Bill Black: The Banks Have Blood On Their Hands

Tyler Durden's picture

Submitted by Adam Taggart via Peak Prosperity blog,

We invited Bill Black to return to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.

In the US, our regulators have publicly embraced a "too big to prosecute" doctrine. We are restraining, underfunding and dismantling regulatory oversight in the interests of short-term stability for the status quo. Which as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.

If you can steal with impunity, as soon as you devastate regulation, you devastate the ability to prosecute. And as soon as that happens, in our jargon, in criminology, you make it a criminogenic environment. It just means an environment where the incentives are so perverse that they are going to produce widespread crime. In this context, it is going to be widespread accounting control fraud. And we see how few ethical restraints remain in the most elite banks.


You are looking at an underlying economic dynamic where fraud is a sure thing that will make people fabulously wealthy and where you select by your hiring, by your promotion, and by your firing for the ethically worst people at these firms that are committing the frauds. And so you have one of the largest banks in the world, HSBC, being the key ally to the most violent Mexican drug cartel, where they actually did so much business together that the drug cartel designed special boxes to put the cash in that they were laundering that fit exactly into the teller windows so that there would be no delay. This is the efficiency principle of drug laundering.


So these banks figuratively have the blood of over a thousand people on their hands. They are willing to fund people that murder and torture and behead folks. And they are willing to do that year after year, despite warnings from the regulators that they are doing this. And the regulators are not willing to actually take serious action until there has been “true devastation.”

And as time passes, our ability to bring effective justice -- should we want to -- atrophies:

I will tell you one of the things from being a former enforcement specialist: If you do not bring cases for year after year after year, it would be like a tennis player who stopped playing tournaments for ten years and never practices, and then he or she goes onto the court. What is going to happen?


They will get crushed by the opposition. So once you have given up enforcing the laws, I can tell you this with my lawyer hat on and former enforcement hat: You fear bringing these cases because you have allowed your skills to deteriorate so badly.

Given the sorry statements from officials like Lanny Breuer, who stepped down as the DOJ Criminal Division Chief earlier this year (he headed up the investigation of the banks and mortgage companies) -- we may already be at this stage.

Black sees a natural end to this systemic rot: a day where the bad actors no longer trust one another, and the system implodes upon itself:

I can tell you as a criminologist and as a former financial regulator, this is what you need to know about fraud: Fraud involves me, the fraudster, getting you to trust me. And then I betray your trust for my financial gain. And so there is no more destructive asset against trust than elite fraud.


So yes, we have been running a system under which the fraudsters get incredibly wealthy. And now they get incredibly wealthy and they do not even get prosecuted. And if there is a civil case – actually, they get the worst of all worlds. It sounds large for propaganda purposes, but all of us in finance know it is trivial. It is often literally a week of income, where their income is massively increased by the frauds.  The statistics show that there has been a general withdrawal of less sophisticated investors, in particular, from the marketplaces -- and it's because people do not trust the markets anymore.


Here is what people forget: After Lehman Brothers goes, the run that occurred was not Ma and Pa. The run that occurred that, for example, broke the buck in the money market mutual funds: that was a massive run of the most sophisticated financial players, where they were taking out hundreds of millions or even tens of billions, in some cases of money, in some cases, literally, in microseconds. In other words, bankers no longer trusted other bankers. And when that happens, markets do not simply become inefficient; they actually lock up. And that is what happened thousands of times after Lehman collapsed, because bankers would no longer trust other bankers’ evaluation of the assets.


And we have not even discussed derivatives to this point. Which is the not-800-pound gorilla, but the $8-trillion-ton-gorilla that is out there. So we already have the insanity of derivative trades in which both of us book a gain because we have different evaluations for the asset. So we have phenomenal paper gains that cannot be true. When the markets no longer trust each other, then those kinds of transactions do not work anymore, and there is no liquidity, and you are in the equivalent of trying to sell minority shareholder interest in a privately held corporation. How is that going to work out for you? Ever tried to do that?


So all across the globe, all across history, minority shareholders get completely screwed in that circumstance, when liquidity dries up. Well, the same thing can happen to much broader markets, including in particular the derivatives markets.


And if it does, when trust is interrupted, much less eroded, in the ways I have talked about it in the derivatives market, liquidity completely dries up. Anything that functions like a market-maker collapses, and you get whole financial systems that grind to a halt. And they do not happen just a few times. It can happen in thousands of markets roughly simultaneously.

