Welcome Charles Ferguson (HuffingtonPost) and Host Maureen Tkacik (Slate.com)

Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America

Charles Ferguson is a former Clinton Administration policy consultant and Brookings Institution senior fellow with a lifetime membership in the Council on Foreign Relations and a political science PhD from MIT. What enabled a guy with such impeccable establishment bona fides to make a documentary as comprehensively censorious of The System as Inside Job, the Academy Award-winning 2010 documentary about How It All Went To Hell is, I suspect in part, because he has also done considerable time in Silicon Valley, having founded the company that developed the web software Front Page before selling out to try his hand at filmmaking.

On every page of Predator Nation, his follow-up to Inside Job on the legislative, judicial and intellectual history of deregulation since the late seventies, it is gratifyingly clear that Ferguson knows instinctively and intuitively what a productive sector of the economy looks like and how it prospers, and this ain’t it. (If you never caught former Intel CEO Andy Grove’s treatise on industrial policy of two summers ago, it’s a similar reading experience.) This lends to his analysis a few distinct (and frankly, enormous) advantages over those of mere journalists such as myself and the other varieties of observers (disgruntled finance types, Michael Moore, Jonathan Franzen, etc.) most likely to attempt a scathing diagnosis of all that went so wretchedly wrong with the American experiment during the past three decades or so, all of which essentially boil down to: the man is a grownup. As a software developer, his mind is clearly trained to comprehend precisely the magnitude of complexity Wall Street deploys with the intention of confusing us to death; as a self-made centimillionaire, he sidesteps all the existential insecurities that seem to lurk at the heart of the Beltway bro-aucracy’s slavish and pathological ass-licking of the oligarchy. And as a veteran of one of the rare American industries in which it has been entirely possible to join the Top 0.1% while actually improving the lot of the 99%, he harbors none of the misanthropic zero-sum nihilism that enables destruction and exploitation profiteers to rationalize their work to everyone.

Put simply, he sees everything you and I and Michael Moore see about what’s sick and deranged and deluded about this place, but it doesn’t seem to make him want to eat a gun. Which is nice since Predator Nation will, predictably, depress the hell out of you. But it’s one of the more comprehensive and well-organized indictments of the financial disservices industry and the crooks and brown-nosers and enablers who insist on letting them steal all our money. And knowing guys like Ferguson are decent enough human beings to quit their much more glamorous Hollywood day jobs for long enough to put it all together is about all we’ve got going for us in the Department of Hope these days.

 

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]

189 Responses to “FDL Book Salon Welcomes Charles Ferguson, Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America”

dakine01 June 23rd, 2012 at 1:53 pm

Charles, Welcome back to the Lake.

Maureen, Thank you for Hosting this afternoon’s Book Salon.

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Mauimom June 23rd, 2012 at 2:01 pm

Charles, welcome!! What a terrific book. Can’t wait for the discussion to get started.

William Black June 23rd, 2012 at 2:02 pm

I wanted to introduce myself. My field, white-collar criminology, our heterodox economics department, UMKC, and the work that many of who are former financial regulators did and continue to do offers a great deal of support for your ideas about the destructive role of deregulation, desupervision, and de facto decriminalization (the three “de’s). We can also explain in detail the system we developed that once held senior S&L executives accountable for their crimes and misconduct.

Best,
Bill Black
Associate Professor of Economics and Law
University of Missouri – Kansas City

Maureen Tkacik June 23rd, 2012 at 2:03 pm

Charles! Very honored to be spending Saturday evening hanging out in the same comments thread as you! It’s tough to know where to begin asking questions, but I’m always fascinated by the process of discovery for a fellow Crisisologist. Did you take on Inside Job intending for this to become a new life project and how much more pessimistic has the intervening two years made you? What surprised you most, putting together this follow up?

dakine01 June 23rd, 2012 at 2:04 pm
In response to William Black @ 3

Good afternoon Bill and thanks for joining us as well. You probably more than most, can fully understand what can be done and where the current legal system has fallen down.

Mauimom June 23rd, 2012 at 2:04 pm

Maureen, what a great comment, above:

it’s one of the more comprehensive and well-organized indictments of the financial disservices industry and the crooks and brown-nosers and enablers who insist on letting them steal all our money.

Charles, one of the things I most appreciated about your book was the “rogues’ gallery” of Bad Actors — not just the names of those we’re familiar with [Summers, Rubin et al.] but particularly those in “academia” who are all too willing to sell their “expertise” to the Bad Guys.

Quite helpful to have this list around when you see one of these “authorities” quoted.

Charles Ferguson June 23rd, 2012 at 2:06 pm
In response to dakine01 @ 1

When I started working on Inside Job, I really had no idea how much the financial world had changed since I had last had any contact with it – roughly 15 years previously, when I was in the software industry.

I think that my greatest surprise in writing the book, however, was how much information is now publicly available, and yet not widely discussed – primarily information from private lawsuits, and secondarily from whistleblower cases and government investigations.

Maureen Tkacik June 23rd, 2012 at 2:07 pm
In response to William Black @ 3

Bill! Everyone here buy Bill’s book, which is worth it for the poem at the beginning alone, which goes something like:

You can never hope to bribe or twist (thank God!) the British journalist. But, seeing what the man will do unbribed, there’s no occasion to.

My sense of things is that Brits actually demand pretty stiff bribes these days, it’s the American hacks who will suck up to oligarchs for a $30,000 a year centrist think tank fellowship.

Mauimom June 23rd, 2012 at 2:07 pm
In response to William Black @ 3

Bill and Charles — I’m old enough to remember the Bad Old Days of the S&L crisis. But recalling how the criminals involved were caught and charged, it seems like the Good Old Days.

Talk a bit about how NOT having investigation, prosecution, conviction & punishment for CURRENT crimes affects us.

Charles Ferguson June 23rd, 2012 at 2:07 pm
In response to William Black @ 3

And by the way, Mr. Black, I have long admired your work from afar. A pleasure and an honor to meet you electronically.

CHF

William Black June 23rd, 2012 at 2:09 pm

This is the kind of thing that drives us crazy. This U.S. attorney is in one of the epicenters of mortgage fraud — prosecuting only relativel tiny cases. He can’t even keep his pronouns straight. He thinks “they” (the CEO) is the same entity as “themselves” (the bank). He also is clueless about accounting fraud and modern executive compensation:

“Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. ‘It doesn’t make any sense to me that they would be deliberately defrauding themselves,’ Wagner said.”

Charles Ferguson June 23rd, 2012 at 2:10 pm
In response to Mauimom @ 9

I am still idealistic enough that the lack of criminal investigation and prosecution does still shock me. It’s difficult to get used to the idea that the United States is like this…but we live in a very imperfect world, and hopefully this condition will eventually change…

Maureen Tkacik June 23rd, 2012 at 2:11 pm

I’d be interested hearing from either of you gentlemen on the subject of the irritating “conspiracy theory” slur. I don’t talk much with they type of people who’d attempt to discredit me with it these days—I moved from DC back to Brooklyn a couple months ago, thank god—but I’m sure close watchers of this stuff could use some tips for handling conversations about contemporary politics with their less informed/enraged friends and family.

Mauimom June 23rd, 2012 at 2:12 pm

how much information is now publicly available, and yet not widely discussed

This to me is a puzzlement.

Charles, both you and Bill are authors who write constantly about these crimes, and Charles, you’ve even made a [great] movie.

Yet still, there’s little discussion, and even less awareness, of the forces against us and the crimes they commit daily.

How are we ever going to get “change” if the vast majority of folks have no clue as to what’s going on?

Do you ever bang your head on your desk in frustration about this continuing ignorance & stupidity?

FWIW, another great source of information, the movie “Heist,” [a complement to "Inside Job"], yet I don’t see it playing in the rarified air of the art house movie theatres of DC.

Maureen Tkacik June 23rd, 2012 at 2:13 pm
In response to dakine01 @ 1

Some weird italics in the post, just fyi!

William Black June 23rd, 2012 at 2:13 pm

Likewise. We often make reference to your work in class. Your takedowns of the economists are legendary. You can see that they have never been exposed to serious questioning of their predictive records and their mores. Dogma rules. Greenspan was probably the most destructive. Did you find out anything from insiders about how he helped build a culture of Fed economists who led the vitriolic counter-attacks whenever the Fed supervisors (not exactly hot-blooded and tough) proposed to crack down on fraudulent loans?

cmaukonen June 23rd, 2012 at 2:15 pm

Hello Bill and Charles.

