Bill Black is back ...pointing out that Obama has retained all of the nonfeasant, misfeasant, and malfeasant financial regulators appointed by Bush.

PAUL JAY, SENIOR EDITOR, TRNN: "...the way the [finance reform] bill is established, everything depends so much on regulators. And given how powerful Wall Street is in lobbying and appointing regulators, [with lax regulators] you wind up with very little in this bill. Am I reading it correctly?"

WILLIAM K. BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: "You end up with nothing. Indeed, you end up with, potentially, two very bad things. One, you end up with complacency. After all, everybody said this is going to prevent all future crises, so we don't have to worry about future crises. The second thing that you end up [with] is that there are actually provisions in the bill which make the world worse."
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"But your question also raises the more fundamental point. If Obama and his economic team really wanted to regulate banks more intensively, well, you know, we're a long way into the administration at this point."
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"Obama left in charge the absolutely disastrous leader who was supposed to regulate Fannie and Freddie, a guy who, by the way, had been a personal friend of Bush for 40 years..."
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"[The Obama administration] left the worst regulator in the history of the Office of the Comptroller of Currency. This is a guy that not only didn't protect us from frauds; he ran a holy war against state regulators who tried to crack down on predatory lending—it's called 'preemption'."
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"If the Obama administration really wanted to regulate, to protect us, it had ample authority under the existing laws, without any passage, to revolutionize the protection. And instead... they have [Lawrence] Summers and [Timothy] Geithner, who are lifelong opponents of effective regulation, running their economic policies."

JAY: "...Should people simply be demanding some kind of public alternative for credit and for financing?"

BLACK: "Yes, they should. But the broader logic also applies, and that was you've got to change the incentive structures. If you leave the private insurers in place, the incentive structure is inherently anti-public."
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"So, yes, we have to change the fundamental incentive structures. And, again, this bill, the dominant fact about it is it doesn't even examine, much less attempt to fix, the perverse incentives that are causing not just this crisis [but also those in Britain, Spain, Greece, Latvia, and Iceland, who have] all had their own versions of this crisis, not driven by the US crisis, but driven by these perverse incentives that I've talked about and this belief that you didn't need to regulate or supervise."

Blogger's Note: This is Part 3 of the series begun in my previous post below.

The recently passed "financial reform bill" -- by design -- will NOT prevent a repeat of big bank crashes and consequent additional taxpayer bailouts ...proving once again our government to be "Of the rich, by the rich, and for the rich."

PRESIDENT BARACK OBAMA (speaking on the new financial reform bill): "There will be no more tax-payer funded bailouts, period. If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy."

WILLIAM K. BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC (commenting on Obama's statement above): "Now, that is nonsense. There is nothing in the bill that will prevent that. Actually, there's nothing in any bill that really could ensure that you would never have those circumstances."



PAUL JAY, SENIOR EDITOR, TRNN (after listing to Black's discouraging answer to his first question): "And there's no—nothing in the current bill will change this?"

BILL BLACK (excerpt): "No. And indeed, more generally, there's nothing to fix rating agencies." ... "Americans don't know that over 10 percent of all appraisers in America have signed a petition calling for the government to step in and regulate and enforce [the rating agencies] because of this Gresham's dynamic. A Gresham's dynamic is where cheaters and the least moral people prosper, and they drive the honest, moral people out of the marketplace. (emphasis added)"



Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri — Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" — frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

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