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William K. Black on The Prompt Corrective Action Law

The Prompt Corrective Action Law: Section 1831o

William K. Black
Associate Professor of Economics and Law
University of Missouri – Kansas City
Please note that the views and opinions expressed are not necessarily the views and opinions held by Bill Moyers or BILL MOYERS JOURNAL

My comments in the Bill Moyers Journal interview about the “Prompt Corrective Action” (PCA) law (adopted in 1991) have sparked considerable comment in the blogsphere. Here is the portion of the interview transcript that discusses the PCA law.

WILLIAM K. BLACK: Well, certainly in the financial sphere, I am. I think, first, the policies are substantively bad. Second, I think they completely lack integrity. Third, they violate the rule of law. This is being done just like Secretary Paulson did it. In violation of the law. We adopted a law after the Savings and Loan crisis, called the Prompt Corrective Action Law. And it requires them to close these institutions. And they're refusing to obey the law.

BILL MOYERS: In other words, they could have closed these banks without nationalizing them?

WILLIAM K. BLACK: Well, you do a receivership. No one -- Ronald Reagan did receiverships. Nobody called it nationalization.

BILL MOYERS: And that's a law?

WILLIAM K. BLACK: That's the law.

BILL MOYERS: So, Paulson could have done this? Geithner could do this?

WILLIAM K. BLACK: Not could. Was mandated-

BILL MOYERS: By the law.

WILLIAM K. BLACK: By the law.

I first published an article about the PCA law over a month ago entitled: “Why is Geithner Continuing Paulson’s Policy of Violating the Law?” (February 23, 2009).

I was the staff leader for Federal Home Loan Bank Board Chairman Ed Gray’s successful reregulation of the S&L industry. That reregulation provided the tools that allowed the agency to place in receivership many of the worst control frauds. Gray inherited (and for a time supported) a dominant strategy of covering up the scale of the S&L industry’s insolvency. He personally recruited vigorous senior regulators such as Michael Patriarca and Joe Selby to reverse that strategy. The PCA law was adopted largely in response to the enormous cost to the taxpayers of our predecessor’s failed strategy of not closing insolvent S&Ls.

The new law had an impressive start, thanks in great part to the transformed reregulatory spirit. How many readers recall the 1991-92 subprime crisis? It didn’t happen because we took prompt regulatory action against subprime S&L lenders that were following practices (e.g., qualifying borrowers at the teaser rate, offering “neg am” mortgages, etc) that we knew would lead to widespread failures.

The broadcast of Bill Moyers Journal interview has raised enormously the public’s awareness of the PCA. A commentator has responded by arguing that the PCA law does not mandate that the regulators place insolvent banks into receivership. I am delighted that the debate has turned to focus in part on the issue of why virtually all economists and white-collar criminologists believe that it is essential to take prompt regulatory action to resolve failed banks, particularly ones that are insolvent due to “control fraud”, i.e., where the person that controls a seemingly legitimate entity uses it as a “weapon” to defraud. In the financial world accounting fraud is the “weapon of choice.”

Banks owned by holding companies are fully subject to the law

The commentator’s primary concern can be answered briefly because it criticizes a claim I never made. S(he) notes that banking holding companies and insurance companies are not subject to PCA. I did not say that they were. As the interview excerpt shows, we were talking about “[savings] institutions” and “banks” that can be put into “receivership” (I’m going to use “bank” here to refer to any FDIC-insured depository institution.) The FDIC (and if it lacks the funds, the U.S. Treasury) is only legally obligated to pay depositors of FDIC-insured banks up to the deposit insurance limits. The federal banking regulators have receivership powers only over federally insured depository institutions. The FDIC and the U.S. Treasury have no obligation to pay the debts of bank holding companies or insurance companies – and shouldn’t be paying those debts.

The commentator uses this strawman argument (refuting a claim no one made) to imply that the fact that PCA doesn’t apply to bank holding companies means that the federal financial regulators did not have to comply with the PCA law. S(he) lists a series of companies, primarily large bank holding companies (BHCs) and declares that their existence means: “So, pretty much all of the really big players don't fall under the PCA in the first place.” Bank holding companies, of course, are called that because they own banks – and the U.S. banks they own are subject to PCA. The fact that a bank is owned by a holding company is irrelevant to the PCA’s requirements; it provides no immunity from the PCA. BHCs are “really big players” because they own massive banks subject to the PCA. The banks are the “really big players” and they are subject to the PCA law. When we put insolvent banks into receivership their BHCs and affiliates lose all control of the bank. The FDIC has sole control of it.

PCA does not apply to the corporate owners of banks or their non-bank affiliates.
However, the bank subsidiaries are the dominant assets of almost all holding companies that own banks. As such, the failure of the banking within the group is likely to trigger the failure of the holding company.

To sum up the first point: banks are the issue. U.S. banks have FDIC insurance and are subject to the PCA law, regardless of whether they are owned by a BHC. Deposit insurance covers only insured banks, not BHCs, so the FDIC, the Treasury and the taxpayers do not owe any obligation to pay their creditors. If the commentator is worried that BHCs will escape receivership, s(he) need not fear. BHCs and insurance companies such as AIG are subject to the bankruptcy laws, which can be used to block and even “claw back” excessive and fraudulent executive compensation. (Treasury is also requesting Congress to grant it authority to place BHCs and some insurers into receivership.)

The PCA law mandates receivership in these circumstances

The commentator’s secondary argument is that the PCA law does not mandate that deeply insolvent banks be placed in receivership. S(he) points to several discretionary exceptions in the law, but none of the exceptions apply to insolvent banks that cannot be promptly corrected (recapitalized). They must be placed in receivership to comport with the stated purpose and language of the law. Moreover, neither the Bush nor the Obama administration has purported to act in accordance with the inapplicable exceptions.

I will respond to the argument primarily by citing other scholars on the PCA that were writing at an earlier time and in an apolitical context. The scholarly literature on the PCA is fairly extensive and quite consistent. I’ve drawn on Nieto & Wall (2007) (see n. 2) for the quotations in the following discussion (other than statutory language), but other sources do not differ materially on the origins, singular purpose, and provisions of the PCA law.

The PCA law, as I noted in the interview, arose as a corrective to problems exposed during the S&L debacle. The consensus was that the central problem was that regulators, sometimes bowing to political or industry pressure (“regulatory capture”), were delaying placing failed banks into receivership and greatly raising the cost to taxpayers.

The US has a long history with the basics required to implement PCA: binding capital adequacy standards and the ability to take substantial actions against banks that failed to meet the standards. The supervisors had the authority to adopt many of the provisions of PCA using their pre-existing powers if they had so chosen. However, the experience of the 1980s had clearly indicated that US supervisors valued discretionary responses targeted at keeping some banks (especially thrifts and large banks) in operation after they had became financially distressed. (p. 12)

Economists and white-collar criminologists broadly agree that prompt receiverships of failed banks reduce taxpayer costs and systemic risk.

[A]llowing insolvent banks to continue in operation runs the risk that they will accumulate even larger losses leading to even greater market disruption when the bank’s continued operation is no longer tenable. In contrast, if a bank is required to be closed before its losses exceed the bank’s equity and subordinated debt then depositors and other creditors should not be exposed to any loss. Moreover, prompt resolution reduces the probability that more than one systemically important bank will be insolvent at the same time. In sum, a supervisory focus on limiting deposit insurance costs is unlikely to result in significantly higher expected losses due to systemic financial problems and may well result in lower expected costs. (p. 18)

Leaving the senior officers that caused bank failure in control creates particularly severe risks to the taxpayers.

Prompt corrective supervisory action seeks to minimize expected losses to the deposit insurer and taxpayer by limiting supervisors’ ability to engage in forbearance. Along with reducing taxpayer losses, PCA should also reduce banks’ incentive to engage in moral hazard behavior by reducing or eliminating the subsidy to risk-taking provided by mispriced deposit insurance. These potential benefits from PCA appear to have been recognized, as reflected in the increasing number of recommendations to policy makers to introduce PCA type of provisions in their national legislation. Japan, Korea and, more recently Mexico have adopted this prudential policy. (p. 31).

“Moral hazard” can lead to both “reactive” control fraud and wildly imprudent risks. Either can cause a dramatic increase in taxpayer losses. As I explained in the interview, leaving the managers in place that caused the failure also prevents us from obtaining honest evaluation of assets and the criminal referrals that are essential to resolve this crisis.

The PCA law states its sole, express purpose:

(1) Purpose

The purpose of this section is to resolve the problems of insured depository institutions at the least possible long-term loss to the Deposit Insurance Fund. (1831o (a) (1)).

The administration’s duty, under the rule of law, is to administer the law to achieve that purpose. Prompt receiverships “resolve the problems” of insolvent and failing banks “at the least possible long-term loss.”

Because the problem prompting passage of the PCA law was supervisory delay in closing insolvent banks, the law mandated “prompt corrective action.” This, of course, need not mean receivership for troubled banks that can promptly recapitalize themselves by raising equity. The mandate to the regulators is that either the bank or the regulator must promptly correct the capital inadequacy.

In 1991 the Congress moved to limit taxpayer exposure to losses at failed banks with the passage of FDICIA. The PCA provisions of FDICIA create a structured system of supervisory responses to declines in bank capital, culminating in the bank being forced into receivership within 90 days after its tangible equity capital dropped below two percent of total assets. (pp. 11-12)

Note that two percent tangible capital (the point below which a bank is “critically undercapitalized”) is a much higher number than it may appear, for many banks have large amounts of “goodwill” (an intangible) on their books as an asset. The authors emphasize the regulators “forc[ing]” the bank into receivership if it does not promptly restore its capital. They expressly tie these provisions to the PCA law’s intent to combat regulatory forbearance through “mandatory” supervisory intervention.

The key innovation of PCA is that it recommends a reduction of supervisory discretion to exercise forbearance by proposing a series of capital adequacy tranches with a set of mandatory supervisory actions for each of the undercapitalized tranches. Mandatory supervisory actions are intended to override the incentives supervisors would otherwise have to engage in forbearance. (p. 19)

The authors also explain that the PCA law was intended to protect the regulators “independence” from the common political pressures to keep failing banks open by “requir[ing] them to intervene.

The US supervisors did not need political or judicial approval prior to PCA to intervene at a troubled bank or to force an insolvent bank into resolution. The major change in supervisory practice resulting from PCA is that after PCA the supervisors were required to intervene as a bank’s supervisory capital ratios deteriorated. The independence of supervisory action provided to supervisors before PCA is critical to the effective operation of PCA. A system that requires the prior approval of political authorities creates the potential for delay and forbearance in supervisory intervention to the extent that the political authorities do not follow the supervisors´ recommendations. Moreover, if this condition is not met, the requirement of prior political approval reduces the effectiveness of PCA in discouraging banks from taking excessive risk. (p. 22)

If the bank cannot promptly raise capital on its own to return to health it must be placed in receivership. Nieto & Wall explain that such receiverships are the normal U.S. means of dealing with failed banks, lead to the removal of the bank officers that caused the failure, are not remotely akin to “nationalization”, and substantially reduce the cost to the taxpayers.

