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Former financial regulator Bill Black discusses the significance of a new lawsuit against Evans Bancorp that alleges the bank would not give loans to black neighborhoods

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JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore. And welcome to this edition of the Bill Black report.

Now joining us from Bloomington, Minnesota, is Bill Black. Bill is an associate professor of economics and law at the University of Missouri-Kansas City, and he’s also a white-collar criminologist and a former financial regulator. And, of course, he’s a regular contributor to The Real News.

Thanks for being with us, Bill.


DESVARIEUX: So, Bill, there was a story out this week about a bank in Buffalo that is allegedly redlining certain districts and not giving loans to black neighborhoods. What’s the significance of that story?

BLACK: Well, the significance is this is one of our jobs as financial regulators, still, and that’s to prevent discriminatory lending practices. This allegation is a recent one. In other words, they’re not talking about behavior during the financial crisis; they’re talking about behavior after the financial crisis.

The history of all of this is that it was actually the U.S. government that literally did redlining. It was the FHA, the Federal Housing Administration, which didn’t want to lose money on housing and thought that if desegregation occurred, there’d be white flight and a collapse of housing values. So they literally took red pens and marked geographic areas as out of bounds, where they wouldn’t provide lending. And this helped to lock in segregation in the United States.

And this particular bank, Evans Bank, is accused of actually literally drawing a map with boundaries. Now, the way they did it, according to the allegations, is to say, here is our service area. This is where we’re going to provide product. And, of course, if you look at their service area, it reminds folks of political gerrymandering: it just so happens to follow the white areas of the Buffalo area pretty much exactly and to exclude black areas. And so they put their branches almost entirely in white areas, some in Buffalo, but also in the suburban portion that’s heavily white. And heavily black eastern Buffalo they defined as we don’t do business there, according to the allegations.

And the allegations say also that they looked at the numbers, and that compared to other institutions that had branches in the Buffalo area, this bank made far fewer loans to African Americans; and even–this is a powerful allegation–even as to banks that had no branches in Buffalo, those other banks had a better record in lending to African Americans in Buffalo than did this institution.

The institution denies the charges and says it’s going to fight it, so we’ll see how the facts come out in that litigation. But right now it’s a powerful reference as well, in a weird way, politically, because there is a new anti-Eurozone party in Germany–and trust me, this actually has a link to what we’ve been discussing. The top business supporter of that party is someone who’s–took the position that the American financial crisis occurred because we got rid of racist redlining. And that person, until he supported these high political office, was the leading European banking adviser to Bank of America. And they continued that practice even when I blew the whistle on this person.

DESVARIEUX: What’s his name, Bill?

BLACK: His name is Herr Henkel.

DESVARIEUX: And then, you were saying, when you blew the whistle, what happened?

BLACK: Nothing. And at the time I first blew the whistle, Bank of America, as a public relations thing, in part, had a prominent African-American as chairman of its board of directors.

DESVARIEUX: And why do you think nothing happened?

BLACK: I don’t think Bank of America has any power in the board of directors. I think it has power entirely in the CEO. And they saw this person in Germany as immensely well tied in with the business classes. He had been head of what would be the equivalent of the Chamber of Commerce in the United States and the Business Roundtable in the United States. So Herr Henkel is a very powerful guy.

And he was speaking–the context in which he was defending redlining was in defending the actions of one of the equivalent of our governors of the Federal Reserve system here, so a top guy in their central bank, who was making openly racist remarks about Turks and such and said that they lack the IQ and they were only good to be fruit venders. By the way, Bank of America started as Bank of Italy, largely lending to fruit vendors and such. And this guy, whose name is Sarrazin, then went on to say, you know, things were so bad with the Turks that it would be better to have Jews.

DESVARIEUX: Okay. Alright. Bill Black, joining us from Bloomington, Minnesota.

Thank you so much for being with us.

BLACK: Thank you.

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


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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.