reporting that at least 36 john lists and media workers are among the approximately 10000 people pills since the world kicked off of that. but as of the details are on the, [000:00:00;00]

the they were all keenly attuned to the issue of bank fraud. here on the show, we've spoken to numerous voice of lowers who have told us about money laundering, income, tax evasion, and legal offshoring of assets. that's all complicated enough to make matters worse . imagine having to do so with little support in the policy and regulatory

communities or even in congress. that's what our next guest has found himself up against. i'm john kerry ok, welcome to the whistle blowers the . 2 2 2 2 2 2 2 2 to the united states has been home to countless banking scandals over the decades from the savings and loan crisis of the 1980s to the great recession of 200820092 the collapse of lehman brothers bear stearns and others. there seems to be a cycle where bankers go hog wild, they allow their agreed to get the better of them. their banks and investment firms collapse. congress expresses shock info, outrage. new regulations are implemented and then retracted. and then the entire cycle just starts over again. this is the system that we've given ourselves. it's

one that fosters and rewards corruption in the name of free market capitalism. but sometimes the good guys actually when our next guest is one of those good guys, he was a central figure and exposing congressional corruption, including among some of the most powerful figures in the body during the savings and loan crisis, which he brought to national attention. he correctly called the collapse of the us housing market in 200820098 ponzi scheme and said that the bank programs to provide loans to people not able to pay them, was a criminal act. and he testified before congress that the collapse of major us investment houses was not a result of poor investment decisions. but instead, the result of fraud. bill black is an associate professor of economics and law at the university of missouri at kansas city where he teaches white collar crime, public finance, anti trust law and economics, as well as latin american development. he's a former executive director of the institute for fraud prevention. he has taught at the lyndon

b johnson school of public affairs at the university of texas at austin as well as at santa clara university. the professor black was litigation director of the federal home loan bank board, deputy director of the savings and loan oversight body. the f s l i see general counsel of the federal home loan bank of san francisco, and senior deputy chief council of the office of thrift supervision. he's the author of many books and his book, the best way to rob a bank is to own one, which was published in 2005 is considered to be a classic in the genre. professor black, welcome back to the show. we're happy to have you. you have been a leading voice for smart banking regulation for decades. indeed, you were the person who exposed one of the biggest governmental scandals since watergate tell us how you got involved in the issue of banking, banking regulation and the investigation of bank fraud. sure,

the heroes in the story are the least powerful folks in the organization. the bank examiners, in our case, the thrust examiners, usually the folks that actually go into the field and look at the loans. and they also look at what you claim is your underwriting standard. and then they look at a sample of loans to see whether you actually do this things. and one of the we did the examiner's early on people to the queue. you were inside. and the insight was this, the worst of savings and loans. ultimately there were 300 of these rod schemes are making loans in a way that is certain to cause them massive losses and you're going, well, that's crazy, right? and then the g insight was yes,

but it will make the ceo incredibly wealthy. because the c e o is looting and the best way to loot is a to control the bank and be to use accounting and see typically making bad loans works far better in terms of the accounting. so that's principally how they tend to do it. now sometimes they add in coordination, and this in the united states context tends to be aimed against blacks, hispanics, particularly those who speak primarily spanish, up and the elderly. i and you can combine these 2 things, loading, and prediction. let's walk through these scandals. one at a time. one of the biggest was called the kidding 5. the kidding 5 were 5 us senators including john mccain and john glenn, who were involved in a bank scandal that was a part of the savings and loan collapse. you had such

a major impact on the revelation of and on the investigation into this scandal that charles keating, after whom the scandal was named, said in a memo, quote, get black, kill him dead on quote. tell us about the heating 5 and about the aftermath. right, so 1st it isn't just eating 5, working with the cheating by was speaker of the house, jim. right. and the speaker, the house is the answer to the trick question. goes to the 2nd most powerful elected official in america? you ain't the vice president. it's the speaker, the house under our constitution and the rules of the house. right. and so these folks up, and by the way, that means 5 of the 6 were democrats. you know, of this, including that you said some very prominent democrats, including to war bureaus, as you mentioned,

john glen and the son of ad moment thing. right? you know, all of this. so the reason that they use these senators is that other things have failed. so this one you really love, they use trading crap. i am not exaggerating. charles keating literally got a mole appointed by president ray, get one of the 3 presidential slots. his name was lee hankle and i blew. that's the 1st person i believed with a lot. right, so he's one of our 3 bosses presidential pin point. he's running the agency and that is only because the other guy that, that it regular ministration also agreed to

a point. but miracle of miracle was blocked by weird political stop involving yet another war here of bob. all right, so otherwise cheating. but for the weird miracle of bob dole blocking this other cheating, the pointy, the agency was run by 3 people who would have given the majority to charles, getting the most notorious fraud. so i blow the whistle on hankle and the f. b, i begins an investigation and he, he, he hankle had actually been bought and paid for. right. they had them just dead to rights. but they agreed and they being the justice department to

