Financial Crisis Inquiry Commission’s Interview of William Black

Audio (mp3) of the FCIC’s interview of William Black are avialable in two parts on the FCIC’s website.  Links to the mp3’s follow.

Part 1
Part 2

2 responses to “Financial Crisis Inquiry Commission’s Interview of William Black

  1. Thank you for posting the interviews – they are very informative. One comment: you say that insurers (I think you may have been implying firms like AIG) were making promises of insurance that could never be paid. But hasn't this been pretty much always the case? Aren't insurers really just pirate clubs of rich people who gang together to profit from the misfortunes of others? They get their premiums by promising to pay out enormous sums of money to airline operators, ship owners, and the like if there is a disaster. Because they haven’t got the money to actually pay if there is a disaster, they ‘reinsure’ with other groups of rich people, who themselves reinsure – all of course taking their cut. For example, 75% of Lloyds transactions have nothing to do with the actual insurance of goods in the real world – but in the trading of possible risks for a profit.Derivatives are essentially insurance policies which cover a complex set of eventualities in future commodity prices, currency exchange, interest rates and other financial/trading markets. The premium paid is small compared with the total cover. The need for such insurance coverage has grown as world trade has grown, both in volume and complexity.The calculation of risk over many parts of policies has become so sophisticated for the derivative traders that major financial firms have been employing those who are more numerate than the usual MBA or economics graduatuate – they now look to first-class honors mathematics or physics graduates. However, unlike ordinary insurance policies, derivatives are not just fixed agreements between two parties. The insurer can sell the policy to anyone else, thereby transferring the liability to pay out. Hundreds of millions of individual trades occur each year, involving trillions of dollars. Because taxes aren’t paid on these transactions, trading has mushroomed. Some might remember Nick Leeson at Barings Bank involving derivatives. In these cases of scandal, few are charged and any director unlucky enough to be convicted seems to serve a year in an open prison where his cell becomes a small office through which business is conducted on a slightly smaller scale than before. For these people the crime was to be caught.The line between criminality and everyday business practices has become very blurred, indeed, under successive governments, both democrat and republican. And there was no talk of scroungers from Mr. Gingrich on this one, on the savings and loan scandals, or with Goldman's and AIG. Tax payers end up getting hurt on these deals but few talk of closing down or properly regulating banks. Unstilted by the dead hand of government interference, guided solely by the profit motive, the theory is that banks lend funds for industry to invest; the practice is that speculation, with virtual money via computers, increasingly characterizes what is going on.

  2. Many people can say a lot of things about the financial crisis around the world, many of them do not have the knowledge to say an appropriate comment.Bob, you say some good things about the problem, congrats because you are the kind of people who know about the topic!