William Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City. He is the author of The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry.
Broadcasting on the road from Kansas City, Missouri, we’re joined by William Black, a white-collar criminologist, former financial regulator, and author of "The Best Way to Rob a Bank is to Own One." Black teaches economics and law at the University of Missouri-Kansas City and recently took part in Occupy Kansas City. "If you look [at the Occupy protests], not just nationwide, but worldwide, you will see some pretty consistent themes developing," Black says. "Those themes include: we have to deal with the systemically dangerous institutions, the 20 biggest banks that the administration is saying are ticking time bombs, that as soon as one of them fails, we go back into a global crisis. We should fix that. There’s no reason to have institutions that large. That’s a theme. That accountability is a theme, that we should put these felons in prison... That we should get jobs now, and that we should deal with the foreclosure crisis. So those are four very common themes that you can see in virtually any of these protest sites... I think, over time, you won’t necessarily have some grand written agenda, but you’ll have, as I say, increasing consensus. And it’s a very broad consensus." [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
AMY GOODMAN: We are on the road in Kansas City, Missouri, in front of a live audience of public television broadcasters at NETA, the National Educational Telecommunications Association conference. Kansas City is known for its barbecues, blues and boulevards. It’s where Republican presidential [candidate] Herman Cain was chair of the Kansas City Federal Reserve Bank.
It’s also known as the home of the Hallmark Company, the largest manufacturer of greeting cards in the United States. However, those greeting cards are not likely to contain the words of a former resident of this area, the famed African-American poet Langston Hughes. He was born in Joplin, Missouri, but spent most of his childhood in nearby Lawrence, Kansas. In his 1951 poem "Harlem," Hughes asked a simple question: "What happens to a dream deferred?" Well, let’s listen to Langston Hughes in his own voice.
LANGSTON HUGHES: What happens to a dream deferred?
Does it dry up
like a raisin in the sun?
Or fester like a sore —
And then run?
Does it stink like rotten meat?
Or crust and sugar over —
like a syrupy sweet?
Maybe it just sags
like a heavy load.
Or does it explode?
AMY GOODMAN: That’s Missouri native Langston Hughes. "Or does it explode?" As protesters with Occupy Kansas City join in solidarity with protesters across the country and around the world, Langston Hughes may finally have his answer.
Well, our first guest is one of the many people who have participated in Occupy Kansas City. William Black is a white-collar criminologist, former financial regulator, worked in the Reagan administration, and is author of The Best Way to Rob a Bank is to Own One. He is associate professor of economics and law at the University of Missouri-Kansas City.
William Black, welcome to Democracy Now!, as we broadcast here in Kansas City.
WILLIAM BLACK: Thank you so much.
AMY GOODMAN: It’s very good to have you with us. What does it mean to be a white-collar criminologist?
WILLIAM BLACK: It means Rodney Dangerfield: we get no respect. Virtually all the funding goes to blue-collar. Virtually all the resources go to it. So it’s a thin group of folks that look at the most elite criminals who cause most of the property and most of the physical damage in the world.
AMY GOODMAN: What do you think has to happen now? And what does this have to do with the Occupy Wall Street protests that have expanded here in Kansas City and across the globe? There are more than a thousand demonstrations that have been held in the last weeks.
WILLIAM BLACK: Well, we have companion problems. We’ve got to stop this dynamic that’s producing recurrent, intensifying crises. I mean, this one has devastated the nation. The next one would probably be equivalent to the Great Depression. And part of that answer—but only part of it—is to hold the folks accountable, especially the most elite, who caused this crisis. And they did it through fraud, and they did it through fraud in what we call the "C-suites" —the CEOs, the COOs — so, the absolute top.
AMY GOODMAN: What do you mean by fraud?
WILLIAM BLACK: Well, I mean just what we say in the law: fraud is when you use deceit to steal something from someone. And so, the essence of fraud is, I get you to trust me, and then I betray that trust for gain. And as a result, there’s no more effective acid against destroying trust than fraud, particularly at the elite levels. And when you destroy trust, you destroy economies, families, democracies.
AMY GOODMAN: Now, you worked in the Reagan administration. Explain the trajectory of how we have fallen so far. Where do you feel it began?
WILLIAM BLACK: Well, it’s, you know, quite remarkable. It actually, of course, begins in the Carter administration with very substantial deregulation, although I would say of a better sort. I mean, most people don’t think trucking should be heavily regulated, and that’s the type of thing he deregulated. By the Reagan administration, they were—deregulate everything, at the worst possible circumstances, when you had no one looking. And the result was a disaster. It was the savings and loan crisis, at least the second phase of it. And if it had not been contained, it would have been at least a trillion-dollar crisis.
