2016 Postmortem

Jefferson23

(30,099 posts) Fri Feb 5, 2016, 07:06 PM Feb 2016

Did Financial Giant Goldman Sachs Just Admit the System is Rigged?

Former financial regulator Bill Black explains why one of world's largest investment firms Goldman Sachs questioning the "efficacy of capitalism" and why its CEO is terrified of a Sanders presidency

February 5, 2016

Bio

William K. Black, author of THE BEST WAY TO ROB A BANK IS TO OWN ONE, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics. Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement. Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.

Transcript

The head of Goldman Sachs, Lloyd Blankfein, has a bone to pick with Democratic candidate Bernie Sanders. In an interview on Wednesday he said he was concerned Sanders was singling him out in his critique against Wall Street, calling Sanders' candidacy a, quote, dangerous moment for the country. In public appearances, Sanders has singled out Blankfein for representing Wall Street greed, and has come out strongly in favor of breaking up the big banks.

Now joining us to get into all of this is our guest Bill Black. Bill is an associate professor of economics and law at the University of Missouri, Kansas City. He's a white collar criminologist and former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One. And of course, he's a regular contributor to the Real News.

Thanks for joining us, Bill.

BILL BLACK: Thank you.

DESVARIEUX: So Bill, let's first talk about this statement that Lloyd Blankfein made. For whom--what is he talking about when he says this is a dangerous moment? And who is it really dangerous for?

BLACK: It's dangerous for the people that have rigged Wall Street. And indeed, Blankfein, of course, has a rather high opinion of himself and Goldman Sachs, saying, and I quote, that they were doing God's work, unquote. So this is, of course, the entity made infamous by Matt Taibbi as the vampire squid.

And yesterday they came out, basically simultaneously, they being Goldman, with a report that said hey, you know, all the economic theory of the, you know, the right-wing economic theory, says these super high returns to capital and to the wealthiest people aren't supposed to last. This is supposed to go to workers. They're supposed to get the improvement in productivity. And this hasn't been happening for a very long time. And therefore, we really have to question whether those economic models, whether capitalism actually works.

DESVARIEUX: And Bill, you're referring to a recent article in Bloomberg that, that basically laid out--they spoke to staff members of Goldman Sachs, and they, quote, said they are questioning the, quote, efficacy of capitalism.

So it, it sounds like quite a statement, coming from one of the largest investment banks, and you're kind of unpacking it here. What are they really saying when they make a statement like that?

BLACK: They're saying that the evidence says the system's rigged. And it's rigged against all of us, and in favor of Goldman and the people who lead it, and a really tiny base of folks, not even the top 1 percent, but the top 1,000th of 1 percent, which has gotten the enormous bulk of the gains, have gone to this group.

So Goldman says yes, that's exactly what's happening. And then Blankfein goes on pretty much simultaneously and says Bernie is a danger to the system because he's point out that the system is rigged. He has to be stopped. And how dare he criticize me? So it's very [inaud.].

DESVARIEUX: The first thing that comes to mind, though, why even point out that the, they're questioning the efficacy of capitalism? It seems like you're sort of alerting the public to the fact that they're having a party. I mean, people are very much aware of by, hey, the system is really rigged, and we're very much aware of it and having a good time.

BLACK: Yeah, but you know, occasionally honesty seeps in in all kinds of places. Particularly among researchers, who look at the data and say, well, you know, we can't explain this data under our theories of capitalism, because this is impossible. So gosh, some other theory must be true. What's the other theory? The other theory is that the system is rigged. And that's what the numbers say. Right, it's not just rhetoric. It is fundamental economic numbers that economist, finance-types look at, and have looked at for some considerable time. In other words, it isn't just people complaining inaccurately, hey, the gains aren't going to us. It's actually true.

And indeed, if you look at certain groups, it's precisely the groups that have tried to do what they were told was the right thing. So these would be college graduates, among Latinos and blacks. Well, guess who got nailed the absolute worst in the great recession? It's exactly those two groups, where college-educated Latinos lost about 72 percent of their wealth, and college-educated blacks lost in the range of 65 percent of their wealth. Just a staggering financial holocaust of people trying to do the right thing. So again, this isn't supposed to happen if we really have, quote-unquote, free markets, which tells you we don't really have free markets.

