A presentation by Bill Black disproves that TED only features elite-flattering conventional wisdom. Black in this talk recaps the findings of his book, The Best Way to Rob a Bank is to Own One, and uses those lessons to explain how banks caused the financial crisis and why it was completely avoidable.
This is a great piece to share with friends and who still aren’t sure why we had a crisis or are predisposed to blame it on greedy borrowers, as opposed to greedy and reckless financial services industry players.
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A presentation by Bill Black disproves that TED only features elite-flattering conventional wisdom.
Note though that this is a TEDx. That’s an independently organized event licensed to use the branding and format, relinquishing copyright for distribution by TED.
Exactly what I was going to say Econ. I find many of the TEDX talks to be more informative and honest than the constant cheerleading nonsense that one gets from the “official” TED talks. Not long ago I think Yves posted a link that covered the problem with TED talks in general. Not sure if this is it- but it covers the issue very well.
http://gawker.com/tedx-speaker-talks-about-how-ted-talks-are-bullshit-1496985980
Let me try this one more time since I think that this TEDX talk gets beyond the chatter of the techno masses and is worth viewing. I posted earlier after viewing the presentation, but it appears that my comment was censored — probably due to providing a website link. It appears that only a chosen few get to provide links. If I am mistaken and the censoring was for another reason, please let me know. (You have my email address.)
Patrick, thanks for the link. The presenter gets to the heart of the matter and in almost half the time of the typical TED talk.
Thank you for linking to this short but powerful presentation on the massive Control Fraud that led to the 2008 financial collapse by a man I view as a national treasure, Bill Black.
I hadn’t previously been aware that the FED had and has authority to regulate any financial intermediary, including non-FDIC insured financial intermediaries, but that both Alan Greenspan and Ben Bernanke had declined to exercise this authority. I have difficulty understanding how anyone in a position of policy responsibility can support deregulation given what has occurred.
I appreciated Bill Black’s proposed three-step solution:
1.) Shrink (Break up) the so called “Too Big To Fail” banks.
2.) Reform Executive compensation
3.) Reform the “Three D’s” (deregulation, desupervision, and de facto decriminalization).
I thought that was the most interesting bit too – that the Fed could have imposed regulations and restrictions on liar’s loans early on but declined to do so because they were ideologues devoted to free marketeering. So the Fed owes us too. Big time. My guess is that Janet Yellen knows this full well because she was the one who volunteered to do the presser about the curtailment and resolution by the fed of the forclosure review – the bogus review. Love BB’s barbs too, about the banksters in-your-face “lack of a certain subtlty” and their pious insistence that it was all a “virgin crisis.” Let the Fed get together with the investment “trusts” and banksters who purveyed them and give everybody back their house free and clear. And then give everybody who wants one a new house of comparable value to compensate them for being railroaded by the rogue financial system into foreclosure. That would be a neighborly thing for the Fed to do, no?
Also that our financial system was in a race to the bottom with the UK’s. Explain’s Hank Paulson’s disbelief and disappointment when he found no interest or cooperation by the BOE to have Barclay’s buy Lehman Bros. “The Brits just screwed us.”
Not that ideology was not a force at the Fed at the time, but that the take on the con was way too huge and over the pay-grade of anyone at the Fed. Policy is not made there but, rather synthesized and brokered based on the realpolitik situation at the time.
Agreed. Most Fed Chairs are not independent agents, but representatives of certain interests. They basically serve 1) the banks, 2) the US government, and 3) the systemic needs of the international capitalist system. Fed Chairs need to keep all three “in the loop” and broker deals to meet the needs of all three, which is a pretty tall order.
