William Black On Why "Recurrent Crises Will Get Bigger And More Disastrous" And Why All Talk Of Change By The Administration Is Just Posturing
The ever insightful William Black sits down with PBS' Paul Solman to note that most of the too big to fail banks are currently insolvent, that mortgage fraud is pervasive and lender complicit, and that unlike in previous systemic crashes, not only person has been indicted for the trillions in mortgage fraud perpetrated. "At this stage we have zero convictions, we have zero indictments." But the most damning indictment from Black: that Congress managed to extort FASB to change their rules just so that the big banks would continue to appear healthy and solvent, even as unworthy execs made tens of billions in bonuses.
PAUL SOLMAN: What would you have us do about the major financial institutions as they currently exist?
WILLIAM BLACK: First, stop them from getting
bigger. The 19 largest institutions are what we call systemically
dangerous institutions. Many of them are already insolvent on any real
market value basis.
PAUL SOLMAN: What do you mean insolvent? I mean, they're reporting large enough profits, that they can give bonuses to their employees.
WILLIAM BLACK: They were able to get Congress to
extort FASB, which is the Accounting Standards Board, to change the
rules, so that you no longer have to recognize losses on your bad
loans, unless and until you actually sell them.
PAUL SOLMAN: Extort FASB? Why would it be extorting FASB?
WILLIAM BLACK: They said, you will change the
rules, and you will change the rules such that banks no longer have to
recognize their losses, or we will remove your authority over the
accounting rules, which is the whole reason for existence for FASB,
right? So, that's extortion in anybody's language.
And for all those who still don't get just why the big banks don't care if they get even bigger and even more systematically riskier (and why the Fed is dying to regulate them, just so that ever more problems can be swept under the rug until it is too late).
PAUL SOLMAN: You see no arguments that keeping the system as it is, is a legitimate political objective?
WILLIAM BLACK: Well, then you are going to have
recurrent crises that get bigger and are disastrous. The financial
firms get this burst of short-term profits. They max out their personal
bonuses of their executives. It's great for them, but it's terrible for
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