Excellent suggestion, oleeb! I concur.

This is so important! And we must get the word out. Who better to do that than the professor himself?

I'm not sure Will is agreeing to much, if anything of what Prof. Black has to say as it pertains to the coverup of fraud and the way to identify and "fix" it. Will's argument, though it is nice to see him being suspicious of the giveaway, is essentially tha government and spending have grown beyond our capacity to manage them. That is a very, very different and unrealted point.

Now, if pressed, would Will agree that massive fraud took place on the part of Wall Street and all those who committed it should be prosecuted? I don't know. It would be nice if he would, but somehow I think he'd construct an argument very like that Mr. Geithner puts forth in order to protect the wealthy banking interests which he views as his primary duty. Will's duty, as a confirmed member of the village club in DC would be stepping way out of line if he were to do anything that would question Geithner's moves to protect the interests of the predator class he has always so faithfully served.

Good suggestion.
Here are some more:
http://www.freepress.org/departments/display/20/2009/3370

Part of the problem is that Mr Black claims that the Prompt Corrective Action Act mandates seizure/receivership.

However it actually says:

(3) Conservatorship, receivership, or other action required (A) In general The appropriate Federal banking agency shall, not later than 90 days after an insured depository institution becomes critically undercapitalized—

(i) appoint a receiver (or, with the concurrence of the Corporation, a conservator) for the institution;

OR

(ii) take such other action as the agency determines, with the concurrence of the Corporation, would better achieve the purpose of this section, after documenting why the action would better achieve that purpose.

I will not dispute the systemic problems leading to the crisis, but his claim that the administration is breaking the law needs to be analyzed more carefully. Kos diarist Geekesque explains.

Also, with respect, he didn't say they were breaking the law. He said they were ignoring it.

There is a substantive difference. You're good at snark, but not so good on the substance here.

For those who care, here's a short profile of Prof. Black that I think more than adequately demonstrates that he is a person of genuine substance when it comes to the financial crisis that has brought our nation to it's knees:

Bill Black is an Associate Professor of 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.

He 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. His regulatory career is profiled in Chapter 2 of Professor Riccucci's book Unsung Heroes (Georgetown U. Press: 1995), Chapter 4 (“The Consummate Professional: Creating Leadership”) of Professor Bowman, et al’s book The Professional Edge (M.E. Sharpe 2004), and Joseph M. Tonon’s article: “The Costs of Speaking Truth to Power: How Professionalism Facilitates Credible Communication” Journal of Public Administration Research and Theory 2008 18(2):275-295.

I have two objections to Black's reiterated accusation that Geithner is breaking the law by not taking over "the banks".

First it istaking over a certain number of banks every week.

Second I doubt there are many other banks that the Govt is legally obliged to put into receivership right now.

For that to be legally required the banks would have to be insolvent ,which they're not. The Mark to Market regulation would indeed have made a large number of banks "insolvent".But the FASB has cancelled M2M .So they aren't,

So Black's wrong to accuse the Govt of acting illegally in not demanding they enter receivership.

I'm puzzled by this unsubstantiated allegation. Perhaps he just hadn't heard about FASB's volte face.

Two observations. One....I find it interesting that those blog entries that deal with this subject (Bill Moyers and Bill Black) do not seem to have a very long life span at TPM.

Second...more of a guess really, but I'll bet that the Obama team is busily trying to come up with some sort a a response to the interview and Black's statements and allegations. Moyers' Friday interview has made it a the topic de jour on more than a few other blogs.

C

they wouldn't need the apparently endless billions we have been pumping into them

They're illiquid.

Krugman and others who claimed they were insolvent did so prior to the FASB change at which point I have no doubt banks with a majority of the country's assets were insolvent since the sub prime mortgages exceeded their capital and right now the value of those sub primes is essentially zero.

Meanwhile the FDIC continues to take over banks whose insolvency is such that FASB can't bail them out. I suggest that implies that the ones not taken over are not in fact insolvent if able to exclude the drastic undervaluation required by mark to market.