Dr. Black is a national treasure. I recommend taking his course if close to the area as well as downloading the FCIC (Financial Crisis Inquiry Commission) report led by Angelides, which is not unlike many federal documents (thick with distraction, but hidden gems lurk in the pages of what has been done and what has not). Find a copy at this link: http://fcic.law.stanford.edu/
Also, here are a few resources for those who want to take Dr. Black’s challenge to learn more about our historical response to regulation, criminal prosecutions, and academic studies of fraud:
Akerlof, G. & Romer, P. (1993). Looting: The economic underworld of bankruptcy for profit,
Apel, R., Paternoster, R. (2009). Understanding “criminogenic corporate culture: What white-collar crime researchers can learn from studies of the adolescent-crime relationship, In Simpson & Weisburd (Eds.), The criminology of white-collar crime
Beasley, M., Carcello, J. Hermanson, D., & Neal (2010). Fraudulent financial reporting: 1998 – 2007. Committee of Sponsoring Organizations of the Treadway Commission
Black, W.K. (2009). Those who forget the regulatory successes of the past are condemned to failure, Economic & Political Weekly, p.80-86, March 28: (xliv):13.
Boyle, D.M., Carpenter, B.W., Hermanson, D.R. (2012). CEOs, CFOs and accounting fraud: Implications of recent research, The CPA Journal (January), p.62-65.
Easterbrook, F. H. & Fischel, D. R. (1991). The economic structure of corporate law (Cambridge, Massachusetts: Harvard University Press). **** Chicago School Stakeholders of Efficient Markets & Neoclassical Econ Theory
Hudson, M. (2006). The new road to serfdom: An illustrated guide to the coming real estate collapse, Harpers, May, p. 39-46.
Littman, A. (2010). The fraud triangle: Fraudulent executives, complicit auditors and intolerable public injury —- (note Donald Cressey is known for the fraud triangle model, but it is well understood to capture very little fraud knowledge, overlooking many of the areas Dr. Black discusses).
Pontell, H. N., & Geis, G. (2007). International handbook of white-collar and corporate crime.
Simpson, S. S., & Weisburd, D. (2009). The criminology of white-collar crime.
Tillman, R., & Indergaard, M. (2007). Control overrides in financial statement fraud, A Report to the Institute of Fraud Prevention
I will end this post with a quote that sums up an often forgotten point:
“Most of the large executive frauds that occurred in the 20th Century, and those that are still occurring should have been detected and disclosed a long time before they caused huge damages.” – Allan Littman, The Fraud Triangle p.40
After reading William Cohan in the NYT Sunday Review: http://www.nytimes.com/2013/09/22/opinion/sunday/was-this-whistle-blower-muzzled.html?pagewanted=2&_r=0 , my admiration for the work of the FCIC and Phil Angelides has waned. Would you happen to know if the report sheds any light on how Richard M. Bowen III (Citi’s Chief Underwriter) full statement got conveniently sealed until after the statute of limitations runs out on Bob Rubin and company? Was the sealing a unilateral decision by Angelides or was it a full committee vote? And most important of all what would it take to get Bowen’s full statement unsealed before the statutes runs out?
Do not know about Bowen, but the 663 page document does have some interesting arguments forwarded by Peter Wallison that really attempt to muddy the waters. The FCIC report is really an amalgam of admission of fraud, diversion, and an expedition that did not go far enough (with the claims from a few, Angelides being one, that they were not given a mandate to go further with the investigation that they did. If you listen to the Angelides interviews following the release, there is some marketing go on about the quality of the work.
In essence, my conclusion was that he rode up to the problem and described it from awkward places, but any type of real analysis was absent, thwarted or pursued gingerly. One might think that the biggest control fraud in our nation’s history might be better researched. Thanks for pointing out the Bowen testimony, I will have a look at it.
Bowen testimony @ FICI:http://www.c-span.org/video/?292886-2/2008-financial-crisis-citigroup-subprime-mortgages-day-1-panel-1-
Wallison from AEI has been peddling GSE F&F caused the crisis; they were late to the party. This Bowen clip shows the spot where Angelides steers Wallison away from a line of questioning that Cohan refered to is his Times piece.
@Teejay,
Writing this on the run. No time to look up your NYT link right now. Does it describe the sealing you refer to?
Yes. Actually it was the SEC that has it sealed. Cohan attempted to get it via
FOIA but even with Bowen’s permission SEC denied his request.
@Teejay (and John Mc)
Thanks, there goes my weekend. ;-)
MRW,
Here is a brief synopsis from my class notes:
FCIC Marketing
700 witnesses, 19 days of public hearings, 4-5 million homes lost or in some phase of foreclosure during the 2008 period.