2.3 Should banks be closed with positive regulatory capital?
Both SEIR [the academic proposal of Drs. Kaufman and Benston that led to the adoption of the PCA law] and PCA call for timely resolution, which is a policy where banks with sufficiently low, but still positive, equity capital are forced into resolution. In the US context, resolution is understood to include: (1) the government assuming control of the failed bank, firing the senior managers and removing equity holders from any governance role, and (2) the government returning the bank’s assets to private control through some combination of sale to a healthy bank or banks, new equity issue, or liquidation. Timely resolution provides two important benefits. First, forcing a bank into resolution while it still has positive regulatory capital truncates if not eliminates the value of the deposit insurance put option, reducing the incentive of the bank’s shareholders to support excess risk taking. Second, timely resolution is critical to limiting deposit insurance losses. If insolvent banks are allowed to continue in operation then the potential losses from failure can be very large. (pp. 20-21)

These mandatory provisions of the PCA law are “critical” to its effectiveness. Note the scholars’ emphasis on the provisions that “require minimum and automatic supervisory action” and subject banks to “mandatory closure” before they become insolvent.

Three aspects of the philosophy underlying SEIR/PCA are critical to its effective operation. First, the primary goal of prudential supervisors should be to minimize deposit insurance losses, a goal which is also likely to result in a reduction in the expected social costs of systemic financial problems.

The PCA policy applied in the US goes beyond those three principles of Basle II in that it limits even further supervisory discretion as to when to forbear from intervening by specifying capital/asset ratios that require minimum and automatic supervisory action.

The third critical part of PCA follows from the first two parts, banks should be subject to mandatory closure at positive levels of regulatory capital ratio. This provides an incentive to banks’ managers to recapitalize the bank or look for a healthy merger partner and, ultimately, contribute to reduce the cost of deposit insurance. (p. 31)

The authors also explain provisions of the PCA law that make its requirements anathema to the bankers that caused the failures (i.e., firing managers and restricting management “bonuses and raises”) and the regulators whose laxity permitted widespread frauds.

No bank may make a capital distribution (dividend or stock repurchase) if after the payment the bank would fall in any of the three undercapitalized categories unless the bank has prior supervisory approval. All undercapitalized banks must submit a capital restoration plan and that plan must be approved by the bank’s supervisor. All undercapitalized banks also face growth restrictions. Significantly undercapitalized banks must restrict bonuses and raises to management. Critically undercapitalized banks must be placed in receivership within 90 days unless some other action would better minimize the long-run losses to the deposit insurance fund. Supervisors are also given a variety of discretionary actions they may take. For example, the supervisors may dismiss any director or senior officer at a significantly undercapitalized bank and may further require that their successor be approved by the supervisory agency. (p. 13)

PCA requires that the inspector general of the appropriate supervisory agency prepare a report whenever a bank failure results in material losses. The report addresses why the loss occurred and what should be done to prevent such losses in the future. A copy of the report is to be provided to the Comptroller General and to any member of Congress requesting the report.21 FDICIA also provides for public release of the reports upon request…. (p. 14)

Recent IG reports of this nature have led to the removal of two of the most senior Office of Thrift Supervision (OTS) leaders. Regulators that place fraudulent banks that they have failed to supervise properly into receivership risk their reputations and careers. One can well understand why senior regulators are so hostile to complying with the PCA law. (As Treasury Secretary, and as a leading colleague of then Secretary Paulson, I have concentrated on Mr. Geithner’s role, but each of the top federal banking regulators is complicit in failing to comply with the PCA law.)

Before the legal minutia, let’s not lose sight of the policy issue

To review the bidding to date: there is a consensus among economists and white-collar criminologists (and senior regulators that have successfully resolved prior crises such as William Seidman, Edwin Gray, and Paul Volcker) that failing banks should be placed promptly into receivership if they cannot recapitalize. So the fundamental question, even if the PCA law was never passed, is what can the nation do to end the disastrous Paulson/Geithner policy of covering up the largest banks’ losses and leaving the CEOs and senior officers that caused their failures, often through fraud, in power? How many of those of us that voted for Mr. Obama believed that they were voting for a continuation of Bush’s failed financial regulatory policies? Given the terrible cost to taxpayers during the early years of the S&L debacle of “forbearance” for failed S&Ls, the horrific failure of Japan’s embrace of the cover up of its bank losses, and the great success of the vigorous reregulation of the S&L industry why would we adopt the failed strategy instead of the proven success? The way we reregulated the S&L industry was not simply an economic success, it was vital to restoring at least some integrity. We insisted on honest accounting, used prompt receiverships, and rooted out the control frauds. This led to over 1000 felony convictions related to the debacle – the greatest criminal justice success in history against elite white-collar criminals.

On to the legal specifics

The commentator argues that the PCA law does not mandate receiverships, citing exceptions to the mandatory language. None of the exceptions apply in the circumstances we are discussing and neither the Bush nor the Obama administration purports to be following such exceptions. Instead, what is occurring is a coverup designed to evade the PCA that relies on abusive accounting to hide the banks’ losses that arose due to mortgage and accounting fraud. There is a certain awful symmetry to thinking that the cure for accounting fraud is greater accounting fraud countenanced, even arguably mandated, by the government. Governmental abuse of accounting makes it far harder to prosecute bank officials that enriched themselves through accounting fraud.

To begin, we need to review the context of the discussion during the interview. Here’s the relevant portion of interview that led to the discussion about the PCA law:

BILL MOYERS: Why are they firing the president of G.M. and not firing the head of all these banks that are involved?

WILLIAM K. BLACK: There are two reasons. One, they're much closer to the bankers. These are people from the banking industry. And they have a lot more sympathy. In fact, they're outright hostile to autoworkers, as you can see. They want to bash all of their contracts. But when they get to banking, they say, ‘contracts, sacred.' But the other element of your question is we don't want to change the bankers, because if we do, if we put honest people in, who didn't cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up.

BILL MOYERS: The cover up?

WILLIAM K. BLACK: Sure. The cover up.

BILL MOYERS: That's a serious charge.

WILLIAM K. BLACK: Of course.

BILL MOYERS: Who's covering up?

WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he's a failed legacy regulator.

BILL MOYERS: But he denies that he was a regulator. Let me show you some of his testimony before Congress. Take a look at this.

TIMOTHY GEITHNER:I've never been a regulator, for better or worse. And I think you're right to say that we have to be very skeptical that regulation can solve all of these problems. We have parts of our system that are overwhelmed by regulation.

Overwhelmed by regulation! It wasn't the absence of regulation that was the problem, it was despite the presence of regulation you've got huge risks that build up.

WILLIAM K. BLACK: Well, he may be right that he never regulated, but his job was to regulate. That was his mission statement.


WILLIAM K. BLACK: As president of the Federal Reserve Bank of New York, which is responsible for regulating most of the largest bank holding companies in America. And he's completely wrong that we had too much regulation in some of these areas. I mean, he gives no details, obviously. But that's just plain wrong.

BILL MOYERS: How is this happening? I mean why is it happening?

WILLIAM K. BLACK: Until you get the facts, it's harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts.

BILL MOYERS: What facts?

WILLIAM K. BLACK: The facts about how bad the condition of the banks is. So, as long as I keep the old CEO who caused the problems, is he going to go vigorously around finding the problems? Finding the frauds?

The context then is Geithner saying that it would cost the taxpayers $2 trillion to bail out the insolvent banks, yet virtually all the banks are reporting they are solvent and “well capitalized.” I noted that both statements could not be true. Geithner has every incentive to understate, not overstate, the cost of bailing out the banks and his $2 trillion estimate is materially lower than most analysts, so there is every reason to believe that the banks are not recognizing at least $2 trillion in losses. We know that the big banks hold a greatly disproportionate share of the worst assets. That means that many, probably most, of the big banks are massively insolvent (because $2 trillion far exceeds what they claim to hold as capital). We know that many large bank stocks (before the announcement of the huge TARP II subsidy for banks) were trading at prices that indicated market expectations that they had suffered massive capital losses and were essentially high risk options capitalizing the value of moral hazard. (Remember, the worst thing we can do is to maximize moral hazard. We are maximizing moral hazard by leaving open insolvent banks under the control of managers that caused the failure, often through fraud.)

If Geithner is right about the scale of the banks’ insolvency many of the large banks have to be hopelessly insolvent, but engaging in accounting fraud to hide that insolvency. That was the context for our PCA discussion. These large banks have not been able to recapitalize. They have been deeply insolvent since, at the latest, March 2007 when the secondary market in nonprime assets collapsed. (If we are fortunate it will never be restored because it was inherently dangerous. If it is it will cause future crises.)

The PCA law is characterized by mandates that the regulators ensure that a bank, well before, insolvency, is recapitalized – promptly. Failing that action, the PCA law requires the regulators to act to correct the problem by selling the bank or putting it in receivership. In the context we are discussing – the deep insolvency of many large banks that means that the law mandates receivership.

Here are the specifics:

Immediately after the “purpose” clause quoted above comes the mandate (“shall”) to act in accordance with that purpose to achieve prompt corrective action:

(2) Prompt corrective action required
Each appropriate Federal banking agency and the Corporation (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.

Well before insolvency, as soon as a bank becomes “undercapitalized”, it must (“shall”) file a plan to promptly restore its capital adequacy and that plan must meet strict standards.

(IV) Capital restoration plan required
(IV) In general
Any undercapitalized insured depository institution shall submit an acceptable capital restoration plan to the appropriate Federal banking agency within the time allowed by the agency under subparagraph (D).
(B) Contents of plan
The capital restoration plan shall—
(IV) specify—
(IV) the steps the insured depository institution will take to become adequately capitalized;
(II) the levels of capital to be attained during each year in which the plan will be in effect;
(III) how the institution will comply with the restrictions or requirements then in effect under this section; and
(IV) the types and levels of activities in which the institution will engage; and

Subsection (C) (1) of the law mandates (“shall not accept … unless”) tough standards on the agency in terms of capital restoration plans it is permitted to approve.