You asked me earlier about Dodd Frank, and I said it had no coherent strategic vision. And a couple of the areas in which it had no coherent strategic vision we have talked about. It did not deal with the international competition-in-laxity. It did not deal with “too big to fail.” And it did not deal with derivatives. So I would say that was strike one, strike two, strike three.

Click the play button below to listen to Chris' interview with Bill Black (47m:23s):



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HedgeAccordingly's picture

Of course they do.. so does zimmerman - but Icahn is figitity - 

Stuart's picture

Bill is right but what is anybody going to do about, pull an Egypt?   doubt it. sooo... people will just bitch to themselves.....and the beat goes on...  

hivekiller's picture

He lost me when he started talking about Iran and the bomb. What about the crazies in Israhell and their 300 nukes? 

seek's picture

This underscores what I've been thinking for a while now -- that this crisis (and unavoidable collapse) is a crisis of trust.

Post-collapse I strongly suspect one of the most valued commodities will be a trustworthy person with a long track record of not fucking anyone over. That's the guy that people will do business with, or who will be in a position to create a new bank.

holdbuysell's picture

Everyone can do their part by cutting ALL business ties with the TBTF/TBTJ:

Think local for financial needs, and keep the money in the community: community banks, credit unions, and insurance when possible.

HowardBeale's picture

Cutting ties is not going to do shit. Cutting heads may cause things to change. The utter cataclysmic destruction of D.C. would allow Hope...

CCanuck's picture


I want to invest and deal with people that live in my community, moving our choice of currency and barter amongst our community helping it become stong and self-suffcient, then take capital for investment to strengthen regions. The Stongest ballot you cast should be for a politician that lives in your community and represents from there. The Greater Good is a Slogan used to sell the current system to the muppet-like sheeple.

The current system of sending our money and political power to the same group (central planning) does not work, it only corrupts.

IMO the solution will be found in our own communities, not Washington, Ottawa, or Mexico City.

I can help but think how great a Combo of Bill Black & Cathrine Austin Fitts would be to any community, as leaders and teachers.


DoChenRollingBearing's picture

Trust, that`s a very interesting set of ideas, seek.


Who can (will be able to) be trusted?  Verifying a stranger`s trustworthiness would be hard (for example, if I wanted to start a bank or whatever, who knows me?).  Perhaps it may be easier than I suspect to get that kind of information.

Trust is the key, but other things would be important too.  Skill sets.  Capital.

I am guessing that it would be very hard to recover if we collapse hard.   And it would take a long time.


fonzannoon's picture

If every TBTF bank CEO walked into their local precinct tomorrow and demanded they be arrested and their banks be dismantled immediately for all sorts of crimes againts their depositors and humanity in general, and the banks were totally dismantled...I still would not trust a bank ever again.

DoChenRollingBearing's picture



Evening, fonz and Zero Hedge

I had another thought on trust.  There is a saying out there that I largely subscribe to: to be trusted, you must trust others (please note I am not saying that you should trust a bank or bankster).

Years ago, I went and trusted..., and made some mistakes along the way by choosing unwisely, and so lost money.  But, more time went by, and I made the biggest trust-decision, investing with my in-laws in Peru, 23 years ago.  That turned out to be a great decision.  Our business in 2013 is doing great:

TheFourthStooge-ing's picture


This underscores what I've been thinking for a while now -- that this crisis (and unavoidable collapse) is a crisis of trust.

It certainly bodes ill for anything having a value based on Full Faith and Trust©.

Post-collapse I strongly suspect one of the most valued commodities will be a trustworthy person with a long track record of not fucking anyone over.

In the current environment, trustworthiness is the most oversold asset of all. Those who possess it will, post-collapse, reap all the benefits of the ensuing bull market. This is because a good reputation takes years to build, yet a bad reputation but a moment.

nofluer's picture

a trustworthy person with a long track record of not fucking anyone over.


So you're looking for someone who has been unemployed for ten or twelve years... or longer?

CCanuck's picture

Integrity....Those who still have it will be in a great position after the "fuck everyone, before they fuck you, cause everyone is fuck'n everyone, I'm gonna fuck someone to get ahead era".. has ended.

