Good Video Dr William Black - Great American Bank Robbery

Frankcoins · October 26, 2010 8:11PM

Year old, but a great video on the banking system and the failure of regulators. At 40:20, Dr. Black rips Tim Geithner a new one.

Link

Justacommeman · October 27, 2010 12:15AM

Thanks for posting that Frank. I'm sitting in China with my lap top on a fish crate and it helped me while away the night. I really appreciate it since it wasn't a Youtube link. No Youtube allowed in China. A very very good piece. MJ

TwoSides2aCoin · October 27, 2010 3:34AM

Pencil manufacturers are in a recession proof business. This makes me want to buy wood, lead and rubber. I've already got some precious metal.

jmski52 · October 27, 2010 4:25AM

A very good video! As a former regulator, he does bring up the point that regulators have to be careful not to overstep. I was interested to note that he contradicts a few of my previously-held conceptions, which now need further review, including the impacts of the Community Reinvestment Act which he says did not contribute in a major way to create the present crisis. I lost track of how he disconnects that from the fact that 40% of all housing loans in 2006 (or 2007) were sub-prime.

His comparisons of the 1989 S&L crisis and today's banking & economic crisis are interesting, especially noting that he helped in over 1,000 convictions as a result of the 1989 debacle while exactly zero indictments have been handed down as a result of the current banking crisis, much less prosecuted and convicted. (I guess Madoff doesn't count because he wasn't part of the banking fiasco.)

His opinions of and litany of the grossly incompetant recommendations by the economists who have helped formulate & direct policy for the past three administrations and the current administration is damning, as is his analysis of how the banking system is tied together. No surprise there, as we have been following and highlighting these issues in this forum for years.

His observations and prognostications for the next two years are not encouraging in terms of the economy, as he expects further failures to continue to shock the whole system, while the only people in power who could make a positive impact for corrective actions - are few and far between.

My own observation is that guys like Phil Black are great at what they do and should have more influence on policy, but that they are also very, very prone to be co-opted by one side or the other, in spite of their unwillingness to be used as political pawns.

Added: One last question occurs to me. Does anyone here know what John McCain's actual involvement was in the Keating 5 Scandal, and exactly why he was absolved (sorta) as only having had "bad judgement" instead of being found guilty of inappropriately trying to influence the ongoing prosecutions of Lincoln Savings & Loan? What did he do and not do? Anyone know? Just curious.

derryb · October 27, 2010 5:21AM

It would do the administration and the people great justice to put this man in charge of as much of the economy as possible. His experience is unequaled in financial matters, especially why things are as bad as they are.

Frankcoins · October 27, 2010 5:28AM

<< <i> the Community Reinvestment Act which he says did not contribute in a major way to create the present crisis. I lost track of how he disconnects that from the fact that 40% of all housing loans in 2006 (or 2007) were sub-prime. >>

The CRA banned banks from "red lining" poor neighborhoods...meaning they would only take deposits from those people, but make no loans. The CRA loans were mostly made in poor black neighborhoods, average mortgage $20,000...mostly to remodel exisiting homes.

The CRA requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation. There are no quotas and never a requirement that money be loaned to people who are not credit worthy.

The subprime loans that caused most of the trouble were for new houses in new subdivisions, to people who could barely make the "teaser" first year payments...which often did not even cover the interest (negative amortization) When the normal interest rate kicked in, the payments were unaffordable. But the realtor, builder, appraiser, and bank that packaged the loans all got their commissions and service fees, so they didn't care what happened to the buyer.

KUCH · October 27, 2010 5:43AM

Interesting you say, sub-prime loans which was the major cause of failure, was in new sub-divisions and new homes. That statement would disregard several other areas of sub-prime bad loans, which might lead to incorrect solutions. A problem is rarely the result of one single action or policy. Rather the problem becomes systematic when several or many components of a system become grossly sick. Therefore fixing sub-prime mortgages in new sub-divisions/new homes alone will not correct the problem.

gsa1fan · October 27, 2010 5:46AM

I learned that 80% of the bad loans are/were not under any regulation.

FBI had this on record in 2004 as a major "meltdown"!

Obama doing policy through the Fed to avoid congress.

I was not clear on Mr Black's fix? He did mention CEO compensation many times as being "root of all evil".

roadrunner · October 27, 2010 5:55AM

Excellent video, thanks for posting it.

roadrunner

jmski52 · October 27, 2010 6:20AM

The subprime loans that caused most of the trouble were for new houses in new subdivisions, to people who could barely make the "teaser" first year payments...which often did not even cover the interest (negative amortization) When the normal interest rate kicked in, the payments were unaffordable. But the realtor, builder, appraiser, and bank that packaged the loans all got their commissions and service fees, so they didn't care what happened to the buyer

Yes, Frank - I understand that explanation but the question is why it happened and to whom. My question would be whether or not the CRA was involved in those cases as well. My understanding to date is that the banks were intimidated by the regulators into providing those loans in neighborhoods to people who didn't qualify. And that is subject to interpretation depending on which ideology you follow. That's been my opinion until I learn otherwise.

Obama doing policy through the Fed to avoid congress.

Black does mention the tactic of using existing banking regulations to enforce the correct policies, even though the statutes have been repealed or made weaker. I am not sure that I would ever agree to having regs that are inconsistant with existing law or vice versa. That simply leads to the very overstepping by regulatory agencies that Black himself criticized in the video.

I was not clear on Mr Black's fix?

I took him to say that he would utilize existing banking regulations, which were not removed when the laws were repealed or weakened. Why not just re-enact the post-depression Glass Stegal Act along with any modern tweaks that might make sense? There's also the issue of private, non-exchange traded funds and transactions. Would private transactions be regulated, and would that be considered an obstruction of free enterprise?

He did mention CEO compensation many times as being "root of all evil".

He referred to CEO compensation as a problem, but I thought he described CEO corruption as one of the biggest problems. I forget what he said the remedy for those problems would be.

Good Video Dr William Black - Great American Bank Robbery

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