(C) Criteria for accepting plan
The appropriate Federal banking agency shall not accept a capital restoration plan unless the agency determines that—
(i) the plan—
(I) complies with subparagraph (B);
(II) is based on realistic assumptions, and is likely to succeed in restoring the institution’s capital; and
(III) would not appreciably increase the risk (including credit risk, interest-rate risk, and other types of risk) to which the institution is exposed; and
(ii) if the insured depository institution is undercapitalized, each company having control of the institution has—
(I) guaranteed that the institution will comply with the plan until the institution has been adequately capitalized on average during each of 4 consecutive calendar quarters; and
(II) provided appropriate assurances of performance

No deeply insolvent large U.S. bank could provide, “based on realistic assumptions” a plan to return itself to adequate capitalization. That means that the bank is prohibited to pay any bonus or give any raise to any senior executive official.

(4) Senior executive officers’ compensation restricted
(A) In general
The insured depository institution shall not do any of the following without the prior written approval of the appropriate Federal banking agency:
(i) Pay any bonus to any senior executive officer.
(ii) Provide compensation to any senior executive officer at a rate exceeding that officer’s average rate of compensation (excluding bonuses, stock options, and profit-sharing) during the 12 calendar months preceding the calendar month in which the institution became undercapitalized.
(B) Failing to submit plan
The appropriate Federal banking agency shall not grant any approval under subparagraph (A) with respect to an institution that has failed to submit an acceptable capital restoration plan.

Deeply insolvent banks, however, fall into a more severe category under the PCA law. They are “severely undercapitalized,” and the law mandates that the bank or the regulators promptly restore them to adequate capital or place them in conservatorship or receivership (and prohibit a wide range of business activities).

(h) Provisions applicable to critically undercapitalized institutions
(1) Activities restricted
Any critically undercapitalized insured depository institution shall comply with restrictions prescribed by the Corporation under subsection (i) of this section.
(2) Payments on subordinated debt prohibited
(A) In general
A critically undercapitalized insured depository institution shall not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on the institution’s subordinated debt.
(B) Exceptions
The Corporation may make exceptions to subparagraph (A) if—
(i) the appropriate Federal banking agency has taken action with respect to the insured depository institution under paragraph (3)(A)(ii); and
(ii) the Corporation determines that the exception would further the purpose of this section.

(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.
(B) Periodic redeterminations required
Any determination by an appropriate Federal banking agency under subparagraph (A)(ii) to take any action with respect to an insured depository institution in lieu of appointing a conservator or receiver shall cease to be effective not later than the end of the 90-day period beginning on the date that the determination is made and a conservator or receiver shall be appointed for that institution under subparagraph (A)(i) unless the agency makes a new determination under subparagraph (A)(ii) at the end of the effective period of the prior determination.
(C) Appointment of receiver required if other action fails to restore capital
(i) In general Notwithstanding subparagraphs (A) and (B), the appropriate Federal banking agency shall appoint a receiver for the insured depository institution if the institution is critically undercapitalized on average during the calendar quarter beginning 270 days after the date on which the institution became critically undercapitalized.
(ii) Exception Notwithstanding clause (i), the appropriate Federal banking agency may continue to take such other action as the agency determines to be appropriate in lieu of such appointment if—
(I) the agency determines, with the concurrence of the Corporation, that (aa) the insured depository institution has positive net worth, (bb) the insured depository institution has been in substantial compliance with an approved capital restoration plan which requires consistent improvement in the institution’s capital since the date of the approval of the plan, (cc) the insured depository institution is profitable or has an upward trend in earnings the agency projects as sustainable, and (dd) the insured depository institution is reducing the ratio of nonperforming loans to total loans; and
(II) the head of the appropriate Federal banking agency and the Chairperson of the Board of Directors both certify that the institution is viable and not expected to fail.
(i) Restricting activities of critically undercapitalized institutions
To carry out the purpose of this section, the Corporation shall, by regulation or order—
(1) restrict the activities of any critically undercapitalized insured depository institution; and
(2) at a minimum, prohibit any such institution from doing any of the following without the Corporation’s prior written approval:
(A) Entering into any material transaction other than in the usual course of business, including any investment, expansion, acquisition, sale of assets, or other similar action with respect to which the depository institution is required to provide notice to the appropriate Federal banking agency.
(B) Extending credit for any highly leveraged transaction.
(C) Amending the institution’s charter or bylaws, except to the extent necessary to carry out any other requirement of any law, regulation, or order.
(D) Making any material change in accounting methods.
(E) Engaging in any covered transaction (as defined in section 371c (b) of this title).
(F) Paying excessive compensation or bonuses.
(G) Paying interest on new or renewed liabilities at a rate that would increase the institution’s weighted average cost of funds to a level significantly exceeding the prevailing rates of interest on insured deposits in the institution’s normal market areas.

Parsing through this legalese yields the following:
• The regulators must place an insolvent bank into receivership or conservatorship
• Normally, this should be done no later than 90 days after becoming “critically undercapitalized”, i.e., well before the bank became insolvent.
• The 90 day limit can only be pushed back if the FDIC and the primary regulator agree in writing that doing so would best serve the purposes of the Act – which is to minimize the cost of resolving the insolvent bank – and “document” that the delay would reduce that cost. To our knowledge, the FDIC and the OCC (the primary regulator of most of the largest banks) have not made such joint determinations for any of the large, deeply insolvent banks. Given the fact that delaying receiverships of deeply insolvent banks typically increases the cost of resolving the failure, it is unlikely that the regulators could provide honest documentation to support a failure to act.
• Even if we were to assume, counterfactually, that they provided such documentation, they would have to place the big insolvent banks in receivership or conservatorship. After being insolvent for 270 days (and many of the big banks will have been insolvent for roughly two years), the regulators can no longer extend the clock. They cannot extend the clock for an insolvent bank beyond 270 days. A “critically undercapitalized” bank’s clock extension can only be extended if it meets each of four criteria:

(I) the agency determines, with the concurrence of the Corporation, that (aa) the insured depository institution has positive net worth, (bb) the insured depository institution has been in substantial compliance with an approved capital restoration plan which requires consistent improvement in the institution’s capital since the date of the approval of the plan, (cc) the insured depository institution is profitable or has an upward trend in earnings the agency projects as sustainable, and (dd) the insured depository institution is reducing the ratio of nonperforming loans to total loans; and

A deeply insolvent bank (recall, that is what we were discussing) has negative net worth. It will also typically fail the other minimum requirements. The bank must meet all four of the requirements. To sum it all up, the interview explained why Geithner’s statements about a $2 trillion bailout cost means that many large banks have to be deeply insolvent. The PCA law mandates that deeply insolvent banks be placed in receivership or conservatorship. The exceptions to PCA’s mandatory closure directives do not apply to insolvent banks. Indeed, it does not appear that the regulators have complied with the provision that delays the requirement to appoint a receiver. The regulators could not, in good faith, invoke that delay provision for a deeply insolvent bank.

The PCA’s Achilles’ heel has always been accounting fraud

Nieto & Wall note the vulnerability of the PCA law to accounting fraud by banks and regulators.

3.4 Accurate and timely financial information
Arguably, the biggest weakness of PCA is its reliance on regulatory capital measures of a bank’s capital, measures which may significantly deviate from the bank’s economic capital. Banks that are threatened by PCA mandated supervisory actions have a strong incentive to report inflated estimates of the value of their portfolios. The extent to which banks are allowed to overestimate their capital under PCA depends in part on the accounting rules and in part on the enforcement of the rules. Thus, if bank prudential supervisors want to preserve their discretion despite the requirements for mandatory actions in PCA, supervisors need only accept a troubled bank’s inflated estimates of its regulatory capital adequacy ratio. In the US, PCA is vulnerable to problems both in the accounting principles and their enforcement. (p. 27)

To the extent that outside auditors are unable or unwilling to force banks to recognize losses in their asset portfolios, PCA depends on the effectiveness of bank examinations by the supervisory agencies. Yet relying on the supervisors to enforce honest accounting creates a contradiction in PCA. PCA is designed to limit supervisory discretion in enforcing capital adequacy, yet PCA will only be fully effective if the bank supervisors use their discretion in conducting on-site examinations to force timely recognition of declines in portfolio value. The vulnerability in enforcement is highlighted by Eisenbeis and Wall’s (2002) finding that deposit insurance losses at failed banks in the US did not decrease as a proportion of the failed bank’s assets after the adoption of PCA as should have happened if the supervisors were following timely resolution. (p. 28)

These are the points I was making in the interview. We need honest accounting and honest asset values. We will not get them if we allow the failed bankers and regulators to remain in charge. They have strong incentives to inflate asset values in order to escape the consequences of PCA. The people of America, however, have a compelling interest in demanding that the government comply with that law and resolve cases at the least cost to the taxpayers.

Secretary Geithner is not simply writing the PCA law effectively out of existence; he is creating an unprecedented (and unauthorized) rival system in place that will maximize fraudulent bank CEOs’ perverse incentives. The transcript of his press conference rolling out the TARP II bill contains two separate references to his creation of “capital insurance” for favored banks.


U.S. Department of Treasury
Washington, D.C.

8:56 A.M. EDT
But the critical part of that program is to make it clear that they will be able to raise capital from the government if they can't raise in the markets so that they can get through a deeper recession. That will help reduce the odds of a deeper recession, help make sure, again, they can provide a level of lending that will be necessary to support recovery.
And a program of insurance -- you could call it capital insurance for the banking system so that banks have the cushion of capital necessary to lend and expand even if the economy goes through a broader -- a deeper recession.
This program is dangerous because it optimizes moral hazard, but it also violates the express purpose of the PCA law to resolve bank problems at the lowest cost to the FDIC and the taxpayers. Providing taxpayer “capital insurance” subsidies to insolvent or troubled banks increases the taxpayers’ costs. TARP II is designed to provide a federal subsidy to insolvent and failing banks.

Additional reading on this subject:

"How to Clean a Dirty Bank," ANDREW ROSENFIELD, THE NEW YORK TIMES, April 5, 2009.

Please note that the views and opinions expressed are not necessarily the views and opinions held by Bill Moyers or BILL MOYERS JOURNAL


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Julie, Shiva,

"If financial institutions such as BofA or Citi are allowed to fail, wouldn't it kick off credit default swap payouts which would in turn be in the order of tens of trillions of dollars of obligations? Which is better - to lie about $2 trillion of underlying mortgage-backed asset liabilities, or to lie about $20 trillion in CDS liabilities?! Or was he suggesting that all companies that wrote CDS policies simultaneously go bust alongside the banks? Isn't that commensurate with True Financial Armageddon?!"

What's wrong with letting the CDS policies go bust? The people who entered into those contracts knew they were entering into arrangements tantamount to black market gambling. Why should the taxpayer be held responsible for fulfilling these contracts?