But what can one really do about this when it appears that the big banks (JPMorgan and all) and the FED an treasury are in collusion as Ellen Brown contends here. And congress takes a “hands off” approach.

dakine01 June 23rd, 2012 at 2:15 pm
In response to Maureen Tkacik @ 15

Where? (it all looks fine to me)

Charles Ferguson June 23rd, 2012 at 2:16 pm

I find that banging my head on my desk produces no lasting benefits…:)

I think that many people feel a certain fatalism and/or cynicism about the situation which leads them to be less interested in writing about, or reading about, things that they feel cannot be changed. Resignation seems presently to be a stronger emotion than outrage (or pain). It may take more time, or perhaps even another crisis, before a coherent social or political movement arises to change all this…

thatvisionthing June 23rd, 2012 at 2:17 pm

Charles, just want to say that I love the cover. Are origami instructions included? I think I could use that.

GlenJo June 23rd, 2012 at 2:18 pm

Maureen, Charles, and Bill, thanks for being here today.

Due in a large part to your work and others (Yves, Dean, etc), I feel I have a much better understanding of just what happen in 2008, and how we got there.

My question is, how do we start fixing this mess? What corrective action now is our best bang for the effort?

Charles Ferguson June 23rd, 2012 at 2:18 pm

I will ask the publisher for origami instructions. A superb suggestion!

Mauimom June 23rd, 2012 at 2:19 pm

True.

One of the main things I took away from the book salon here with Bill Moyers was his undying optimism and encouragement to “soldier on” and not get discouraged/resigned. I’ll add your thoughts to that.

Maureen Tkacik June 23rd, 2012 at 2:19 pm
In response to Mauimom @ 14

I know you weren’t asking me but YES. Also, I cry often. One concept it helps to familiarize yourself with is “agnotology,” which is essentially the production of revisionist nonsense narratives like HBO’s Too Big To Fail with the specific agenda of inducing the masses to forget what just happened and distrust any and all conclusions they might have drawn from reality. I found living in DC that corporate speech had literally strangled reality there. You are assaulted constantly with lobbyist blather and everyone seems to be on some level a lobbyist, often entirely unconsciously. Information is currency there, “truth” has been sort of relegated to the realm of long-forgotten mythology.

Cynthia Kouril June 23rd, 2012 at 2:20 pm

I am stunned at the lack of prosecutions. I was a Special Assistant US Attorney in the late 80′s/early 90″s working on, amoung other thigns, mafia control of the NYC construction and Waste Disposal industries.

The same techniquies that enabled those prosecutions, would work effectively on the bankster prosecutions. Especially with respect tot he robo signing cases, where the low level robo signers have been remarkably candid in civil depositions about their own actions.

Working up the foodchain flipping witnesses would not be that difficult.

This is not rocket science, and the playbook has already been written.

Maureen Tkacik June 23rd, 2012 at 2:20 pm
In response to dakine01 @ 18

The System and How It All Went To Hell are not supposed to be italicized, they should be in quotes if anything. I didn’t intend to imply that they were proper nouns in any way, sorry. Thanks!

dakine01 June 23rd, 2012 at 2:21 pm

Charles, do you care to speculate on why USAs and Attorneys General around the country have ducked so may prosecutions and crafted that giveaway settlement when they had so many available prosecutions already available to them through the work of others? They gave away so much low hanging fruit it is pathetic

William Black June 23rd, 2012 at 2:21 pm
In response to Mauimom @ 14

Mukasey was worse, but we had hoped for something better from Holder. Way back as a junior Senator, Obama pushed for more funding for white-collar FBI agents. When the President and the AG constantly emphasize the lack of criminality in the crisis (based on no facts or reasoning) and refuse to conduct investigations or re-establish the criminal referral process at the banking regulatory agencies very few facts are made public by DOJ. Charles is correct, the civil suits, based on routine discovery and sometimes some good statistical work, have made enough public to confirm what we’ve been saying (liar’s loans were endemically fraudulent — and lenders and their agents overwhelmingly put the lies in liar’s loans). But a real investigation goes well beyond document discovery and produces far more evidence and evidence that has more jury appeal. So, by failing to prosecute or even bring contested civil or administrative cases to the point of testimony they keep the juiciest facts out of the public record — or limited to whistleblower complaints that the media largely discounts. Consider what would have happened if DOJ had prosecuted for foreclosure fraud and ripped MERS apart.

cmaukonen June 23rd, 2012 at 2:23 pm

Or maybe because most of the people involved are invisible the the general public. They are for the most part faceless and when you do see them it’s in front of a congressional committee speaking of things the general public does not understand.

Kind of like getting angry at a ghost or camouflaged drone or something.

Mauimom June 23rd, 2012 at 2:23 pm

I was struck by your remark in discussing the creation of the mortgage bubble and the failure to stop it that folks realized they would “gain nothing by acting ethically.” What a sad, sad state.

Charles Ferguson June 23rd, 2012 at 2:23 pm

I am always quite moved and impressed when I encounter people who have persisted in the face of seemingly overwhelming odds, and sometimes for decades. Nelson Mandela, in prison for a quarter century; Aung San Suu Kyi, under house arrest for 21 years; Andrei Sakharov in the Soviet Union…when I think of them, our own problems and obstacles seem so minor by comparison…

Mauimom June 23rd, 2012 at 2:24 pm
In response to Maureen Tkacik @ 24

revisionist nonsense narratives like HBO’s Too Big To Fail

That’s exactly how I felt about that tripe!!!!!

Cynthia Kouril June 23rd, 2012 at 2:25 pm
In response to William Black @ 28

How can Holder prosecute the mortgage fraud when his is, and his Deputy’s, former law firm, issued the opinion memo that said MERS was kosher?

Conflict of interest much?

Mauimom June 23rd, 2012 at 2:26 pm

Have you focused at all on what many see as the “next” bubble: the student loan debt bubble?

It’s different in many ways, but similar in others. And it’s causing, and will cause a lot of pain, even before it pops.

You touched slightly on this, in your discussion of Education Management, but it seems to me there’s so much more.

Charles Ferguson June 23rd, 2012 at 2:27 pm
In response to Cynthia Kouril @ 33

Certainly the fact that Holder, and Lanny Breuer (head of the criminal division), were partners in a firm that worked for most of the investment banking sector, was an immediate red flag about the Administration. And it turned out to be pervasive – Mary Shapiro and Khuzami at the SEC being further examples…

Charles Ferguson June 23rd, 2012 at 2:29 pm
In response to Mauimom @ 34

I have not done much research on the student loan situation, though my impression, simply from talking to friends and students, is that it is indeed becoming a major problem. As, of course, is the sheer cost of getting a decent education…

Maureen Tkacik June 23rd, 2012 at 2:30 pm
In response to GlenJo @ 21

“organize, organize, organize” is all I can think. We have virtually no political power or say, our side; all we’ve got is truth. People are beginning to get it though. Nicki Minaj tweeted the other day as to the effect of Obamacare being kind of a scam. I don’t know if this will make it into her next single but it was nice to think someone like her was paying attention. I’m beginning to think that the single positive legacy of Obama was that he proved to focus group organizers of the land that the American populace was desperate for smarter, weirder, more interesting celebrities and…I’ll take what I can get. Pop music has improved demonstrably since the Bush Administration.

But I digress. It struck me recently while composing a book review about a terrible book on social networking that technology and labor need to figure out a way to cross-pollinate and create trust-based social networking platforms that are impervious to trolls and infiltrators. All of us who are hanging out here for free on a Saturday night need to figure out a way to divide thought-labor and research-labor in a more constructive way. I’ve been thinking I need to learn database programming. I could care less who wins in 2012.

Cynthia Kouril June 23rd, 2012 at 2:31 pm

A couple months back I was at an event in SDNY and spoke with the chief of the structured instruments section at SEC. This gentleman, who’s name escaps me at the moment, did not think that there was a material mistatement in alleging that 1) the mortgage notes were transferred into the trust during the REMIC open period, 2) that the notes were backed by the mortgage deeds[when they had in many instances been transferred to MERS before the notes ever left the hand of the originator].

I found this stunning.

He said that the investors thought they were buying a revenue stream and did not care if it was backed by a securty interest in land. I kid you not.

The difference between a secured debt and an unsecured debt is HUGE. And if it turns out that you bought a security backed by an empty trust and that in theory all that revenue stream you’ve recieved so far might be clawed back, I would thinkthat was pretty material.

But not the guy at the SEC who would be the one to do the criminal refrrals.

Every other lawyeri in our conversational bouquest understood, except him. So, don’t expect any referrrals uless he has a Road to Damascus moment

Cynthia Kouril June 23rd, 2012 at 2:32 pm

Yep.

Maureen Tkacik June 23rd, 2012 at 2:33 pm

Yeah but our modes of propaganda and misinformation are so much more elaborate and sophisticated than Burma’s ever was. We’re dealing with a populace that is for the most part at least somewhat brainwashed and an elite that is almost wholly indoctrinated in neoliberal nonsense. When I lived in DC I started to believe that our problems were actually more cognitive than they even were structural.

