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.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.This is the first of a series of weekly segments we're going to be doing with Bill Black. For those of you who watch The Real News, you'll know Bill's a regular contributor. Well, now he's going to be an even more regular contributor, where once a week he's going to come and give us a report on financial institutions, regulation, and all the issues connected thereto.And so now without further ado, joining us is Bill Black. And once again, Bill's an associate professor of economics and law at the University of MissouriâKansas City. He's a white-collar criminologist, a former financial regulator, and he's the author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.WILLIAM K. BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.JAY: So what caught your eye this week in financial news?BLACK: Well, first there's HSBC. This is the biggest bank in Europe. It's roughly the size of the entire GDP of the United Kingdom. And what the Senate has found is that it was, top to bottom, worldwide, an incredibly sleazy institution, the reincarnation of BCCI, which was informally known to regulators in my era as the Bank of Crooks and Criminals International.JAY: And this has to do with the laundering of Mexican drug moneyâand other money, I would guess.BLACK: Yeah, massive laundering of Mexican drug cartel money, not only the laundering of money to aid Iran in its nuclear program, butâ.JAY: That's assuming there is one. But go on.BLACK: But the aid to Sudan as well, and North Korea. And they not only laundered their money; they stripped information off of the files that would indicate that these were illegal transfers, to make it very difficult for the government to spot it.JAY: Now, weâ. Yeah, go on.BLACK: But all of the people who did this ended up being promoted to incredibly senior positions. A couple of them resigned during the Senate hearing from their positions, but not from their salaries. And we learned that the Office of the Comptroller of the Currency, which was supposed to be regulating big chunks of these operations, foundâdocumented these violations over six years and took no meaningful enforcement action to prevent the problem.JAY: Now, Wachovia was previously found to have laundered money. Am IâI'mâthis is by memory, not reading any research here. Am I right about that? And there's been accusations that this laundering of Mexican cartel money, drug cartel money, goes fairly far throughout the American banking system. What do we know about all this?BLACK: Well, we don't know all that much about it. There's enormous speculation. But the reason we don't know as much as we should is: why are we relying on the Senate to do the investigation? I mean, the Senate has its staff of six or seven people that it was able to allocate for several months to do this investigation. The U.S. banking regulators have several thousand investigators who are supposed to be doing this full-time and be absolutely expert in it. So what we're really learning is not just about the banks, but how deeply in bed the banks are with the regulators.And one humorous but disastrous note out of HSBC. One of the most senior people in the organization, who was repeatedly involved in creating these violations of law in ways that are potentially very dangerousâand by the way, a huge tie with Saudi Arabia, with executive who had close ties to al-Qaedaâis that he went to the Senate and he apologized for his intemperate memos to his subordinates. So he seemed more concerned about social tact than this incredible thing that he had done to the world.JAY: And what's happening to them now that it's been revealed they've been laundering drug money? What are the consequences?BLACK: Well, theyâyou know, presumptively, the Office of the Comptroller of the Currency is embarrassed enough that it's going to have to do large-dollar fines that of course will be trivial compared to the violations and such. But there's no indication that anyone is about to be prosecuted for these incredibly clear violations of law with deliberate coverups that are well documented in the file. And indeed, because the Office of the Comptroller of the Currency has sat on these things for so many years, the statute of limitations has probably run on a number of these offenses. And these are themes picked up by the second thing that caught my interest in terms of the financial world this week.JAY: Yeah. Go ahead.BLACK: And that is the publication of Barofsky's book on bailout, Barofsky who was SIGTARPâand that's of course a Washington acronym for Special Inspector General of the Troubled Assets Relief Program, also called TARP. So the IG is the guy or gal who's supposed to make sure that people at the agencies are actually doing their job and are actually enforcing the laws and, of course, complying with the laws.And Barofsky had a couple of really important things. First, he talks about his relationship with Treasury Secretary Timothy Geithner, and in particular the meeting where Timothy Geithner called him in and at great length, in an obscenity-filled rant, explained to him just how stupid he was and how he was improperly criticizing Treasury Secretary Geithner. So Geithner, who can never find himself the way to use the F wordâthe five letter one you can use in polite company called fraudâwas very happy to use the other F word, apparently, dozens of times within the course of this rant. And, of course, the complaint that Geithner had against Barofsky is that Barofsky was making public his criticisms of Treasury and the implementation. And in the book, Barofsky goes into much more in length, of course, about what those violations are. But they can be summarized pretty quick.JAY: Yeah. Go ahead.BLACK: First, the regulators were absolutely in bed with the industry. That isn't a suspicion. That isn't an exaggeration. Barofsky says that's the real world, folks.Second, they, the regulators, therefore acceded every time to the bankersâand big bankersâin designing the programs. And that's why the programs failed. So these are the programs that were designed, like HAMP, to help homeowners in foreclosure problems. Barofsky says the whole effort was a disaster, and it was a disaster for understandable reasons that they warned Treasury about, and Treasury did nothing because Treasuryâthe big banks wanted the program to fail in that manner.Third, that there have been no significant prosecutions. Barofsky says the only prosecution of a CEO that was successful was because his office made the criminal referral. So, again, the regulators fail utterly to make the criminal referrals. The special inspector general for TARP makes the criminal referral, and at a large but fairly obscure mortgage bank, they find, of course, when they actually look, widespread fraud in the elite ranks and they get convictions.Barofsky says, however, that they are very unlikely to get any other prosecutions, the statute of limitations is becoming a real problem, and that without the help of the regulators, the prosecutors neither have the will nor the ability to make the cases against the elites, and soon it'll be too late, because the running of the statute of limitations. So very discouraging news.And here's the interesting thing. Barofsky argues there's only one area of good news, and that's in the American people, and he says it's because the American people are furious about this. They're furious that the Treasury programs have betrayed, consistently, Main Street to help Wall Street. And Barofsky says it is only rage on the part of the citizenry that has the capability of forcing somebody to have enough spine in the regulatory and prosecutory ranks to actually take on the biggest bankers.JAY: Alright. Thanks a lot, Bill. And if you'd like to see more of Bill, meaning more weekly Bill Black reports, don't forget the "Donate" button over here, 'cause if you don't click on that, we can't do this.
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