allow him to resign and avoid prosecution. and then a host of things happened, and as i said, they're using all these opt the accountants. they had not one, but ultimately 3 of the big 8 audit firms. and they would get these in man, in kind of criminal letters from the audit firm, saying that they've never seen anything like these regulators. we were out of control. we were felt mean at them out, you know, the type of thing. we had all kinds of hospitals here, age. we had a majority of the house of representatives at the behest of charles keating. a majority of the house of representatives co sponsored a resolution saying do not re regulate the industry as we were doing. and that majority included every senior member of the leadership of both the republicans and

the democrats in the house of representatives. the reagan administration, the office of management and budget threatened to make a criminal referral against the head of our agency. and the grounds for the criminal referral was that we were supposedly closing too many in solvents, savings and looks now our job, is it closing and solve it, sir? and so they weren't going to have to keep the man for that bill. you've been a regular presence on capitol hill over the years, testifying before myriad committees on these issues, and you've never pull any punches. i know from my own time on capitol hill that it's regular practice for outside experts to write. most of the legislation, whether it's lobbyist attorneys, or substantive experts, you certainly fit that bill. have congressional leaders ask you for your expertise

in crafting legislation to prevent future bank scales. tom frank, uh you know, the great the a journalist, a story and he has a ph. d. history. i often talk to me about during the great financial crisis about this any. and he and the obama administration film, the video in the living room of our home in kansas city a. yeah. which they set out to 6000000 folks allegedly because john beginning of course was one of the feeding 5. and the point i was making is john mccain was still making the same mistakes or, you know, supporting the same kind of bad policies that had led to that kind of disaster. so tom frank knew that things going, so you know, when you're going to get the senior position and i, and 3 minutes later when i can start out laughing, i said, you know,

basically 70000000 people would have to die the thick of a happening me and they would certainly never make the regulators the head of the national commission, you know, to investigate the causes of the great financial crisis. why did you make me the chief investigator? but of course, it knew that there was no way the republicans would allow that to to happen. so, uh, i have, i do it from the outside. i mean, i do have a 10 top with 1600000 to get on. uh, some of these things uh it and um, many journalists have uh asked me about it as you say, a different than that. um, i'm very blunt. thank you. bill. we're speaking with bill black, a law professor and banking whistleblower about his experiences examining corrupt

banking practices. we're going to take a short break and come back and talk about the banking regulation and how to make it stay state to. 2 2 2 the, i think 2 national boards, i understand you choose to use this one to go over that which governs horst, h. the results here we know who makes the rules and the situation where we ought to be governed by some of notice system with the rules. well, i know that's quite a difficult to have. i do not know what the rules of the rules basting to next to go

the the the welcome back to the suppliers. i'm john kerry onto we're speaking with professor bill black about corruption in the banking industry. bill, it's good to have you with us. thanks again. bill, you've made something of a cottage industry of providing warnings in the banking sector. what are you currently seeing? and several regional banks failed across the us earlier this year. that sent shock waves through the industry, but should we have been shocked? should we expect more failures? the terrible thing about this is one we did the significant parts of the law based on lies and based on the scam that we were

helping little institutions. when they had nothing to do with it, it was all about helping institutions in the $100000000.00. and above the range, often up to $250000000000.00. the really scary thing about these failures is they're the equivalent of a big sailing ship capsizing because there was an 8 not wind economic times in the united states. yeah. there been pressures. oh, there was some inflation for a, you know, a time. but, you know, pretty modest by any historical stuff. okay, so what this,

these recent failures show you 261 the incentives for the managers, the senior managers of the bags are still incredibly perverse. which is the biggest stress what i've been saying for 2530 years. and the 2nd thing is the regulators have largely collapsed as effective forces, right? we rear it and we have to re establish effective examiners again. the heroes of the piece to be able to deal with this because the l. i'll start with the regular tory part 1st. you never made sense to allow these institutions to make the kind of risk that they were taking. here's why. the risk were in jargon, a symmetrical. in other words, if things went bad,

we austin's would pay for it. if things went good, then the ceo and the senior managers would make a ton of money. but on top of that, they did it in circumstances when things were almost certainly going to go bad in the sense that there was clear that the fed was pushing up interest rates is the fed pushes up interest rates aggressively interest rates will go up. and so if you been taking a bath, the interest rates will fall, you will lose money. but your bonus will go up as a c, e o and as a cfo. and so that's what they did. and they did just deliberately took the interest rate risk if you're going to take interest rate risk. so a run is it like pneumonia, right?

