Remembering Aquino Braganca (b. 6 April 1924), who fought for freedom
of the former Portuguese colonies in Africa. An online tribute
http://aquinobraganca.wordpress.com/ (includes many historical
references, some photographs and documents)
Date: Thu, 9 Apr 2009 00:05:31 -0400
From: Venantius Pinto venantius.pi...@gmail.com
The following Bill Moyers interview with William K.Black, will be helpful to
those trying to understand Ponzi schemes.
Moyers Journal: Madoff Was A Piker -- America's Big Banks Are a Far Larger
Fraudulent Ponzi Scheme
http://www.alternet.org/workplace/135161/moyers_journal%3A_madoff_was_a_piker_--_america%27s_big_banks_are_a_far_larger_fraudulent_ponzi_scheme/
Mario responds:
Unfortunately, those looking to understand Ponzi schemes will only learn how
dishonest left wing propagandists like Bill Moyers operate in their attempts to
undermine traditional American society.
Anyone with access to the internet trying to understand Ponzi schemes could
have Googled Ponzi scheme and found a number of sources of more credible
information.
Here is one source that has a correct explanation of a Ponzi scheme in one
pithy paragraph. It also describes in another section schemes that are NOT
Ponzi schemes.
A Ponzi scheme is a fraudulent investment operation that pays returns to
investors from their own money or money paid by subsequent investors rather
than from any actual profit earned. The Ponzi scheme usually offers returns
that other investments cannot guarantee in order to entice new investors, in
the form of short-term returns that are either abnormally high or unusually
consistent. The perpetuation of the returns that a Ponzi scheme advertises and
pays requires an ever-increasing flow of money from investors in order to keep
the scheme going.
Ponzi schemes are illegal; there is no business being done and no profits being
made in a Ponzi scheme. This is what Bernard Madoff was convicted of and he
will spend the rest of his life in jail. What the banks did was engage in
business practices that were stupid and risky and venal on the side, but not
illegal.
Under sound principles of capitalism these banks should have been allowed to
fail - i.e. bought out by other banks for pennies on the dollar - and should
not have been bailed out by the government.
Here is how Bill Moyers' guest, Bill Black, described as an expert at fraud
prevention, who previously opines that the financial crisis was caused by fraud
- I wonder where he was all the years the fraud was developing - describes what
the big banks did:
Well, the way that you do it is to make really bad loans, because they pay
better. Then you grow extremely rapidly, in other words, you're a Ponzi-like
scheme. And the third thing you do is we call it leverage. That just means
borrowing a lot of money, and the combination creates a situation where you
have guaranteed record profits in the early years. That makes you rich, through
the bonuses that modern executive compensation has produced. It also makes it
inevitable that there's going to be a disaster down the road.
To begin with the US has some 8,000 banks, and only a small handful engaged in
risky practices and ran into financial trouble late last year.
Making bad loans and growing rapidly is not how a Ponzi scheme works, which
is why Bill Black describes it as a Ponzi-like scheme. Of course the only
commonality is the rapid growth, because in a Ponzi scheme there is no commerce
involved, whereas the errant banks did conduct business but engaged in highly
risky business practices under pressure from government regulators, and based
on partly coerced, partly self-serving assumptions that there would be no end
to the rising business cycle and low inclome borrowers would be able to
continue to make their payments.
The problem can be traced to the Community Reinvestment Act which was passed in
1977 under the Carter administration and required banks to lend to a certain
percentage of low income people. This was a classic left wing attempt at
social engineering, and to heck with the fundamentals of economics. After
being dormant for several years it was revived during the Clinton
administration when the banks were coerced into complying with the Act's
requirements under threat of legal action and negative regulatory decisions.
The only way the banks could make loans to low income people with risky credit
histories and insufficient income was to lower their lending standards, which
is what they then began to do with no down payment loans, interest only
loans, 100% plus loans, none of which a prudent bank would do. In addition
they were not checking the veracity of the information on loan applications,
which became known as liar's loans.
What the bankers achieved
