus cause 1,000 financial markets to seize up. Nobody can predict those things. And so you can't have a living will. And if you did have a living will, it wouldn't do you any good, because you would have a complete financial crisis, because the thing is systemically dangerous.

    So the only way to fix it is to shrink them, and to shrink them dramatically, to the point where they no longer pose a systemic risk. Here's the good news. Not only will that make our financial system vastly safer, it'll make those banks more efficient. They are way too big to manage.

    And the third win in the win-win-win is democracy, because if you allow systemically dangerous banks, what they do first is hold hostage the national economy. They say, you do anything to me and the entire economy comes down. And, of course, (b) they have so many resources that neither party is willing to take them on. And we've run a real-world test, right? We had a global disaster, a global, worldwide—nearly worldwide recession. In the United States alone the household sector lost $11 trillion. And we still have nobody in either party seriously willing to take on and shrink the banks.

    JAY: Well, one of the issues you've raised many times and President Obama in the speech says he's now going to address is the issue of holding what was essentially criminal fraud and those people that conducted it accountable. Here's a little—a further clip from his speech.


    OBAMA: We'll also establish a financial crimes unit of highly trained investigators to crack down on large-scale fraud and protect people's investments. Some financial firms violate major anti-fraud laws because there's no real penalty for being a repeat offender. That's bad for consumers and it's bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.


    JAY: So, Bill, does this mean he's ready to start holding what, you know, people call the "fraudsters" accountable?

    BLACK: Well, it means that he gave a speech claiming that he would do that. But all the performance belies the speech. So what have we seen? Well, first, you know, I think this is the fourth or fifth time you've had me on to address the fact that they have not prosecuted the elites. And that's still true. And we're now over three years into this administration—and, of course, the administration before that, five years' worth that they should have been prosecuting. So it's eight years and no serious prosecutions. That is a disgraceful record for both administrations.

    JAY: Well, he's implying here, 'cause he's—State of the Union, he's speaking to members of Congress, he's saying to them, pass legislation that allows me to do it. Well, is that the problem, that he hasn't had the legislation?

    BLACK: No. And he hasn't asked for legislation. He just had the Dodd-Frank bill, the most massive piece of legislation in finance in U.S. history. And, like, you know, he forgot about it when he did this massive bill? I don't think so. He also, as you note, didn't ask for any specific legislation, didn't explain any specific problem that required legislation to be able to prosecute. So that is a complete nonstarter.

    What else have we just seen? Well, we've just seen that a memo was released because a citizen complained to Fannie Mae about illegal foreclosure practices. Fannie Mae hired an outside law firm to investigate, and the outside law firm confirmed many of the charges of the individual, you know, who blew the whistle on this stuff. One of the lines in that report is that it is axiomatic that these kinds of practices are criminal.

    JAY: What are examples of the practices you're talking about?

    BLACK: Examples of the practice are the robosigning. And that brings us, of course, to this giant settlement in which absolutely no one individually who committed the frauds is held at all accountable—no one's fired, no one loses a raise, no one has their bonus that they got for defrauding people clawed back, no one's indicted at the federal level. There are two indictments at the state level in Nevada. It is amazing.

    JAY: This is the deal just announced in the last couple of days, where states have made a deal brokered by the federal government that the major mortgage companies are going to supposedly pay a certain amount towards—penalty towards this, but it doesn't amount to that much, as I understand it correctly. But before we dig into it, let's see another quote from President Obama, 'cause he says he's going to create a commission that will deal with this. Here's what he said.


    OBAMA: And tonight I'm asking my attorney general to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.


    JAY: So, Bill, isn't this what you've been asking for?

    BLACK: No. It doesn't do any of those three things. And, again, seriously, after three years in office, you're going to finally create a working group, something you could have done on day one?

    So let's see what they said about the working group. The working group isn't staffed up, but when it's staffed up fully, it will have 55 personnel. Just in terms of investigative agents in the savings and loan crisis, which had losses less than one-seventieth as large as this crisis, we had 1,000 agents. That gives you an idea of scope.

    JAY: And just for people who don't know, you were part of that process, were you not?

    BLACK: Yes. I helped design that process. I helped train the FBI agents, the regulatory personnel, the assistant U.S. attorneys who prosecuted. I served as an expert witness. I worked on the criminal referral process. I worked on the process by which we detailed dozens of our examiners to work for the FBI so they could serve as their in-house experts. None of those things have been done in this crisis. And the number of investigative personnel is going to be somewhere between 25 and 30 versus 1,000. And this one is 70 times bigger.

    JAY: Well, how does this relate to the deal that just been brokered? 'Cause it does seem a little odd that there's a deal being made already before the investigation takes place.

    BLACK: Well, first, there was never an investigation, at the federal level, of robosigning. You're going to see some statistical analyses released by HUD, but there was never the equivalent of a serious criminal investigation. And that would have taken scores of agents working. So there's been—this supposed negotiation and supposed investigation is overwhelmingly been done at the state level, and the states don't have remotely enough resources to do what you would consider a full-scale investigation of any of these practices. And, as I said, there've been a little bit of investigation, two indictments in Nevada of two of the robosigners.

    But let me step back for your viewers as to what this means. Robosigning may sound like, well, they were just doing it mechanically and quickly, and that was impersonal, maybe, but certainly not criminal. No. It was axiomatic that what they were doing was—involved multiple crimes. Robosigning primarily involved signing—knowingly signing false affidavits that said, I have checked the following things and the facts are as follow. And not due to investigations by the United States government, or even by the states, but due to competent depositions by, frequently, small firm, even sometimes solo practitioner firms, they finally took the testimony under oath of these people, and they admitted that they systematically, as a matter of policy, filed false affidavits, which is a felony.

    And they didn't do this a little bit. The large servicers did it over 10,000 times a month, over 100,000 times a year, and they did not stop it through any internal process. In other words, it was speeding up until private counsel found these felonies. No one—and this stuff is all done under the management of senior lawyers. No senior lawyer, to my knowledge, involved in this massive filing of false affidavits has been sanctioned in any way by state ethics boards for attorneys, either.

    So President Obama announced this as his exemplar of accountability, and it is precisely the opposite. It is that people can commit hundreds of thousands of felonies at our most elite banks and it is not treated as a crime.

    JAY: Thanks very much for joining us, Bill.

    BLACK: Thank you.

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


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

    More Info

    "Barack Obama" Election banksters banks fraud Goldman "Division Of Banks" Fed "Federal Reserve System" Crisis Economy Economic


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    University Sit-In Targets World's Largest Private Coal Company
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting