Always Have a Plan B — plan Bush
Recommended Books
"It's the Things You Do Know, But Aren't So, That Cause Disasters"
(The title for Chapter 10 in William Black's book, "The Best Way to Rob a Bank Is to Own One")
Because banks play such a large role in everyone's life, we can all benefit from knowing how the savings and loan industry (S&Ls) was literally looted in front of everyone's eyes by the individuals who owned the banks. The initial banking crimes occurred over 20 years ago but have continued to impact our financial system ever since. Many people feel that the 2008 bank crisis had its beginnings in the S&L crisis. What is it they say about criminals returning to the scene of a crime?
Author William K. Black has written about what happened and what we can hopefully learn from it in "The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry." William Black developed the financial and legal theory of "control fraud" that in simplest terms refers to the deceitful looting of a public company or a government entity for personal profit by using the controlled entity as a "weapon" to commit fraudulent activities.
Please don't overlook my special commentary (Why Didn't We Listen?) near the end of the page. When I mention the title of William Black's book ("The Best Way to Rob a Bank Is to Own One") to anyone who is not familiar with it, the responses usually indicate an assumption that the book is referring to what happened during 2006-2008. In fact the book was published just before that period (2005), but isn't it remarkable that we are still talking about the huge financial mess caused by banks after all of the previous banking problems?
"The Best Way to Rob a Bank Is to Own One" focuses on the large number of savings and loan institutions that failed over 20 years ago because of two primary reasons:
(1) S&Ls took advantage of changes in laws governing financial institutions.
(2) S&Ls took excessive risks.
When we review the banking crisis that led to a huge bank bailout in 2008, most observers attribute the underlying problem to these same two factors. In the Bill Moyers video shown below, we begin to see just how clearly the events described in "The Best Way to Rob a Bank Is to Own One" are intertwined with the more recent banking debacle.
Book Comments from Financial Experts
- "Bill Black has detailed an alarming story about financial and political corruption. The lessons are as fresh as the morning newspaper. One of those lessons really sticks out: one brave man with a conscience could stand up for us all." (Paul Volcker, former chairman of the Federal Reserve)
- "This is an extraordinary book. No other account gives a complete picture of the control fraud that occurred in the S&L crisis. There is no one else in the whole world who understands so well exactly how these lootings occurred in all their details and how the changes in government regulations and in statutes in the early 1980s caused this spate of looting. This book will be a classic." (George A. Akerlof, University of California, Berkeley, winner of the 2001 Nobel Prize for Economics)
- "His main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname banksters." (Bill Moyers)
During the Savings and Loan crisis, how many S&Ls failed?
Answer: 747 out of 3234 (23 percent)
William K. Black
Bill Black is a lawyer and former bank regulator. His expertise in white collar crime and regulation serves him well in teaching us many valuable lessons. He was born September 6, 1951.
"Banking establishments are more dangerous than standing armies."
(Thomas Jefferson, Third President of the United States)
There are quite a few variations of this particular quote even when examining Thomas Jefferson's official and unofficial papers. Some of his observations are private letters during the period from 1802 to 1816. I believe the many places that he expresses this sentiment are the best evidence of how strongly he felt about the subject. Just as William Black has done hundreds of interviews as a measure of how important he feels it is to understand what banks and bankers did and how they did it, Thomas Jefferson kept on talking about his banking concerns. For both Thomas Jefferson and William Black, their exact words might vary but I think we all get the point. Or do we?
Why Didn't We Listen?
William K. Black and Sheila Bair Both Tried to Warn Us
Both this page about William K. Black's book and another I published about Sheila Bair's "Bull by the Horns" demonstrate that experts can tell us what is about to happen but that is not enough. People who can do something about it then need to listen and act. In both of these cases, the warnings were ignored.
The all-powerful banking lobby is probably as responsible as anything for this failure to act even when warned. They have a front row seat for all of the political games being played, and the umpires are under their extensive influence as well. Even after the savings and loan debacle of the 1980s, Congress eventually gave banks much more freedom instead of less by revoking the Glass-Steagall Act.
For a current example of the silliness, the recent banking crisis forced a bailout because banks were supposedly Too Big to Fail, so naturally the response was to let the biggest banks become even bigger since then. They're still not listening. Do you see a pattern beginning to form? Please feel free to contact me for my help and warnings about what small businesses can and should do about their choice of banks.
The first Bill Moyers video below explains why bankers earned the nickname of banksters.
Copyright © 2014, Stephen Bush. All rights reserved. AEX Commercial Financing Group
Stephen Bush is the CEO of AEX Commercial Financing Group. He is a small business consulting expert who helps small businesses throughout the United States and Canada.
"The Best Way to Rob a Bank Is to Own One"
Originally written in 2005, William Black obviously knew we had a big problem with banks before it was popular to criticize the banking establishment. An alarming but true story.
It is always prudent to learn from mistakes, and William Black's exceptional book provides an insider's look at the many mistakes which contributed to the S&L crisis. As you will see in this book, many people in fact failed miserably when it came to learning from mistakes. As in many criminal activities, fraudulent patterns kept reappearing but were ignored by numerous people who should have known better.
Originally written in 2005, William Black obviously knew we had a big problem with banks before it was popular to criticize the banking establishment. An alarming but true story.
It is always prudent to learn from mistakes, and William Black's exceptional book provides an insider's look at the many mistakes which contributed to the S&L crisis. As you will see in this book, many people in fact failed miserably when it came to learning from mistakes. As in many criminal activities, fraudulent patterns kept reappearing but were ignored by numerous people who should have known better.
Sheila Bair Book: Bull by the Horns
“The American public needs to fully understand the crisis in order to bring it to an end.”
Sheila Bair is the former head of the FDIC (Federal Deposit Insurance Corporation) and foresaw the sub-prime lending crisis well before it caused huge problems for all of us. I think we should all be paying more attention to what she has to say now.
“The American public needs to fully understand the crisis in order to bring it to an end.”
Sheila Bair is the former head of the FDIC (Federal Deposit Insurance Corporation) and foresaw the sub-prime lending crisis well before it caused huge problems for all of us. I think we should all be paying more attention to what she has to say now.
