About William Black's claim

[ProSense]

This is a lie. Not a reasonable difference of opinion. A lie. A material misstatement.

Now, it is true that the diarist got this lie from Black himself:

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.

Again, let me repeat. This is a lie.

And quite a lie it is. It is a lie on at least two levels.

First, the Prompt Corrective Action ("PCA") law does not give the FDIC the ability to take over any Bank Holding Company ("BHC"). Instead, BHC's are regulated and governed by the Federal Reserve, pursuant to The Bank Holding Act of 1956.

Amongst the financial institutions that are thus not subject to the PCA are:

JP Morgan Chase
Citigroup
Bank of America
Wells Fargo
HSBC
Goldman Sachs
Morgan Stanley

And, of course, the PCA also does not apply to AIG, which is an insurance company and not involved in banking at all. So, pretty much all of the really big players don't fall under the PCA in the first place. Their commercial banking subsidiaries very well may, but your local Bank of America branch is not at the root of this crisis.

Second, the diary is a lie because Obama isn't breaking the law. Why? Because the PCA does not mandate that the FDIC take over any bank .

Incredibly, the diary in question actually links to and quotes the Prompt Corrective Action Act.

TITLE 12 > CHAPTER 16 > § 1831o

§ 1831o. Prompt corrective action

(d) Provisions applicable to all institutions
(2) Management fees restricted
An insured depository institution shall pay no management fee to any person having control of that institution if, after making the payment, the institution would be undercapitalized.

SNIP

(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.

more

Also, the claim about the savings and loans has nothing to with the issue of nationalizing the large financial institutions. Banks are nationalized all the time. The claim is not only wrong, it's stupid.

[ProSense]

1. No comment? n/t

[slipslidingaway]

2. Reading through some of the comments it does not look as

clear cut as the poster on KOS suggested.

[Junkdrawer]

3. Yep. Too much emphasis on the Bank Holding Company....

vs. licensed bank subsidiaries (an effort to use the letter of the law to ignore the intent of the law)

AND

the quoted "OR" clause was selectively edited.

[ProSense]

5. Because they are BHC.

You can't ignore that fact just to make your argument. Banks that are not BHC are nationalized all the time.

[SOS]

16. BHCs are not immune from Federal action

From The Commercial Banking Regulatory Handbook on Prompt Corrective Action:
c. Holding Company Guarantee
If the undercapitalized bank is owned by a holding company, that holding company must guarantee that the bank will comply with the plan until the bank has been adequately capitalized and provide appropriate assurances of performance.

For example, the FDIC must take action in regard to Citibank if it is undercapitalized, and Citigroup would have to guarantee that division under PCA.

The Federal Reserve Board does employ a definition of "well-capitalized" in it's regulation of bank holding companies.
Washington Mutual was a BHC and was seized by the Federal Reserve Office of Thrift Supervision and was placed under the supervision of the FDIC.

While BHCs are not covered under prompt corrective action, their subsidiaries are, the BHCs must guarantee that capitalization and, if necessary, the OTS can seize the holding company.

While Black's assertion that BHC "Citigroup" must be seized under PCA is incorrect, "Citibank" must be seized or reorganized by the FDIC if it is undercapitalized and then must be guaranteed by Citigroup.
If Citigroup is undercapitalized, the OTS has the option of seizing the whole thing and handing over the insured subsidiaries to the FDIC.

To say that Black is a "liar" is unfair, given the complexity of the structures involved.

[SOS]

18. Correction - Black was correct on all points

Black clearly refers to receiverships under Reagan and the RTC and does not even mention BHCs.
Thus I retract the line: "Black's assertion that BHC "Citigroup" must be seized under PCA is incorrect".
Not surprisingly, Black was correct on all points.

Bill Black:

He was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and General Counsel of the Federal Home Loan Bank of San Francisco, and Senior Deputy Chief Counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

He knows what he's talking about.

[TacticalPeek]

26. Precismo - correct on all points. No lie, no misstatement, not even misdirection.

Misdirection and smoke screens appear to be more in the provenance of those he stung.

[ProSense]

28. What are you arguing?

The facts, and the links to relevant laws, are in the OP.

[SOS]

40. Simple

The "facts" in the OP are not facts at all.

[slipslidingaway]

8. Appears that way, a few direct links to comments...

http://www.dailykos.com/comments/2009/4/4/101447/8340/115#c115

http://www.dailykos.com/comments/2009/4/4/101447/8340/279#c279

http://www.dailykos.com/comments/2009/4/4/101447/8340/311#c311

[ProSense]

4. It's clear.

The argument that the FDIC doesn't have the authority to take over all banks is clear. It's also clear that the law doesn't mandate takeover. Furthermore, the government doesn't have the authority to takeover any financial institution, and the pieces linked to provide clarification.

Black's declaration is BS.

[slipslidingaway]

7. I'm not clear on all of the laws, so I'm not as willing to accept

this poster's analysis, there are other comments as well.


