Moyers drops bailout bomb on Obama

This evening, Bill Moyers interviewed William K. Black, the former senior regulator during the savings and loan crisis of the 1980s, who blew the whistle on the Keating Five (the U.S. Senators implicated in taking “gifts” from S&L bankster Charles Keating was convicted of racketeering and fraud in both state and federal court after his Lincoln Savings & Loan). Black is now an Associate Professor of Economics and Law at the University of Missouri, and the author of the recently released book, The Best Way to Rob a Bank is to Own One.

Black, who supported the presidential campaign of Barack Obama, excoriated both President Obama, and former President Bush, and their Treasury Secretaries Timothy Geithner and Hank Paulson, respectively, for deliberately and consciously violating the law. Specifically, the Prompt Corrective Action Law, passed after the savings and loan crisis, which mandates that severely undercapitalized banks be promptly put into receivership (i.e., nationalized).

From the Bill Moyers Journal this evening:

WILLIAM K. BLACK: Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they're refusing to obey the law.

BILL MOYERS: In other words, they could have closed these banks without nationalizing them?

WILLIAM K. BLACK: Well, you do a receivership. No one -- Ronald Reagan did receiverships. Nobody called it nationalization.

BILL MOYERS: And that's a law?

WILLIAM K. BLACK: That's the law.

BILL MOYERS: So, Paulson could have done this? Geithner could do this?

WILLIAM K. BLACK: Not could. Was mandated—

BILL MOYERS: By the law.

WILLIAM K. BLACK: By the law.

SNIP

WILLIAM K. BLACK: In the Savings and Loan debacle, we developed excellent ways for dealing with the frauds, and for dealing with the failed institutions. And for 15 years after the Savings and Loan crisis, didn't matter which party was in power, the U.S. Treasury Secretary would fly over to Tokyo and tell the Japanese, "You ought to do things the way we did in the Savings and Loan crisis, because it worked really well. Instead you're covering up the bank losses, because you know, you say you need confidence. And so, we have to lie to the people to create confidence. And it doesn't work. You will cause your recession to continue and continue." And the Japanese call it the lost decade. That was the result. So, now we get in trouble, and what do we do? We adopt the Japanese approach of lying about the assets. And you know what? It's working just as well as it did in Japan.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, "We just can't let the big banks fail." That's wrong.

The Prompt Corrective Action Law is codified as Title 12 of the US Code, and as currently published by the US Government reflects the laws passed by Congress as of Jan. 3, 2007. Here are some parts of it.

TITLE 12 > CHAPTER 16 > § 1831o § 1831o.

Prompt corrective action

(d) Provisions applicable to all institutions

(2) Management fees restricted An insured depository institution shall pay no management fee to any person having control of that institution if, after making the payment, the institution would be undercapitalized.

SNIP

(3) Conservatorship, receivership, or other action required

(A) In general The appropriate Federal banking agency shall, not later than 90 days after an insured depository institution becomes critically undercapitalized—

(i) appoint a receiver (or, with the concurrence of the Corporation, a conservator) for the institution; or

(ii) take such other action as the agency determines, with the concurrence of the Corporation, would better achieve the purpose of this section, after documenting why the action would better achieve that purpose.

Of course, if Black’s charges take hold and force President Obama and Secretary Geithner to respond, a lot of debate is going to take place over that little section (ii), “such other action as the agency determines.”

0
No votes yet

Comments

 Does anyone know why they're avoiding nationalization? I just don't get it.

Look carefully at the timeline of the events, the appointments (or lack of), and the actions taken so far.  In less than three months the administration has moved quickly to reorganize the structure of the entire federal government, including the interplay between the alphabet soup of branches, agencies, and commissions dealing with the financial industry.  They announced their intention early to perform 'stress tests' (read:  audits) of the major investment banks, have removed Chairs/Boards of Directors, changed a staggering number of rules and regs, and injected close to a trillion dollars in the broader economy.

Give them a few more weeks to make sure they have all the authority they feel they need.

finally, we are starting to all get it.  please, please keep getting the word out on william clark, the prompt corrective action law, and the mechanisms already in-place to deal with an incredible act of fraud and irresponsibility (not to mention just plan lousy business management by ceo's and directors).  i think one of the important messages to get out is that receivership IS NOT nationalization.  receivership is a common part of the bankruptcy process, a normal way to unwind a bad business situation. 

i would not be surprised if we discovered that that the power brokers and financial institutions with a vested interest (duh) concocted this notion that receivership equals nationalization.  receiverships happen all of the time and are a tremendous tool.  they just used it for lehman brother which was sold off quite well.

plus, the obama administration and congress are simply not following the law.  let's follow the prompt corrective action law and hit them right between the eyes.  the world will not blow-up, and the proper people will take the hair-cut.  keep it up.  we need this information out there.  my kids thank you. 

 

 

but the point that my crashing browser keeps preventing me from making regards the fact that we're essentially under control of a corporatist (ie., fascist) government system. 

By design, its benefit is largely to big business or we wouldn't allow the money of big business lobbying to buy the representation of those we elect out from under us.  I think Obama's got some restructuring to do as rba allows, but I still think a larger issue is that...well, as follows.

Even if the effect WOULD BE nationalisation, the successful re-engineering of the American psyhcic genome is complete.  We now believe that programs to spend government money to the benefit of average citizens rather than for big business, or to take a private enterprise under public ownership, is SOCIALISTIC and, so, is inherently bad.

It's bad for those who believe that any and all social contracts must necessarily exploit for maximum profit to private enterprise.  That maximal profit always trickles down to benefit the exploited, in the end, has been the fantasy aphorism that has been engineered into our collective wisdom.

The lessons of the last 30 years have proven how delusional that propagandistic fantasy is, if swallowed in its whole form, but the corporatists can't get over the need to profit from absolutely ANY venture.  I think that Americans must revise our understanding to know that some ventures won't work that way and not be to the detriment of those who are exploited.

I don't think we get that fact yet.

 

-----
"I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government in a trial of strength, and bid defiance to the laws of our country." - Thomas Jefferson