Findings
Crisis was avoidable. It was called a collision of forces (notice they do not start off with fraud). Stewards (CEO’s) let us down all along the way. Conclusion: you cannot offer a loan to someone who cannot pay it back (WOW, what insight). There are 3,000 lobbyists for the industry and Greenspan/Bernanke had few regrets (Ayn Rand et al).
Mass failures inn regulation and supervision along with corporate governance, risk rating agencies. This led to SDI Systemically Dangerous Institutions.
In addition, wait for it…….. excessive borrowing occurred at multiple levels. Risky investments were constructed and there was a lack of transparency. This is combined with a complete absence of accountability along the securitization food-chain and an ethic to pass the buck or ignore the trend.
The OTC market derivatives amplified the problem and credit agencies were rubber stamping their quality based on what the investment banks were telling them. This is classic bait and switch stuff with a bit of chaotic, selective truths built in for garnish.
Interesting Bits
Somewhere in the document there are two interesting pieces: 1) there is an admission that as early as 1999, appraisers were being pressured by banks to inflate their home appraisals. Of course, this means more money to be borrowed and higher fees. Several thousand appraisers came forward and wrote a letter to regulators saying they were being forced to inflate or face black-listing. This is a full 9 years before everything blew up.
2) Mortgage Industry data was well known that an epidemic of liars loans were being sold throughout the system – FBI 2004 and MARI 2006. Different parties knew but either had little man power (after 9/11) as in the case of the FBI (expertise too) or chose to ignore the incidence 90% of bad loans as a general business practice of do not rock the boat.
Essentially, the deregulatory, desupervised, and decriminalized patterns won out in the mid to late 90’s and this culture led to an anything goes western shootout of graft and fraud. Everyone knew, but no one is responsible. That is their story and they are sticking to it.
**** This information was gather sitting in on a course with Dr. Black this fall. It is a brief summary of the 663 pages, Hope you have a good weekend, MRW.
Thank you, John Mc!
@John Mc,
Check back next week. I might have more questions. Here’s your link: http://www.nakedcapitalism.com/2014/03/bill-black-ted-explains-insiders-rob-banks-cause-crises.html#comment-1912916
Again, thank you.
@Teejay: devastating op-ed.
Did you also catch Bowen’s FCIC testimony? He was also on 60 min. What was the legal justification for sealing his full statement from the public? It seems obvious it was to protect
Citi exec’s. What’s your take on Angelides response?
http://philangelides.com/2013/09/25/was-this-whistle-blower-muzzled/
Can someone please post a link to this Bill Black video? For some reason my Firefox refuses to show most videos embedded in articles – showing a blank white space instead.
Bill Black is indeed a treasure. President Obama should have appointed him (or someone similar) to head a new ‘Peccorra Commission’ during the first year of his presidency, had he been serious about solving the GFC, The fact that he didn’t, and then squandered so much of his political capital pushing the abortion known as ‘Obamacare’, WITHOUT a single-payer option, revealed his presidency for what it was,
“They thought they’d elected a black Roosevelt, and instead found they’d elected a black Hoover.”
Sorry, have also added it to the post proper:
http://www.youtube.com/watch?feature=player_embedded&v=-JBYPcgtnGE
Thanks, Yves. Hope you’re feeling better.
P.S.: LOVED the ‘drop-bears’ article! Have you also heard about our extremely dangerous ‘bunyip menace’? ;=))
Almost as funny as that article warning about the dangers of ‘dihydrogen monoxide’.
http://www.snopes.com/science/dhmo.asp ;
https://en.wikipedia.org/wiki/Dihydrogen_monoxide_hoax :
“On April 1, 1998 (April Fools’ Day), a member of the Australian Parliament announced a campaign to ban dihydrogen monoxide internationally.[26]” …
We just can’t help ourselves! See ya.
Hey, James, dihydrogen monoxide is dangerous stuff! If we succeed in getting rid of it, the spy agencies will no longer be able to dihydrogen-monoxide-board prisoners during interrogations. That will be a great success for human rights!
