Financial Deregulation & Racist Housing Policy Brought Us 2007 Meltdown, with More to Come (Pt 1/3)


Welcome to The Real News Network. I’m Marc Steiner, great to have you all
with us. We’re all too well aware of the 2007 economic
meltdown, the horrendous role that bundling mortgages played in that crisis that came
out of the subprime mortgage market to a full-blown international banking crisis. It was then we learned how banks and other
lenders targeted Black and Latino communities, whose loans they bundled, that we just talked
about. Black and Latino homeowners were the largest
group of victims, losing homes being forced to default on their mortgages. Now, ten plus years later, a group of economists
have published an important study called The Social Structure of Mortgage Discrimination. It outlines how that industry targeted Black
and brown communities and the history of discrimination in our banking world. So today, we’ll examine not only how they
did their study and what they found, but as importantly, what could come next, because
the congressional fix was never very strong, and the reality that the predation of our
banking industry is still not regulated enough to prevent another disaster like 2007 or something
similar from striking our country again. And joining us once again from Minnesota,
he was here from Kansas City Missouri, is Bill Black. Bill’s an Associate Professor of Economics
and Law at University of Missouri, Kansas City. He’s a white collar criminologist and former
financial regulator, author of the book–and I love this title–The Best Way to Rob a
Bank Is to Own One. Of course, he’s a regular contributor here
to The Real News. And Bill, welcome back. Good to have you with us. Thank you. So Bill, let’s start with this study,
and it was really fascinating. You sent this to us and I was going through
it all day here, and I’m just very curious. Why is it important ten years later, or twelve
years later, looking at what they did? OK. So first, the critical phase of the 2008 financial
crisis, as opposed to 2007 when the meltdown occurred, obscured the predation and indeed
turned the victims into the supposed villains. And this was through the famous Santelli rant,
which is bizarre. It was a bunch of finance guys screaming that
the problem was poor, and to use their word, “losers,” who were often the victim of
predatory and fraudulent lending. And that led to the creation of the Tea Party
and eventually to Donald Trump. And so, the whole story of predation got lost
and perverted in this bizarre fiction, nasty fiction that was created. It goes back, actually, all the way to Carter. Interest rates reached all-time peaks in a
sharp rise that began in 1979 under Jimmy Carter. And the response was to pass a law that allowed
the removal of interest rate controls on banks and other financial institutions. In the old days, it had been in the ballpark
of eighteen percent. Nowadays, as many of your viewers will know,
it can be over five hundred percent interest rate on payday loans. And this deregulation of interest rates did
two critical things. One, it allowed financial institutions to
grow at extraordinary levels, hundreds sometimes thousands of percent a year, because in the
old days you couldn’t get cash to be able to grow that quickly. But now, you could offer to pay on deposits
an extra one tenth of one percent, that’s ten basis points, and the next day you would
literally have, if you wanted it, two billion dollars to be able to grow. Well, by removing interest rate caps, you
allowed that massive growth, but you also allowed predation against the most vulnerable
folks. The savings and loan crisis, this was made
infamous by the most notorious fraud, Charles Keating, where they deliberately predated
against widows, consciously targeted retirement communities, and had internal memos that said,
and I quote, “Remember, the weak, the meek, and the ignorant are natural targets for all
of this.” Thereafter, it got worse, because we drove
these predatory lenders, who in the early days, right near the end of the savings and
loan crisis, clustered where all good financial frauds in America begin, in Orange County
California. And we had jurisdiction over them, and we
forced them out of the insured industry. In fact, the worst of them, Long Beach savings,
voluntarily gave up federal deposit insurance and its charters of savings and loan for the
sole purpose of escaping our jurisdiction. So it went out and it became the vector, in
the sense that like an anopholese mosquito is the vector that spreads malaria, that spread
this toxic loan and predation through the industry. And then, it morphed as a bunch of folks like
Household Financial, who specialize–they were sort of the payday lenders of the early
1990s, 1980s, not as virulent, but really nasty–they started hiring people out of
Household Finance when it went out of business into places like Long Beach Savings, which
changed its name to Ameriquest. And literally, as the Attorney General of
Illinois, Lisa Madigan, has said, became the model for what became known as the shadow
financial sector, which was the primary specialist in making these fraudulent and predatory loans,
but with the financial backing of Wall Street, mostly the investment banks. So it really wasn’t Garn-St. Germain or
the 1982 legislation on savings and loans, nor was it Gramm-Leach Bliley, which mostly
got rid of Glass-Steagall, that was critical in this regard. It was this unholy marriage of two forms of
