We Must Not Speak Uncomfortable Truths to Power: Why I Won’t be Briefing Congress about Derivatives

By William K. Black

When I was the Deputy Director of FSLIC, House Banking Committee Chairman St Germain was helping Speaker Wright hold the FSLIC recapitalization bill hostage to extort favors for Texas control frauds, including Don Dixon’s Vernon Savings (which was providing prostitutes to the State of Texas’ top S&L regulator and was building towards having 96% of its ADC loans in default – which is why we referred to it as “Vermin”). The attack on our agency was that we were mad dogs biased against Texas S&Ls and causing the Texas crisis by closing too many insolvent but well-run Texas S&Ls. Our response had many elements, but one of our principal points was that the Texas S&Ls we were closing were typically control frauds. At this juncture, St Germain’s staffers made a mistake. They requested that we testify on a host of issues, but the invite letter had a zinger, premised on an article saying that the Feds were slow to prosecute frauds in the Southwest. The invite specifically called for us to respond and discuss the role of fraud in the Southwest. We used the opportunity to explain the extensive role of fraud in Texas S&L failures.

The day of the hearing, I walked toward the witness table, but was called over by St Germain’s chief of staff. He proceeded to disinvite us from testifying on the grounds that we had filed non-responsive testimony. (We had, of course, responded to every inquiry they made. They simply hated the response because we documented the enormous role that control fraud was playing in causing Texas S&Ls to fail.)

Today, I received definitive word that I had been disinvited from a bipartisan briefing of members of Congress on the subject of financial derivatives. I have deleted the name of the staffer because he is not the issue. The relevant email thread is below.

The member of Congress putting the event together is one of the strongest advocates of the need for banking reform. I have assisted the Member’s staff in the past in such efforts. The Member’s chief of staff called me today. His position is that I was never invited to participate and that it was unfortunate that I booked the flights and put UMKC on the hook for the non-refundable fares and hotel before informing his office that I was accepting their inquiry about participation (as opposed to invitation). He explains that it is impossible physically to have me participate and that the decision not to have me participate has nothing to do with concerns about “balance” or “bank bashing.” I emphasize also that, unlike St Germain’s disinvitation the email thread states an interest in inviting me to speak at future briefings. I hope that such invitations will be made. The Member and the Member’s staff were polite while St Germain’s chief of staff was deliberately rude.

Nevertheless, I think that the Chief of Staff’s phone call to me explaining their view that I was never invited makes my point. We all know that is simple to add a panelist. What is really going on is that things are so toxic in Congress now, and the largest banks are so sensitive to any criticism, that the progressives fear that any criticism of bank practices that will cause the next financial crisis will be considered “bank bashing” and will cause Republicans to be unwilling to participate. The fact that I have a 30 year record of non-partisan service to the nation on banking matters, including service as a banker with the Federal Home Loan Bank of San Francisco, does not count in such a world. We must not speak uncomfortable truths to power. You will see that it is his staff that informed me that the concerns that prevented me from joining the panel were maintaining a “consensus” about the panel’s “balance” and avoiding “bank bashing.”

I remain supportive, of course, of members of Congress reaching out and getting facts about our financial system, so I hope that the Member’s efforts to create a series of bipartisan briefings succeed. Self-censorship, however, is most debilitating form of censorship. A “consensus” that seeks to minimize any criticism of the “too big to fail” banks on the grounds that criticism equates to “bank bashing” is a consensus to play ostrich.

Excerpts from the e mail thread:

Sent: Wednesday, May 23, 2012 5:34 PM
To: Black, William
Subject: Re: Financial Services Panel Series: Derivatives

Mr. Black,

It was nice speaking with you earlier and I thank you for your consideration. Currently, the panel information is as follows:

Financial Services Panel Series: Derivatives Thursday, May 31
2:00 p.m. to 4:00 p.m.
Rayburn 2226

Moderator: – CNBC or Bloomberg


-Wallace Turbeville – Senior Fellow, Demos (Formerly of Goldman Sachs) -John Parsons – Senior Lecturer in Finance, MIT -Nela Richardson – Senior Economic Analyst, Bloomberg Government (formerly of Freddie Mac and the Commodities Futures Trading Commission) -Marcus Stanley – Policy Director, Americans for Financial Reform (AFR) -Chris Young – International Swaps and Derivatives Association (ISDA) -Mark Calabria – Dir. Of Financial Regulation Studies, CATO Institute

Please let me know if you have any questions or suggestions.

From: Black, William [mailto:[email protected]]
Sent: Thursday, May 24, 2012 10:28 PM
Subject: RE: Financial Services Panel Series: Derivatives


I am pleased to accept your invitation to participate on the panel. My cell is [redacted]. I’ll be flying in from California. Please send me information on logistics/venue etc. as soon as you have more details.


Best regards,

May 25, 2012 10:36 a.m.

I want to sincerely thank you for your willingness to participate and contribute to the discussion. Unfortunately, we cannot add any additional participants to the panel. In efforts to proceed in a bipartisan manner, we have achieved a nice balance of individuals who will accommodate various points of views on derivatives regulations. Accordingly, adding another participant at this time would disrupt that balance and will spark concerns with our Republican colleagues.

I apologize for any inconvenience this may have caused, but I do hope you will consider joining us for the next panel we are convening to discuss the Volcker Rule. Next week’s panel is intended to be the first in a series and I intend to reach out to you again and Mr. Greenberg.

Thanks again for your assistance and the resources you provided earlier in the week. And I hope you enjoy the Memorial Day weekend.

Best regards,

Sent using BlackBerry

> From: Black, William [mailto:[email protected]]
> Sent: Friday, May 25, 2012 02:17 PM
> To:
> Subject: Re: Financial Services Panel Series: Derivatives
> We have already booked the flights and hotel in response to your invitation. Please reconsider.
> This will cause our school a serious loss and me considerable embarrassment after I called in favors to be able to accept.

From: Black, William [mailto:[email protected]]
Sent: Friday, May 25, 2012 02:33 PM
Subject: Re: Financial Services Panel Series: Derivatives

FYI, I have testified to Congress five times about this crisis and two of those appearances (once in each chamber) were as the Republican designated witness so I won’t throw off any bipartisan balance — quite the opposite.


Sent: Sun 5/27/2012 11:16 AM

In case you did not receive my voice message I wanted to once again apologize for any incovenience you may have incurred and thank you for your willingness to participate. As I mentioned before, in the time between my initial call to your office and when we spoke last week, I had confirmed the participation of several others who agreed to do so under the understanding that the panel would be bipartisan and non confrontational. Quite frankly, many of the trade associations were hesitant to speak in public because of what they thought would be a public ‘bank bashing.’ So for this initial panel, we have tread carefully because we want Republican participation and we want to keep these forums ongoing. It is my hope that your colleagues and university will understand that we tried to accomodate another participant, but we just could not make it work without disrupting consensus. I will be in touch with you regarding the next panel we are organizing to discuss the Volcker Rule.

Tuesday 5/29/12 10:41 a.m.

Unfortunately, we cannot accommodate an additional participant. I understand and appreciate your experience, but the factors I outlined in the previous email still exist and this change would compromise the consensus we have achieved. I do wish you would have confirmed your availability with me before making arrangements. When we last spoke, it was my understanding that you had to check your schedule first. So I was a little surprised that you were so quickly able to clear your schedule and make flight arrangements before we had a follow-up conversation. In any event, your previous work as a regulator during the S&L crisis is highly noted and I do think your primary knowledge and insight is helpful as Congress and the agencies grapple with the 21st century financial regulation. To that end, I do hope you will consider participation in the follow up panel, and I sincerely apologize for any inconvenience you have incurred.

Bill Black

21 responses to “We Must Not Speak Uncomfortable Truths to Power: Why I Won’t be Briefing Congress about Derivatives

  1. The problem with you testifying is that it makes it more and more difficult for them to ignore what you have to say.

  2. When Chris Hayes asks if the system is redeemable….I think this is the answer.
    just stinking sad.

  3. “I intend to reach out to you again…”

    More to the point, will they cut a check for the airfare?

  4. Must. Not. Rock. The. Boat. It’s another election cycle and members of Congress depend on the financial industry contributions to their campaigns. “Sorry Mr. Black, we no longer need you. We can’t handle the truth in an election year.” AND, they don’t need you to explain about those pesky derivatives since the administration is going to backstop derivative trading. They don’t want you to tip off the taxpayers to the latest bankster “bailout”.