It’s good to see Bill get exposure to groups like this.
But TED is all about fetishizing the technoelite and they have decided that banking is ripe for “disruption.” So I’m not sure it’s particularly counter culture but instead justifies why the valley should move into finance.
Typical. Those who come to understand banking fall into 3 groups:
1) Those who loath it.
2) Those who think it can be regulated for the common good.
3) Those who wish to join the looting themselves.
Whenever you hear the word “disruption” put your hand on your wallet. Speculators like churn.
Ha! Ha! As usual, Bill Black is concerned about how banks are robbed instead of how the banks themselves rob.
[Matthew 22:20-22 –lambert]
Quoi?
Bill Black is another defender of banking in general as if a government-backed usury for stolen purchasing power, especially from the poor, cartel could EVER be made to work properly. Example: Watts and other redlined black inner cities burned long before banks were deregulated.
The irony is that a criminologist does not recognize that government-backed/enabled/privileged banks themselves are criminals though legal ones.
I’m sure he does F.Beard.
No, you’re wrong there. You should listen more carefully.
“Ha! Ha! As usual, Bill Black is concerned about how banks are robbed instead of how the banks themselves rob.”
You’re a regular participant at NC and I never seen any indication leading me to think this before, but are you deliberately trolling with the remark you just posted? Nothing Black has written in the past or presented at TED could lead someone to reasonably conclude that he’s
“concerned about how banks are being robbed…”. What are you thinking? Please view the
presentation again.
I’ve listened to the entire presentation through nice headphones and have nothing to retract and this to add:
Professor Black,
How dare you speak of crony capitalism when you implicitly support government-deposit insurance and a government-sanctioned fiat lender of last resort, i.e. special privileges for the banks? Hypocrite much? You should too?
[Matthew 22:20-22 –lambert]
scratch “You should too” – a typo.
Or add it to the last paragraph.
Honestly Beard, and there’s no need for us to get into a tangle over this, I think you could make your points much more clearly if you followed the “no proselytism” rule.
[Romans 12:19. –lambert]
This isn’t a game. The banking cartel blighted my parents’ lives and by extension the lives of their children – not to mention caused the Great Depression and WWII. And who knows where the Ukraine will lead to?
Progressives think they can make a deal with the Devil and win and so far the laugh is on them except misery is not a laughing matter.
Better cutting this time.
Not revenge, but a call to justice.
But keep reading the Bible and you may be able to handle it properly one day.
Personal note so feel free to delete it too.
Matthew 22:20-22 Lambert
Huh? Since when should Caesar’s money be lent to private interests, the banks, or be used to insure their deposits?
Maybe you should educate yourself a bit more. Warren Mosler, Hymen Minsky, and the works of John K Galbraith are good primers for the work of Bill Black.
Second, I think if you had worked and succeeded in preventing control fraud as regulator during the S&L debacle, you might feel differently. Also, you need to understand the process of being of a part of an institution that was systematically dismantled to allow for control fraud. The problem is that the solution that is known to work is prevented from acting.
Special privileges for the banks were in place long before the Neoliberal turn, but we did have defenses that prevented wholesale criminal fraud. Your arguments are weak and smack of a troll like libertarianism fetish where the fear of government is more of synaptic response trigger than thoughtful understanding of the levers in need of change.
but we did have defenses that prevented wholesale criminal fraud.
Did they keep Watts and other black inner cities from burning due to redlining?
Libertarian? No, since I believe the Bible and in particular Romans 13:1-9. I’m an anti-fascist and here to tell you and Bill Black and anyone else that government explicit and implicit support for banking is fascism, violates Equal Protection under the Law and in particular oppresses the poor.
You guys should be ashamed.
Is it too much to stay on point? We were discussing Bill Black’s work. You seem to be attributing your own stuff to him. Have you ever met him? Do you actually know what he thinks?
All this nonsense about the Bible, banking fascism, and the prevention of Watts Riots/redlining are really distractions from being challenged about his work. Either you know it or you do not. All this other stuff seems like you are selling an agenda many here neither understand nor believe.