To make an analogy. Suppose you entered into an independent risky gambling contract that was almost completely unregulated and unsupervised, for which you knew full well that you had know certain reliability that the contract would even be fulfilled. Completely black market, completely unregulated, completely at your own risk.

Now, when you "win your bet" and demand to be paid, the person you gambled with has no money or assets, and can't fulfill the contract. You want the American TAXPAYER to step in and meet the obligation?

You knew the risk. To claim that these people had no idea the other party might not be able to pony up when they were obligated to is asinine. You live with the lumps. The taxpayer steps in to back up FDIC-insured deposits. As far as these "side bets", the "winners" "lost their bet", as part of the bet was that the other party would be able to pay.

Suck it up. Separate the companies into the solvent parts and the insolvent parts. Maybe bail out the creditors and bondholders of the insolvent parts. But don't send our hard-earned tax money overseas to the "winners" of these black market bets.

Thank you to William Black for this update. You have assisted me greatly in developing a final essay for school, and given me much new information about the illegal activities of the American federal government.

Integrity J you are funny, that is, the way you say what you say is funny, but what you say is not funny.

Are 'the people' listening or will they go back to paying a financial advisor even when profit & principle are lost?

If they do not go back to the recent old ways then how will those 'to big to fail institutions' be able to contribute those 'profits' to Congressmen's campaigns?

Will there be a change in 2010 or will the Democratic spin be swallowed hook-line-&-sinker again?

We need a "PEOPLE PARTY" for a CHANGE.

Billy Bob, Florida where our votes were CHANGED to void.

I am an American who has chosen to opt out of or consumer based-honorless society.
TV-SCAM: -get rid of it . You can pick what you want on streaming video on the internet. Don't allow mindless brainwashing by the networks-(sitcoms and news) and the consumeritis disease to enter your home via the monster called flat screen TV.
House-SCAM: Think about your reason for purchasing..another scam investment for the Banksters. (1) A house is a home to raise a family not an investment vehicle!(2) Houses are 40% overpriced. (3) Your home equity is fake since you spend most of it fixing this slow appreciating monster.(4) No one actually pays for a house anyway-It's really glorified renting from the Bankster till death you do part!
Bankster-money makers:
Credit Cards:-SCAM:SHRED THEM. A diseased investment vehicle for the Banksters to turn you into an "ETERNAL REVOLVER." Never pay it off...Just keep paying is the rule of thumb at 21% or more interest.
Automobile Loans:-SCAM-High priced,no appreciating chunks of plastic, fiber and metal with gears that move humans from point A to B while polluting the air. They depreciate as soon as you drive off the auto lot, while paying the Banksters'and their cousin, the INSURANCE SCAMMERS another Car payment through top dollar insurance premiums. The true disease of the auto industry-The HUMMER- A air polluting Abomination!

Student Loans:-SUPER SCAM-Predatory- DON'T DO IT IT! Your quality life will be significantly reduced. Result: No life and eternal debt!

Just think of it! The Free World: Run by Banksters and their friends who sell toxic waste to unsuspecting, unknowledgeable citizens who own nothing. Banksters have successfully marketed the so-called Middle Class out of existence. I plead my case:

Item Owned by
House: Banksters
Household Goods:Banksters
Car: Bankster & Cousin
Education: Bankster, Stu.Ln
Clothes: Bankster(CHG.IT!)
Food: Bankster (CHARGE IT!)
Income: Master Bankster IRS!

Wake up America! Bankster Owns You!

OPT OUT! Don't buy it! Don't eat it! Don't need it!



Mr. Black...You sir are my hero!
It is a relief in my body to hear the truth.
It should be mandatory that you sir should have to be in charge of this fiasco!
A Sane person with integrity!

Mr. Moyers...i may start watching you seemed very fair..and i am not used to that from you.
Maybe there is "Hope" on the horizon

Mark J. Ryan
Austin, Texas

The world has taken a 90 degree swerve off course and the leadership choose to abandom the ship back during vietnam the irony is we are slowly gaining back our economy but the fact is they have left only debt and a broken vessel. The American public will recover but heroic efforts to disgorge the thiefs and villians must start now. As a Canadian we have even greater moral degeneration as our parliament has an insatiable taste for easy money and they are all spineless thiefs and crooks fashioned after the global bunchof enterprise barons that took advantage of our good natures and natural derisiveness that Quebec has afforded. Immigration has destroyed Canada and now it is only a matter of time before non immigrant Canadians will be forced to fight as a minority to gain back any control of our country. My suspect is that we will be pushed aside for a new Americas incentive and our identities will be subtefuged.In any event if asked I will stand with our six nations peoples as they have been the only peoples true to the wilderness and wildlife they share.

The PCA Law was unfamiliar to me when Sect. Paulson made his demand for $700 billion in small unmarked bills & he was the only decider as to how the bailout would be used.

However, I could smell a rat in the hen house. Wall Streeters charged fees to spend your money & if principle was lost you still paid the fees. No wonder Paulson thought Mainstreet would just fork over & shut up. He did not know any better. It had always worked before.

Now, let the rules be CHANGED & prosecute fraud where ever it is found--oooops how will we ever replace so many Congresssmen?

Billy Bob, Florida where 'they' ignored my vote & the PCA Law.

Is 'LEFT' a term meaning 'they don't think like you'?

Bill Moyers and Michael Moore are pillars of truth? ROFLMBO
Moore has been caught in so many lies that he has trouble standing up. Moyers is so far left he can't even see the right anymore. If you actually watched the program, Moyers was trying to find a way to apologize for Geitner/Paulson, etc.

The only way to get close to the truth is research the facts being "reported" and find out for yourself, instead of relying on the summations and conclusions of the talking heads.

I've complained about the lack of PCA enforcement for over a year, to no avail. The only response I received was the provide direct evidence to the contrary of what is being reported by the banks and accepted by Fed,Treas, OCC, FDIC. Right.
BTW, I don't work for any of those banks, but I do work for a large bank. Funny thing. We are profitable without resorting to fraud and stealing. They could have been as well, but they chose to be criminals.

William K. Black is a very brave an American Hero.

Mr. Black is not the first American to speak out against the total fraud and corruption that's taken over in Washington DC.

Mr. Bill Moyers, via his interview with Mr. Black should also be commended for his willingness to allow his medium to express the truth of what's been happening.

In addition to Bill Moyers, Mr. Dan Rather should also be commended for his efforts to find the truth. Dan Rather Reports, episode 331, Dirty Money Down South for exposed how the Bush Administration allowed this crisis to happen. The transcript can be read on the website.

The state of Georgia (2002) passed the GFLA that held Banks and Investment firms liable for trading in predatory Liars' loans. In addition to liability, these firms could also be fined or prosecuted. The law was gutted with the aid of the federal government and financial communities massive resources.

The states of North Carolina and Iowa (2003) sent Attorneys Generals to Washington DC to meet with Bush's treasury officials. They walked away knowing that not only did the Banks and Wall Street have the backing of our federal government, the fed's were supporting laws that prevented states from doing anything to prevent the Banks and Wall Street from selling and pooling Liars' Loans.

Massive Fraud was supported and encouraged by the Bush Administration. Does Obama have the courage to stand up to the Banks and Wall Street?

As I write this comment, CROOKS are embedded within the Obama Treasury department. They need to be in JAIL.

The law of the land has been violated and comprimised by the most powerful members of our federal government, Wall Street and some of the biggest financial firms operating in America.

Will Obama enforce the law? or is he just as crooked as Bush? Only time will tell.

Supporting documents can be found at freedomfromthepress dot net - Open Bush Warned of Mortgage Crisis in 2003

Sadly, Prof Black's call to regulation is about a decade too late... we have no choice, isn't that clear enough to see and swallow?!

Posted by: Shiva

The regulations were put in place 70 years ago. The past decade is when the thieves began their work.

Just like the thieves CHOSE to do what they did, how justice is sought and delivered is also a CHOICE that "we the people" have a responsibility to make.

"Have no choice" is something that is not real or possible if a humans being is still living. It is operationally and philosophically IMPOSSIBLE to "have no choice".

An "institution" or "business" is not going to be "saved" at the expense of the living human beings who it was meant to SERVE. As usual, there is a complete opposite viewpoint - that people serve the institution and not vice versa.

I agree with Julie's comments and wonder why Professor Black does not tackle the crux of the issue in this lengthy discussion: If financial institutions such as BofA or Citi are allowed to fail, wouldn't it kick off credit default swap payouts which would in turn be in the order of tens of trillions of dollars of obligations? Which is better - to lie about $2 trillion of underlying mortgage-backed asset liabilities, or to lie about $20 trillion in CDS liabilities?! Or was he suggesting that all companies that wrote CDS policies simultaneously go bust alongside the banks? Isn't that commensurate with True Financial Armageddon?! Sadly, Prof Black's call to regulation is about a decade too late... we have no choice, isn't that clear enough to see and swallow?!

Hmmm, I never thought about it in that way, but what a hoot.

Everything that happened in my life in the 1980s, I can say was the result of Reagonomics.

Everything that happened in my life in the 1990s was Clintonomics.

And everything that happened since 2000 was - well - was "psychological".

And zoop, this thought will be made as if it never was, also.

Promoting "thinking" by censoring "thinking"? Sounds about "RIGHT".

This was a very good episode and thanks to both Mr. Black and Mr.Moyers to have the appetite to discuss the financial mess.

BTW >>> Is this just a coincidence or so but Mr. Black is also in the latest Barron's weekly so one more opportunity to understand this financial mess in simple words !

If 'they' can Deny your vote 'they' can GET your money too!

If 'they' can determine the candidate nominated, 'they' can determine the dog your kids can have.

If 'they' can make rules determining the order States may exercise rights, 'they can determine which States receive federal 'gifts'.

If 'they' can keep telling the story their way without follow up questions, 'they' can decide when to go to war.

If 'they' control the media, they can classify Top Secret 'their' abuses & eliminate deep-throats.

If our only concern is financial, then 'they' can tax those others & give us a stimulus.

If I had 18 consective holes-in-one, then I might beat Tiger.

If my 'if' game worked as well as 'theirs' I might rule the world.

Billy Bob, Florida where they denied my vote & now I see where my money went

Anna D and other strangers: To conspire or not to conspire: That is the question. Whether it is nobler to flaunt one's advantages of power (possess the hubris to become a "controller" of global outcomes), or simply to let them take their blind course ("free trade"); therefore negating economic democracy. Maybe the question is mute, and maybe it is too simple for intellectuals (Sartre).