Charles Ferguson June 23rd, 2012 at 2:35 pm
In response to Cynthia Kouril @ 38

I don’t think that too many of the relevant administration officials will be having sudden revelations about their moral obligations, unfortunately…:)

cmaukonen June 23rd, 2012 at 2:35 pm
In response to Maureen Tkacik @ 40

And the use of distractions to make sure we do not focus on what is really going in in DC or on Wall Street.

Mauimom June 23rd, 2012 at 2:35 pm

I have not done much research on the student loan situation

I’d suggest you wander over to the blog Inside the Law School Scam, written by a law professor @ U of Colorado. There are, of course, a number of blogs about the high cost of law school and the impossibility of getting a job which pays sufficiently to retire one’s monumental debt, but this is the best, and will give you a good history, together with a lot of “real life stories.”

The discussion is, of course, limited to law schools, but graduates are in even more dire straights than those coming out of college, because of both the hugh amount of their debt [usually $125K or greater, on top of whatever they may have accumulated as a undergrad] and the exceedingly small number of jobs. Frequently having a JD can PREVENT a person from getting a job, once he/she has exhausted the possibilities in the legal field.

Maureen Tkacik June 23rd, 2012 at 2:36 pm
In response to Cynthia Kouril @ 33

Eric Holder worked for Purdue Pharma. That’s just fucking vile. They were the domestic Blackwater of the Bush Administration as I saw it.

Cynthia Kouril June 23rd, 2012 at 2:38 pm
In response to Maureen Tkacik @ 37

That and the Robin Hood campaign has launched in the US.

http://www.youtube.com/watch?v=Bd_U2mnHqMU&feature=player_embedded

It’s attempt to pass a 0.5% tax on certain financial transactions. This would strip a lot of the incentive out of high frequency trading.

Bill and Charles, what’s your take on it?

Scarecrow June 23rd, 2012 at 2:38 pm

A welcome to all our guest and host, and our friend Bill Black. In reading about either D.C. econ/housing or the Euro crisis, it’s hard to miss the growing number of apocalyptic assessments. Martin Wolf wrote until now, he couldn’t understand how 1931 happened, but now he does. DeLong writes, “if you had told me three years about that ____ would be this bad and no one did anything, I wouldn’t have believed you.” Krugman/Wells write in NYRB this:

And where, in all this, is the hope that was so widespread back in 2008? It is, frankly, hard to find. President Obama bears some of the blame for that; he chose to listen to the wrong people, and arguably missed his best chance to turn the economy around. (Just to be clear, this isn’t a suggestion that Mitt Romney would do better. On the contrary, Romney is deeply committed to the false Republican narrative about what ails our economy, and all indications are that if he wins, he will make a bad situation much, much worse.) But ultimately the deep problem isn’t about personalities or individual leadership, it’s about the nation as a whole. Something has gone very wrong with America, not just its economy, but its ability to function as a democratic nation. And it’s hard to see when or how that wrongness will get fixed.

It seems that you, Charles are there too. So, where is the hope? How do we walk back from this precipice?

chicagogal June 23rd, 2012 at 2:39 pm

Thank you to all who are here today. I am awed and humbled to be amongst some of the best and brightest minds available today!

As one of those average Americans who never really followed politics or financial news until the past couple of years, I do remember somewhere around the early 1990s telling people that tearing down the wall between banking and insurance was not a good idea, though that was more a gut feeling than me actually understanding why. And I’m not entirely sure it was banking and insurance, but certainly one of those walls put into place to prevent another Depression.

Now that I’ve read a number of books on the subject of how we got here, it is just so hard to find out that our public officials have been lying to us for so long. That was one of the most refreshing things about Mr. Ferguson’s book actually, that he outright calls people liars. You have to admire someone who doesn’t dance around the edge of this farce like so many others!

Charles Ferguson June 23rd, 2012 at 2:39 pm
In response to Mauimom @ 43

Yes, law school does indeed seem to be one area where the ratio of cost to benefit is particularly high…:(

Cynthia Kouril June 23rd, 2012 at 2:40 pm

I don’t think it was dishonest on his part, he genuinely didn’t seem to “get” it.

In the elevator when I was leaving, someone who had overheard the exchange said it seemed as if he did not understand the products or what had actually been done, that he was relying on bank lawyers were telling him.

Charles Ferguson June 23rd, 2012 at 2:41 pm
In response to Scarecrow @ 46

It’s going to take a while to fix this – perhaps a decade, perhaps even longer…sad but true. And in the meantime, there will be a lot of pain – in Europe, and in America, and possibly elsewhere – even China is slowing down now…but hopefully we will come to our senses eventually…

Charles Ferguson June 23rd, 2012 at 2:42 pm
In response to Cynthia Kouril @ 49

Wow!

Charles Ferguson June 23rd, 2012 at 2:43 pm
In response to chicagogal @ 47

Glad to be of service!

bluewombat June 23rd, 2012 at 2:43 pm

With all the sharp cookies in here, I’m a little embarrassed to ask a general question: Given how much both parties are in the tank to the finance industry, what’s the best way to try and get criminal prosecutions?

When I asked Philippe Sands, author of Torture Team, what do do about torture, he said “Push the media.” I assume that’s part of it here, but is there any particular public official or government agency we should be concentrating on?

Cynthia Kouril June 23rd, 2012 at 2:44 pm

Back to the book, I have to pile on with Chicagogal, I enjoyed how Charles was not afraid to call a liar a liar, and then back it up with fact pled on fact.

So much fun to read.

I spent a lot of time with the end notes.

William Black June 23rd, 2012 at 2:45 pm
In response to GlenJo @ 21

There are roughly one million Americans working in our criminal justice system (not counting inmates). Of those one million, approx. 2000-2500 do white-collar crime (overwhelmingly FBI white-collar specialists — you can get higher numbers if you include specialized frauds such postal and securities frauds and the FTC folks that handle identity theft). (I’m ignoring police squads that handle very minor frauds.) There are a bit over 1,300 industries in the U.S., so we have fewer than two FBI agents per industry. So the first thing to understand is that nobody is walking a beat to stop elite white-collar crime. The FBI only investigates when it gets a criminal referral. Corporations will not make criminal referrals against their CEOs. Only the regulators can serve as the analogs to “the cops on the beat” and make the referrals against control fraud. Whistleblowers can make episodic referrals, but DOJ can’t break a fraud “epidemic” with episodic referrals and it tends to view whistleblowers as disaffected employees whose credibility is dubious.

The fastest bang for your buck is to appoint acting regulatory heads of the OCC and the FDIC who will make the filing of criminal referrals against the elite frauds that drove this crisis among their highest priorities — and then will follow-up on those referrals (quietly and professionally) in fraud working groups — and if that fails by going public about the refusal of DOJ to prosecute and demanding action from DOJ and the president.

The OCC and the FDIC, the Fed, and the FHFA all have the resources and the bad loans aplenty to conduct an intense review of a sample of loans from the most fraudulent lenders and report publicly by name on what that sample reveals. Such an audit would place enormous pressure on the administration and DOJ to act.

Each of the agencies should begin administrative enforcement actions of the worst executives and use the ability to take testimony under oath of key employees (particularly whistleblowers and their bosses) during the investigation. The agencies then need to do a hard hitting, short white paper in plain, blunt English on the pattern of what they have found in terms of the deliberate gutting of underwriting and inflation of appraisals — two actions that no honest lender would take.

If DOJ refuses to do it, the financial regulatory agencies should make a public call for whistleblowers from the industry (many will have lost their jobs) to come forward and provide evidence of the frauds and the management actions that facilitated the frauds.

FYI: right now, the FDIC (in conjunction with OTS when it still existed) is creating a data base of mortgages that will be a disaster. It defines alt-a (liar’s loans) on the basis of FICO score — defining such loans as intermediate between prime and subprime). That is false and will throw out of the data the most important characteristic of the loans — were they made without appropriate underwriting. It also means that the FDIC is (falsely) claiming that liar’s loans and subprime are mutually exclusive categories when in fact it was common for subprime loans to also be liar’s loans (49% by 2006 according to Credit Suisse). Fixing the FDIC and OCC’s data collection/categorization, therefore, is vital.

thatvisionthing June 23rd, 2012 at 2:46 pm

Not having read your book, but delighting to have both Charles and Bill here, I hope this is on topic:

Eric Schneiderman recently tweeted a link to article In Nothing We Trust and said “Excellent piece on the loss of confidence in America’s institutions & how to restore it.” I thought that was boggling, because in the article a man ends up being responsible for mowing the lawn of the house the bank foreclosed on, because they left it in his name, while he and his wife have lost their jobs and have been living in a trailer for a year. It seemed to me that no one seemed to know definitively who owns the house, they just keep putting bandages on bandages. He agrees to mow the lawn and the city council votes to defer the fine as a lien on the property for whoever buys the house next, in case it isn’t the man, who dreams of buying it back someday.

