On April 3rd, PBS broadcast an interview with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black addresses the trillions of dollars that are now being given to the banking industry and answers the question "How do they get away with it?” His response: Fraud!
He ascertains that CEOs of some of these banks and mortgage firms deliberately set out to make bad loans, as a means to increase their own personal income. And this was possible because the Bush Administration essentially got rid of regulation, so nobody was looking. Among the facts he presents:
- Complex instruments were deliberately created so swindlers could exploit them.
- Liars’ Loans were assigned triple-A ratings, which is supposed to mean there is zero credit risk.
- Rating agencies never looked at a single loan file. Fitch, the smallest of the rating agencies, stated "the results [of an investigation] were disconcerting, in that there was the appearance of fraud in nearly every file we examined."
- Secretary of the Treasury Geithner is covering up the fraud, just like Paulsen did before him.