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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.

JESSICA DESVARIEUX: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore.

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Five Years After Lehman Brothers Fall, Big Banks Even Larger

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    James posted on 2015/06/19
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