Why did the Fed allow the collapse of Lehman Brothers? How did liars loans and fraud become so pervasive throughout the financial sector? Bill Black continues his history of financial fraud on theAnalysis.news with Paul Jay.

Transcript

Paul Jay

Hi, I'm Paul Jay. Welcome to theAnalysis.news, and please don't forget the donate button, subscribe button, and share and all that kind of stuff, and we'll be back in a second with Bill Black.

So we're picking up our discussion with Bill Black about the development of fraud at the lowest, midlist, and highest level of the financial sector that gave rise to the 07/08 financial crash, and then we're going to get into more about has anything actually changed or are we likely to see it all again? Maybe we already are. Again, there's a new docuseries titled The Con that Bill helped advise and create. It's about the 07/08 crash and here's another trailer from the film.

Now joining us again to discuss the history and state of control fraud is Bill Black. As I said, he helped advise the filmmakers of The Con. He's a lawyer and academic and author and former bank regulator and maybe has the best title of a financial book ever, which is The Best Way to Rob a Bank is to Own One. He's an associate professor of economics and law at the University of Missouri, Kansas City. Thanks for joining us again, Bill.

Bill Black

Thank you.

Paul Jay

All right. So pick up the story. Now, I don't know if I'm jumping ahead. Let me ask if I'm jumping ahead. Then you can back up a bit. You talked about how while, none of the big guys went to jail, a lot of the small guys, even though individually made tons of money, a lot of those institutions did go bankrupt, but then one of the big ones, Lehman Brothers, was allowed to tank. Allowed, meaning it wasn't bailed out. So why did Lehman Brothers get into such trouble? Why did this dance, it's like musical chairs, why didn't they have a chair to sit down on?

Bill Black

So it really isn't like musical chairs, because you can make as many chairs as you want if you're the Fed. So nobody needs to end up this way. So why did it happen? And the answer is overwhelmingly dogma. The Fed and Treasury when Bear Stearns was failing were shocked. So let me just back up briefly.

Paul Jay

Yeah. Why did Bear Stearns fail?

Bill Black

Right. So the recession begins in 2007. The non-prime markets collapse in mid-2007 and that means the whole fraud scheme and predation scheme that we've described and predation, which we will describe is going to come down, but all the powers that be rushed to reassure – this is near the end of the Bush administration – that this isn't going to be a problem. The housing stuff is just too tiny. It can't affect big things like Wall Street and the general economy. There's not even going to be a recession. Well, there actually was a recession while they were denying it because there's lag when you report on a recession by definition, but this wasn't just the Republican Bush administration trying to win an election for the Republicans. It was prominent Democratic economists like Austan Goolsbee, who Obama would name chairman of his Council of Economic Advisers, who goes and writes an op-ed in The New York Times saying the mortgage markets are becoming ever more perfect, because of these insane things. We're going you people are insane. You see nothing. The disaster, it is an avalanche, it's just an avalanche in slow motion at the beginning.