I will say this again. Dr. Black is a national treasure.
I’ll say it again and again, Bill Black is attempting to save an inherently corrupt banking model from itself by pretending that eliminating bad apples and regulation will fix what can’t be fixed.
Yeah, I used to be a fan of Bill’s too till I listened to what he WASN’T saying.
The only pity is that Bill is probably poorly paid for the immense service he provides for a banking model that smarter (or perhaps wiser or more righteous) men have decried for centuries.
I don’t care how many bankers Bill Black put in jail; how about the banking model that has killed tens of millions and continues to threaten mankind?
First, I am not really concerned with your journey to and away from a particular scholar. Second, F Beard, you have not demonstrated much understanding of what Black has accomplished (instead focusing on what he has not been accomplished). Under this graded rubric, we might malign Einstein for not doing more for social movements, or make a few snotty remarks about Galileo’s understanding of family constellations.
Third, I challenge you to provide evidence of Dr. Black’s attempts at saving a model of banking, as if this was his seminal thesis.
Lastly, directing your anger at “a banking model” and then blaming all of those who look to operate and change parameters within a given system is insane and lazy thinking. It is so much easier to sit back and play monday morning quarterback, taking pot shots, while offering very little. I guess you are doing something, though – listening to what he is NOT saying. Considering the entirety of the English language and all the words he does not use, maybe you could use your time a bit better.
He wrote “Hymen” instead of “Hyman”, heh heh, heh heh.
Must of had Virgin Crisis on his mind?
Please don’t go into surgery, lambert.
So is everyone up to speed now? “The fox was [and still is] in charge of the hen house.” Any more questions?
Look I appreciate Bill Black and I never tire of hearing the word Bankster…but we’re into the sixth year now since the crisis and *nothing* substantial has changed. I guess I just don’t see the point anymore, regardless who’s holding the microphone, of continuing to identify the culprits, call for major reforms (that have zero chance of happening in the foreseeable future)…outlining just how far “over the rainbow” we really are. We know we’re f—ed, we’ve known it for a long time.
It’s to the point now that the phrase “crony capitalism” hardly registers a blip because we understand it’s the new normal. “They” are in charge, “they” call all the shots, the U.S. Congress and the broadcast media are bought and paid-for by the same greedy f–ks responsible for the mess we’re in…as they continue to distract the conversation, pitting us against one another…
I don’t mean to sound ungrateful for the link to Bill Black’s talk – I’m not, in fact I am glad his words are making the rounds. But if we don’t get another Occupy movement or some massive boots-on-the-ground, in-your-face action going soon…I’m afraid the change, when it comes will be much more violent than it could’ve been.
I too am frustrated by the lack of traction and action, this blatant law breaking has produced but my take away on this presentation was as a cautionary tale, to be ignored at our own peril.
As he said it isn’t a matter of if but when the next crisis occurs, if we continue on this course.
“If there is no struggle, there is no progress. Those who favor freedom without agitation want crops without plowing … they want rain without thunder and lightning.” – Frederick Douglass
I’ve been feeling that for a long-time. I would like to learn something new like how does the power-elite actually work? How are they organized and/or networked? The current power arrangements are far more robust today that they were six years ago–how did that happen? There is no real opposition unless you call cries of “it’s not fair!” as opposition.
Occupy was the road not taken by the American people, mainly due to cultural reasons like “why aren’t they working?” and “why don’t they bathe?” and so on. I’ve tried to bring up the issue of what the current power elite actually is and there is very little interest around here for that kind of thing around here or anywhere else on the left.
As someone who looks to Mills’ book as an ur-text, don’t count me in that group showing very little interest in the Power Elite! Please accept that with a smile. I agree with you, but getting people to think systemically, rather than as a question of dodgy individuals or a moralizing condemnation of “rotten apples” is, as you know, very hard in this culture.
The power elite are highly computerized . Some of their organizational power is via internet virtual corporations which are very fluid and easily scalable . They are like ghosts in the night – not many people get to see who the virtual bosses are .
