Spooky Economy

   Transparency and Knowledge Dispel Fear

What is the robbing of a bank compared to the FOUNDING of a bank?
— Bertold Brecht

Black, an American Associate Professor of Economics and Law, was a regulator during the time of the Savings and Loan crisis of the 1980s, a period of time when a total of 747 financial institutions failed. (http://en.wikipedia.org/wiki/Savings_and_loan_crisis)

Black's experience includes research in the area of “control fraud”, a method by which individuals in authority use the system they control to commit fraud. He has appeared before the House Financial Services Committee to give testimony on “Alt-A” mortages (“liars loans”) and how they played in the failure of the economic giant Lehman Brothers.

Current Economic Crisis

Most recently, Black has courageously spoken out on how our current economic crisis is partly the result of widespread financial fraud – fraud so deep that politicians are afraid to talk publicly about it for fear of panic. [2@20:30] In short, mortgage writers, bankers and rating agencies intentionally wrote bad loans, package them as investment securities and gave them high safety ratings. The securities, which Black calls “toxic waste”, were then sold worldwide for use in pensions, retirement plans and as sources of revenue for city, state and national coffers. In short, Black denounces the process as the world's largest Ponzi scheme and says the players, with the assistance of governments, are now involved in a costly, unsustainable cover-up. He believes the cost of the fraud is many trillions of dollars.

The incentive for the bad loans was “because they pay better”. The number of loans was grown extremely rapidly and then was leveraged (borrowed against). This results in “guaranteed record profits in the early years” and performance bonuses. [2@2:50] Government regulation and oversight had been done away with years earlier, so “if no one was looking and you were able to do this with impunity and that's exactly what happened”. [2@4:18]

Quotes

What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, … the smallest of the rating agencies, [said] 'The results were disconcerting.' and that 'there was the appearance of fraud in nearly every [mortgage loan] file we examined'.[2@7:14]
They just gutted the verification process. We know that that will produce enormous fraud, under economic theory, criminology theory, and two thousand years of life experience.[2@5:58]
Our system became a Ponzi scheme.[2@8:42]
Where's our investigation?... What would happen if after a plane crashes we said, "Oh, we don't want to look in the past... No. We [would instead] have a nonpartisan, skilled inquiry. We [would] spend lots of money on [it and] get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere."[2@18:31]
[Those in charge] don't want to change the bankers because if we do put honest people in who didn't cause the problem, their first job would be to find the scope of the problem and that would destroy the cover-up.[2@14:45]

Personal Concerns

During the S&L crisis, Charles Keating, the person who gave name to the Keating Five of the Savings and Loan scandal, became so angry with Black that he issued a memo demanding they metaphorically “Kill Black Dead”. [2@1:17]

Proposed Solutions

Black believes the following actions are required:

Must-see Resources

  1. Book: “The Best Way to Rob a Bank is to Own One” [April 1, 2005]
    URL: http://www.amazon.com/Best-Way-Rob-Bank-Own/dp/0292721390
  2. Video: Interview with Bill Moyer [April 23, 2009]
    URL: http://www.pbs.org/moyers/journal/04032009/watch.html
  3. Video: Interview with Bill Moyer [April 23, 2010]
    URL: http://www.pbs.org/moyers/journal/04232010/watch.html
  4. Interview with Paul Jay of Real News [March 19, 2010]
    URL: http://www.youtube.com/watch?v=sA_MkJB84VA
  5. Video: 5. Interview with Paul Jay, The Real News (On Financial Reform Bill)[July 22, 2010]
    URL: http://www.youtube.com/watch?v=greYnznmTw0

Added February 19, 2010 Posted December 4, 2010 December 15, 2010 (n/a)

This is my opinion. It's a work in progress. I hope it's helpful.

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