During the Clinton administration USAID exterminated the sustaining small mulatto pig population in Haiti on the assumption they were susceptible to a virus that had never been detected. They imported pigs from Iowa (white pigs) that required a richer and more controlled diet (could not recycle the waste available) and had to be kept cool in a tropical zone. This was the coup de grasse for domestic food production in Haiti. Who benefited? Well, maybe US assembly plants in Haiti who could tighten control and lower pay due to the influx of the hungry to Port au Prince. Let's term this example the "free market."

In 1994 a democide proceeded after the Franco-American coup that deposed Aristide. FRAPH, the army, the police, and attaches murdered anyone they could who supported Aristide. They were directed by CIA and other US personnel resident in Haiti. Tens of thousands were tortured and killed. There was an embargo but the wealthy, the dictators and American manufacturers were exempt. Texaco was directed by President Clinton to sell these parties all the fuel they could use. One wealthy family, the Mevs were subsidized in the building of a tank farm for gasoline reserves for the army.There was a great influx of automatic weapons from the USA to FRAPH and the army.The worst mass murder directors had been trained at the School of the Americas in Ft. Benning, Ga. (still operating under new name WHINSAC) When Aristide was later reinstalled after taming under house arrest things became calm. All the previous violence and the milder conflicts after reinstatement were blamed on Aristide and his unarmed supporters, many of whom had been killed.The first places the Marines went upon landing were efforts to secure or destroy evidence of the massacre and US involvement in it. Court cases under Aristide became impossible without this evidence so that the macoute element remained free even after order was restored. They also kept their weapons. (So much like our hidden right wing militias in an absence of assault weapons control.) Let's term this instance integrated conspiracy.

Both instances required a pronounced asymmetry of power. (Under asymmetrical class warfare the meanings of generic terms like democracy and socialism and capitalism may become distorted because language is a disputed resource.)

For the sub-intellectual experimenters in American society like Anna D. and myself I will sum it up this way: A head transplant. They cut off the head (Aristide) and replaced it with a convenient but more violent one (the junta). Then they tuned up the body (intensfied massacre and repression+ political education by embargo). The "diseased" pro-democracy (socialist?)element was eradicated so that the Head (tuned up Aristide) could be reinstalled. And didn't that all go well? And without notice among the American public?

I submit to you that the inauguration of our first black president on January 20th is turning out to be a head transplant. Our country is being dragged backward by the feet into debt peonage and wage slavery while our military ,covert agencies and especially our Mevs (wealthy class) tighten their grip. Macoutes (sadistic anti-social elements) are reasserting themselves (in service to those they admire= "success ethic")in a tax critique against domestic humanitarian aid to the poor, sick and unemployed. They're not to worried about the FED advances and the bailout for it may increse the "trickledown" they drink. They certainly oppose bringing conspirators and banksters to account. The meanings of the root words Capitalism and socialism are being skewed in the media to evoke hatred.

I assert to you that Obama (with his financial crew) is nothing but a tuned up head transplant and that any resistance is being deflected by "browned shirt" activities directed by media and funded by powerful interests. All we the people have left is the inverse of an embargo, boycott is our last tool of defense and it will be difficult to sort out our "resistance" using marketing records. What would they impose, mandatory consumption?

I hate to think what the next giant head over us could be. But I do know that a farm boy (who had lived in Thailand) named Ed Fallon and I reasoned in 1984 that Haiti and other business colonies present a high amplitude model of conspiracies within the United States and that they proceed by one or two decades the games played upon the American public. I didn't become labeled as a conspiracy theorist over the Kennedy assassination, but over Reagan's freedom fighters (the sadistic murdering Contras) in Central America. As well concealed as mass murder and the undermining of previously self-sufficient economies have been according to my observations I would not put any betrayal of our populace out of the reach or purpose of our Giant Heads. Sometimes the giants crush us by accident and sometimes on purpose for their pleasure and aggrandizement. Let's hope for a mass extinction of giants. With the long view of the wealthy class and the diminishment of world resources this strategy is inevitable under "free trade" and desirably speeded under integrated conspiracy.

Mr. James Anderson came full circle, "What bothers me about his thesis is that he seems to imply that there was some grand, vertically integrated conspiracy....Everyone else simply performed as the 'invisible hand' would have them based on the stage that was set..."

How could a "stage be set" if there was no "vertically integrated conspiracy" to set it?

Thank you to William Black for this update. You have assisted me greatly in developing a final essay for school, and given me much new information about the illegal activities of the American federal government.

Black definitely hits on everything that helped cause the problem. What bothers me about his thesis is that he seems to imply that there was some grand, vertically integrated conspiracy. I'd probably argue that early on, everyone was operating independently to promote their own interests (political or profitable) and later on, everyone was operating independently to cover their own a$$e$. Any coordination of efforts was impelled by circumstances threatening differently the survival of the independent actors... In a crisis human nature unfailingly falls back into the modes of 'my enemy's enemy...' and 'any port in a storm...'

He's dead on on about the ninja/liars-loans and ratings standards. IndiMac/Countrywide pumped the snake oil and S&P, etc certified it as pure (purposefully omitting 'crap' from the label). Black seems to overlook or disregard the federal legislation that gave IndyMac the drilling rights in the first place (the Community Reinvestment Act specifically). He talks about regulation but (aside from a nod to the great depression) seems to suggest that Geitner was the first person in the history of government with responsibility and opportunity to 'regulate'. Sadly though, he is right that everyone in DC is going to try and do everything possible to cover their tracks going forward. I don't see any grand commission coming forward to help us understand how not to do this again... That said, banks would have never had the interest in creating or selling these MBSs had any of the first 3 tranches of operators acted responsibly (the first being Washington). I blame Washington more than any others & the ratings agencies second. Everyone else simply performed as the 'invisible hand' would have them based on the stage that was set...

Credit default swaps are an entirely separate story... that bubble was little more than the the love child of greed and stupidity...

The real "power" that functions as "government" is NOT the elected officials! That's the biggest problem! They've been "burrowing" into positions where they can pull stunts like change the wording of "laws" congress is about to vote on just before the vote happens to insure that no one will read it.

That's how HUMAN BEINGS lost their legal writes - someone gave the CORPORATION the rights of an individual human being. But instead of the corporation being added to the roster of human beings, they took away OUR rights as humans.

That's how everyone has been philosophically operating ever since - that's the game. You have to TAKE from someone else.

This is NOT following the laws of physics and math, which is how they would have you believe they are running the $$$ flow.

When a lightening bolt strikes in Arizona, it did NOT take the electrons away from Peoria's electrical station.

Politics and religion have completely been taken over by people with an irrational, visceral hatred for other people. A hatred based on delusional information about "genetics" that has long been noted as a mental illness.

USA path is diverging from the other white meat, so to speak. Whatever kind of hybrid USA ends up being, it seems that it will always be "managed" by people who throughout history have proven themselves to be CONSUMERS of civilizations, NOT builders of civilization.

As much spinmeistering as is done, there is not even a half-true historical instance of civilization building and maintaining. So they established Hollywood :-) Lalaland where Big Giant Heads give "direction".

What isn't USA all one big Disneyland...? Oh, that's right, MM eats kid brains...and does not need a "home"...

There is so much CONTROL and CENSORING on the internet that is should prove that the internet has MORE power to get a different class of people into politics if people could VOLUNTEER 2 years of service based on the skill set that is needed at the time. We need people in politics NOW who KNOW how to build and maintain civilization because we WANT/DEMAND a new infrastructure.

The entire crew - elected and "secret appartchicks" - in DC needs to GET OUT and we need to draft people into public service if we don't get enough volunteers (not going to be a problem, I'll place my Vegas bet on that FACT).

And as for the mass-media machine - shut off the idiot-making contraption called TV and overturn the "law" that sold the AIR WAVES to 5 people to "manage" the "message".

Selling the air waves to an owner to officially LIE to us day in and day out...

No one can watch the young sociopath talking heads on TV anymore without getting insulted at the idiocy that they are spewing as "news". And worse, they don't even realize how twisted their thought processes ARE - every single time a decision is made based on common sense and reality, it will be the WRONG political decision - according to their play "book". Good lord, that's sick.

This WAS from the very beginning an economic scorched earth policy.

Scorched earth. If that's not the government declaring war against its citizens, what is?

2009 4 15 Response to Anna D PCA
Anna D | April 14, 2009 7:37 PM
Thank you for your response on my comment. Actually the statement was made by
John | April 14, 2009 12:46 AM.
However, I live in a state where the law requires specificities. Abbreviation PCA
has over 254 meanings. Therefore, I question John to explain, what PCA stands – means
to him in respect from legal point of view! I did a grammatical error, I did
not put his statement in a quotation marks and it did not help much to get my point across.
Since the subject pertain to “William K. Black on The Prompt Corrective Action Law” I could only assume that the PCA for John meant to be for “The Prompt Corrective Action Law.”
As far as your comment - response, you are very correct, informative and helpful. I am hoping that John would consider them very carefully before he takes any action.
I hope that he also reads the law:
Ҥ 1831o. Prompt corrective action
(a) Resolving problems to protect Deposit Insurance Fund
(1) Purpose
The purpose of this section is to resolve the problems of insured depository institutions
at the least possible long-term loss to the Deposit Insurance Fund. “
The purpose and the power is in the FDIC. The facts are, agencies and departments have absolute power, “the decisions are final within their authorities” and the courts should stay out!
Pertaining to the current legal system we have, attorneys have very well stated, “Do not go against the government for you will never win!”
We have a two tier system, One for them and the other for us, the forgotten, the the poor, the homeless, the workers, the unemployed, the uneducated!
To sue or to institute legal proceedings, I believe first step MUST be to
“ AMEND the CONSTITUTION” to empower the people to AMEND the LAWS!

My 90 year old mother argued tonight that my personal boycott of Walmart was cutting off my own nose to spite my face. I hadn't heard that one in a long time. I crossed the street and visited that heathen church K-mart, my saving place. It seems like few unions will be organized or demonstrations staged because people are caged like clipped beak broiler hens by their immediate needs. You certainly don't want a relative to lose a job over politics and crowd into your three little pig house. Still it seems like any half-awake pilgrim would transfer their direct deposits to a credit union and take their refinancing and loan requests far from CITI and Bof A and Wells. I'm not rushing out to buy a policy from AIG or a new car from anybody. I wonder if Mr. Black knows if you can be renditioned to a black site for saying the work "boycott." S-h-h-h, Keep it to yerself.

William Black talks about how we (as individuals) can rely on FDIC deposit insurance (which protects up to 250k), but he does not cover the insolvency scenario for corporations which have their couffers in US insolvent banks. For the corporations who don't have their funds in US Treasuries, etc. What happens in their case? Is this a common case?


Chris: "Will someone please address the question as to whether or not a "citizen" may petition federal court so as to drive the issue of PCA enforcement to front and center?"

Yes, but only if you bring with you enough "evidence" to satisfy the judge.

