If your understanding of the present financial debacle is not changed by watching or reading the video on this page, you aren't thinking. I am so incensed by this I am not thinking straight. I know I will have something better to say, but just watch.
William K. Black: CSI Bailout
William K. Black suspects that it was more than greed and incompetence that brought down the U.S. financial sector and plunged the economy in recession — it was fraud. And he would know. When it comes to financial shenanigans, William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s, has seen pretty much everything.
Now an Associate Professor of Economics and Law at the University of Missouri, William K. Black tells Bill Moyers on the JOURNAL that the tool at the very center of mortgage collapse, creating triple-A rated bonds out of "liars' loans" — loans issued without verifying income, assets or employment — was a fraud, and the banks knew it.
And while there is no law against liars' loans, Black points out that there are, "many laws against fraud, and liars' loans are fraudulent. [...] They involve deceit, which is the essence of fraud."
Only the scale of the scandal is new. A single bank, IndyMac, lost more money than the entire Savings and Loan Crisis. The difference between now and then, explains Black, is a drastic reduction in regulation and oversight, "We now know what happens when you destroy regulation. You get the biggest financial calamity of anybody under the age of 80."
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.
Published April 3, 2009. Guest photos by Robin Holland
Another news item of note:
Switzerland's biggest bank, UBS, has banned company managers who deal with foreign clients from travelling abroad, as a US fraud investigation continues.
The Swiss bank is being investigated by the US authorities over alleged fraud and tax evasion involving US citizens.
UBS denied the travel ban had been put in place specifically to protect senior staff from American authorities.
US officials have accused UBS staff of helping American clients hide money in offshore accounts.
The bank earlier gave them the names of some 300 Americans it has advised, but refused to identify 52,000 others.
In February, UBS agreed to pay $780m (£525m) to the US government to settle allegations that it had defrauded US tax authorities.
It is estimated that the US government loses $100bn in revenues every year because of tax havens.
The move at UBS confirms widespread media speculation that it and other Swiss banks are imposing travel bans on their staff for fear of falling foul of an international crackdown on tax havens, the BBC's Imogen Foulkes reports.
UBS said it was in the process of reviewing its wealth management policy and that for the foreseeable future, contact with clients would be confined to e-mail and telephone.
The travel ban is yet another worrying signal from UBS, our correspondent says.
It is still reeling from enormous sub-prime losses and is at the centre of the widening US investigation into alleged tax fraud by US citizens.
Although Switzerland has now agreed to comply with international guidelines and lift banking secrecy in tax evasion cases, it has not put the new policy into practice yet.
The UBS travel ban is perhaps sensible, our correspondent adds, but it is also a major humiliation.
UBS is the world's biggest wealth manager, its slogan was "UBS You & Us", and it prided itself on its personal face-to-face approach.
Now its managers can contact foreign clients only by phone or e-mail.
Published: 2009/04/05 21:42:17 GMT
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