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Yves here. In this Real News Network interview, Bill Black raises red flags about the nomination of former Goldman partner, later movie producer Steve Mnuchin as Treasury Secretary. The choice of Mnuchin is troubling particularly in light of the extremely aggressive financial services industry deregulation that experts believe the Republicans will pursue, such as the hobbling of the Consumer Financial Protection Bureau, curbs on SEC rulemaking and enforcement so severe as to render this already weak agency meaningless, the elimination of Dodd Frank and weakening of bank capital requirements.
AISAL NOOR: Welcome to The Real News Network. I’m Jaisal Noor, in Baltimore. During President-elect Trump’s campaign, he promised to take on banks like Goldman Sachs for ruining the lives of hardworking Americans. Here’s a clip.
(video clip)
DONALD TRUMP: The establishment has trillions of dollars at stake in this election. For those who control the levers of power in Washington and for the global special interests, they partner with these people that don’t have your good in mind.
(end video clip)
JAISAL NOOR: Well, Trump has chosen former Goldman banker, Steven Mnuchin and billionaire equity investor, Wilbur Ross to lead the Treasury and Commerce Departments. On Wednesday, they said the incoming administration “would make tax reform and trade pact overhauls top priorities as they seek a sustained pace of economic growth”. Mnuchin also signaled the desire to remove US mortgage finance companies Fannie Mae and Freddie Mac from government ownership, a move that could have wide-ranging ramifications for how Americans pay for their homes.
Well, now joining us to discuss this and more, from Kansas City, Missouri, is Bill Black. Bill is an Associate Professor of Economics and Law at the University of Missouri-Kansas City. He’s a white-collar criminologist, a former financial regulator, and the author of The Best Way to Rob a Bank is to Own One, and of course, he’s a regular contributor to The Real News. Thanks so much for joining us, Bill.
BILL BLACK: Thank you.
JAISAL NOOR: Bill, as we all know, Trump had promised to drain the swamp. Let’s start with Mnuchin. He spent 17 years at Goldman Sachs, and what’s not been widely reported is that he’s known as the Foreclosure King for heading the bank, IndyMac when it kicked tens of thousands of people out of their homes. What can you tell us about him?
BILL BLACK: He’s a second-generation Goldman Sachs, so you had a choice in the election between Hillary Clinton, who had incredibly close ties to Goldman Sachs, or Donald Trump who promised that that would end, and that his first major act is to appoint a top Goldman Sachs person, and is interviewing the managing director, as well, according to news reports.
So, yet another campaign promise that didn’t survive 10 days after an election.
JAISAL NOOR: And Mnuchin and Ross also criticized the financial reform legislation known as Dodd-Frank, passed after the financial crisis, they said it’s too complicated and cuts back lending. The Wall Street Journal reported that regional banks, in particular, have been lobbying for relief from Dodd-Frank, and Mnuchin said that’s the engine of growth for small- and medium-sized businesses. How do you respond to that?
BILL BLACK: Well, first, it of course hasn’t been much of an engine for growth, but that is the common rhetoric. What they failed to mention, of course, was that the Republican platform called for the return of Glass-Steagall, and one of Mnuchin’s first initiatives, he said, was to get rid of the only surviving portion along the lines of Glass-Steagall, dividing banks… trying to keep them out of speculation in derivatives through the so-called Volcker Rule. The Volcker Rule is sort of Glass-Steagall lite, and, again, the Republican platform says return Glass-Steagall heavy. Instead, well, that’s another one of those campaign things that are not going to happen, they’re going to go exactly the opposite direction. And they say it’s a top priority to get rid of the last remnants of Glass-Steagall philosophy.
JAISAL NOOR: And they’ve both also proposed cutting corporate tax rates from 35% to 15%, saying this will be an engine of growth. What’s your response to that?
BILL BLACK: Ah, yes, and then why don’t we then cut them to zero if they claim that this would double the growth rate in the United States? Why not bring it to zero and quintuple it, or something like that?
