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JESSICA DESVARIEUX: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore.
And welcome to another edition of The Bill Black Report.
Now joining us is Bill Black. Bill is an associate professor of economics and law at the University
of Missouri-Kansas City, and he's also a regular contributor to The Real News. Thanks for joining
us, Bill.
BILL BLACK: Thank you.
DESVARIEUX: So, Bill, it's been five years since the collapse of Lehman Brothers, and
it's on record that these too-big-to-fail banks are much larger now. The six largest
banks have $9.6 trillion in assets, which comes to 58 percent of GDP. That's a pretty
big number, Bill.
Can you talk a little bit about these too-big-to-fail banks and how much bigger they are now? And
why are the banks larger now? And wasn't Dodd-Frank supposed to resolve all of this?
BLACK: Okay. So these are the systemically dangerous institutions that the administration
insists on calling systemically important. But they are dangerous. The administration
tells us that when the next one fails, it's likely to cause a global financial crisis.
So the obvious answer was to get rid of them, and the administration has completely refused,
as did the Bush administration, as do the other governments in the world, to get rid
of these giant institutions.
Why are they bigger? They're bigger because when the other banks failed, they were--other
large banks failed, they were typically acquired by the largest banks. That's one reason.
Second is that banks this large have an implicit federal subsidy in the U.S. context, or national
subsidy in other contexts, that allows them to outcompete their competitors because of
the unfair advantage of that guarantee. So a group of very conservative economists, their
metaphor for this is that it's like bringing a gun to a knife fight, and they say that
there's nothing free about free markets--and, again, these are folks that worship free markets--because
there are no free markets when you have this implicit federal subsidy.
So it's critical to fix it, they've refused to fix it, Dodd-Frank doesn't even begin to
address fixing it is the answer on that part of the problem.
Second part of the problem is modern executive compensation. And modern executive compensation
is bigger and badder than before we went into the crisis, and it is typically even more
short-term weighted (which is a very bad thing) than before the crisis, and it's much larger.
And this is why you've seen that virtually all of the income gains since the crisis in
the United States have gone to the top 1 percent of the population, and the top 1 percent is
actually heavily driven by the top 0.001 percent, which got the overwhelming amount of those
gains, and they are overwhelmingly folks in big finance and CEOs of major corporation.
And the third thing that was driving our crises they also haven't fixed, and that's the three
de's--deregulation, desupervision, and de facto decriminalization. To take it in reverse
order, there was still, five years after Lehman, not a single prosecution of an elite banker
that drove the crisis. In terms of desupervision, we still appoint our supervisory heads primarily
on the basis of people who refuse to engage in any crackdown, and indeed they went so
far as to adopt officially the too-big-to-jail principle, which is, of course, the death
of any accountability. And on deregulation, well, you might say, hey, there's certainly
been a change there. You do have Dodd-Frank, and it does call for the creation of over
1,000 regulations. And that's true, but very few of those regulations are addressed to
the things that actually caused the crisis.
To the extent there are a few regulations that address what actually caused the crisis,
only one of them has actually been fully implemented. That deals with liars' loans. And that's a
good thing. Liars' loans were endemically fraudulent. But it doesn't fix the problem
that there are many assets you can use to run the scam. And this is only one of the
assets they cracked down on.
So a little mixed story on regulation, but on the other parts of the de's, the desupervision
and the de facto decriminalization, it's actually gotten far worse than, for example, our response
to Enron.
DESVARIEUX: We'll continue this conversation in our extended version of this interview.
So we invite our viewers to click on the link to the extended interview.
But, Bill, thanks so much for joining us. We'll continue this conversation.
And thank you for joining us on The Real News Network.
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Five Years After Lehman Brothers Fall, Big Banks Even Larger

949 Folder Collection
James published on June 19, 2015
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