The point is not to stir up another Occupy Movement. It is to get your friends and neighbors to (truly) understand what happened. Get them to understand and be able to restate how the Financial Crisis happened in a 1-2-3. How did it work? How did it happen? I regularly ask people I meet and my relatives to explain how September 2008 came about. I get platitudinous “Ah, the banks this. . . . The banks that. . . .” And a lot of bloviating about the little guy getting shafted. (I have the same problem with the 9/11 Snap-Crackle-and-Pop theory about Jet A fuel disintegrating skyscrapers within 10 seconds. The physics doesn’t add up, or 1800F commercial woks and induction stoves would be melting the steel pans they heat, and they don’t. Who did it is immaterial without understanding first how it happened. Scientific Method Step #1.)
In this Harry Shearer Le Show interview on May 1, 2011, Bill Black goes into more detail than the TED talk, and it’s entertaining to listen to. Bookmark it. Download it. And give it to people.
Dean Starkman wrote this the other day: No, Americans Are Not All To Blame for the Financial Crisis — Exposing the big lie of the post-crash economy. He recounts how people (like my brother-in-law) think everyone was to blame, but some more than most. My brother-in-law still believes it was the “takers” that crippled the economy, scamming the banks pursuing fraudulent loans and mortgages. He’s now convinced Blacks were the perps. It is incomprehensible to him that the system is so corrupt that something like ‘control fraud’ could even exist.
Getting the hoi polloi angry doesn’t work. It feeds irrationality. Shaming your friends and relatives into putting some self-education behind their pop-off statements is a better start. And Bill Black’s radio interview with Shearer, btw, is a brilliant place to begin. So is Episode 365 of This American Life.
“The point is not to stir up another Occupy Movement. It is to get your friends and neighbors to (truly) understand what happened.” – MRW
Exactly!
I feel your frustration and double down on your call to action. Now for the downer portion…..have you talked to the average “citizen” (i.e. consumer or new disgusting term….folks).
Well to get you up to speed I will use a saying: “we get the government we deserve”. And after many discussions with “citizens” of this country I am firmly convinced we have earned what we have.
So for me, well I have disengaged from the matrix. I use no credit, I shun the consumerism foisted upon me and I say F–K OFF to the political circus both parties present. I still vote, but never for a demopublican or republocrat.
“” Well to get you up to speed I will use a saying: “we get the government we deserve”. And after many discussions with “citizens” of this country I am firmly convinced we have earned what we have .””
Political pundit George Will feels the same about it .
Surely there are many others that believe ” the victims of crime ( or predation ) deserve it “. So sad .
And the banks are still in control, more so than ever – beware! The mis-named Home Valuation Code of Conduct (HVCC) was born in 2008 out of a fraudulent union of an Appraiser Management Company (AMC) “EAPPRAISEIT” and WAMU in inflating appraisal values. WAMU blacklisted any appraiser that did not make the values they needed. In 2006-2007 these 2 conspired to inflate values on over 262,000 appraisals making WAMU over $50 million in the process. They got caught and investigators wanted to see what the GSE’s had bought from WAMU. AG Cuomo used to be the head of HUD and denied access to those files. AG Cuomo then decided to settle with these 2 miscreants by creating the HVCC which left the banks in control of the appraisal process and appraisers, to this day. (Got out ahead of the mob and called it a parade). BTW, Cuomo sat on the board of an AMC, AMCO.
The HVCC was issued in part by an administrative agency of the Federal government but did not go through the administrative procedures act (APA) or the Regulatory Flexibility Act (RFA) as required of rules issued by administrative agencies of the Federal government. The legality of the HVCC has been challenged but answered as “the GSE’s are in conservatorship and therefore the HVCC can not be challenged in any court of law.” The banks are still in control of the appraisers for the next round of manipulation of values as they need. Thanks to Cuomo the banks can own these AMC’s furthering the banks goal of absolute control of the appraisal process and values. This also turns their AMC’s and appraisers into ATM’s.
Per a 2008 FBI report at least 66% of mortage fraud occurred at the application stage.
