Bill Black: Part 1. Financial and Fraud Report: Romney plan for smaller federal government and privatization is a way to make private profit from crisis - November 1, 2012
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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. And welcome to this edition of The Black Financial and Fraud Report.Joining us again is Bill Black, who'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 the author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again.BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.JAY: So what do you got this week?BLACK: Well, of course, we have the terrible hurricane and damage, and we have the whole question about what the government should do and what the private sector should do, and the incredible views of Governor Romney, who was asked in the context of the Republican debates leading up to the nomination on JuneÂ 13, should we be pushing FEMA's role thatâFEMA is the emergency management response group at the federal levelâshould we be pushing that level to the states. And Romney said, yes, that's always the right direction to move things, from the federal level to the state level, and indeedâand this is where he went gratuitously onâwherever possible, we should be privatizing. And he was pushed by the moderators, you know, did he really mean that, in terms of disaster relief, and he began talking about how we couldn't afford to spend the money at the federal level, and that it was immoral, because we had deficits and this would hurt our children and our grandchildren.JAY: Yeah. Let me just tell everybody, this is on JuneÂ 13 at the Republican primary debatesâJohn King, who was moderating for CNN. Go on, Bill. BLACK: So this is significantly crazy on multiple levels. First, you don't know where the national emergency is going to strike. By definition, these things are only moderately predictable and such. So it's vastly more efficient to have one federal agency that has the capacity to aid the states. Instead, if you have all your buildup of support in Utah and you have a crisis in New England, you have no way to get the support from Utah to New England.And far from being the best way to do things, there was a time period in America when we tried to do it that way, where everything was done through the states, and it was called the Articles of Confederation. And it was such a disaster that they staged what's sometimes called a constitutional coup, the framers, and said, we got to get out of this system, we need a much stronger federal government to be able to respond to all kinds of crises.JAY: And we've seen the private sector operate during war and natural disaster. It's what's called war profiteering or disaster profiteering. You introduce the profit motive as the driving force of disaster relief, and you get terrible, rapacious behavior.BLACK: Well, and you don't have to even go that far back, because, of course, we had private fire companies, where if you didn't pay your money to them, they let your house burn down. And you just cannot have that. I mean, think of this storm surge, a flooding operation, and this private entity is supposed to go in and say what? You know, do you have the special seal, the tattoo on your arm that says you paid up, so we'll save you, and if not, eh, you know, you drown type of thing?JAY: Well, that's part of the hypocrisy of this, because it's probably not the way it would work. It would probably be private companies billing the federal government, as they do, like a Halliburton does, contracts for the Pentagon. So, in fact, it's actually still going to come out of the public treasury. It's just going to go directly to private enterprise, which will, in all likelihood, cost the public treasury even more, as you see from Reagan's great smaller government, where he pushed everything out into private consultancies, and the private consultancies are charging triple what it costs to do it in-house.BLACK: Yes, and this is very much Governor Romney's strategy. He wants to privatize prisons, and he wants to go back to the incredibly stupid days where we took federal money, loanedâgave it as grants and subsidies to private banks, insured them against losses on their student loans, and then they would make the loans. They'd get all the profit, and all the risk would come to the federal government. And it was massively more expensive and caused far greater default rates. It was just Looney Tunes. So this is all Looney Tunes.And, of course, none of this saves money, because you're either going to, you know, save people from drowningâwhich saves a lot of money, by the wayâor you're going to let them die. And I don't think even Romney is going to say, I'm going to let them die. So he is going to spend more money, as you say, through privatization. If that'sâyou know, increased expense is immoral, then that's precisely what his plan is going to do. And, of course, in the areas that I concentrate in, that's what they want to go back to in the financial sphere as well. They want toâ.JAY: Well, isn't, in fact, a lot of this election about which section of the elite gets to pillage the public treasury? I mean, everyone, both sides, Democrats and Republicans, are talking about lowering the deficit and cutting costs and all the rest. But billionaires don't spend, you know, multi-multimillions on elections unless they get something for it. And isn't this about which set of allies gets their hands directly on the public treasury?BLACK: So one of the biggest things is privatization makes people incredibly wealthy. And it depends on which survey you look at, but the wealthiest person in the world or the second-wealthiest person in the world is Carlos Slim of Mexico. Why? Because the Mexican government sold him, in essence, the cellular phone network of Mexico. And, of course, it sold it very cheap, and he became spectacularly wealthy and has this incredible monopoly power.JAY: Same story in Russia with the Russian billionaires, oligarchs.BLACK: And same story in the attack on Social Security. So the attack on Social Security isn't really about we can't afford Social Security; it's really about trying to get privatization.JAY: Okay. We're going to doâbecause this is the week before the American elections, we're going to do a two-part series with Bill, and the next part's going to be about Social Security. Some people call it a possible grand bargain that could be made after President Obama's elected. Others, including Bill, call it more like a grand betrayal. So join us for part two of The Black Financial and Fraud Report. Thanks for joining us, Bill.BLACK: Thank you.JAY: Thank you for joining us on The Real News Network.
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