No, there’s no basis for believing that a country like the United States can achieve any such growth increases through such a mechanism. Tiny countries that want to become tax havens can do that, like Ireland, so this is going to kick off a competition and it’ll be exactly the opposite of what they’ve talked about: the competition will be to see who can charge the lowest corporate tax rate. We know that Ireland will react by going even lower than whatever Trump does.
So, basically, it means a tremendous reduction in taxation on corporations, and they’ll switch to taxing individuals and that will fall most heavily under their precepts under the working class. So, yeah, that’d be another one of those campaign promises.
JAISAL NOOR: And so talk a little bit about the role that Mnuchin played in the foreclosure crisis and the financial crisis, as well, when he was the head of IndyMac. It kicked something like 35,000 people out of their homes. It foreclosed on them. Some of these were reverse foreclosures. Now he’s going to be one of the most powerful people in Donald Trump’s administration and guiding a lot of the policy, and as we know, going to be trying to get rid of some of this regulation that came out of that.
BILL BLACK: Right. And this will be another one of those promises and such, and so these key appointees for Commerce and Treasury are folks that have worked closely in the past with the Paulsons of the world, and the George Soros of the world, who is the Great Demon, according to Trump, but these are allies of Soros.
IndyMac was one of the most notorious fraudulent lenders in America. It specialized in making liar’s loans and again, I want to emphasize that there’s testimony in front of the Federal Reserve by the top attorney generals, state attorney generals, who investigated these kinds of frauds. And they said that overwhelmingly the frauds came from the lenders, as opposed to the borrowers. And the incidence of fraud in these liar’s loans, according to the industry’s own anti-fraud experts, was 90%. So, what did these and Goldman Sachs decide to do? Well, create a fund to buy this most-notorious fraudulent entity, and did they do it so they could provide recompense to the victims of the fraud, the borrowers? No, of course not. They did it so that they could start this aggressive wave of foreclosing on the fraudulently originated loans double-victimizing the people that took out these loans.
And so they are probably the most notorious foreclosure in the United States and there are complaints saying that they did this disproportionately with regard to blacks and Latinos. But that would also follow naturally from being a specialist in liar’s loans, because they frequently, particularly in the last couple of years, 2006 and the first half of 2007, deliberately targeted blacks and Latinos for those kinds of loan fraud.
JAISAL NOOR: Thanks, Bill. We’re going to continue this conversation in Part 2 when we’ll take a closer look at Trump’s pick for Commerce Secretary, Wilbur Ross. Thanks so much for joining us.
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I have no idea how Steve Mnuchin is going to work out but we need to look at this choice in relationship to Trump’s overall grand strategy, which is to stop the US from being ruled by a united globalist oligarchy and to instead create a warring oligarchy where a newly created (by Trump) nationalist/industrial oriented oligarchy competes against their globalist oligarchic brethren.
One way of looking at the Mnuchin appointment is that Trump is trying to shift power away from the globalist oligarchy’s financial base of Wall Street, and towards regional banking centers, which could become a nationalist/industrial oligarchy’s financial power base. Some critics say that Dodd-Frank has helped Wall Street increase market share at the expense of regional banks. And so removing it does seem to superficially at least fit the overall strategic goals of Trump which is to favor the regional banks.
Removing the Volker Rule, which is at best is ambiguous and hard to enforce, is not contrary to the idea of reinstating Glass Steagall, which is very much clearer. Again, Glass Steagall would tend to hurt Wall Street and therefore help the regional banks.
The idea that Mnuchin, who does not have much of a track record, did not go on an anti-Wall Street rant in his first interview after the appointment is not all that surprising. He must still be confirmed by the Wall Street dominated Senate so he would be wise to keep quiet about any potential pain he intends to inflict on Wall Street. Only time will tell.
“I have no idea how Steve Mnuchin is going to work out”
If I am run over by a truck or by a train, I think I have a pretty good idea how it “is going to work out.”