I just don’t understand people that blame the homeowners for the financial frauds. The banks are not supposed to lend money to people that can’t afford to pay it back. The reason that underwriting standards went out the window was because the banks could write the loan and then get paid for the entire loan through securitizations. They no doubt received 2-3 times what the home was worth through securitizations, mortgage insurance and bailouts. The banks were illegally giving kickbacks to brokers which opened up a broker feeding frenzy that put pressure on appraisers. They too used only appraisers that would make the values needed – think Countrywide. I can’t remember how many times I just hung up on those high pressure brokers.
The banks incentive to make bad loans was that they were able to unload the loan almost instantaneously and then double and triple their profits on just that 1 loan. I’m an appraiser that signed those petitions that asked that the government look into this fraudulent activity before the meltdown. I could say much more but, thanks Mr. Black, he covered it well.
There was a systemic need for these loans to be made. MBOs had become a critical means of recirculating dollars and debt generated by chronic balance of trade deficits. The US had leveraged housing debt, starts, and sales as a differential growth engine that kept our average rate of GNP increase greater than that of Europe and Japan throughout the 90s and early 2000s. This sucked in capital that was bleeding away in balance of trade deficits and direct foreign investment (i.e. offshoring). Then the Americans turned around and sold the MBS’s to Europe et al. to suck the money back. By 2006, the US had run out of good credit risks and were therefore selling homes to anyone with a pulse in order to keep the machine in motion. The least downturn would induce massive defaults, and it did, but even before then European banks (starting in France) saw the danger and stopped buying MBSs. That’s why the US government had to come in and guarantee the value of all that dreck and then the Fed come in and buy it up–to restart the engine that papers over our endless inability to export as much as we import by keeping dollar-denominated securities solvent and king.
There was a systemic need for these loans to be made. James Levy
Yes. At least according to Steve Keen who says the system needs accelerating debt to avoid collapse.
And it’s not called the boom-bust cycle for nothing despite repeated and failed attempts for “soft-landings.”
James Levy,
Thought provoking comment and a facet of the collapse I had not considered. Thank you.
You are welcome, but my insights are largely due to the work of Herman Schwartz at the University of Virginia, my old International Political Economy professor when he was at The New School. Schwartz has done an amazing job of playing “follow the capital flows” in his book Subprime Nation.
James Levy points out there was a systemic need for these loans to be made. On a more macro level, is there any evidence to point out the easiest way to restrict and damage the western social safety net states is through financial crisis (and the prescription of austerity).
Even further, the goal of a one world economy driven by the current owners of world resources would suggest that it would be a terribly unpopular and difficult task to get Americans to give up their privacy, social security, medicare etc. However, funded think-tanks (Petersen) and ominous predictions of a couple lost decades, lack of labor talent, student debt and whole host of environmental catastrophes allow the elite institutions to hold off investing in infrastructure, new jobs etc. In Europe, it is far worse as the EU countries are pitted against one another in a sick game of Survivor – the debt crisis (PIIGS).
As Naomi Klein reminds us, crises like these are opportunities to shape a future one world free market (INO) in ways that would not be possible with consent, and recognition. This is why Yves work here on the TPP (along with Lori Wallach) is so important. Multi-national oligopolies are the institutions in charge of implementing policy and disciplining those who do not play ball.
So, when I read a sentence like James’, the first thing I think is that he is right. These loans needed to be made to extract as much resources from the middle class as possible and reroute them to those entities carrying out policy. Everything else be damned.
Like 9/11, I think it is a matter of grasping opportunities rather than making them. The Elite in the US loved MBSs and the whole housing bubble economy for their own reasons, and made a fortune off of it all. As always, they were in the room when one set of rules blew up and a new normal had to be established. So, they did their level best to establish the new rules in a manner grossly favorable to them. Our system had no mechanism for meeting what was, in my opinion, a real crisis other than a backroom deal among the “stakeholders”. That meant saving the bankers, brokerage houses, and big-money investors at a huge cost to everyone else; but since everyone else wasn’t in those meetings, their issues/problems/pain were largely irrelevant to the decision-makers. They defined the problem as the fact that 12 of the 13 largest US banks, and most of the major banks in Europe, were technically bankrupt, or would be if the “free market” were allowed to work its “magic.” Paulson, Bernanke, Bush, and later Obama, Geithner, and Summers acted accordingly–technically, they “solved” the problem as they saw it, and the rest of us could go hang (and have).