predators, Wall Street predators and these really sleazy payday lender types, SNL fraud
emigres, that got together and said, “Hey, Keating was right. All we have to do is pay loan brokers more
money to induce people to overpay in interest rates. How should we go about doing that?” So the first answer was pay. But the second answer is what this new research
is about, which by the way, is not primarily by economists, but by folks who really understand
culture and demographics and such. And they said, “Let’s go look at the whistleblowers,
the people who actually worked for these banks,” in the epicenters for where this predation
occurred, which is places like Baltimore, Prince George’s County in Maryland, Cleveland,
Ohio, Atlanta, Detroit where I was born. So let me ask you something. I want to play two clips since we’re talking
a bit about history, to see how they are relevant or not relevant. And then, we’ll take a short break, do a
second segment. I want to hone in on just what folks found
in this cultural look at how this happened and what it has to do with the city we’re
broadcasting from and others around the country. But let me play these two quick clips for
you and just get your thoughts and see if this is the blending you were talking about,
the marriage that created some of this, the beginning. This is the first one, when Bill Clinton decided
Glass-Steagall it was no longer important. It is true that the Glass-Steagall law is
no longer appropriate to the economy in which we live. It worked pretty well for the industrial economy,
which was highly organized, much more centralized, and much more nationalized than the one in
which we operate today. But the world is very different. Now we have to figure out, well, what are
still the individual and family and business equities that are still involved that need
some protections? Glass-Steagall not being completely relevant
to this, but let me play this and juxtapose it to what Ronald Reagan said when he started
beginning the process of deregulation here. This bill is the most important legislation
for financial institutions in the last 50 years. It provides a long-term solution for troubled
thrift institutions, it’s pro-consumer, granting small savers greater access to loans,
a higher return on their savings. And when combined with recent sharp declines
in interest rates, it means help for housing, more jobs and new growth for the economy. All in all, I think we hit the jackpot. Now, this bill also represents the first step
in our administration’s comprehensive program of financial deregulation. The question is, have we really hit the
jackpot here? Are there connections between these two and
what we just saw in 2007 and what this report is talking about, or are they disconnected? Well, the broader connection is in some ways
the obvious one. First, as I said, it begins with the President
Carter, goes through President Reagan. His vice president is the chairman of the
deregulatory task force was talking about, that they were just at the start of efforts
of getting things wrong with the Garn-St. Germain Act which kicked off the savings and
loan debacle’s second phase, the vastly more expensive, fraudulent phase, and then
was continued under Bill Clinton, who had the same fundamental policy. And then, the second George Bush continued
it. And so, you had twenty plus years of essentially
an assault on regulation. And secondly, of course, what did they have
in common? Well, President Trump isn’t the only president
that lied, because virtually every statement that you just presented was a lie. From both presidents, the Republican and
the Democrat one, from both presidents. From both presidents. So we’re going to end this conversation
here, just for this part of it right now. We’re talking with Bill Black, who of course
you know is a regular contributor here at The Real News. In our second segment, we’re going to talk
a bit more about what he just said, what was this dishonesty about, and then really delve
into this report and what this report shows that we didn’t already know. And then, later we’ll talk a bit about where
this might take us all in the future. So check the next segment out. I’m Marc Steiner here for The Real News
with Bill Black.

9 comments on “Financial Deregulation & Racist Housing Policy Brought Us 2007 Meltdown, with More to Come (Pt 1/3)”

  1. Mickey The maltipoo says:

    Last

  2. BeeFriendlyApiary says:

    The duopoly will ruin us all!!!!

  3. creamsykle says:

    Let me get this straight… These communities complain when banks dont give them loans, but when the banks do give them loans they say "how dare they give us loans when we cant afford them".

  4. Sandy says:

    I hate Bill Clinton, bastard destroyed our country. Glass-Steagall repeal legalized bank gambling, investment banks used to be separate

  5. Mohammed Alsaadi says:

    Money hungry always money hungry and as long them Jews in control of them banks consumers always lose

  6. darren alevi says:

    great title for the Book Will have a look for that one.

  7. Paul Charles says:

    The superrich capitalists exploit the weakest and most vulnerable to enrich themselves further…in America??? Who'd have thought??

  8. Paul Charles says:

    Goyim unite and sharpen your pitchforks!!

  9. Robgoren says:

    Hey CNN, MSNBC, Fox … take notes. This is what journalism looks like.

Leave a Reply

Your email address will not be published. Required fields are marked *