People who were asked for certain information have already refused to provide it and no "law" has gone in to take it from the premises.

So if a "citizen" went to the premises to get the "evidence", the citizen would be breaking the law.

Get the loop de loop?

CRIMINALS are protected. Citizens are not.

Without labor having the RIGHTS to the fruit of its labor - ya got NOTHING.

And once you got "nothing" - no rights to your labor - on what principle is there economic justice?

I tried for years to figure out the visceral hatred for "labor" - can't find the cause because it is irrational (some disease develops in the mind that occurs over time when only a certain part of the organic mind is utilized - ie. only doing THEORETICAL math). The rest of the brain atrophies.

All the "elite" basically have an MD following them around because of their great health care plan. Again, personal HEALTH info is protected so we'll never see the EEG of a big finance person. Lots of inactive, dark regions in the brain, hence all the mind-altering drug research - "love is just a certain chemical reaction in the brain..."

I'm giving myself a time out :-)

"It's CORPORATE, private business property that we are under no obligation to share."

Too bad millions of homeless and jobless doesn't qualify as "evidence" for a Prompt Corrective Action.

Judge not..?

Will someone please address the question as to whether or not a "citizen" may petition federal court so as to drive the issue of PCA enforcement to front and center?
Explain, what PCA stands for?

Jack Martin wrote, in part, "Our government under the thrall of global corporate business remains as unresponsive as the Saudi kings to their populace."

So astro turf instead of grass roots isn't working? Hmmm, wonder why?

What kind of "religious" principle decrees a scorched earth policy against the best and brightest in its own society in the name of "politics"?

But to crash back down to earth, not all "cold war" strategy is defunct. At least now we can see that the 21st century will be divided between those who progressed in the 20th century, and those who retrogressed back into 19th century "trade", and even all the way back to the "dark ages" in their "religion". Will we need to fall on our knees when the Big Giant Head speaks AGAINST free will?

Amazing how I can't get anyone to engage in the philosophical consideration of whether you LIVE according to free will actions AND believe in a "prophecy" that insists your living MUST conform to the "will of god" in bringing on the "end times". That's quite the cognitive dissonance, must make a person immobilized.

As they quipped on that old TV show Buffy the Vampire Slayer, "What? Armaggedon - AGAIN? This is getting BORING..."

The world will always be "divided" into a balance of power. Everyone has their own "paper" money on the monopoly board.

People can definitely choose the wrong "friends". There, obviously, was something about the "culture" of the "Saudis" that so appealed to USA "businessmen" that they were willing to kill off (whether with bullets, ballots, judges or charge cards) all the wonderful souls in their own hometown! Any "theories" on what was so ALLURING?

Alas, there is nothing left to "fear" losing. A tipping point is reached when people are thrown out into the streets to form their own gangs.

Evolution, biologic evolution of the species, is in control now not a bunch of secret society social engineers donning shaman masks.

You could at least PRETEND that you want rule of law to work again, Jack.

John: Are your pockets deeper than Mr. Black's. I don't see Warren Buffet who has admitted and described asymmetrical class warfare donating any bucks to justice. Elizabeth Warren is wringing her hands over the refusal of transparency in the bailout, and she heads Obama's commission. Our government under the thrall of global corporate business remains as unresponsive as the Saudi kings to their populace. We just do more marketing and polls. Legalities will not remedy a fixed up oligarchy, so I am left wondering what could. I see now why my correspondent Betsy Whitfill wishes for Maiterya to come. It works about as well as did. People are afraid and rightly so.

Will someone please address the question as to whether or not a "citizen" may petition federal court so as to drive the issue of PCA enforcement to front and center?

I would like to file a suit. God help me for the storm it may create.


I vote for Mr Black to be a director of FBI to go after big bank burglurs, such as CEO of BA,GS,AIG,CITIGROUP.


Wow! Moyers is the man!! I can't believe he's the only journalist who's telling the truth!! I wonder if it's because he's just smarter and the rest are just so stupid (prob. true) or perhaps the others work for a company who won't let them tell the real stories (prob. true too) !! I mean after watching FOX, which is just a propaganda front for Conservatives/Republicans, or MSNBC which is just a propaganda front for Liberals/Democrats you just don't see the true, honest, integrity journalism you see w/ Moyers or Charlie Rose. You just don't get the bright intelligent journalism and gests like Prof. Black on the prime propaganda news group fronts- Fox & MSNBC! Fox & MSNBC just dance around everything in this jocular, joking, sarcastic grinning way which solely suggest such vanity, and self obssessed attitudes- it's pathetic! I really don't know how these twinky level people call themselves journalists!! Fox, MSNBC, CNN check out Moyers & Rose, salivate and just wish you were in their leagues!! At the end of your careers just wish you could ligitimatly call yourselves journalists instead of SELL OUTS which is what you are! O'Rielly, Matthews, Maddow, Olberman, and all the rest of you, Especially Hanity & Glen Beck, are just complete sell outs!!

All of this can come under the heading of "Predictable Outcomes". What can you expect as an outcome when gamblers are allowed free reign to do whatever it can do to people mwhom DO NOT gamble -an entirely different human being.

Gambling is predicated upon the darkest of human qualities such as lying and deception - whether stock trading or derivative hawking.

Honest people get abused and used, whether it is Church or the market.

THAT is why life NEEDS oversight.

I never trusted Geithner or Summers, but when I objected I found absolutely no support for resisting them, even though their deregulatory past was no secret.
People need to bank together and demand their resignations and replacements.

The fraud mentioned by professor Black happened in Hong Kong from 2003 up to the moment when Lehman Brothers went bankrupt. Some 40 thousands victims are believed to have been defrauded by 'piggybacked structured' financial derivatives products described as 'minibond'. The de facto central bank during the colonial era of Hong Kong - the HSBC Bank is implicated of lending its name to the fraud by assuming the roles of issuer, trustee, custodian. Now, the HSBC maintained that these roles carry no substantive duties, the individuals occupying these positions are meant to be clerks.
So far the government of Hong Kong has been trying to distort the facts and turn its eyes away from the evidence when it is presented before it. The victims, almost half of them are elderly and illiterate, have been betrayed by a government readily kowtowing to the banks.
The victims have organised themselves into a self-help group known as The Alliance of Lehman Brothers Victims in Hong Kong whose website is at
Although the contents at the website is still predominantly Chinese, more materials in English should be available soon. Our civilisation is decaying to a state where outrageous is an inadequate expression of how we feel. We hope to learn what viewers of Mr Moyers' excellent programs feel about the fraud here in Hong Kong. Feedback is most welcome and it could be sent to the LBV website.

Love the show, love your economic reporting. But, being a stock trader myself (and somewhere to the left of Noam Chomsky -- an odd bird indeed), thought you'd be interested with this take on the AIG 'pass-through' bailout of Goldman:

Looks like there's not much 'there' there. If you can find an economist to counter any of this argument I'd be interested to see it.

It's good to read that someone is saying what needs to be said. It's very disappointing that so few people are saying in public how traitorous the actions of Geithner and Paulson and Co. were and still are. We are going to need to throw all the bums out to fix this thing--including the politicians. They all are responsible so they all have a huge incentive to cover this up.

I hope Mr. Black gets more and more air time because his message needs to be heard.

This was the most phenomenal program I've ever seen on the subject, yet I haven't met a single
person who has seen it.

America has lost its moral compass. It has become a land of vast greed and corruption. The family on Main Street has its moral character but all the insitutions (corporate and political/government)are frauds. We will become witnesses to the real test of democracy. The journey will take us either to a higher level of a civilized society or, a dark and tragic end to the freedom and liberties that we know of.

we must know by now that all this is a well planned scam by bankers all over the world, to get our hard earned money for once and all, it happens, they called cyclical every 10 to 17 years as we acepted the four seasons we are acepting this robbing on Us

Without consequencial action on the part of America, Obama, the moral high ground will remain elusive. Without a level playing field no amount of window dressing can cover over the truth witch lies within. Therefore at some point judicial responsibility must exert influence to reaffirm the checks and balances that maintains the working American government. There is a need to prosecute.

I am not sure I agree with all the people complaining about the people who created all these loans. I have two mortgages with First Republic Bank. They sold them to someone else at a profit. To me that's good business and there's nothing wrong with that. The real idiots are the people who bought the loans as investments (using our 401K balances). Had they checked if the loans in the houses they bought were worth more than they paid, they wouldn't have bought them and the banks would have stopped financing 100+% of the houses because they couldn't sell the loans.

I am writing from Australia, and am astounded that the US Government and regulators appear to be wilfully ignoring the requirements of the PCA.

Is it possible under US law for an ordinary citizen to apply to the courts to force the executive government to implement a particular law that is already on the books? ie. to force the government to act rather than continue to ignore? If so, I urge any concerned Americans to do so, quickly!

Those who disagree with William K. Black's opinions would then be able to contest his claims in the proper forum.

And no matter what the outcome, it would shine considerable light into the darker recesses of this crisis that is affecting people around the globe.

I couldn't believe the program with William K. Black. There is someone who seems to see things with sense and clarity. We need more to combat the propagandists who are going to bring the U.S. into this globalization,freetrade,IMF etc.Our sovereignty is and has been under attack. Stop the Dumbing Down of America!!

This was a good interview by another brave citizen who is not afraid to talk REAlistically and BE SIMPLE.

I gave up on CNN and MSNBC and all those other high profile "news" networks. As many feel the same way, I can basically summarize it by saying that they are TOO AFRAID OF losing THEIR PAYCHECK TO SAY WHAT THEY REALLY FEEL AND KNOW. I mean, I listen to Interviews, and you practically have to be a decipher of LITERATURE and CODES to abstract what they are trying to say, since they're trying to be very very "politically correct" and "profesional"
Many times i watched the CNN news and commentators, and left amaAAAAZED at the fact that i DID NOT UNDERSTAND A SINGLE PHRASE they said!! I would shake my head thinking maybe i'm not paying attention or something, but it really was not the case. I mean, I am a Mathematics major with an interest in Philosophy and I know for sure i've comprehended more difficult subject matters than "CNN"

Major news networks have become so EMPTY IN SUBSTANCIAL MEANING that it reminds me of another similarity i saw in college, that of the new textbooks with the older textbooks.

Each year, it seems, they keep watering down college textbooks by explaining less concepts and meaning, and replacing them with PICTURES! THe funny thing is that, a basic algebra textbook will set the poor student back about 150 bucks! just for a bunch of pictures with little mathematics at all! And, by the way, many of those textbooks are in their 10th edition! I mean, they got the 1st, 2nd, 3rd, .... 9th editions so wrong that they have to keep improving them??? I mean, if i write a book i will write it PERFECT!...or close. It would be embarrassing for me if i have to keep renewing it all the time! But of course, these pseudo-scientists are in it for the money. They don't want used-textbooks to circulate the campuses because they don't make new money on used textbook! What kind of generation being formed and thrown out into society!?..year after year.