  5. Sorry if I am missing something obvious, but where was the invitation? Was it over the phone?

  6. “.. a Prophet is not accepted in his own country.” ~ Jesus Christ

    They’re simply attempting to prolong the massive 1.5 quadrillion derivative disaster that is beginning to crumble. The truth is too hard to handle.

    Actually, I wouldn’t doubt itif Jamie gave a call to his pals on the Banking committee to have you dis-invited.

    Keep up the great work Bill, and God Bless!

    ~ JDH

  7. I hope you consider engaging the public on this important issue by sharing your information through alternative news sites such as: Max Keiser or The Corbett Report; in a timely manner.

  8. margaret hansen

    It’s obvious…the federal government is going broke. They will have no means of getting more money soon. The treasury is direct selling to China???? What does THAT say?

    I am amazed at how the headlines all say the taxpayer will pick up the debt tab. It’s not possible. We can’t pay those taxes and will probably pull an Iceland, after the banks crash. The BRICs new bank will remove profits. Iran has devised a way out of SWIFT. Who will pay for the fuel to bomb Iran? It must be borrowed.

    Game over….and we the people aren’t the pawns anymore. There’s nothing left to take. I love the joke on them….just like in Atlantis, they imploded their own system.

  9. Bill,
    This big piggy is a Big Fan of yours, and you WILL be vindicated – given time. Johnathan & Judy C. are both spot-on. Next time this type of chutzpah is dished to you, tell them in the name of the First Amendment to go POUND SAND. OINK!!

    L T P -aka- Major Bacon – Silver Liberation Army
    follow this cantankerous swine on Twitter: @lickthepig
    and Keep Stackin’ da Phyzz! :8)

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  11. let me guess

    why do you think in coups in banana republics they first go for the TV and radio towers?

    access to media is access to (dis)inform the masses which is a basic function of power.

    media is the main organ of deception.

    truth in media is suicide for those in power.

    No one can handle the truth. Those who can must be exiled.

  12. Mr. Black,

    Since you already have the tickets, accommodations why not go and hold a press conference about this? Bring some other voices of reason? Maybe Alan Grayson, Matt Stoller, Yves Smith, Abigail Field-Kaplovitz come to mind…Strange days require alternative strategies. Just a thought.

    Kind Regards,

    Jylly Jakes

  13. Bill Black was one of just a handful of regulators who, back in the 1980s, tried to tell the truth about what Charles Keating and his kind were up to looting savings and loans around the country. They shut him up then too. When the money is flowing after a round of deregulation the last thing those looting want is someone blowing the whistle on them. Afterwards the same people jump in front of the CNN cameras demanding to know, “where were the regulators!!?” It happens and happens again. And for the same reason Willie Sutton robbed banks for a living.

    Steve Pizzo

  14. Sorry to hear that yet again your valuable input into these matters is overlooked. It’s all about appearances to this administration and 3-card monty aka kick the can down the road. They want to lull the American people to sleep with controlled media that does not get to the truth and only pumps out government propaganda. Weaving fairy tales while preying on hopes and dreams and stealing the people blind. I wish you had challenged Obama in this primary – you’d have gotten my vote for President – and I’m sure many others. The media and Wall St have narrowed the choices down to 2 and both are Wall St fronts. Scary to think we are electing Wall St to the halls of power when they always had to steal or buy their way in before. This is why I’m writing in Ron Paul.

  15. daniel9696

    The panel already knows the bankers are crooks and they are using derivatives to siphon off massive amounts of money from the economy for themselves. Why would they want an expert to point out the system they created for selling shit and passing it off as fine chocolate is crooked, and have the flaws revealed? They already know that when derivatives perform as designed, only the bankers are safe. Not the banks, not the investors, just the bankers.

  16. Seriously, is there a milligram of testosterone left in congress?

  17. This is an extremely confusing story. The events being spoken of in the first paragraphs had to occur in some timeline between 1987 and 1989. Yet, it is made to sound as if this is current news.

    It is not clear to me what the first paragraphs have to do with the last part of the story. Something that happened over 20 years ago is now under investigation? Or that this is the second time this man has been dis-invited when he has something to say that Congress doesn’t want to hear?

    All in all, a very ineffective piece.

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