“So I’m liable for a house I don’t live in or own?” Whitmire sputters.

Yes, [city's attorney] Quirk says.

Another story in that article is that the mayor ran on dishonest campaign promises because she felt the public didn’t want to know the truth.

So Schneiderman’s tweet seems incredible to me, especially in light of his key role as elected caver in the mortgage fraud settlement. If there was something in there about how to restore confidence, I missed it. Any thoughts?

Cynthia Kouril June 23rd, 2012 at 2:47 pm
In response to bluewombat @ 53

campaign finance reform.
As long as candidates need money in large amounts, they will need the 1%.

You have to severely restrict the amount of money in individual donations, and overturn Citizen’s United.

bluewombat June 23rd, 2012 at 2:49 pm
In response to William Black @ 55

Mr. Black, if Barack Obama were anything more than a hollow, charismatic fraud, he would have hired you to clean out the stables. That’s my opinion.

bluewombat June 23rd, 2012 at 2:49 pm
In response to Cynthia Kouril @ 57

Good answer; thank you.

Charles Ferguson June 23rd, 2012 at 2:50 pm
In response to bluewombat @ 53

A very good and therefore difficult question…

I’m not sure we have much leverage at the moment. One possibility might be private lawsuits directly targeted at those with major personal liability. But I’m not sure there is much we can do right now, unfortunately…

William Black June 23rd, 2012 at 2:50 pm
In response to Cynthia Kouril @ 33

By recusing themselves and appointing a vigorous prosecutor to investigage MERS. Instead, the administration (led by HUD), desperately pushed the deal to try to prevent any investigation.

Fyi: Harris Weinstein, from the same law firm as Eric and Lanny (Covington & Burling), led the enforcement crackdown on S&L frauds after our House testimony led the head of our agency (Danny Wall) to resign in disgrace. His boss, Tim Ryan, picked Harris because he wanted an aggressive approach. Tim Ryan (first cousin to Meg) now runs one of the top securities lobbying outfits and is equally aggressive in pushing the regulatory race to the bottom so that we can “win” the competition in laxity with the City of London.

HelenaHandbasket June 23rd, 2012 at 2:51 pm

In 2008, as the economy was imploding, candidate Obama seemed to understand the gravity of the situation while McCain was telling us that the fundamentals of the economy were strong. So, what was this ‘smart person’ thinking by bringing in Summers, Geithner, etc. ?

Extra credit question: Is Bernanke being a dishonest broker and making politically-biased decisions/actions (or lack thereof?)

bluewombat June 23rd, 2012 at 2:52 pm

Sad but true.

Still, I’m reminded of the Vaclav Havel remark, “If you do nothing, nothing will happen. If you do something, something might happen.” (Or words to that effect.)

Charles Ferguson June 23rd, 2012 at 2:53 pm
In response to Cynthia Kouril @ 57

I agree that campaign finance reform, and more generally control over the role money plays in political life, is critical. And unfortunately it is no longer just campaign finance; it is also the divergence between public and private sector salaries, the rise of the lobbying sector, and the growth of industrial funding of academic economics.

Maureen Tkacik June 23rd, 2012 at 2:53 pm

Gentlemen,

The Chicago school Law and economics movement which is now headquartered at George Mason University is a particular perverse fascination of mine. The regulatory apparatus is literally infested with attorneys who do not believe in fraud or monopoly. I think I first encountered this reading an amicus brief written by a prolific friend of the court named Joseph Grundfest, a former SEC commissioner under Reagan who is apparently a Democrat.

It seems pretty apparent to me that from FCC to FEC to CFTC etc. etc. etc. if a commissioner or an administrative law judge has anything to do with GMU or Chicago you can pretty much rest assured they are there to make sure that massive corporations are utterly immune from any of the typical norms of the reality based community.

Anyway, to that end it occurred to me that someone somewhere out there really ought to compose a detailed Biography of Sarbanes-Oxley, which seems to have hit a wall in a little noticed (but noticed by Yves Smith) and totally un-explained 2008 decision by a Chicago federal judge in the Conrad Black trial. My suspicion based on chats with former PCAOB officials and some digging around on Magnetar’s political giving was that some tacit agreement to just abandon Sarbox “won” Rahm Emanuel’s seats in the 2006 election. But I don’t have time to do all the investigations I want to do.

What are some threads you guys would like to see other people pursue?

Mauimom June 23rd, 2012 at 2:53 pm

I got to say, Charles, I was REALLY glad to see you spell out the involvement of both Clinton & Obama administrations in this mess. I am so tired of “it’s all Bush’s fault; Republicans block any of Obama’s attempted good deeds.”

Both of those Dems and their followers, were completely complicit in this. Clinton has profited handsomely since his retirement, and Obama no doubt will as well. [Bush is too stupid and not a good "sell" to be useful.]

William Black June 23rd, 2012 at 2:53 pm

Geithner (as with many IMF alums) is a giant believer in the “confidence fairy.” According to Louise and Gretchen’s NYT column he pushed then NY AG Coumo to not even investigate the largest frauds on the grounds that it could impair confidence in the banks. I responded that modern regulators are far more sophisticated than we were — we never even considered leaving felons in charge of financial institutions as a means of restoring confidence.

Charles Ferguson June 23rd, 2012 at 2:56 pm

I don’t know if we will ever completely understand Obama’s motivations. Was it naivete, insecurity due to inexperience with finance, conflict aversion, ruthless political calculation, or some combination thereof?

As for Mr. Bernanke, although he was a career academic, as soon as he entered politics / government, he began to show himself as a very astute political maneuverer – not aggressive, always ready to please those above him – first Bush, then Paulson, then Obama, now perhaps looking even beyond Obama…

chicagogal June 23rd, 2012 at 2:56 pm

At a certain point, you have to wonder if the people stealing money from their companies and regular people though investment vehicles that have turned into toxic sludge understand that if there is no middle class, then they have to do that work themselves. Pushing everyone into the same abject poverty and hunger that the vaunted UN Millenium Goals pledged to reduce or halve by 2015, seems like base stupidity on their parts, but then, when corrupted by greed, values like caring about the common man (woman/child/people in general) are some of the first to be thrown off and trampled on the way to “gimmee, gimmee, gimmee!”

Maureen Tkacik June 23rd, 2012 at 2:57 pm

Also gentlemen, before I forget, are either of you on Twitter? (I’m at @moetkacik)

econobuzz June 23rd, 2012 at 2:58 pm
In response to Maureen Tkacik @ 65

The Chicago school Law and economics movement which is now headquartered at George Mason University is a particular perverse fascination of mine.

You are a masochist? LOL

Charles Ferguson June 23rd, 2012 at 2:59 pm
In response to Maureen Tkacik @ 70

I am shamefully retrograde, technologically…:(

Scarecrow June 23rd, 2012 at 2:59 pm
In response to William Black @ 67

Well, you can’t argue with success. You just have to refine it a bit.

William Black June 23rd, 2012 at 3:00 pm
In response to bluewombat @ 58

Two presidential appointees of my agency resigned, and the Speaker of the House and five U.S. Senators were greatly discomfitted by our testimony — I guarantee that no one will appoint me to a position of power. Three weeks ago, the staff of a progressive Dem on House Financial Services disinvited me to a briefing of the members on financial derivatives because of concern from the industry’s participant that I might engage in “bank bashing.” We have recently seen the Senate and House’s display the preferred congressional treatment of Jamie Dimon. When the American Banker, the trade press, labels the Senate committee “obsequious” you know how bad it is.

cmaukonen June 23rd, 2012 at 3:00 pm
In response to William Black @ 67

ARG ! Don’t keep the foxes from the hen house or people might lose faith in the cook who makes the omelet.

William Black June 23rd, 2012 at 3:01 pm
In response to Maureen Tkacik @ 70

@WilliamKBlack

Maureen Tkacik June 23rd, 2012 at 3:01 pm
In response to econobuzz @ 71

half masochist, half procrastinator. There is a Notre Dame professor named Phil Mirowski I blame for enabling it.

thatvisionthing June 23rd, 2012 at 3:01 pm

Do you see a way to get ahead of the wave instead of being lost in the wash? Given that the fraud is too big to stop, or that it won’t be stopped. Kind of War of the Worlds, can we microbes win?

Maureen Tkacik June 23rd, 2012 at 3:02 pm
In response to William Black @ 76

ah yes, was already following you.