It was contained despite the Reagan administration, and despite a lot of prominent Democrats, as well, who were very heavily in the same camp. So we acted against the wishes of the administration, against the wishes—a majority of the House co-sponsored a resolution saying don’t reregulate—the Keating Five—many people remember those five senators—most of the media, what the political scientists considered the third most powerful trade association in America. And by the way, that’s why I have a message of hope. If we could succeed in those circumstances, it’s far easier to succeed now.
AMY GOODMAN: And how would these powerful financial entities be held accountable? What exactly should happen?
WILLIAM BLACK: It all starts with the regulators, which is why it’s all not started here, because we have, of course, the wrecking crew, Bush’s wrecking crew, what Tom Frank called them, in charge, and they stopped making criminal referrals. So our agency, in the savings and loan crisis, made over 10,000 criminal referrals to the FBI. That same agency, in this crisis, made zero criminal referrals. If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions. So, in the peak of the savings and loan crisis, we had a thousand FBI agents. This crisis has losses 70 times larger than the savings and loan crisis. And the savings and loan crisis, when it happened, was considered the largest financial scandal in U.S. history. So we’re now 70 times worse. And as recently as 2007, we had 120 FBI agents—one-eighth as many FBI agents for a crisis 70 times larger. And they looked not at the big folks, but almost exclusively at the little folks.
AMY GOODMAN: William Black, you mentioned Bush’s wrecking crew, but we live in the time of President Obama.
WILLIAM BLACK: And we’ve been living for some years in the time of President Obama, and he has done absolutely nothing to reestablish the criminal referral process. And as a result, there are virtually no prosecutions of any elites.
When people tell you this crisis couldn’t have been stopped—I’ll give you two simple things. First, these liars’ loans that caused this crisis—and it’s overwhelmingly lenders that put the lie in liars’ loans—they were big in 1990 and 1991. We killed them by regular regulatory means and stopped a crisis for a decade. Our successors—I mean, how hard is it to figure out that something called a "liar’s loan" shouldn’t be allowed? This was not tough.
The second thing is, the FBI warned, in open testimony in the House of Representatives, picked up by the national media, in September 2004, that there was an epidemic of mortgage fraud and predicted it would cause a financial crisis—their exact words. And the regulators did nothing, because you had the Alan Greenspans of the world and the Harvey Pitts of the world, who were selected because they were the leading opponents of effective regulation in America. Well, you know, you create a self-fulfilling prophecy of regulatory failure, and then turn around and say, "Well, you can’t trust the government. It fails."
AMY GOODMAN: Talk about the message of Occupy Wall Street. In the corporate media, in the mainstream media, there is a lot of questioning, not so much of the people themselves, because they don’t usually have them into their studios, but a lot of questioning along the lines of "What do these people want? There’s no clear message."
WILLIAM BLACK: Well, first, of course, I don’t speak for that movement, and indeed they don’t have official spokespersons with clear plans. So that part is true. They think of that as one of the great strengths of democracy now, right? That things bubble up, and they have different ideas. However, if you look, not just nationwide, but worldwide, you will see some pretty consistent themes developing. And those themes include: we have to deal with the systemically dangerous institutions, the 20 biggest banks that the administration is saying are ticking time bombs, that as soon as one of them fails, we go back into a global crisis. Well, we should fix that. Right? There’s no reason to have institutions that large. That’s a theme. That accountability is a theme, that we should keep—put these felons in prison, and there’s no action on that. That we should get jobs now, and that we should deal with the foreclosure crisis. So those are four very common themes that you can see in virtually any of these protest sites. And they have asked me, for example, to come to New York to talk about some of these things. So, I think, over time, you won’t necessarily have some grand written agenda, but you’ll have, as I say, increasing consensus. And it’s a very broad consensus. It’s not left, it’s not right; it’s not Republican, it’s not Democrat.
AMY GOODMAN: You know, as Democracy Now! covers the Occupy Wall Street movement in New York, there are a lot of pizza boxes that are used for signs, the back of pizza boxes—
WILLIAM BLACK: Right.
AMY GOODMAN: —because pizzas are being sent in to the protesters from all over the world. They put in orders to the local pizzerias, and they’re sent in. I mean, there are orders coming in from Cairo, from Madison, Wisconsin, and they all go to the people who are staying there overnight. And one of the signs that one of the protesters was holding said, "We’ll believe corporations are people when Texas executes one." Can you talk about the idea of corporations as people, corporate personhood?
WILLIAM BLACK: Yeah. Well, I mean, one of my hats is I’m a lawyer. And it’s bad law. And so, one of the best ways to change this is simply to appoint better justices to the Supreme Court. And this is a five-four decision, so one justice could make an enormous amount of difference.
AMY GOODMAN: First, explain what it is.