Meanwhile, you have your idiotic HIP HOP, with it's catchy rythms and sounds (to sort of compensate and distract the young person from realizing how stupid the lyrics are) Meanwhile you have your XBOX and Playstations, and your DORA and DIEGO and MICKEY seems that we're forced to sorround ourselves with stupidity from DAY 1...yes, day 1 amigos!....what do you call SIMILAC and synthetic "mother's milk?" all because the pretty mom doesn't want to ruin her ****!....yep, that's how good we got it in the US!

The case is very very different when I watch Bill Moyer's JOurnal, or when I listen to Noam Chomsky, or even good old Michael Moore, or AMy GOODman and others! These are people who are not just intelligent, not just FED up with the LIES, they also happen to have endured the lures of the fake american treats, and remained steady in their culture and education, and progressed to where they have the opportunity to go live with their ideas! THat, my friends, is not easy at all. I wonder how many times BIll Moyers or Noam Chomsky have had to sacrify family time, or have come acrross many stupid people criticizing their views!!

I wonder though, is it okay to say that I care about changing my country solely for the future benefit of my decendants? Or do I care for all HUMANS to live in a "better" world? But, how better will it be? Would a better democracy constitute of lesser crimes, more cultured and educated people, less numbing news networks, less republicans, and so on and so on? But having a bachelor's degree and working at starbucks doesn't quite make sense. Having a bachelor's degree and teaching junior high for 40,000 a year doesn't quite make sense either! Education is good, and yes, academic education even better. But wait, who's going to do our blue-collar jobs? Who's going to pick berries and corn and etc? Who is going to fix my 50K car? And finally, who is going to give us enough reasons to ARGUE in favor of the good?? Utopia, it seems, is not really what we're after.

And so, it seems problematic, even to do good!??? Therefore, it may just be that our own desire to END THE LIES and stupidity is primarily so that my children would grow up in a less mean world? but, not primarily for the benefit of the majority? However, if we all try to finish the lies, then it can't work; because then you end up in the "who's going to do the dishes" argument.

maybe the day will come when we have robots do our lesser jobs? then we can all have phDs!

can you imagine police officers with PhDs?? Can you picture a Doctorate dissertation in Tactics of the Battle field, by a sargent?

the only good answer to this dilemma, for me, is that if we just let them (republicans maily, democratics too) continue to lie to us and continue with their oppression, then pretty soon the world will end, literally! SO maybe we're just delaying it, or the constant battle of good vs evil is handed down from the few good to the fewer good ones. while the evil ones continue to gain numbers, but maily as pawns.

I mean, HOW the heck are you supposed to fix an economic crisis by giving more tax-breaks???? THe republicans are a bunch of morons ssssoo detached from society and MEAN and LIFELESS that they almost seem to me as if they're THE ENEMY. I'm conservative, but I'm DEFINITELY NOT A REPUBLICAN. Many ignorant republicans (the masses) think that words like "patriotic" and "coservative" and "small government" appeals to them because they're strict and don't want none-sense in their country, right? isn't that how they think? Well, guess WHAT!? All that is designed to keep you stupid and a servant; you (the republican) just don't have the "stuff" to see that.

THE FREEWAY anecdote. Why are people so impatient?? Why is it that 35mph just won't cut it for most of us??? Why does an impatient prick have to move from behind me, just to put himself in front of me on the freeway??? I mean, I always see cars changing lanes left and right, thinking that they're going to arrive faster at their destination, but really they DON'T. Most of the times, I who stay in my lane and move at a constant rate, end up about the same as the other car who changed lanes multiple times! But that's just a sign of how impatient (and posibly how ignorant) those people are. Yes, i said "those" because i'm detaching myself from THEM. THis is the same crowd who is a bi-product of our watered down democracy.

As much as most of us want Mr. Obama to succeed I believe Mr. Nader when he says get ready to be disapointed. Its either the corporate democrats or the corporate republicans running the crooked show and often its a collusion of power to screw the amerage taxpayer. I know a hard working teacher who always pays his credit card bills and just this month they have raised his interest rates to a mafia style interest. As a retired vet I know longer think we are the good guys. Shame on American greed. Thank you Mr. Black.

When you play ball with the neocons (GHWBush & Co.) your crimes are forgiven or overlooked, but when you’re the CEO of a communications company, and you demand a court order or FISA approval before giving the government communication records, you go to jail. Even though Nacchio is guilty, this has Rove written all over it.

I agree with MJA Above. 3% interest cross the board for home owners...mandatory! Good, bad, mediocre credit..all included! We bailed out the big guys....where's ours?

But I must ask Mr. Black...Who is or would have been the better candidate to enforce these receiverships?

Well, besides the American taxbreaking individuals, who have enough on the plate, to even have the time and energy to keep writing our congressmen, only to have it fall on deaf ears.

Why not afford President Obama a new and more alternative candidate for the job? Perhaps, he will listen to you?

Who can you trust?
Who would do the right thing?

Yes, America is being raped by the banking industries, as my good friend Susan, suggests and it has to stop.

and it's a sad day for the good guys and gals.

Thank goodness for Bill Moyers and Mr Black. Why are there laws on the books that are being ignored? Why is the taxpayer money being funneled to Banks and they are not telling anyone? How can Poulson, US Treasury Secretary, funnel money to his Corporation Goldman Sachs and get away with it?

Thanks to Bill Moyers and Mr Black. Amazing to me how my 32 year US Senator is "laying low" and not saying much as he was an advocate of "de-regulation". How can laws be on the books and be ignored? How can we allow no reporting of where the Money went and is going? I hope this interview arrives at the Whitehouse and every email of our sitting US Congressmen and US Senators.

The cozy and corrupt relationship between big banks and big governments is completely understood by those who study Austrian economics (see Murray Rothbard's book, What has government done to our money? is a great introduction to the truth of the situation. Another book, The Creature from Jekyll Island, a second look at the Federal Reserve explains just how corrupt this organization truly is.

America Wake Up!

Steve Woods
Hyattsvill, MD

For a different perspective on Professor Black's allegations please read this.

Thank God for Bill and Mr. Black

When we go to commemorate the rescue of America and Democracy with a bronze monument; do you, Bill, prefer standing, sitting, or mounted on a horse with sword drawn? About time America has at least one defender with a platform take a stand for the truth and the people.

Take one more step in prescribing the remedy; as.. dissolve the Federal Reserve Private Bank that turns all our U.S. Government budgets into magic loans from themselves; and cancel all the previous years' "loans" from the FED to the Government. It always was OUR MONEY not YOUR LOAN. In the future all moneys expended by the U.S. Government must be in money the U.S. Government prints, not money the FED prints and then LOANS to US. It is OUR MONEY, to be expended for the common good. THAT is how God intended money to get into the economy.

Let us see a detailed list of our supposed "creditors" and let us search out HOW they came to be OUR "creditors". The continuing fraud since 1913 called the Federal Reserve Bank does not actual incur indebtedness for America, just a crime to solve and people to jail.

Yes, it will require close scrutiny by the people at all times for the Government to print the money and spend it. But most importantly the FCC must be replaced with honest patriots who will protect the people from lying monopolies and oligarchies serving their own nefarious purposes through propaganda disguised as "News".

Masses awake and defend yourselves with the law while you still can! And stop reading and watching the mass propaganda commonly called "Mass Media News" unless you just want to keep an eye on those whose only purpose is to enslave you, financially first, and physically if they continue to succeed.

Charles Michael Couch

Makes you wonder if our elected government is really in power, or if they are just puppets of the Wall St. banks. Or is Obama just getting bad advice on who to appoint. Either way it's troubling.

"oh what an evil web you weave when at first you do deceive."

"The fundamentals of our economy are sound"

"I am your candidate of CHANGE"

"Only the credit default swap dealers can save us in this financial crisis"

"I have to have $700 billion in small unmarked bills & only I can know how they are spent"

"The banks that were insolvent yesterday are OK today due to change in Mark to Market accting and all will be well"

"The banks have to be bailed out so they will start lending again"

"I agree their votes should not count cause they broke a party rule"

Billy Bob, Florida

I read the Prompt Corrective Action Law. It appears it is applicable to insured financial institutions. Are all banks insured? How about companies like AIG? Is this a factor in how the government can intervene? Thank you!

Julie; Why are you trying to preserve the insolvent mega-banks on a technicality. The best economy and order would result from their dissolution or break-up. Willaim Greider and his group advocated just that right here on Moyer's journal. He asked us to come out for demonstrations on Saturday April 11th at 2pm in more than 50 cities. Find our details at Mr Black advocates pretty much the same "nationalization" program as Greider's group. Do not mistake this campaign for the pro-bank T-parties where stimulus funds are opposed. (T may mean Treasury?)

Ed Crump and I are promoting an rally on Union Square in Hickory, NC at 2pm Saturday. We have rejected Charlotte as too hostile to the needs of grassroots working people. We have secured the necessary permits and it will be a peaceful civic event. People in western NC should attend. Come early and sign up. (There is a sister event in Raleigh.)

You keep asking,"What can I do?" and this is your safe and secure chance. get together and talk face to face. Soft signs (no sticks), costumes and banners are welcome. We want you to speak your mind Thanks. You can also contact me at concerning this rally.

Professor Black,
Thank you for the truth.
As soon as I heard the names Summers and Geithner come out of President Obama's mouth my gut did flip flops.
The American people are screwed again, as we have a president, a Senate and a Congress that are beholding to Wall Street and not Main Street.

Professor Black,

As one who in their (brief and stormy) college years stood up before the Econ 101 prof and class alike to expose the self-obvious roots of the utterly infandous mess We the People now find ourselves in, and having taken the Heretick's Exile right quick following that "ill-advised" classroom move, I can only applaud your public stand on and elucidation of the matter at hand. You have covered the ground with thoroughness, dignity and professional aplomb.

Now I am racking my Constitution-loving civic-minded brain for the Lawful ways and means through which to engineer a "General Recall" or "De-Election" of both the US Executive authority, which has indeed emerged post-election in as fraudulent an operation as any travelling carny razzle-dazzle game, AND the full US Congress (both houses) that has emerged in a state of gross complicity in that planet-sized scam.

Having been trained up from middle school by that traitorous Majority Leader Steny Hoyer, *l-o-n-g* before he went to Washington and then apparently sold his Nation's Constitution as well as his own soul out to the Dark Side, I can do no less.