Kevin Gosztola June 23rd, 2012 at 3:02 pm

Hello, Charles

I greatly appreciate the section of your book that focuses on how there have really been no prosecutions for the massive financial crime being committed. Calling President Barack Obama and his administration’s claim that they are unable to prosecute because “conduct wasn’t illegal and/or the federal government lack sufficient power to sanction them” “complete horseshit” is beyond appropriate and justified at this point.

I also am pleased that in your work you get into how this is a problem of the political system—the fact that America is run by a duopoly. However, with all do respect, I do not think you coined the phrase “political duopoly.” You may have started using it in 2010 (and it is a great phrase to use), but if anyone coined the term, it’s the prominent consumer advocate and perennial third-party presidential candidate Ralph Nader, who has dedicated his entire life to crusading against the kind of corporate concentration of power in America that we see today. For that, for trying to mount a challenge to the kind of corporatism that produces rampant financial crime through advocacy and largely symbolic president campaigns that expose the rigged nature of the American electoral system, he has come to be viewed by many as a pariah.

And, so, my question for you:
To what extent do you view the duopoly as something the American people must confront in order to address predatory capitalism in the financial industry? What is the likelihood of shifting the culture toward one that recognizes the importance of accountability and justice for those in the financial industry if the political system remains under the control the two parties? Because right now, “Moving Forward Instead of Looking Back,” rules the day and one has to wonder if substantial electoral reforms are needed to address predatory capitalism.

Mauimom June 23rd, 2012 at 3:02 pm

Charles, in the conclusion of your book under “What Should Be Done,” your first item is “improving educational opportunity and quality.”

As a former teacher, I’m totally with you on that. However, I was a law student in CA when Prop 13 was passed, and since that time I’ve watched the devastation it wreaked on public education. We don’t have to look around too far now to see similar havoc in other states. And then there’s Obama’s “Mr. Charter School” Secretary of Education.

I really think they WANT everyone to be uneducated. All the better to run their propaganda and manipulation. And folks are so busy scratching for a job [or three] that they can’t investigate and vote wisely.

How do we overcome this, when the “monied parties” want to slash school budgets, university budgets, training schools, etc?

[I was aghast to read recently the "brag sheet" from my local state representation [Maui] crowing about how he’d secured $7+ million in funds for a local CEMETERY. Only slightly more than a million was going to school maintenance for the entire island.]

Charles Ferguson June 23rd, 2012 at 3:03 pm

I have long been an advocate of taking refuge in the technology sector, an industry where, for the most part, talent and hard work are rewarded, and one need not be criminal to succeed…:)

cmaukonen June 23rd, 2012 at 3:05 pm

Having spent over 30 years there (now retired) in a major university, you’ve got to be kidding.

bluewombat June 23rd, 2012 at 3:05 pm
In response to William Black @ 74

I guarantee that no one will appoint me to a position of power

Someone once described the Bush 43 administration as an integrity sieve — to get in, you couldn’t have any integrity. It’s apparently more pervasive than that now, and it gives me the heebie-jeebies.

Maureen Tkacik June 23rd, 2012 at 3:06 pm
In response to Mauimom @ 81

This is important to remember: they really really do want everyone to be uneducated. You wouldn’t believe how badly they actually do want this. It’s nuts when you start researching the history of it. I’m trying to figure out how to put it all together right now.

Charles Ferguson June 23rd, 2012 at 3:07 pm
In response to Kevin Gosztola @ 80

Towards the end of my book, I listed three structural alternatives for reversing the duopoly problem: an insurgency within one of the parties; a third party; and a nonpartisan social movement (such as the civil rights or environmental movements). I’m not sure which I think is the most feasible; it may be some combination of them. All of them, of course, will take time…

HelenaHandbasket June 23rd, 2012 at 3:07 pm

Since so many of the RE loans that went bad weren’t conforming, requiring them to carry private mortgage insurance, why haven’t we heard from these insurers? Have they been wiped out? Aren’t they victims of Wall Street fraud? Or, were they in on the ‘game’?

econobuzz June 23rd, 2012 at 3:08 pm
In response to Maureen Tkacik @ 85

This is important to remember: they really really do want everyone to be uneducated.

x2. That’s why there are now no more funds for higher education.

cmaukonen June 23rd, 2012 at 3:08 pm

Good question. I forgot about that.

thatvisionthing June 23rd, 2012 at 3:09 pm

Invent some software that people can use to definitively establish solid or broken chains of title, and then submit that to court in their state? The ones with the best cases are the ones who can’t bring them? Or they’re all good cases, but no way to make a cumulative wave big enough to accomplish anything? Like, say, Turbo Title.

Maureen Tkacik June 23rd, 2012 at 3:10 pm

Another general comment on the “what is to be done” end of things is finding intelligent people in other fields and sharing information with them somehow. This problem we have is ubiquitous and practically unavoidable.

I have a theory that technology has been more impervious to the destructive ideology that has inculcated every other industry because Moore’s Law effectively “proved” that the glorious infallible laws of “free market” supply and demand did not apply to them.

Charles Ferguson June 23rd, 2012 at 3:10 pm
In response to Mauimom @ 81

The abandonment of broad educational opportunity, and the decline of national commitment to public education, will I think be seen as perhaps the single most damaging thing that this country did to itself during this period – even worse, in some ways, than allowing the rise of money-based politics and the housing bubble / financial crisis. Because more fundamental. It is a huge tragedy for this country, unquestionably.

RevBev June 23rd, 2012 at 3:11 pm

I may have missed the answer here…But how do you explain the lack of forceful, cohesive outrage? People have been hurt and the facts are shameful & tragic. It seems to me we knew alot more about the S & L. It seems to me that we have learned little more about this mess than on the night McCain was deciding not to participate in the debate, then did.

William Black June 23rd, 2012 at 3:11 pm
In response to Cynthia Kouril @ 49

I agree. He simply took his information from a lobbyist — and industry lawyer with a facile “cash stream” argument. I’d be shocked if he ever did secured lending in his life.

cmaukonen June 23rd, 2012 at 3:13 pm

Humm…. not do difficult. But a major relational database would be required.

But that is not what would frighten me. it’s the “what happens if you can’t find any unbroken chains of clear title ?”

ooopppsss…

Maureen Tkacik June 23rd, 2012 at 3:13 pm

I think the Temperance Movement which begat the income tax is the movement we’ve got to be studying right now. (Anyone who wants to get a beer in Brooklyn sometime and plot a secular WCTU should tweet me)

Charles Ferguson June 23rd, 2012 at 3:13 pm

Several of the insurers were indeed wiped out – most spectacularly, those who insured mortgage-backed securities rather than individual mortgages – MBIA, Ambac, and of course AIG…

Kevin Gosztola June 23rd, 2012 at 3:14 pm

But, to quickly follow-up, you would be willing to say breaking the hold of the duopoly is critical to having a government with the political will to prosecute financial criminals?

econobuzz June 23rd, 2012 at 3:14 pm

The abandonment of broad educational opportunity, and the decline of national commitment to public education, will I think be seen as perhaps the single most damaging thing that this country did to itself during this period …

Absolutely. And folks who voted for Obama are now supporting cuts that they criticized Shrub for even proposing. Want to know how to blunt the political impact of the growing Latino population? Deny them access to higher education.

dakine01 June 23rd, 2012 at 3:15 pm
In response to William Black @ 94

I would think someone with some basic intelligence would not need to have worked in secured lending to understand that if there’s nothing in the security, you are SoL

Charles Ferguson June 23rd, 2012 at 3:15 pm
In response to RevBev @ 93

I too have been surprised at the lack of outrage, and action. I think many Americans may simply be very stressed about their own personal situations; and others, too cynical and fatalistic. But I remain puzzled by it, still…

thatvisionthing June 23rd, 2012 at 3:16 pm
In response to cmaukonen @ 95

search for Linda Green or Doc X

Charles Ferguson June 23rd, 2012 at 3:17 pm
In response to Kevin Gosztola @ 98

Probably. Although, IF someone who got elected President decided to take this seriously, I think that they could make it happen, even with structural and Congressional opposition…e.g., IF Obama had made different choices, I think that he could have made a difference…

thatvisionthing June 23rd, 2012 at 3:18 pm

No, seriously, haven’t all the major players stipulated to fraud — isn’t that what the mortgage settlement was about? They’re off some hook, for some period of time, but chain of title wasn’t fixed for anything? Meanwhile robosigning continues?

William Black June 23rd, 2012 at 3:18 pm
In response to RevBev @ 93

There was very little outrage originally about S&L fraud and neither the agency nor DOJ originally (until 1984) made such frauds a priority. By bringing over 1,000 successful “major” prosecutions, approx. 800 civil suits, and 3,000+ administrative actions we (1) put facts in the record that journalists could cite with[out] fear of libel actions, (2) demonstrated over time that there was a pattern to the frauds and that they were led out of the “C” suite, and (3) eventually made it politically impossible for several years not to favor strong efforts at prosecution.