pneumonia is often the thing that kills you at 1st. but something underlying major, really sick and often puts you in the hospital, right. and then pneumonia can kill you in 24 hours to opportunistic disease. well, the same thing there, the most analogous thing in finance is a run liquidity problems. and the thing you want to do absolutely, to minimize, that is to make sure your deposit are fully insured. and in the united states that was over while we leave the nor this is very different than europe, as you may well know. where many large banks have money that is primarily uninsured, and therefore it makes a whole lot of sense for depositors tavern stage to run on the bank. but in the united states, traditionally, even very large banks have been over,

whelming lee ensure the banks that got in trouble and failed were ones that decided, hey, let's bring it in on, on of uninsured money by the federal government. not protected by the f b. i see there is no upside for society to one piece of legislation that came out of congress in the early 2. thousands was something called the sarbanes oxley that had to do with compliance. and by all accounts, it worked with that said bankers hated it. they seem to hate most regulations sarbanes oxley has now last is the making industry better off with it or without it sharpens actually quite accurately was this at get on. right? said you need good internal control. so that's what it's all about in internal controls, are you actually know what's happening at your institution?

and you're acting appropriately in light of that knowledge was the 2nd part. but the 2nd part was assumed, right? they assume that the bankers simply didn't know. whereas the top bankers were a problem, no. and they just wanted to hide it. so what are the bankers do when they implemented sarbanes oxley, they went to the most anal, most bureaucratic means of implementing it possible. they hired outside top audit firms, who here's a shock created a one size fits all documents, which sometimes when they sold you, they hadn't even figured out that they hadn't raised the prior banks name in the form document. so we got to sell the same thing. hundreds of times it made a ton of money, but there was no real buy in at the bank. so, so i ran to actually is right. they their internal controls sucked. but surveys

actually assumed it was because they just didn't know how to make good controls. they know how to make good controls for a 100 years. they have crappy controls because they don't want to alert the regulators to the problem. they want to perverse incentives because a perverse incentives turn it out. it assures thing for the managers economist still talk in terms of what the bank wants, what the banks incentives are with the bank. because seeking to accomplish banks are people. they have no incentives, they have no ability to protect themselves from managers. it's all about what the managers want and share the modern executive compensation according to the economist who created the concept as produce the disaster. is there any

appetite on capital hill to enact legislation to prevent future bank failures and tell us about the regulatory environment on capital hill? is the executive branch willing to stand up to the bankers we god in the savings and loan debacle. bearable regulations off of that we have inherited from our predecessors. and while much of what we did was to re regulate the industry, much of what we did was not even under the weeks stuff precisely because the fraudsters really, you know, they ramp it up to the equivalent of a 150 miles an hour. so the frauds tend to get crude or because they can get away with it. so in those you can be successful if

you know of the 20, the equivalent of a jo selby and a mike patriarchal as a regulatory head. despite everything that in today's you know, it would be a combination of republican and democrat. busy legislators tried to do, you could have very effective regulation, but it would have to come from the president the united states. he or she would have to actually appoint leaders that needed to do the very thing. let me give you another example of them right? by the way, 1st cousin of meg was appointed head of the 1st regulatory agency. after i blow the whistle and the head of our agency of to gave them to the king 5 and to speak right. had to resign and disgrace along with the other member. right. tim ryan

then continued the if something he actually inherited the enforcement action against the son of the president, the united states of america. how timely huh. and as a result of that, the white house called the general counsel, the f b i c. and said, is there any way you can get this taken away this action taken away from the office of direct supervision, which is the federal threat regulatory agency. the tim ryan was leaking and the general council guy named pepper. i went to bill shipment the head of the agency and said, hey, i got this thing for the white house and statement said don't go, you know, close to it with the 20 foot pool and the general counsel. anyway, norris's boss, i called tim ryan the head of the 1st regulatory agency and pictures this. we get this taken away from you. this action against the presidents on the

right. god bless them. does an ethics referral? i'm the general counsel the up the i'd say. and so that's why you don't see tim ryan, who is the republican vendors that professor william black. thank you so much for being with us. anyone who wants to tackle corruption has to be willing to go all the way. sometimes that means all the way to the top, there are no short cuts to ensuring honesty and transparency. and it is incumbent on people in positions of authority, whether the elected officials, business leaders, or anybody else to ensure that the rules are followed, and that there's respect for the rule of law. but that's not real life. greed is a powerful motivator and that's why we need whistle blowers, whistle blowers, light. bill black. thanks for joining us for another episode of the whistle blowers . i'm john kerry onto we'll see you next time. 2

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to bring us into people. not, of course, are there any other way, not comfortable with it? it will not put when it was up at the moment. this is just so please stay with me. your last name was needed read it was can when we used to be too much and

we have some more than i wish someone was this. we would show new people to the, the, the, the, the largest hospital and got the on the brink of completely running out of fuel photos. a deadly is riley strikes me at the facility with benjamin netanyahu saying not. and all of the crucial energy supplies will be allowed in the most of these really is refusing a temporary chose that doesn't include the release of all hostages. israel will not able bianco fuel into guys, the process is right there and tell of the pulling for the release of hostages, taken by her boss with over 200 people still held by militants in gaza. that's not