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Everybody is mad as hell that big investment banks put the country on the brink of economic ruin. Few people get a chance to vent in front of Congress.
Bill Black, a law and economics professor at the University of Missouri-Kansas City, appeared before the House Financial Services Committee last month. The subject was the bankruptcy of Lehman Brothers.
Black worked as a regulator during the savings-and-loan crisis. As an official at the Federal Savings and Loan Insurance Corporation, he sat in on a meeting with a group of U.S. senators as they tried to beautify Charles Keating Jr., a corrupt, craggy financier who had donated richly to their campaigns. The senators, a group that included John McCain, came to be known as the Keating Five.
Black describes himself as a "serial whistle blower." As the veteran of a previous banking crisis, he takes a dim view of the job lawmakers and regulators did in the run-up in the most recent meltdown.
Black's frustration came through in his testimony before the House committee. He spared no one's feelings. He accused of Lehman of perpetrating a fraud, called the Securities and Exchange Commission negligent and faulted Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner (a former president of the New York Fed) for not making an effort to shut down Lehman's "liar loan" factory.
Speaking about his experience at a lecture at UMKC on Sunday, Black said that he wanted the encourage lawmakers to a take wider view of the Lehman Brothers debacle.
Much of the committee's attention focused on the use of an accounting method
that enabled Lehman to keep items off of its books. Black felt that Lehman's performance as a buyer and seller of sleazy subprime loans
deserved more attention. At UMKC, Black compared Lehman's mortgage-banking subsidiary to a vector that transmits disease.
Financial blogs cheered
Black's blunt testimony; major news operations ignored it. Black said that he was surprised that his remarks did not receive more play. Former Lehman CEO Dick Fuld
was sitting six feet from Black as he described the company in the terms of a criminal enterprise. "You would have thought that would have been a pretty good story," Black said.
Black was asked about Goldman Sachs. He said he was glad to see the SEC file a complaint
, although he thinks there were easier targets for authorities to pursue.
Black is disturbed that Wall Street bankers have thus far avoided criminal charges. Hundreds of individuals were marched into criminal courts during the S&L rehabilitation process.
Indictments, Black said, deter bad behavior and would help the citizenry make sense of the shenanigans took place. The financial instruments that Lehman and others created were complicated. Fraud, however, is an age-old concept. Black noted that the Talmud forbids the pouring of wine from a height. "Too much of it will be foam instead of wine," he said.