I seek people in business with integrity, they are almost extinct. I can't trust anyone, its a trickle-down theft and fraud world, and lack of enforcement on the 1%, while using smashmouth enforcement for the rest of us can't last.

I agree, on the other side of this mess, your best assets will be those of sound characture, Integrity, Trust, Intelligence, they will be sought after, and needed to advance humanity to new levels.




Black Swan 9's picture

I'm with you on all your points, Ccanuck, and I hope you're right, that a return to integrity that must start at the bottom, grass-roots, will begin to trickle back up..

Cabreado's picture

We're beyond "crisis of trust."

We're at "Why didn't we give a damn, 'til it all blew up."

That "trustworthy person" that you speak of, has no normal, rational, calm manner of entry.

And there will be no "new banks" until banks are at the Utility level,
which appears to be not in your lifetime.



Stuck on Zero's picture

Notice that your currency says: "In God We Trust."  It does not say, "In the Fed We Trust."


eatthebanksters's picture

No shit...and Obama and Holder and Geithner and Bernanke are all trustworthy?  To do what, take care of their buddies at the cost of everyone else in the country?

Black Swan 9's picture

My thoughts, too. Lost trust is a bitch, on every level, from personal relationships to the banking system, politicians & the MSM.

The inevitable implosion when the banksters overtly lose trust in each other will be spectacular.

Freewheelin Franklin's picture

If most regulators were like Bill Black, the global fiat debt based Ponzi scheme might actually be bearable. But he's one of a kind.

Yen Cross's picture

 Willy Black? I'm sure he cares. I'll do my own due dilligence {thank you}!

Ignorance is bliss's picture

The more things change the more they stay the same. No prosecution, no jail, the fraudulent drum beat keeps playing. Protect yourself with real assets because the song is about to end...and when it does you better have ... A plan.

HowardBeale's picture

"No prosecution, no jail..."

And that's the way it goes until it doesn't; and there won't be prosecution and jail time for the psychopaths that are currently posing as the Federal "government": they'll endure a compressed Sadaam Hussein experience; compressed, because there won't be a person on planet Earth that will help them once the dollar/bond collapse accelerates and millions are starving.

monad's picture

Bill Black is awesome.

loveyajimbo's picture

Barry Obunga sold his soul even before taking office for his first (historic failure) term... the shit rolled downhill from HIM.  the turds like Bruer and Gensler, Shapiro, Shulman, etc, etc, could have been slapped down and/or jailed for criminal collusion... but the Chicago WH syndicate called the tunes... now the nation is FUBAR.  So much for electing an Afro-whatever as Prez... next time, maybe we should check his personal records first.

DoChenRollingBearing's picture

Yes, Obama failed the black community as well as the whole country.  Lies and dirt is is legacy.  Not even sheeple will forget that.

HowardBeale's picture

Not even sheeple will forget that.

Especially People who are watching their children starve...

Obama: Greatest disappointment of the last human millenium.

Pasadena Phil's picture

The biggest reason banks insist on being this big is because the most profitable global financial opportunity in the world is laundering the trillions of dirty US dollars acquired by the drug cartels, illegal weapons trade and other international cash-only (mostly US dollar) businesses. We like to pretend it doesn't happen, like pretending snakes don't eat pigs. But snakes can't hide the pigs in their bellies unless they are so big that the pigs don't create a revealing contour. Same with the already unauditable banks. And now that in addition to being "too big to fail" they are also "too big to jail", what is the point of regulating and auditing them?

Anyone want to bet that this property isn't bought by dirty global money? Maybe another Russian oligopolist or Chinese politician using an opaque 3rd party go-between? I mean what makes a residential property worth $190 million? A fixer-upper no less! Are there subdividing opportunities once the property is re-zoned into a commercial zone? Where was the bidding boosting the price up that high? Or do they just pull numbers out of the air? My guess is that it comes down to being a matter of how much dirty money needs to be laundered relative to the opportunities at hand.

buzzsaw99's picture

Ancient story. When have the banks NOT had blood on their hands?

HowardBeale's picture

Had that same thought; i.e., All wars have been initiated for a class of psycopathic vermin which are a constant throughout history: sometimes known as Kings; other times known as bankers...

MiltonFriedmansNightmare's picture

And when has the US not been owned by special interests? At least 150 years. Rockefellar, Morgan and a handful of others in conjuntion with crooked politions (think Senator Aldridge) led us down this path of destruction and I fear it's about time to pay the reaper.