We agree then. Klein subscribes to the “ready-made” strategies sitting at the Cato Institute, ready to privatize New Orleans’ schools or Tsunami property on coast ready to re-develop.
However, I do think there is an on-going and well-funded force pushing John Birch Society dog whistle codes while simultaneously trying to drown resistance to the free market in a bathtub. if we look at how easily wealth frightens when confronted with truly progressive ideas and their disproportionate responses to resistance, we see why certain events happen:
1) The Marquette Decision – repealing usury laws
2) S&L Crisis – “Black must die” – Charles Keating
3) Repeal of Glass Steagall (Gramm-Leach-Bliley 1999)
4) Enron & 20+ other accounting frauds
5) Iraq war & failed intelligence
6) Tax cuts for the wealthy (Estate Tax Changes over the decade)
7) Madoff, Raj Raj, & Steve Cohen
8) Massive Global Fraud – 2008 Financial Crisis
And why certain events do not:
1) Single Payer Healthcare not on the table
2) Full Employment is nowhere on the radar
3) Regulating Pharma, Big Agriculture, and Fracking – nonexistent
4) Real Financial Reform – Kabuki theater
5) Greenspan’s & Bernanke’s Response to Regulate Banks – no mas
6) TTP – Pharma support healthcare bill passage in exchange for TPP
7) Rubin, Summers, Geithner, Paulson — 1% handlers
Great Talk exactly lays out how the .01% “Taker Class” did in fact defraud the 99%, the consumer that drives all economic activity!
This will only end when the 99% demanding a change to the TAX CODE, eliminating the “Taker Class!
The truth is everywhere if you want to know the truth and Black clearly presents exactly how the manipulation of the “Giver Class” goes unabated by a government which no longer represents the 99%!
Bill is obviously very good. We can extend what he’s been saying into all institutional self-regulation. I see the problem as a very old one concerning virtue ethics. They look pretty feeble when you realise they were being spouted by people doing nothing about slavery and as exposed by a realist like Machiavelli. ‘The Wire’ just about sums our reality up – a combination of dirty hands philosophy and people trying to evade interesting times in a day job.
Look how easy it is to get people agreeing with statements like ‘most people who work in banks are honest, decent people’ or that ‘high rewards are fair if linked to performance’ and ‘most people in politics are motivated to do good’. The crooks running our banks, politics and corporations are seen as ‘necessary in a dirty world’ in which we must compete with demons beyond our gates. Anyone like Bill advocating fair rules is thus an idealist or a rabble-rouser with appeal only to people like us.
I’m sure he’s right. I’d work for free to bring a few banksters to book. Yet such would only be to accept a ‘Forlorn Hope’. One can advance a complex real history approach here, but this will be shunned as an attempt to hobble our ‘brave boys’ in the race to the bottom. Just as Bill has a model of control fraud, there is one we can see on regulation and the stock of “independent” bought-and-paid-for by the establishment figures they will allow to be regulators. I suggest we need to remove much of what we do in recruitment and selection to get past these deeply structural problems. Like the Stoics’ condemnation of slavery, arguments on sortition and lot are thousands of years old. But even genuinely radical solutions interfere with the race to the bottom ethic.
Yves & Lambert,
Who is this F Beard character?
@John Mc
Who is this F Beard character?
Roman 1970 RNEB
John Mc
Well at least in this post F Beard is the mother of all trolls.
I’ve come to the sad but logical conclusion that Progressives are constitutionally unable to understand ethics, particularly wrt money creation. Blindness it is.
I love this site. However, I could not finish watching the video. Pause, pause, pause, pause… I think it was not my connection. The most accurate truth telling that can’t be watched without frustratio is not of no effect, it is of serious negative effect. My friends who need to see this would not get past the second pause.
Did you click on the Image on the Naked Capitalism site, or did you try the Youtube link http://www.youtube.com/watch?feature=player_embedded&v=-JBYPcgtnGE? It’s possible that the performance might differ between the two.