WILLIAM BLACK: It goes all the way back to the civil right era, civil rights amendments after the Civil War. Those amendments were supposed to, of course, protect the freed men and women. They were quickly perverted by the Supreme Court, which is a really ultra-right-wing, pro-slavery group for most of our history, into saying we’re not going to protect the slaves—freed slaves very much, but we are going to protect corporations. And so they interpreted the 14th Amendment and 15th Amendment, in particular, as giving due process rights to corporations as persons. Over time, they extended that under First Amendment cases that said they have not the same rights, but substantial rights that need to be protected in the First Amendment. And now they’ve gone whole hog in Citizens United and produced an atrocity. Right? In a country that was already overwhelmed with corporate influence, they said all the restraints, essentially, are off, and you have almost complete constitutional protection to do anything. And so, the domination by corporations, and in particular by finance, which is now the biggest funder of both parties, is going to grow very substantially, unless we fight back.
AMY GOODMAN: We’re talking to William Black, who worked in the Reagan administration. He’s a professor at University of Missouri-Kansas City. I’ve got two papers here in Kansas City, here in this convention center. USA Today head story, "Student Loan Debt Surpasses $1 Trillion: Burden Could Drag Economy in Future." And then I’ve got the Wall Street Journal. Top story, "Pain Spreads to Biggest Banks: Goldman Posts a Rare Loss; Bank of America Falls from No. 1 Spot." Comment on these stories.
WILLIAM BLACK: Well, I’ve, by the way, just written one myself, 15 minutes before coming here, on Bank of America, because it just broke yesterday that affiliates of Bank of America—this is Merrill Lynch—with really bad derivatives, has been allowed by the Federal Reserve to transfer perhaps many billions, or perhaps even trillions—we don’t know—of these derivatives to Bank of America, which is where we come in as a federal guarantee, and it puts us on the hook as the government. This is obscene public policy, the kind that would have never been permitted in our era. And now, under a Democratic president that rails about excess influence and not putting the taxpayers at risk, that’s exactly what they’re doing.
So, the story on the regulatory side, we had the leading failed regulator in a Federal Reserve Bank, Geithner, and they promoted him to Treasury secretary. We had the leading failed regulator in America, Bernanke, and he was reappointed. So that—and most of the wrecking crew was left on as temporary folks, so most of the wrecking crew is still in place. We have almost no effective regulation, and it’s showing up. They hid the losses by changing the accounting rules through congressional extortion of the Financial Accounting Standards Board. And these problems don’t go away. They just fester, and they pop up three years later. And they’re going to keep popping up until we start telling the truth.
In terms of the student debt, this is a grand disaster in America. The one thing that you want for—almost everybody agrees with—for an international competitiveness, for simply just for our kids, is simply to have free public education, and that anybody with a talent, where it makes sense for them to go to university, should go to university and not be a debt slave for the rest of their lives. So this is insane public policy that is crushing the nation. We can change it at any time. It’s a perfect win-win in a Great Recession, because you want to spend to get out of the recession, anyway. So that’s one of the things we should spend on. And the fact that we’re doing it shows just how insane the policy paralysis has become.
AMY GOODMAN: What do you think should happen with Bernanke? What should happen with Timothy Geithner?
WILLIAM BLACK: Well, Geithner should be fired, because you can fire him. Holder, who is the Attorney General, should be fired. They need to be replaced. The other folks running the banking regulatory agencies can be replaced by effective actings. You don’t have to go through the confirmation process to jumpstart that. Bernanke, you can’t fire, but you can ask for his resignation, and it’s long since time to ask for his resignation. And, you know, you can give him a nice ceremony and have him go.
AMY GOODMAN: But clearly, President Obama is not going in this direction, and we’re moving into the 2012 election. It is predicted he’s going to raise over a billion dollars. One of the lead presidential contenders on the Republican side, Mitt Romney, is raising far more from Wall Street. And then you have Herman Cain, who at this point seems to be ahead of them all, who comes from right here in Kansas City.
WILLIAM BLACK: He does. I don’t—they’re not sending Godfather Pizza boxes to the protesters, are they?
AMY GOODMAN: I haven’t checked the most recent labels. Perhaps Herman Cain himself did.
WILLIAM BLACK: It’s your fault.
AMY GOODMAN: But that’s not where we’re headed right now.
WILLIAM BLACK: No, it’s not where we’re headed, and that’s a grave disappointment to folks who thought that—well, someone campaigned saying, "Yes, we can." And now it’s become, "Well, actually we’re not even going to try," on the prosecutorial side. Right? So, if he continues this way, it’s conceivable the Republicans will nominate someone so bad that he will be reelected, but he will destroy the effectiveness of his administration and do tremendous damage to the nation.
AMY GOODMAN: Well, I want to thank you very much for being with us, William Black, white-collar criminologist, former financial regulator, worked in the Reagan administration, author of The Best Way to Rob a Bank is to Own One. He’s associate professor of economics and law at the University of Missouri-Kansas City.
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