We knew that we had won when Rep. Frank Annunzio (a strong ally of Charles Keating), began wearing a button, six inches in diameter, that said “JAIL the S&L CROOKS”). It was pure hypocrisy, but still telling.

chicagogal June 23rd, 2012 at 3:18 pm

It’s been quite a while since any stories about the Private Mortgage Insurers has been published anywhere, but remember a year or two ago that they were being predicted as the next part of the RE sector to go down due to the number of claims they’ve had to pay out for mortgage defaults.

For mine, PMI paid GMAC on their claim then started coming after me personally to reimburse them, even though I’ve never signed any contract with that company! I also pointed out during my testimony to the IL Supreme Court Mortgage Foreclosure Committee a couple of weeks ago that banks were being unjustly enriched in every foreclosure case because of being paid by selling the loan to Wall Street, then filing a claim with the insurance company who covered whatever loan it was, and then they get paid again when they eventually sell the house for whatever they can get. How many times does anyone need to be paid for a single item for it to be enough?

thatvisionthing June 23rd, 2012 at 3:19 pm

Also, while Charles is here, just want to applaud Inside Job, and I love the opening credits. That’s art.

William Black June 23rd, 2012 at 3:19 pm
In response to William Black @ 67

Cuomo. Sorry for getting the spelling wrong.

RevBev June 23rd, 2012 at 3:20 pm
In response to William Black @ 105

Maybe we should all get some buttons….a great start.;) Thanks

Mauimom June 23rd, 2012 at 3:20 pm

Charles, I think one of the most important paragraphs in your book is the following:

The least-discussed but perhaps most important effect of money-based politics is that it has caused government policy to shield incompetent and/or predatory industries from internal reform and competitive discipline. This problem goes far beyond finance, and is critical to understanding not only the financial crisis but also America’s broader economic decline.

I was struck by your first making this point in your introductory discussion of the S&L crisis, LBOs etc: protecting incompetent management, in effect “shielding” it from the vaulted “market.” And it’s an important summary of what you discuss in your book.

Doesn’t it strike you as incredibly perverse: all of these “businessmen” who are supposed to be so smart and “special” [see, Romney], but who lie, cheat, steal and require protection from honest competition and the consequences of their mistakes.

When, oh when are we going to see this myth of the Omnipotent and All-Wise Businessman demolished, and these clowns seen for what they are/

Charles Ferguson June 23rd, 2012 at 3:22 pm

Thank you! The editors and I worked on that sequence for a long time…:)

Maureen Tkacik June 23rd, 2012 at 3:23 pm
In response to William Black @ 105

and this is EXACTLY why we’d be considerably better off with McCain in charge.

The thing I wonder is, is it possible for a Democratic president to police corporate crime at this point? Republicans who predate the “law and economics” ideology seem often to relish bossing oligarchs around. Or at least, believe that’s how the world of “power” works. Beltway Democrats meanwhile…utterly hopeless.

cmaukonen June 23rd, 2012 at 3:24 pm
In response to William Black @ 105

But going back even further. When the banks failed after the the crash of 1929, it was not until FDR closed a lot of them and people lost the money, that there was any outrage. And a lot of the outrage was directed at FDR for closing them. As if HE was responsible for them losing their money and NOT the bankers.

I know my great, great grandmother was a victim and blamed him for her loses.

The SNL fiasco was not personal enough.

Charles Ferguson June 23rd, 2012 at 3:24 pm
In response to Mauimom @ 110

It is indeed richly ironic, particularly because several of America’s largest firms and industries were run very, very incompetently for long periods of time – automobiles and steel come particularly to mind, but telecommunications and finance as well…

Mauimom June 23rd, 2012 at 3:24 pm

The abandonment of broad educational opportunity, and the decline of national commitment to public education

But how do you combat this?

I tutor in a third grade classroom in my struggling local school. [Factoid: Hawaii ranks at the bottom of the educational barrel, with MS, AL and LA.] Even as I help my kids and their dedicated teacher, they will go on to more inadequacies in their next grade. Good education is hard to find outside of a private school, and of course resistance to “more taxes” is legendary everywhere.

How do you get people to care, and to take action?

William Black June 23rd, 2012 at 3:27 pm
In response to dakine01 @ 100

Ah there’s the rub. A recent WSJ story on JPM’s “whale” made the point in print that I’ve been telling journalists for years. When the whale was being hassled by supervisors he’d respond with a stream of jargon — much of it plainly wrong. As soon as you make the basic error — and the supervisor (or in our case bank examiner or supervisory agent) doesn’t correct you but instead nods knowlingly you know you’ve got them.

No, folks don’t understand complex derivatives. They’re designed not to be understood. So they attribute magic capabilities to them, e.g., I can put in fraudulent liar’s loans and transform it into a “cash stream” with “priority” that warrants “AAA.” So, when someone tells them with the requisite firmness (the tone implies that everyone knows what I’m about to say is correct) that “all investors care about is the cash stream” and that the cash stream is protected by prioritization (which sound like it’s secured to them) they nod knowingly and accept lies as truths.

cmaukonen June 23rd, 2012 at 3:27 pm
In response to Mauimom @ 115

We have too much of an attitude of “Education -> Money” and not enough of “Education -> wisdom and understanding”.

thatvisionthing June 23rd, 2012 at 3:27 pm

Even scientists/techologists can’t fix their chain of title or keep jobs that get defunded because fraud and austerity sucked the money away

thatvisionthing June 23rd, 2012 at 3:28 pm

Applaud them too. It’s just great. I go watch it on youtube sometimes just because I like it so much.

thatvisionthing June 23rd, 2012 at 3:30 pm

Charles, do you have an e-mail address or web form for people to contact you?

June Carbone June 23rd, 2012 at 3:30 pm

Hi Charles,

This is a great discussion. I’m the co-author of Red Families v. Blue Families. We tried to figure out why family form (not just family values) had become political and one of the things we found is that political messages are being filtered through cultural lens that drive the parties farther apart. I sometimes find it encouraging that the one thing that unites the Tea Party and the left is outrage at Wall Street. But all the tea party hears is that the problem is bailouts, excessive regulation and deficits. They think of Democrats as hippies in the streets, not as tough regulators.

William Black June 23rd, 2012 at 3:30 pm

Well, since I got to take the notes of our meeting with Senator McCain and his four Dem colleagues (the Keating Five) 25 years ago, where they tried to intimidate us into not taking enforcement action against Lincoln Savings, I’m not prepared to certify that he would have been better in prosecuting the bank frauds.

Mauimom June 23rd, 2012 at 3:31 pm

Even scientists/techologists can’t fix their chain of title or keep jobs that get defunded because fraud and austerity sucked the money away

When I first read this, I thought you said “Scientologists” and wondered, “hey, the Scientologists now have a way to fix things?”

My bad.

thatvisionthing June 23rd, 2012 at 3:32 pm

Thanks

Charles Ferguson June 23rd, 2012 at 3:33 pm
In response to June Carbone @ 121

Yes – I agree…

Maureen Tkacik June 23rd, 2012 at 3:33 pm
In response to Mauimom @ 115

My personal philosophy is just do not be afraid to become an insufferable crank about all this. And read about the history of book banning and keep yourself informed about national education policy agendas/practices…

People come around. I can’t tell you how many of my friends and family members have converted from “constantly rolling their eyes at me” friends to fellow insufferable cranks/obsessive amateur historians of corruption.

Read about the history of the labor movement. All you can.

There was this cute scene on “Girls” where the cute British nanny Jessa plots to unionize the skeptical eye-rolling (minority) nannies while the kids she’s watching disappear. Two friends of mine recently founded a labor rights/advocacy organization dedicated to protecting runway models (who by the way, are treated about as well as your average sweatshop worker.) The one thing you can be sure about is that they will stop rolling their eyes soon enough.

June Carbone June 23rd, 2012 at 3:34 pm

I disagree with you. It is at least possible to embarrass the Democrats. That’s what happened to Chris Dodd and Barney Frank. The Republicans justify their opposition by calling for cutting funds to the agencies. Bush stacked the agencies with people who didn’t believe in regulation and McCain, while he can get fired up when someone lies to him, doesn’t really believe that business men are bad people. I was working in the Justice Department when Reagan was elected. The big difference between ideological Republicans and ideological Democrats is that the Republicans really don’t believe in government regulation at all.

thatvisionthing June 23rd, 2012 at 3:35 pm
In response to William Black @ 122

perris had a good comment to make recently, that Obama is a quarterback that keeps throwing to the other team and we’d be better off with the other team on the field so we could defend, but for sure when we’re on the field the other team scores.