On the bright side, Mnuchin and Ross would now be working up where they could be seen, not from sacrosanct private offices. It’s not like another regime would have them less connected.
Again this is the nostalgic “return to the postwar” fantasy when the US had 50% of world production in its hands. This has been the leitmotif of the American Right since Reagan, whom Steve Bannon predictably adores (see http://www.politico.com/magazine/story/2016/12/steve-bannon-films-movies-documentaries-trump-hollywood-214495 ).
Indeed Trump is a clear run at Reagan II, The Next Level. Good. Reagan I was a clear fail masked only by the coincidence of the dissolution of the USSR. What czarina will die this time to save Trump’s America for another decade?
Trumpism then wants to grab a greater share of world production for America from its international rivals. Keep in mind that under capitalism there are clear limits to the expansion of production, and those limits were hit in the Great Depression, and America accomplished that in the past with the mutual destruction of its rivals production capacity. But that was a process endogenous to Europe and East Asia and not principally caused by American action. This time America must take the lead. Particularly with a new historic regime of capitalism – state capitalist China – on the scene, a regime that has already logged the single greatest continuous growth surge in human history. (Note, not a plug for that regime, just a historic fact). You can see where that leads – down the same road Clinton proposed – but it’s still an open question whether the Trump gang will have the huevos, despite the appointment of “George Patton” as Defense Secretary.
Your optimism is cute.
I’d love to be wrong here but this guy isn’t suddenly going to start biting the hand that’s fed him (and his father from what I’ve been reading). Trump’s agreement with Carrier pretty much shows he isn’t going to do much that would cut into any business profits.
This is a horrible pick that just continues the revolving door between Wall Street and Uncle Sugar that has brought ruin to millions in this country.
Listening to their actual words (versus solely reading hit pieces) is instructive.
(Sorry, Grey Lady link, just watch the video):
http://www.nytimes.com/2016/11/30/business/steven-mnuchin-expected-treasury-pick-is-an-outsider-to-public-policy.html?mwrsm=LinkedIn
If they believe what they say, they understand that “making America great again” means middle class jobs and wages.
Coordinate between Commerce and Treasury, what a concept.
And bank lending. No more IOER? And they are 100% correct on the ridiculous complexity of Dodd-Frank.
And actual finance guys in Treasury, not upward-failing Bush re-treads (Geithner) or clueless bureaucrat/politicians who never saw an income statement in their lives (Jack Lew).
So sure, lots to be wary of, but there’s potential, too.
Feel free to ride the Bomb all the way down Slim Pickens style if you wish, but it could not be more evident now that Trump is going to deliver big time for every powerful interest from oil to Israel to Wall Street to the Pentagon to the wealthy and powerful at large, while rewarding the middle class with shock and awe at home and abroad – first there was 9/11, then there was the GFC, and now Act 3 – whatever it takes to ensure the immense gains of the powerful both domestically and globally are irreversible, which always means systematic elimination of potential opposition limited only by the morays of those at the helm. The prospects are dismal on that score.
Thanks for the video. He’s already starting to lose me though claiming sustained groaf at 3-4% is possible and that he’s going to cut the corporate rate to 15%. First isn’t possible without finance goosing the numbers and the 2nd is an abominable idea. Sounds like the same old trickle down BS to me, the same BS people on this site have been railing against for years. Sorry but based on past experience I have a hard time believing clowns like this are going to help anyone but their filthy rich peers.
Yup!!!
Trump has no such goal. His only goal is to make himself richer. You sir, have been duped by a two bit con man. Sorry.
You must be new to this site. I don’t want to come off as a Trump defender, but personal attacks with no supporting evidence are verboten. Do it again and you will be banned.
Given how I voted, I guess I deserve this. A friend was arguing that the winner-take-all form of US elections was another way the Constitution suppresses minority views and encourages corruption, contrasted with the parliamentary system. I will need to look into that.
In the meantime, oh well.
There is little evidence that Hillary would have done differently, in fact there is conclusive evidence that she would have done the same, perhaps with a little bit of more caution on the names. However, the end result would have been the same.