I agree with you that the lack of transparency causes understandable suspicion.

I have to disagree with you Flavus. I do not believe that depositors would flee the banks if some one came out and said up right that these banks were insolvent. The FDIC has been dealing with insolvent banks and the FSLIC the same of S&Ls for years and years, there has been few if any "runs" and either of these institutions.

They just want to protect the rich SOBs on Wall Street. And besides any damage to the image of commercial banks, the banks have already done to themselves.

C

rich SOBs on Wall Street

That is indeed the heart of the problem. neither this nor any country has sufficient resources to allow the Masters of the Universe to enjoy their life styles without squeezing the auto workers. The pie just ain't that big.

For decades the rising tide was only been able to lift all boats when supplemented by a stream of debt which had to dry up some day (Block that metaphor!)

Rather than focussing on the particular targets thrown up by a particular crisis :today, Investment Bankers;tomorrow, Brain Surgeons;next day, Shortstops;Etc. we need seriously to redistribute wealth.

I think it's more than suspiscion frankly and I haven't noticed Krugman changing his tune on insolvency. The central point that the Krugman's and Black's are making is that the only reason the major banks are not insolvent is the massive, ongoing bailout which is covering up their insolvency as the Japanese did in their crisis in the 90's for very similar reasons.

I have to agree with flavius. The Obama administration has far more information about what is going on with this financial crisis than anyone here, including myself, or Misters Black, Moyer or Krugman. I do not believe Obama is trying to screw us all; neither are Summers or Geithner. It's time to do away with the circular fireing squads and let Obama and his team do their jobs.

On the other hand, there is no reason to assume that Citibank Federal Savings Bank is insolvent.

From Wikipedia

A bank failure occurs when a bank is unable to meet its obligations to its depositors or other creditors.[1] More specifically, a bank fails economically when the market value of its assets declines to a value that is less than the market value of its liabilities. As such, the bank is unable to fulfill the demands of all of its depositors on time.

The failure of a bank is generally considered to be of more importance than the failure of other types of business firms because of the interconnectedness of banking institutions. It is often feared that the effects of a failure of one bank can quickly spread throughout the economy and possibly result in the failure of other banks, whether or not those banks were solvent at the time. As a result, banking institutions are typically subjected to rigorous regulation, and bank failures are of major public policy concern in countries across the world.

C

"Krugman and others who claimed they were insolvent did so prior to the FASB change at which point I have no doubt banks with a majority of the country's assets were insolvent since the sub prime mortgages exceeded their capital and right now the value of those sub primes is essentially zero."

WHAT?! The FASB change involves changes to how banks must report the value of their assets, not changes to the value of the assets themselves. Their value is a function of expected cash-flow, and fair-value accounting is the closest thing to an honest appraisal of those expectations. If the assets were worth x dollars before, they are worth x dollars now. The FASB decision is irrelevant to the question of solvency. It merely makes it easier for banks to lie about their state of solvency, by parking assets at level 3.

I don't know of anyone who feels confident the big banks are solvent. I do know of a lot of people who think these banks can work their way out of insolvency (for instance Hempton) over the course of a few years were we to suspend fair value accounting. And I know of a lot of people who think we should hand them a lot of money to bring them back into solvency. Geithner has decided to do both - hence the happiness all round.

Either one us might be right.

The starting point of this exchanges was Black's repeated statement that Geithner&co are breaking the law by not putting banks into receivership that should go there. He never specified further the "why" that led to the "should" and Moyers didn't ask him

My supposition is that Black would have said that they should go into receivership because they're insolvent. If so , that rationale was undermined by the change in GAAP. I quite agree that changing the application of an obscure accounting standard doesn't change the real life condition of a bank holding toxic assets. But it
does remove its eligibility for receivership under the law Black quotes.

Sure I could be wrong, Black could have had some other grounds in mind. But if the grounds were technical insolvency,the FASB change eliminates that and also eliminates Black's case for claiming that Geithner is acting illegally.