GlenJo June 23rd, 2012 at 3:35 pm
In response to cmaukonen @ 113

I think that’s a great point. So far, by massive taxpayer bailouts, we’ve keep the “pain” of bank failures and Wall St failures largely away from most Americans, or at least DIRECT pain (indirect pain is huge the more one understands what has happen) except perhaps for the generation just trying to start their careers. That’s why I think OWS really talks more to younger people, they are more directly impacted by the collapse of the economy.

Which puts the complete falsehood of the “must cut to reduce the Federal deficit to protect future generations”. It is NOT Federal debt which has screwed most young people, this the economic collapse cause by the banksters.

RevBev June 23rd, 2012 at 3:38 pm
In response to June Carbone @ 121

This is OT, but I have been trying to think of lessons from a day when both a coach and a priest have been convicted. As ugly as it all is, at least, they’ve been caught. The only bright spot in 2 horrendous stories where many people have been hurt.
As a people we must say we’ve had enough: Enough lies, torture, scams, cruelty. Maybe Wall Street is losing its magic and cover, and now we know that the criminals are running the hen house. Helps explain how Bernie M. got away with so much.

Charles Ferguson June 23rd, 2012 at 3:38 pm
In response to June Carbone @ 128

Neither party is entirely monolithic. There are still many traditional Republicans who were and are outraged at what has happened…though they no longer control their party…

Maureen Tkacik June 23rd, 2012 at 3:38 pm
In response to William Black @ 116

I feel like it doesn’t get pointed out enough that CDO issuance surged wildly AFTER housing prices had demonstrably started falling. A trillion dollars worth of mostly MBS-based CDOs were issued in 2006 and 2007, as compared with $150 billion in ’04 and $250 billion in ’05. This strikes me as pretty much the most goddamned obvious, and surprisingly comprehensible proof of the “scienter” thing here, but what do I know.

William Black June 23rd, 2012 at 3:39 pm
In response to econobuzz @ 71

Should you want to read alternative views, UMKC economics is featured in the current — wait for it — Playboy for our debunking of the Chicago-school’s theories and predictions. There are even pictures of us at the annual meeting of the profession — fully clothed, thank God! Seriously, our blog, New Economic Perspectives, has a wealth of things we’ve written on economics. It’s all avaialable without charge and does not require masochism.

UMKC is best known for Modern Monetary Theory (MMT), programs for full employment, Minsky’s theories on instability, and our synthesis of white-collar criminology, economics, finance, accounting, and law.

Mauimom June 23rd, 2012 at 3:39 pm

Charles, are you familiar with the movie “Heist”?

It’s a very good telling of the story of the “Powell Memorandum” [written by future SC Justice Powell for the Chamber of Commerce] and the decades-long plan therein re establishing right-wing “think tanks,” taking over the press, and basically promoting the CofC point of view.

It’s a useful complement to your work, and it’s now available on DVD. [Film-makers did a "movie night" here @ FDL a few months ago.]

GlenJo June 23rd, 2012 at 3:39 pm
In response to cmaukonen @ 117

Or education -> innovation -> new product creation -> hiring -> economic recovery

Silicone Valley would not have happen without Bay Area world class universities.

Charles Ferguson June 23rd, 2012 at 3:41 pm
In response to RevBev @ 131

I certainly agree that that finance – and the economics discipline – have lost their credibility and their former status as respected experts / elders / sources of wisdom…hopefully a first step towards eventual justice…

To your other point, it was a very long road to prosecuting the hierarchy of the Catholic church…

thatvisionthing June 23rd, 2012 at 3:41 pm
In response to GlenJo @ 136

And hippies

Twain June 23rd, 2012 at 3:41 pm

Are those Republicans doing anything to take the party back?

Thanks for being here. Really interesting.

Mauimom June 23rd, 2012 at 3:41 pm
In response to William Black @ 134

UMKC economics is featured in the current — wait for it — Playboy

Thus proving true those guys who claim they “only read Playboy for the articles.”

Ludwig June 23rd, 2012 at 3:42 pm

One question. Who is the Godfather.

econobuzz June 23rd, 2012 at 3:42 pm
In response to William Black @ 134

Thanks. I’m familiar with MMT and suggest everyone else get familiar with it as soon as possible. Arranged a presentation by RD Wolff and Stephanie Kelton recently. Sort of a one-two punch. LOL

bluewombat June 23rd, 2012 at 3:43 pm
In response to William Black @ 134

Traditionally, I’ve read Playboy for the interviews and fiction. Now I can read it for the economics.

econobuzz June 23rd, 2012 at 3:44 pm
In response to Ludwig @ 141

A guy named Warren — and not Buffet.

Maureen Tkacik June 23rd, 2012 at 3:44 pm
In response to June Carbone @ 128

Bush nominated Sheila Bair don’t forget. There are republicans like Bair and Arlen Specter etc. who are past the point of being “embarrassed” about shit like the Tea Party. Progressives are getting there, in large part thanks to the fact that there is nooooooo embarrassing Tim Geithner.
And Bill Donaldson did a not-bad job all things considered. It’s complicated. There are non-nihilistic Republicans out there, just like there’s still lots of “social justice” Catholics. Neither segment has any voice within their respective institution, however. They’re sort of like us, within the Democratic establishment, but they know more about where bodies are buried in a lot of cases. Trevor Potter is one of these guys, for instance. They seem utterly disenfranchised in DC.

William Black June 23rd, 2012 at 3:45 pm

Liar’s loans surged massively after the FBI’s Sept. 2004 warning that the “epidemic” of “mortgage fraud” would cause a financial “crisis” if it were not contained and after MARI’s five warnings to the industry in early 2006:
1. Stated income loans “are an open invitation to fraudsters”
2. They deserve the term the industry uses to describe them: liar’s loans
3. The fraud incidence is 90%
4. The industry is ignoring the large losses from such loans in 1990-1991
5. The regulators are warning against making such loans

Charles Ferguson June 23rd, 2012 at 3:45 pm
In response to Twain @ 139

I think that traditional liberal Republicans are now just as dispirited as traditional liberals…:(

June Carbone June 23rd, 2012 at 3:46 pm
In response to GlenJo @ 130

The issue that I think we’re missing is the pernicious role of inequality itself. When I came of age, most institutions were bigger than the individuals who ran them. In the fifties (the era of the gray flannel men), a CEO could not cash in, walk away with a billionaire dollars and spend it on his pet political issues. Today, we have billionaires out there who think that they can influence elections all by themselves. I read the story about the hedge fund millionaire backing same-sex marriage, I was first inspired, then depressed. A small number of individuals got same-sex marriage through the New York legislature. And a relatively small number of individuals influenced the Prop 8 campaign the other way in California. The rest of us don’t much matter.

The new book I’m working on looks at what happened to the family. The answer is inequality. The top 25% of the country has the same divorce and non-marital birth rates as thirty years ago. The rest of the country is falling apart. The reason is that greater income inequality itself is destructive of communities. And one of the reasons is that the people don’t invest in communities; they invest in their individual projects.

The last place left where the institution commands loyalty is the military. A general is nothing when he takes off the uniform.

GlenJo June 23rd, 2012 at 3:46 pm

Hippies! Yes! 8^)

Maureen Tkacik June 23rd, 2012 at 3:47 pm
In response to William Black @ 134

that’s pretty awesome.

thatvisionthing June 23rd, 2012 at 3:47 pm

Jerry Brown met with the top executives of Honda. Why should Honda consider California for its first American plant? “Hippies,” Brown replied. “Blue jeans. All important trends start in California.”

from Meg Whitman campaign lit :-)

June Carbone June 23rd, 2012 at 3:49 pm

I agree because I hear them, too, and as I said earlier the tea party is angry at Wall Street as well. But when I see the Republican drumbeat to repeal Dodd-Frank and the Romney insistence (which is one the few things he says that I believe in genuine) on low taxes and low regulation, that means no one will be in charge.

One thing that you and Bill Black do that I appreciate is to emphasize that we’ve taken the cops off the beat. And I certainly agree that Republicans believe in policing.

cmaukonen June 23rd, 2012 at 3:50 pm
In response to June Carbone @ 148

The last place left where the institution commands loyalty is the military. A general is nothing when he takes off the uniform.

he’s not much when he still has it on.

Charles Ferguson June 23rd, 2012 at 3:51 pm
In response to June Carbone @ 148

I think that there is a great deal to what you say. I look forward to reading your next book…

econobuzz June 23rd, 2012 at 3:52 pm
In response to June Carbone @ 148

The new book I’m working on looks at what happened to the family. The answer is inequality.

And higher education in this country has become an engine of inequality.

William Black June 23rd, 2012 at 3:53 pm

Sheila Bair was by far the best of a terrible lot.