Hulk's picture

Shit man, this is minor stuff. Its the printing of money that finances the constant state of war.

Much harder to wage war with a gold backed currency, the drain on the treasury is much more apparent ...

Whatta's picture

fraudulent government, fradulent financial system, fraudulent markets, false flag wars, economy in shitter - here and abroad, underfunded everything (except banksters)....and dare to blow the whistle on any of it. wonder cynicism is now a Virtue.

Atomizer's picture

The poor bankers can’t collect on new gun law revenues. I quote” NO_LIMIT_NIGGA” bombed. The Media & Obama are scrambling.

DoChenRollingBearing's picture



Nice find!  Obama`s would-be son you know.

Zimmerman`s trial was the most politicized Kangaroo Kourt Kase I have ever seen here in America.

Or perhaps another distraction from keeping us getting to the bankster truths...

Jackagain's picture

They're still trying to cash in on carbon credits....

Atomizer's picture

Not yet, plan B. We'll cut through that bullshit by explaining the little contol they have over the SUN.

WTFUD's picture

Absolutely wonderful " the world is on hold " until the sick bastards stab one another in the back!
In the meantime honest folks are busting a gut trying to hold their head above water, most oblivious to the odds stacked against them.
The peoples representitives in my book hould be the first to hang.

yogibear's picture

The Fed and government has just looked the other way. So it's  take the reserves down and bankrupt the bank. Transfer and deposits/reserves overseas and ask to be bail out again. Rinse and repeat.

Eric the Placeholder stated to the public he won't prosecute criminal behavior.

"Hurts any honest business"

So the honest businesses get crushed and  are replaced by the dishonest ones.

"There needs to be a rule of law"

It's been replaced by the rule of the theives and law of the jungle.


Judge Crater's picture

When you talk about trust, you should talk about the number of "trust fund" babies thanks to Obama and Bush handing the keys to the U.S. Treasury to their friends on Wall Street.  The loot from the TARP One bailout has already been divided.  Just like the heist from the JFK Lufthansa high security vault in December 1978, none of this loot will ever be recovered by the Feds.  The Wall Streeters who got the TARP money were in a position to set up tax shelters for their children, guaranteeing them an income for life. Monthly payments from trusts high enough so the kids can afford to pay tuition at the highest priced college in the United States, New York University.  NYU is a college where many trust fund babies go to now, which is appropriate.  What with NYU being running like a Mafia crime family, a non-profit with virtually no oversight on how NYU spends the tuition money it collects.  Whenever a politician is out of a job, depend on NYU to hire the loser as an adjunct professor at a high salary.  NYU even has the Clinton's dimwit daughter on their university payroll, along with her fabricated non-profit.  Chelsea Clinton is just one of many people with connections who collects an NYU salary for doing next to nothing.  See, NYU is just like the federal government, nepotism reigns supreme.  It is not what you know, it is who you know.

HowardBeale's picture

We can't be far off from one of the "mad" gunmen taking down one of the bankster gathering places...

And I say that because as I read, and have been reading for about 10 years, the 1 to 2 hundred sources I visit on the internet each day, I am seeing a vast difference in the awareness of thost who post comments; i.e., The Sheeple are evolving back into The People, and they are fucking angry at this "government" and they are truly coming to a clear understanding that this "government" can not and will not stand. We are not there yet, but all it is going to take is an event, a black swan, a subtle-shade-of-gray-swan and we are going to have mass fucking chaos.

jal's picture

Stop knocking the bankster.
They are only doing what they are told to do to keep their way of life going.
If they were to follow or had followed the laws of the regulators, the financial system would have gone belly up.

Look at the bright side, you got more time to prepare for what is coming.

tradewithdave's picture

Plus your grandkids won't have to learn Mandarin... that's the big plus... at least according to Hank Paulson.  If they had been allowed to fail surely no innovators would have been able to step in.  As Jamie said "That's why I'm richer than you." 

PeeramidIdeologies's picture

In my inexperienced opinion, they have already passed many milestones of potentially game ending scenarios. There will be no prosecutions, simply because one hung banker opens the door for a second, and so on.