And, it is becoming clear by the day that foreign policy would not change much either. The clash course with Russia seems to be avoided in the short term, but a shift in Iran policy is going to create just a different sort of a tension, and the possibility of nuclear exchange appears to be shifted to China, and by turn its ally Russia.
I hate to say it but, it appears that votes do not matter in the US.
Wait, lending on homes in southern CA involved risk ? Who could know that.
I’m curious to know the kind of pleasant terms that FDIC offered up when the IndyMac estate was up for sale.
These might be places to start looking for such information, although there might be more obfuscation than actual information.
https://www.fdic.gov/bank/individual/failed/IndyMac.html
https://www.fdic.gov/buying/historical/structured/INDYMAC_VENTURE_LLC/INDYMAC_servicing_agreement.pdf
“Draining the Swamp”?… Hardly. Just refilling it. Exemplifies the disappointing but not unexpected selections to date.
George H W Bush’s Clean Water Act of 1989 makes it illegal to drain the swamp, unless you create a new swamp somewhere else.
No net loss of wetlands, comrade.
Hadn’t thought about the legal or environmental implications, Jim. Thank you for your insightful observation. I would guess the policy objective remains to maintain a swamp ecosystem that enables the larger predators and parasites to flourish.
Make Foreclosures Great Again.
LOL.
I just donated. This is low, even by the nonexistent standards of today. Pretty soon we will wind up in a police state that is the envy of the Stassi.
Thankfully neither Ross nor Mnuchin seem to be ideologues, unlike their boss.
Despite the god-awful atrocity of Mnuchin’s bank stewardship, I’m withholding judgement.
We can hope they recognize the enormity of the task before them, and act responsibly.
By that I would prefer an evidence-based governance.
More of that “moral hazard” thing?
In this interview Bill Black’s saying that the key to what went wrong along the path from IndyMac to Mnuchin’s foreclosure festival was “liars’ loans.” But who were those loans going to? The answer is crucial if you are gauging the human cost of Mnuchin’s nice little earner–renamed OneWest–following the 2008 crash. Black sadly fails to distinguish between those borrowers who were looking to pad their wealth by speculating on the housing boom (and got mortgages that they later couldn’t pay and consequently suffered foreclosure) and those who were trying to enter the American middle class by buying a home (but later lost their incomes, the terms of their mortgages changed, they couldn’t pay the mortgage and they consequently suffered foreclosure at the hands of Mnuchin’s now infamous “foreclosure machine”, OneWest).
Foreclosing on speculators and foreclosing on families who are living in their homes, struggling to pay a mortgage, keep the lights on, stay warm in winter, save for the kids’ college, etc. are two different animals, even though they may look like the same thing when seen through an economist’s lens.
The implication of Black’s statements is that those who were too poor–even if only by a hair–to live in their own home somehow DESERVED not to live in their own home; hence the banks were wrong/fraudulent/lying when they gave these people mortgages. He fails to see that the entire system is gapingly immoral.
Don’t blame the poor. They’re just trying to survive decently.
The government should have helped out these people, not the banks. The FDIC should never, ever have done that deal with Mnuchin et al.
When did we become a system judging by volume instead of an investigation? How should Black determine who speculated and who is a victim by decades of liars loans never investigated?
I’ve followed Bill Black for a number of years. In consideration of those years, and a view of the video and transcript above, I disagree with your interpretation regarding what you think he is implying.
Buffoonery and Alice-in-Wonderland discourse make up our new public life. The night of the long knives will go on behind the scenes of this ridiculous show. What will this country look life in a year?
Buffoonery and Alice-in-Wonderland discourse make up our new public life. The night of the long knives will go on behind the scenes of this ridiculous show. What will this country look life in a year?
On the other hand: Joe Kennedy. (Appointed by FDR because he knew first hand the frauds perpetrated by Wall St….”It takes a theif to catch a theif” was what FDR said, I think)