Donaldson is a fascinating case. Quite mixed while in office. He did the Comprehensive Supervision scam at the behest of the Big Five securities firms (unpardonable), but also voted frequently with the Dems on the SEC to form 3-2 majorities. I was most disappointed that he resigned when Bush requested it so that Bush could appoint Cox. Donaldson was rich enough and at the point of his career he could have refused. Ed Gray (S&L days) did just that when he was not rich or at the end of his career and his refusal to resign and his continuation of reregulating, re-supervising, and aiding prosecutions saved the nation from a catastrophe.

thatvisionthing June 23rd, 2012 at 3:54 pm
In response to econobuzz @ 142

I’m interested in MMT, I feel the buzz all around, but the entry bite is so big… is there an MMT for Dummies?

Charles Ferguson June 23rd, 2012 at 3:55 pm
In response to econobuzz @ 155

Very true – and not sufficiently appreciated.

Maureen Tkacik June 23rd, 2012 at 3:56 pm
In response to William Black @ 146

Yes yes yes, but the vast preponderance of that trillion dollars worth of CDOs was synthetic or “hybrid” (80% synthetic.) they were churning out clones of loans and selling them on the basis of a projected 7-8% annual housing price appreciation as the market was crashing. The loan origination-level fraud was degenerate and boiler roomy but to the credit of WaMu and New Century they didn’t come up with the idea to sell off 15 derivative clones of each of their very shittiest loans as the whole thing was crashing down. I dunno, in any case it just seems like the most unbelievably obvious…oh I don’t know. I’m getting a headache

bluewombat June 23rd, 2012 at 3:56 pm
In response to June Carbone @ 152

I certainly agree that Republicans believe in policing.

For some people, anyway.

Maureen Tkacik June 23rd, 2012 at 3:57 pm
In response to William Black @ 156

Greenspan was the guy who axed Donaldson. Bill McDonough left then too. Has anyone heard from that guy? That’s when Sarbox was officially no longer happening.

William Black June 23rd, 2012 at 3:57 pm

Charles, great film, great book. I have to take off now to feed the troops.

Nice to meet you electronically. Hope to have many conversations with you, including in person.

Are you coming to KC as part of your book tour? We could help with audience turnout and we’d love to have you talk to our university and city community.

dakine01 June 23rd, 2012 at 3:58 pm

As we come to the end of this interesting and timely (of course) Book Salon -

Charles, Thank you for stopping by the Lake, discussing your new book and the economic meltdown

Maureen, Thank you very much for Hosting this great Book Salon.

Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America – if you haven’t bought it yet….

Thanks all, have a great evening.

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

Charles Ferguson June 23rd, 2012 at 3:59 pm
In response to William Black @ 162

Thank you – and thank everyone. My time to take off, too…

No plans for travel to your town, alas – but I do hope that we can meet in person someday. Good luck with all your own work…

C

thatvisionthing June 23rd, 2012 at 4:02 pm
In response to William Black @ 156

I loved this Sheila Bair Wa-Po op-ed: Fix income inequality with $10 million loans for everyone!

Under my plan, each American household could borrow $10 million from the Fed at zero interest. …

Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years.

…Because we will be making money in basically the same way as hedge fund managers, we should have to pay only 15 percent in taxes, just like they do. And since we will be earning money through investments, not work, we won’t have to pay Social Security taxes or Medicare premiums. That means no more money will go into these programs, but so what? No one will need them anymore, with all the cash we’ll be raking in thanks to our cheap loans from the Fed.

bluewombat June 23rd, 2012 at 4:02 pm

Great thread, although I won’t pretend I understood every detail. Thanks to Charles Ferguson, as well to William K. Black, and the others who gave this thread so much intellectual firepower and moral indignation.

econobuzz June 23rd, 2012 at 4:03 pm

Great discussion, all. Thanks.

thatvisionthing June 23rd, 2012 at 4:05 pm
In response to econobuzz @ 164

63 pages! groan

(is there a T-shirt?)

thanks though :-)

Cynthia Kouril June 23rd, 2012 at 4:05 pm

nonpartisan social movement

Like Occupy Wall Street?
What do you think of Occupy?

thatvisionthing June 23rd, 2012 at 4:06 pm

Thank you for coming here and thanks to Bill and Maureen as well.

thatvisionthing June 23rd, 2012 at 4:06 pm

Oh hell YES — Charles, Bill, come baaaaack

GlenJo June 23rd, 2012 at 4:10 pm

Thank You!

Please keep it up, you are making a difference!

Cynthia Kouril June 23rd, 2012 at 4:12 pm
In response to William Black @ 94

The thing is, I’m not a banking lawyer, I’m a fraud (or more accurately anti-fraud) lawyer. The same techniques that were used to investigate and prosecute the mafia’s grip on the construction and waste carting industries in NYC in the late 80′s and early 90′s work just fine in wading through the mortgage crisis.

This is not that hard, just complicated.

In fact, it has all of the needless complication (and double use of nearly identical names) that is the hallmark of a money laundering case.

Cynthia Kouril June 23rd, 2012 at 4:15 pm

Yep, you have it right.

Cynthia Kouril June 23rd, 2012 at 4:20 pm
In response to William Black @ 116

Which is exactly what I suspect ahppened to the structured derivates guy at SEC. Who BTW, seemed shocked that I had read more than on set of Pooling and Servicing documents end to end.

Like it’s hard to do. Not hard, just really really tedious.

thatvisionthing June 23rd, 2012 at 4:22 pm

Inside Job opening credits youtube: https://www.youtube.com/watch?v=1505DBTp2eE

greed you can dance to

Q: Why do you think there isn’t a more systematic investigation being undertaken?
Nouriel Roubini: Because then you would find the culprits.

Cynthia Kouril June 23rd, 2012 at 4:27 pm

Ooops, EPU’d myself

thatvisionthing June 23rd, 2012 at 4:31 pm

Thanks for all you do, Cynthia, glad you were here too

thatvisionthing June 23rd, 2012 at 5:00 pm

also at the dance party

http://www.neilyoung.com/forkintheroad/forkintheroadvideo.html

There’s a bailout coming but it’s not for you
It’s for all those creeps hiding what they do

BeachPopulist June 23rd, 2012 at 7:54 pm

All I gotta say is, pretty awesome array of folks on this Salon.

HotFlash June 23rd, 2012 at 8:54 pm

And this incompetence magically stopped in 2012? Al this sh*t is still going on.

HotFlash June 23rd, 2012 at 9:01 pm
In response to June Carbone @ 128

I must politely disagree with you. It may be possible to embarrass this or that Democrat, but embarrassing The Democrats? Not possible. Takes more money than there is in the whole world.

HotFlash June 23rd, 2012 at 9:17 pm

Bang head on keyboard. Dosim repitatur.

HotFlash June 23rd, 2012 at 9:22 pm

Maureen, come baaaaaaaack! Please!

HotFlash June 23rd, 2012 at 9:25 pm

Oh, EPU’d. Repeatedly. Fine. My home planet had 30-hour days.

bluewombat June 23rd, 2012 at 10:00 pm
In response to HotFlash @ 186

EPU’d?

EPU Economic Planning Unit (Malaysia)
EPU E Pluribus Unum
EPU Energy Processing Unit
EPU Examen Periódico Universal (Spanish: Universal Periodic Review; UN)
EPU Extended Power Uprate (nuclear power)
EPU European Payments Union (organization formed after WWII)
EPU Emergency Power Unit (F-16 Aircraft)
EPU Early Pregnancy Unit (hospitals)
EPU Earnings Per Unit
EPU European Peace University (Austria)
EPU Environmental Protection Unit
EPU Electrical Power Unit
EPU European University Centre for Peace Studies
EPU European Political Union
EPU Elliptically Polarized Undulator
EPU Estimated Position Uncertainty
EPU European Pharmaceutical Union
EPU External Power Unit
EPU Evil Parallel Universe (firedoglake)
EPU Extended Processing Unit
EPU Emergency Psychiatric Unit
EPU Electronic Processor Unit
EPU Excess Property Unit
EPU Electronic Program Update
EPU Equivalent Power Unit
EPU Exeter Political Union (Phillips Exeter Academ, Exeter, NH)
EPU Editorial and Publications Unit (Philippines)
EPU Ecole Polytechnique Universitaire (French: Polytechnic University)

darms June 23rd, 2012 at 11:13 pm

Except for perhaps a permanent head dent. Could be classy, add a proscenium curtain & perchance it could be a stage for Ken & Barbie (dolls)…

dakine01 June 24th, 2012 at 10:11 am
In response to bluewombat @ 187

Read that list closely and you should at least be able to get a hint. Then go to Urban Dictionary and look it up there for further explanation.

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