It seems to me that there is an amount of confidence building among the "shot-callers" that as long as they keep the ball rolling, hand out losses where they can, and soak up the rest, they will be able maintain this system. I do believe that is the plan. They do not want a collapse. There is too much to be lost if the general population were to stop supporting this system. And that is a long way from happening.

Spanky's picture


For an interesting analysis...

There is too much to be lost if the general population were to stop supporting this system. -- Peeramidideologies

Problem is, as long as they can keep the ball rolling, they can continue their destructive ways towards us and the rest of the world. We are the first domino. We need a collapse, as much as it pains me to say... And if it doesn't lurch there on it's own, we need to find ways to help it along.

Doing so however, begs the question of what comes after... And one hurdle that any serious plan and it's attendant strategy must clear, is how will it address co-option. Lessons learned... from the Green Party, Tea Party and Occupy, and others.

I argue hard for our only Constitutional option; revoking our consent at the ballot box to de-legitimize these twin-party bastards (and their paymasters), and thereby call a Constitutional Convention.

It's a tough choice, but late-stage democratic oversight of a republic in trouble is messy that way...

PeeramidIdeologies's picture

Obviously the capital isn't being invested properly back into population. But we all know that...

You raise the most important question... How do you incite the change? You suggest that it can not be done without a drastic movement, I can see why. There just aren't enough people who will actively partipate. It is disappointing to bare witness, for sure, but I do believe there is a solution to every problem. It's just that some problems require many small solutions, as opposed to one large one.

A collapse at this point, IMO, isn't going to happen. I can see the risk, as well as how it could happen, but in the couple years I have been following this situation, I have come to believe that with control over both the media as well as the market, they can absorb some pretty incredible events.

The solution, I think, SIMPLY (ha) comes in the form of people regaining control of their governments again, which you have mentioned, as well as our wealthiest members of this little planet absorbing some large losses. I think IT IS that simple, to write, but of course, these are only words floating about the interweb...

Back to your idea of constitutional convention... There are a couple of steps I think that could potentially help people regain a hold over localized Gov. The first one being to stop participating in Gov. run programs. I get the impression that in America there is plenty of anti-government sentiment. Yet people are still using their services. On a local level could it not be possible to practically run the Gov. out of town if people quit using it?

Another step, is that a non vote at a ballot, as see though voter participation, could/should be seen as a vote. If 25% vote one way, 25 % vote another, yet 50% don't vote... Who really is the majority? I think it's pretty fair to say that people aren't forgetting nor don't know how, it's most likely that they believe it won't make a difference. Yet it should, because a non vote is still technically a vote, and if the majority of a community believes that a polical overhaul is possible, I think that you could see things begin to change very quickly.

I stay firmly in the camp that a collapse isn't the right answer. It opens up to many doors that I'm not sure people are ready nor want to deal with.

Spanky's picture



I think IT IS that simple, to write, but of course, these are only words floating about the interweb... -- PeeramidIdeologies

Amen. And for...

If 25% vote one way, 25 % vote another, yet 50% don't vote... Who really is the majority? -- PeeramidIdeologies

Indeed, who is the majority? The problem with not voting is that there is no individual or collective enumeration of political intent. This is the issue I've been working on. To give the 50% a voice at the ballot box. A choice to make a difference. Or not.


[Edit] And for...

It's just that some problems require many small solutions, as opposed to one large one. -- PeeramidIdeologies

But many small solutions can add up to one large one...

Black Swan 9's picture

In a perfect world, I think you're right, PeeramidIdeologies, but mathematically, logically, a collapse of some sort will be happening; we don't have a choice. The people who could stop this train, won't.

HowardBeale's picture

...there is an amount of confidence building among the "shot-callers"...

You read it here today: "Confidence" is not "competence."

These psychopaths aren't immortal. They are delusional. And there are plenty of genuinely intelligent, competent People that will take them down when they reach their personal limits of indulgence with regard to this historic crime and its perpetrators.

tradewithdave's picture

Clearly a failure to fully appreciate the value in miniizing the Breurian Ripple Effect - AKA The Himpton modality.  Think of it as the Higgs Boson of democratic republics... criminal/non-criminal simultaneous quantum duality.  Like SOROS... it's a revolving government of palindromes... a Himalayan ride at the amusement park of visible hands... "Do you want to go backwards?!!  Yeeaaahh!  Do you want to go faster?!!  Yeeaaahh!