One comment...direct link.

http://www.dailykos.com/comments/2009/4/4/101447/8340/225#c225


"Pot calling the kettle black - you are half wrong

This first part of where you say:

Again, let me repeat. This is a lie.

And quite a lie it is. It is a lie on at least two levels.

First, the Prompt Corrective Action ("PCA") law does not give the FDIC the ability to take over any Bank Holding Company ("BHC"). Instead, BHC's are regulated and governed by the Federal Reserve, pursuant to The Bank Holding Act of 1956.

Amongst the financial institutions that are thus not subject to the PCA are:

JP Morgan Chase
Citigroup
Bank of America
Wells Fargo
HSBC
Goldman Sachs
Morgan Stanley

This is a lie. And quite a lie it is. (Using your words)


*****Comment starts here*****

First let me direct you attention to § Sec. 1813. Definitions

(q) Appropriate Federal Banking Agency.--The term ``appropriate
Federal banking agency'' means--
(1) the Comptroller of the Currency, in the case of any national
banking association or any Federal branch or agency of a foreign
bank;
(2) the Board of Governors of the Federal Reserve System, in the
case of--
(A) any State member insured bank,
(B) any branch or agency of a foreign bank with respect to
any provision of the Federal Reserve Act <12 U.S.C. 221 et seq.>
which is made applicable under the International Banking Act of
1978 <12 U.S.C. 3101 et seq.>,
(C) any foreign bank which does not operate an insured
branch,
(D) any agency or commercial lending company other than a
Federal agency,
(E) supervisory or regulatory proceedings arising from the
authority given to the Board of Governors under section 7(c)(1)
of the International Banking Act of 1978 <12 U.S.C. 3105(c)(1)>,
including such proceedings under the Financial Institutions
Supervisory Act of 1966, and
(F) any bank holding company and any subsidiary of a bank
holding company (other than a bank);

(3) the Federal Deposit Insurance Corporation in the case of a
State nonmember insured bank or a foreign bank having an insured
branch; and
(4) the Director of the Office of Thrift Supervision in the case
of any savings association or any savings and loan holding company.

So now lets return to § 1803:

(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.

It would be helpful before you quote USC, you learn how to read it."

[TahitiNut]

10. Note that the "Appropriate Federal Banking Agency" for AIG is the Office of Thrift Supervision.

:shrug:

In fact, it was reported that AIG deliberately acquired a small S&L in order to 'game' the system and have the OTS be the designated regulator.

[slipslidingaway]

13. Thanks for that piece of info, we need an investigation - S. Res. 62

http://www.govtrack.us/congress/bill.xpd?bill=sr111-62

:shrug:

[ProSense]

19. ""Pot calling the kettle black - you are half wrong"

Really? Half wrong? Black said definitively that this is mandated by law.

[ShortnFiery]

24. But if he made a mistake that NEGATES all he said because Obama is "golden?"

Wow, partisan fervor is not an attractive quality. :(

[slipslidingaway]

15. "BHC's are regulated and governed by the Federal Reserve,"

above quote from the KOS diary.


What action did the Federal Reserve take as this bubble was building?

Geithner was head of the NY Fed since 2003.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed13.html


I've read through some of his earlier speeches on derivatives....yeah derivatives could be a problem, to the bankers...be good, hopefully we'll have shock absorbers in place if a problem hits etc. etc.

What did they do to regulate the growing CDS market?


Are the tax payers the shock absorber of last resort?

[ProSense]

20. You are not addressing the

issue

Which is: The government does not have authority to seize these financial institutions.

[slipslidingaway]

30. Same issue for me, who should have regulated the BHC and what

did they do?

According to the poster at KOS, it was the responsibility of the Fed, Geithner was head of the NY Fed since 2003.

Do you know of any actions that he took to curb the growing CDS market and make sure that our financial system would be sound? When they were allowed to leverage more capital what did he say?

I'm referring to the same post that you posted here, just a different part of the post.

:)

[SOS]

41. And yet

The Office of Thrift Supervision seized BHC Washington Mutual, Inc. in September 2008.
How did they do that without authority?

[ShortnFiery]

23. Wow, et tu ProSense?

:(

[azmouse]

6. Thank you for the info.

[mopinko]

9. there you go again

confusing people with the facts. troll.






(keeeding)

[yowzayowzayowza]

12. Indeed.

K&R

[slipslidingaway]

14. Except that there are various comments in that diary which

point to errors.

[omega minimo]

11. 1. so they're "Too Big To Follow Law" 2. What part of OR don't you understand?

1.a. even tho their subsidiaries are subject.....


your post was built on toothpicks and your identical OP doesn't appear any more substantive.

[girl gone mad]

17. Where's the substance in this post?

Why would you assume Black is lying?

Where's the beef?

[ProSense]

21. Ah,

pretending not to see is reality.

[girl gone mad]

32. Can you actually make a substantial argument?

I want to see you, ProSense, tell us William Black is "lying".

Explain it to us without links to KOS diaries or other people's posts on DU. I'd like to see some substance from you for once.