Suggestions for perusal of law related to this matter and proposed action are welcome. The Brits have a Parliamentary option of a "No Confidence" vote re the sitting Party's mode of governance. I think we must move similarly to avoid a national Misprison of Felony, fwiw.



Our nation is hanging in the balance; thank you for the courage to speak out!

The criminals on Wall Street and the corrupted in Washington with their cronies in the media, academia, law, and etc are destroying America and the whole world.

It is way beyond time for discussion; it is time for revolution to save this nation by US constitution.

Share the information here and Spread the word to all.

"“Moral hazard” can lead to both “reactive” control fraud and wildly imprudent risks. Either can cause a dramatic increase in taxpayer losses. As I explained in the interview, leaving the managers in place that caused the failure also prevents us from obtaining honest evaluation of assets and the criminal referrals that are essential to resolve this crisis."

I do not thing William Black is correct:

12 USC Section 1831 - "Prompt corrective action" is applicable to banks under the authority of the FDIC, which are commercial banks.

The problem is "holding companies" owning both investment banks and commercial banks. Citigroup Inc. and Bank of America own both as a result of the GLBA.

If we let the trillions in unfunded credit default swaps fail, it will cause considerable problems.

We are bailing out Citigroup Asset Guarantee, which included the unregulated hedge funds trading of credit default swaps. - not Citibank We are bailing out "Bank of America Asset Guarantee." It is the investment bank portion that got them into trouble, the part that we are bailing out.

FINANCIAL REGULATION: A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System, GAO-09-216, January 2009 - 107 pages.

GAO: "The GLBA limits the circumstances under which both holding company regulators and depository institution regulators may examine functionally regulated subsidiaries of "bank holding companies," such as broker-dealers."

The report explains that GLBA of 1999 gave the authority for the holding companies to the SEC and CFTC, but it was voluntary on the part of the holding company - results - little oversight.

The CFMA of 2000 ensured that credit default swaps would not be regulated.

GAO: "Although OTC derivatives and their markets are not directly regulated, the risk exposures that these products created among regulated financial institutions can be sometimes large enough to raise systemic risk concerns among regulators. For example, Bear Stearns, the investment bank that experienced financial difficulties as the result of its mortgage-backed securities activities, was also one of the largest OTC derivatives dealers. According to regulators, one of the primary reasons the Federal Reserve, which otherwise had no regulatory authority over this securities firm, facilitated the sale of Bear Stearns rather than let it go bankrupt was to avoid a potentially large systemic problem because of the firm’s large OTC derivatives obligations.

More than a decade ago, we reported that the large financial interconnections between derivatives dealers posed risk to the financial system and recommended that Congress and financial regulators take action to ensure that the largest firms participating in the OTC derivatives markets be subject to similar regulatory oversight and requirements."

On March 26, 2008, Geithner proposed regulations to increase authority - GOP

"Under current law, no regulator has the authority to essentially take over a troubled bank holding company—conglomerates with a wide range of financial operations—the way the government routinely does with smaller, commercial banks."

Both FDIC Chairman Sheila Bair and Fed Chairman Ben Bernanke have said that even as the government injects more taxpayer capital into two giant financial institutions, Citigroup (NYSE: C) and AIG (NYSE: AIG) it can't actually shut them down even if officials wanted to. Citigroup is a holding company.

read, "To Seduce a Nation", Lindsey Williams

Check out International Financiers: Conversations with Jonathan May

Google, Figuring out the Fed...............

"Grey Men"

This has been going on for a very long time. No one cares!

Obama's Financial advisors learned from the best. If there was one thing the Bush Adminitration did that was extremely harmful to the country, it was to verify that if you tell the lie long enough, the people stop asking you to tell the truth.
You cannot embarrass politicians or corporate CEO's-there is too much money involved to let this get in the way.
While Obama is wow'ing Europe with his rock and roll status, his appointment and bank stooge Tim Geithner, is stealing the silverware out of the White House drawers. Damage control Mr. President...

This is exactly why I watch this show. Finally, someone willing to tell the truth, Mr. Black I love you.. I do believe that the time has come for "we the people" to get a little bit more vocal - because my love for Mr. President notwithstanding - much like FDR - we the people must force him and the Congress to start listening to "US" to WE the PEOPLE!! The elites of this country have not only been effective in making us a corporate oligarchy - but a "WELFARE" corporate oligarchy - where we the people pay on the front end, in the middle, and on the back end!!! These elitist greedheads really believe that "they are supposed" to be paid deferential treatment - it is really time for that to end!!!

Prof. Black,

Thank you for such a clear and concise explanation of the financial mess. As someone that voted for Obama it is disheartening to see that the Obama administration is following the same game plan of the Bush administration.

When it comes to enforcing regulations, holding CEOs accountable, and requiring transparency President Obama is not delivering on his campaign promises.

I have very little confidence in Geithner and I see him as just a mini-me to Hank Paulson.

The only reason to do a cover up to this degree is that those at fault are at the highest levels of our country from banks, to politicians, to the rating agencies that were supposed to prevent this.

There needs to be an investigation, and people should go to jail for this.

Just a small comment about the "Dutch saying" when the Northern provinces of the Low Countries wer fighting the Spanish. The words are from William the Silent, first "Stadhouder" of Holland. The original was in French (the Lingua Franca of the noblemen in those days):
" Point n'est besoin d'espérer pour entreprendre, ni de réussir pour perséverer", which translates roughly as : "it is not necessary to hope in order to undertake , nor to succeed in order to persevere."( undertake as in "entreprise", not the funeral stuff)
Just for the record...

Thanks, Bill Moyers and Professor Black, for making an "Economic Mess" into something much more understandable. It's nice to know that there are people in TV who are worth listening to...people who have the guts to venture 'outside the lines' and put issues into a larger context.

My husband and I have been concerned about Geithner's appointment since we learned that he worked for Bruce Wasserstein, after leaving the Clinton white house.

We also were concerned that Obama's meteoric rise was fueled by money from the Wall Street elites, who had compromised him in order to get the election prize and remain in control of the country. Why are public interest groups and journalists not tackling this relationship, coverup and obvious fraudulent behavior at the highest levels of government? The rest of our media should hang their heads in shame.

FIRST POST - BUT URGENT!! Please have Bill immediately investigate that the new Gov PPIP system of letting Toxic assets be bid and Gov finances 86% + 7% is cutting out Public participation, which would yield to higher sales prices of the assets. The regs were quickly written to eliminate investment groups with less than 10 Billion, and apply this week! The groups of bad loans should be sold on trading platforms which already exist and disclosed persons or groups with over a miilon in assets may bid as per existing regulations. HELP THIS CAN BE CORRECTED Please get back to me on this. Marshall Ives

Professor Black,

Your observations are
startling and alarming. Why do you think Barak Obama
chose these people who helped creeate these problems through deregulation
to be the chief arch itects of his treasury and economic team. And why professor is the word cover up not used in the coverage of this story untily our interview with Bill Moyers?
Thank you

Airline Industry:
Well regulated and safe
Banking Industry:
Unregulated and in Crisis

Elite bankers own and control the media. Notice William Black is quick to add that the American people would never panic and you can rely on your FDIC insurance. But what if we all decided not to? We need to put these banksters back in their place. Bills can be paid with money orders, yes it's inconvenient and costs a little more but if we don't organize a bank strike we'll never be able to take our country back.

Finally, somebody stands up and speaks the truth, which is, putting it mildly, sickening. It is unforetunate that the national media in general, our duly elected politicians, and the sneaking, sliding, slippery folks in the private financial sector are getting away with the hoodwink of all time. What a sad story for democracy, when the word means nothing that the vast majority of the people stand for. How do these folks live with themselves day to day?

Professor Black:

Thank you for your explanation and historical background.

If I understand you correctly, you are accusing the Obama Administration of accounting fraud and as consequence of that fraud, failure to follow the mandates of the PCA. If the accounting fraud charge is true, then the failure to follow the mandate of the PCA is rather easy to establish. At this point, one can draw the conclusions that you have about the existence of accounting fraud, but wouldn't you need more facts if you were to establish the prima facie case before a court of law (as opposed to the court of public opinion)?

I think if congress would enact by law a reasonable 3% fixed interest rate for all existing home loans, much of the housing foreclosure problem would be eleveated, and the economy would stabilize as well. It is the shady adjustable high interest rate mortgages that are sinking us all. And this solution wouldn't cost the tax payers anything at all.
A reasonable 3% would reduce everyone's mortgage payment equitably, would bail out the real issue itself, and would cost nothing. A stimulus package that cost nothing and works could be as simple as this.

As far as the FDIC insuring banks, shouldn't the banks be responsible themselves. If they had soul responsibility, perhaps they wouldn’t have gone so irresponsibly astray. And if they have gone astray, and no one but themselves really knows, shouldn’t they still be held fully accountable?


The S&L disaster seemed to be pain enough for us to not ever go thru such a failure again.

Prof. Black has explained enough of what has been happening with today's financial crisis, and the response may surprise elected officials in the next election.

Bush relied on his ability to look a man in the eye & know if he was capable--right Brownie?

Obama promised Change, & if he doesn't Change the way taxpayers (voters) are represented then he & 43 should face the question of Impeachment.

President Obama, please step up to the Executive part of your elected position and mitigate the damage you inherited, but is quickly becoming yours if you stick with your man Tim, as George W. stuck with his men.

Why is this not more widely publicized so the tax payer can see where there money is going and what Geithner is doing? Why is our president not seeing what is going on, when will he wake up see the truth. If Oboma does nothing he is not the man of change we need.
How can we the people stop what is going on, how can we get Oboma to see what is happening?

Results based analysis begged the question of what's in it for Paulson, when he makes a Surprise Demand for $700 billion in small unmarked bills or else.

Geithner has been on the ground floor with Bush\Paulson, so what's in for Timmy? Maybe he just can't see the forest for the trees--whatever--as with Paulson--TG must GO!

Prof. Billy Black supplied substance to Mainstreet's gut feeling that something is wrong in Denmark--I mean Washington. CONGRESS has failed!

Congress is bipolar, not bipartisn. Govt. & Corp. Big Guys have been counting on Mainstreet getting board -after all- the smart money is that Mainstreet is not smart enough to understand what has been done to them--so why havent they forgotten?

My argument began when Fla, & Mich votes in the national-nomination elections were DENIED by a "party rule".

If Mainstreet did not react to my losing my vote, then why are they upset about something that has been going on for years with "our money"?

The only reason this financial fraud does not surpass Watergate is that CONGRESS is in on the scheme & they put The Wolves in charge of guarding the hen house!

Change the SENIORTY SYSTEM for Congress or your freedom, money, economic retirements good-by!

Billy Bob, Florida

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