William K. Black
Encyclopedia
William Kurt Black is an American lawyer, academic, author, and a former bank regulator. Black's expertise is in white-collar crime
, public finance
, regulation, and other topics in law and economics. He developed the concept of "control fraud
", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud.
and a Ph.D. from the University of California, Irvine
. Black is currently an Associate Professor of Economics and Law at the University of Missouri-Kansas City in the Department of Economics and the School of Law. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007 and previously taught at the LBJ School of Public Affairs at the University of Texas, and at Santa Clara University
.
Black was litigation director for the Federal Home Loan Bank Board
(FHLBB) from 1984 to 1986, deputy director of the Federal Savings and Loan Insurance Corporation
(FSLIC) in 1987, and Senior VP and the General Counsel of the Federal Home Loan Bank of San Francisco from 1987 to 1989, which regulated some of the largest thrift
banks in the U.S.
. He took the notes during the Keating Five
meeting that were later published in the press, and brought the event to national attention and a congressional investigation.
According to Bill Moyers,
, ISBN 0292721390.
and provided critical commentary on the U.S. banking crisis
. In the interview with Bill Moyers
, Black asserted that the banking crisis in the United States that started in late 2008 is essentially a big Ponzi scheme
; that the "liar loans" and other financial tricks were essentially illegal frauds; and that the triple-A ratings given to these loans was part of a criminal cover-up. He said that the "Prompt Corrective Action Law" passed after the Savings and loan crisis
mandated that ailing banks should be put into receivership
. Black also stated that trying to hide how bad the situation is will simply prolong the problem, as happened in Japan's lost decade
. Black stated that Timothy Geithner is engaged in a cover-up, and that the administration does not want people to understand what went wrong or how bad the banking situation is today.
in a hearing titled "Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner." He testified about the role that Alt-A
mortgages, what he called "liars loans," on residential real estate played in the downfall of Lehman Brothers
. His testimony was that "Lehman’s failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001, and that is with their subprime and liars’ loan operations." As explained in his prepared statement, his reference was to Aurora Loan Services, Inc., which was a subsidiary of Lehman: "Lehman’s principal source of (fictional) income and real losses was making (and selling) what the trade accurately called 'liar’s loans' through its subsidiary, Aurora. (The bland euphemism for liar’s loans was 'Alt-A
.') Liar’s loans are 'criminogenic' (they create epidemics of mortgage fraud) because they create strong incentives to provide false information on loan applications."
On the same page in his prepared testimony Black referenced an article from the Denver Post
dated September 16, 2008, the day after Lehman filed for bankruptcy. The article reported on the uncertain fate of Aurora Loan Services, which was based nearby, and quoted Lehman's chief financial officer as saying the previous week that, "The majority of our write-downs were in Alt-A driven by an increase in.. . delinquencies and loss expectations." The article also said that Lehman was "among the first of its peers to originate home loans and securitize them for sale across the globe, and it fueled the growth of the Alt-A loan."
By William K. Black:
White-collar crime
Within the field of criminology, white-collar crime has been defined by Edwin Sutherland as "a crime committed by a person of respectability and high social status in the course of his occupation" . Sutherland was a proponent of Symbolic Interactionism, and believed that criminal behavior was...
, public finance
Public finance
Public finance is the revenue and expenditure of public authoritiesThe purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, and macroeconomic stabilization.-Overview:The proper role of government provides a...
, regulation, and other topics in law and economics. He developed the concept of "control fraud
Control fraud
Control fraud occurs when a trusted person in a high position of responsibility in a company, corporation or state uses their powers to subvert the organization and to engage in extensive fraud for personal gain....
", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud.
Background
Black earned a J.D. from the University of Michigan Law SchoolUniversity of Michigan Law School
The University of Michigan Law School is the law school of the University of Michigan, in Ann Arbor. Founded in 1859, the school has an enrollment of about 1,200 students, most of whom are seeking Juris Doctor or Master of Laws degrees, although the school also offers a Doctor of Juridical...
and a Ph.D. from the University of California, Irvine
University of California, Irvine
The University of California, Irvine , founded in 1965, is one of the ten campuses of the University of California, located in Irvine, California, USA...