[ProSense]

33. Here

simple

For a more complex response, see the information and links in the OP.

[girl gone mad]

34. That's a declaration, not a reasoned argument.

I'm afraid that if you're going to state that you have special knowledge that a legal scholar and regulatory expert doesn't, you'll have to do better than that.

This is Black's field of expertise, and you would like for us to believe that you understand the law better than he does. That's a bold claim which requires real, hard substantial evidence, not simply a two sentence statement assuring us that you believe it's "clear" that Black is wrong based on a diary you read at Daily Kos.

[NashVegas]

22. Please Go Back to GD: P Where This Bullshit Is Welcomed

Here, you're just someone who's trying to justify what cannot be justified for no other reason than it's our party placating the corrupt, this time.

[ProSense]

25. What: Facts? n/t

[ShortnFiery]

27. Party FIRST seemingly is the point of your thread because it conveys no new information

than a half dozen of others posted before it.

I'm so disappointed since you are highly intelligent and an excellent researcher when you don't place party first. :(

[ProSense]

29. Oh BS.

Black's statement was held up as absolute fact: the law mandates. Here in the face of facts people are trying to prove it's "half right."

BS!

[NashVegas]

35. Just Stop It

There is no defending what these guys did, there is no defending an administration's continued blind eye to the fleecing of American citizens of every stripe. Getting on your little stomp box and screaming "oh, Black's LYING! It wasn't against the LAW!" is a steaming load of pure horse shit and does nothing to divert anyone's attention from the FACT these guys need to be jailed.

[ProSense]

36. Show me exactly where the law specifically mandates takeover.

Or, explain why he said the government was mandated to do this.

Or stop wasting my time with your diversionary BS.

[NashVegas]

38. You're Just Too Damn Funny

It's in your own hysterical OP.

[SOS]

42. Here

(2) Prompt corrective action required:

http://www.law.cornell.edu/uscode/uscode12/usc_sec_12_00001831---o000-.html

[ProSense]

31. Be sure to read the update

here.

[On the Road]

37. Thank You for The Link

I just listened to the Bill Moyers interview with Black, and was startled by some of the things he said. Because of his previous position I gave his statements some credibility, but it was contrary to everything I understood about the industry up to that point.

[eomer]

39. Wrong, because the banks owned by the BHCs are subject to the law.

You're right, of course, about AIG -- as an insurance company it is not covered by PCA.

But you're wrong (on this one point) about the banks. The fact that PCA doesn't apply to a BHC is irrelevant because PCA does apply to the banks owned by the BHC.

I'm not disputing your other point about there being an OR that allows the government a choice other than receivership. But you should reconsider your argument about PCA not applying to BHCs -- I think you're wrong about that. Or else let me know if I'm the one missing something (IANAL).

[TayTay]

43. Just out of curiosity, when did William Black become an "enemy of the people"?

Was it before or after he was in the Obama campaign video last summer about John McCain's role in the Savings and Loan scandal. Was William Black to be respected as long as he was useful and providing economic cover to the Obama campaign as a former FDIC official but disrespected the moment he offered a criticism of the economic policies being pursued by this Administration?

Video released by the Obama campaign with William Black's accusation against John McCain: http://www.youtube.com/watch?v=IDofbll86dY&feature=iv&annotation_id=event_922988

I would just like a little roadmap that lets me know when people are thrown under the bus for not uttering criticisms and dissent. I would also like to know when William Black, defender of Barack Obama last summer and someone who lent his credibility to Obama's presidential campaign became and "enemy of the people" and someone you support calling a "liar"?

Is everyone who dissents over policy to be personally labelled a liar? Are the folks who worked hard for Mr. Obama and sacrificed to help make him President given a last meal before you take them out and shoot them or is the simple act of expressing criticism based on their experience enough to merit the political death penalty?

[ProSense]

44. No one said William Black is an enemy of the people.

He made statements that were not accurate, and got caught in the crossfire. His words sparked a frenzy of charges that the Obama administration is corrupt and engaged in a cover up. The diarist obviously believes that's nonsense.

If people are going to make outrageous claims, then they should not be surprised when people use strong language to counter those claims.

[TayTay]

45. There are no charges that the Obama Admin is corrupt.

There are criticisms that the Obama Admin is not doing all it can to hasten our exit from this economic crisis. This is an argument that can happen on the merits without name calling, including call people liars. BTW, Mr. Black did work at the FDIC and that was good enough for the Obama campaign to use him in an internet ad attacking John McCain. Did they know he was a liar then?

BTW, isn't calling someone a liar hyperbole? (Do you have proof that this person "lied" or deliberately chose to prevaricate when the facts were known to him?)

I thought hyperbole was wrong? Maybe it's just hyperbole when the other side uses it in an argument, I guess.

[ProSense]

46. There are charges

here and in the diary that facilitated the dairy in the OP.

Hyperbole is wrong, but I suspect hurling accusations that someone is engaged in a cover up or violating the law based on a mischaracteriztation of the law is equally bad, if not worse.