DESVARIEUX: Yeah, exactly. Bill, let's turn and talk about Goldman Sachs and its connection to Hillary Clinton. Last night we had a debate, a Democratic debate take place. And there was a town hall. Moderator Anderson Cooper questioned Hillary Clinton accepting money from Goldman Sachs for her speeches. Let's take a look.

ANDERSON COOPER: One of the things that Senator Sanders points to, and a lot of your critics point to, is you made three speeches for Goldman Sachs. You were paid $675,000 for three speeches. Was that a mistake? Was that a bad, error in judgment?

HILLARY CLINTON: Look, I made speeches to lots of groups. I told them what I thought, I answered questions.

COOPER: But did you have to be paid $675,000?

CLINTON: Well, I don't know. That's what they offered. You know, every secretary of state that I know has done that.

COOPER: That's usually once they're [in] office, and not running for an office again.

CLINTON: Well, I didn't know--.

COOPER: Must have known.

CLINTON: To be honest, I wasn't. I wasn't committed to running. I didn't, I didn't know whether I was or not--.

COOPER: You didn't think you were going to run for president?

CLINTON: I, I didn't. You know, when I was secretary of state, several times I said, you know, I think I'm done. And you know, so many people came to me, started talking to me--.

DESVARIEUX: So Bill, you just heard Secretary Clinton lay out why she was paid $600,000--$600,000 for her speeches that she gave at Goldman Sachs. What do you make of this?

BLACK: Well, first, it's very bad to say 'to be honest' as part of an answer, because it suggests all those other parts of your answer wouldn't, weren't honest. We like to take it for granted that the speaker is actually being honest.

Second, it was over $600,000. And so, okay. There are two possibilities, right. One, she actually gave them $675,000 in value for three speeches, in which case, what? How does she have secrets of value that can make Goldman incredibly wealthy, and why is she sharing them secretly with Goldman? Because those secrets would have had to come from her time as a public official. You're not supposed to sell secrets for $675,000. Or two, what we really know happened, she gave some bunch of garbage. The standard yada-yada speech. And they cheered. And they paid her somewhere near $675,000.

Okay, why? She gave the answer--you're not supposed to give the answer publicly. She said, but we all do it. Now, first, any of us who are parents [inaud.], or if you're children, remember what your parents said. That's not exactly a very good moral principle.

DESVARIEUX: But maybe she's being more authentic because folks have criticized her on her authenticity. What would you say to that?

BLACK: Yeah. Well, then, again, you're not supposed to admit it out loud. Because that means you're getting well over $600,000 as a legal bribe. And that banks, big banks, make sure that our senior officials, not just elected but appointed officials, like secretary of state, will support the banks while they're in office, which is exactly what Hillary did. And when you get out, we will use the legal form of bribery, where nobody ever goes to jail. We will give you boatloads of money for a half hour of your time. You know, like, over $200,000 an hour.

DESVARIEUX: Yeah. Yeah, not a bad rate.

BLACK: You're saying America is strong under our leadership. Clap, clap, clap, clap. I mean, she doesn't have to ask at the end of her speech like Jeb Bush did yesterday, please clap. I guarantee you, the Goldman folks got up, clapped, cheered, gave her a standing ovation, yada, yada, yada. And then she said absolutely nothing that they didn't already know at the beginning of the speech.

So you're not supposed to admit that there is unbroken practice of paying off the secretary of state, and not, of course, just the secretary of state. It's also the president, it's also the Treasury secretary. All of these folks go out--and President Reagan gave a speech in Japan, reportedly, for $1 million. And that was a whole lot of years ago. You can imagine what it would be now.

DESVARIEUX: Okay. Well, Bill, we are certainly going to be posing a lot of these questions in New Hampshire, where we're going to have live coverage of the New Hampshire primaries. Just putting that out there to our Real News viewers. So please make sure to tune in. that includes you, too, Bill. Thank you so much for joining us.

BLACK: Thank you.

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