. Black is currently an Associate Professor of Economics and Law at the University of Missouri-Kansas City in the Department of Economics and the School of Law. He was the Executive Director of the Institute for Fraud Prevention from 2005-2007 and previously taught at the LBJ School of Public Affairs at the University of Texas, and at Santa Clara University
Santa Clara University
Santa Clara University is a private, not-for-profit, Jesuit-affiliated university located in Santa Clara, California, United States. Chartered by the state of California and accredited by the Western Association of Schools and Colleges, it operates in collaboration with the Society of Jesus , whose...
.
Black was litigation director for the Federal Home Loan Bank Board
Federal Home Loan Bank Board
The Federal Home Loan Bank Board was a board created by the Federal Home Loan Bank Act of 1932 that created and oversaw the Federal Home Loan Banks also created by the act. It was superseded by the Federal Housing Finance Board and the Office of Thrift Supervision in the Financial Institutions...
(FHLBB) from 1984 to 1986, deputy director of the Federal Savings and Loan Insurance Corporation
Federal Savings and Loan Insurance Corporation
The Federal Savings and Loan Insurance Corporation was an institution that administered deposit insurance for savings and loan institutions in the United States...
(FSLIC) in 1987, and Senior VP and the General Counsel of the Federal Home Loan Bank of San Francisco from 1987 to 1989, which regulated some of the largest thrift
Savings and loan association
A savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...
banks in the U.S.
Savings and Loan Scandal
Black was a central figure in exposing Congressional corruption during the Savings and Loan CrisisSavings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
. He took the notes during the Keating Five
Keating Five
The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators – Alan Cranston , Dennis DeConcini, John Glenn , John McCain , and Donald W. Riegle,...
meeting that were later published in the press, and brought the event to national attention and a congressional investigation.
According to Bill Moyers,
"The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L's in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating — after whom the senate's so-called "Keating Five" were named — he sent a memo that read, in part, 'get Black — kill him dead.' Metaphorically, of course. Of course."
Published works
Black is the author of, among others, The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry, 2005, University of Texas PressUniversity of Texas Press
The University of Texas Press is a university press that is part of the University of Texas at Austin. Established in 1950, the Press publishes scholarly books in several areas, including Latin American studies, Texana, anthropology, U.S...
, ISBN 0292721390.
Bill Moyers Journal appearance
On April 3, 2009 Black appeared on Bill Moyers Journal on PBSPublic Broadcasting Service
The Public Broadcasting Service is an American non-profit public broadcasting television network with 354 member TV stations in the United States which hold collective ownership. Its headquarters is in Arlington, Virginia....
and provided critical commentary on the U.S. banking crisis
Late-2000s financial crisis
The late-2000s financial crisis is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s...
. In the interview with Bill Moyers
Bill Moyers
Bill Moyers is an American journalist and public commentator. He served as White House Press Secretary in the United States President Lyndon B. Johnson Administration from 1965 to 1967. He worked as a news commentator on television for ten years. Moyers has had an extensive involvement with public...
, Black asserted that the banking crisis in the United States that started in late 2008 is essentially a big Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
; that the "liar loans" and other financial tricks were essentially illegal frauds; and that the triple-A ratings given to these loans was part of a criminal cover-up. He said that the "Prompt Corrective Action Law" passed after the Savings and loan crisis
Savings and Loan crisis
The savings and loan crisis of the 1980s and 1990s was the failure of about 747 out of the 3,234 savings and loan associations in the United States...
mandated that ailing banks should be put into receivership
Receivership
In law, receivership is the situation in which an institution or enterprise is being held by a receiver, a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights." The receivership remedy is an equitable remedy that emerged in...
. Black also stated that trying to hide how bad the situation is will simply prolong the problem, as happened in Japan's lost decade
Lost Decade (Japan)
The is the time after the Japanese asset price bubble's collapse within the Japanese economy, which occurred gradually rather than catastrophically...
. Black stated that Timothy Geithner is engaged in a cover-up, and that the administration does not want people to understand what went wrong or how bad the banking situation is today.
Testimony before Congress on the bankruptcy of Lehman Brothers
On April 20, 2010, Black testified before the House Financial Services CommitteeUnited States House Committee on Financial Services
The United States House Committee on Financial Services is the committee of the United States House of Representatives that oversees the entire financial services industry, including the securities, insurance, banking, and housing industries...
in a hearing titled "Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner." He testified about the role that Alt-A
Alt-A
An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category. Alt-A interest rates, which are determined by credit risk, therefore tend to be between...
mortgages, what he called "liars loans," on residential real estate played in the downfall of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
. His testimony was that "Lehman’s failure is a story in large part of fraud. And it is fraud that begins at the absolute latest in 2001, and that is with their subprime and liars’ loan operations." As explained in his prepared statement, his reference was to Aurora Loan Services, Inc., which was a subsidiary of Lehman: "Lehman’s principal source of (fictional) income and real losses was making (and selling) what the trade accurately called 'liar’s loans' through its subsidiary, Aurora. (The bland euphemism for liar’s loans was 'Alt-A
Alt-A
An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or "prime", and less risky than "subprime," the riskiest category. Alt-A interest rates, which are determined by credit risk, therefore tend to be between...
.') Liar’s loans are 'criminogenic' (they create epidemics of mortgage fraud) because they create strong incentives to provide false information on loan applications."
On the same page in his prepared testimony Black referenced an article from the Denver Post
The Denver Post
-Ownership:The Post is the flagship newspaper of MediaNews Group Inc., founded in 1983 by William Dean Singleton and Richard Scudder. MediaNews is today one of the nation's largest newspaper chains, publisher of 61 daily newspapers and more than 120 non-daily publications in 13 states. MediaNews...
dated September 16, 2008, the day after Lehman filed for bankruptcy. The article reported on the uncertain fate of Aurora Loan Services, which was based nearby, and quoted Lehman's chief financial officer as saying the previous week that, "The majority of our write-downs were in Alt-A driven by an increase in.. . delinquencies and loss expectations." The article also said that Lehman was "among the first of its peers to originate home loans and securitize them for sale across the globe, and it fueled the growth of the Alt-A loan."
External links
- William K. Black, UMKC School of Law
- Vita
- Why Elite Frauds Cause Recurrent, Intensifying Economic, Political and Moral Crises, Lecture at UMKC Department of Economics
- "Former Regulator Talks Fraud and Big Bank Getaway", Making Sen$e with Paul Solman, PBSPublic Broadcasting ServiceThe Public Broadcasting Service is an American non-profit public broadcasting television network with 354 member TV stations in the United States which hold collective ownership. Its headquarters is in Arlington, Virginia....
, Feb. 17, 2010 - William K. Black Criticizes the Bailout Plan -- Might Destroy the Obama Presidency, The Young Turks (talk show)The Young Turks (talk show)The Young Turks is a progressive Internet talk show via live web stream and YouTube, and starting in late 2011, a weeknight news and political commentary program airing on Current TV. It was Sirius Satellite Radio's first original talk programming. The Young Turks claims to be the first Internet...
, April 6, 2009 - "Dollars and Sense, several articles"
- "Concept of control fraud"
- "Boston Globe, Black criticizes McCain"
- "The Hindu, Black criticizes deregulation"
- "Review from Barnes and Noble"
- "Bill Black: Not Dead Yet - 5 YouTube videos"
- Video and transcript of April 23 2010 appearance on Bill Moyer's Journal, PBS
- 2011 interview with David McWilliams re Savings and Loans and Irish banking crisis
By William K. Black:
- "Two documents... Huffington Post"
- "Americans can do anything, Huffington Post"
- "Adam Smith was Right"
- (The Nation subscribers only) but Verify" article in The Nation with James K. Galbraith"
- "Finance's Five Fatal Flaws"