PAUL JAY: Welcome to The Real News Network.
I’m Paul Jay in Baltimore. And welcome to this week’s segment of Bill Black’s Financial
and Fraud Report. And now joining us is Bill Black. Bill, if you don’t know already, is an associate
professor of economics and law at the University of Missouri-Kansas City. He’s a white-collar
criminologist, a former financial regulator. He’s the author of the book The Best Way to
Rob a Bank Is to Own One. Thanks for joining us again, Bill. WILLIAM K. BLACK: Thank you. JAY: So what do you got for us this week? BLACK: So we have the Brits, in addition to
holding the Olympics, are holding the Fraud-lympics. And every fortnight, as they would say, they
roll out a new scandal. We had Barclays with the Libor rigging, and then we had HSBC, which
was the new Bank of Crooks and Criminals International, with all of its money laundering. And now–low are the mighty fallen–Standard
Chartered, which claimed to be the pure bank, the reasonable bank, and whose head was rumored
to be potentially the new head of the Bank of England. Why? Because the Barclays guys
discredited all the other candidates with their frauds. And now the New York banking
and securities regulator is charging that Standard Chartered was–and I’m quoting–a
rogue bank that deliberately stripped away identifiers to hide illegal money laundering
to Iran, which it said was going–which the New York banking authorities said was going
to fund terror and, of course, potentially, nuclear weapons. So that’s the biggie that
we’re dealing with today. JAY: What did they find? What were examples
of what they did? BLACK: Well, they stripped away the identifiers
so that the regulators would not be able to tell that it was a transaction involving Iran.
And according to the New York banking authorities, this was so ingrained and institutionalized
that they had a procedures manual that taught people how to strip it away. And when U.S.
senior banking executives for Standard Chartered objected to this and noted that it was a violation
of the law and could expose the bank to enormous penalties, got back this response: well, who
is the United States to tell us how we should be dealing with Iran? And, you know, a footnote on that: Standard
Chartered started as a British bank, but like most of the big banks, it really transcends
any nationality at this point, and its management does not identify, really, as being British
or working on behalf of the British people. Standard Chartered is unusual in being–the
huge bulk of its operations deal with the Middle East in particular and other oil-producing
nations and with Asia. And so it has surged with the petrodollars and with the rise, spectacular
rise, of China and India. As I said, it has cultivated a reputation for being the responsible,
reasonable bank. And so to find that under that veneer was actually, you know, not only
mass transactions in violation of the law, but books about how to get away with it, and
then squashing the messengers who threatened to blow the whistle, it all sounds a whole
lot like HSBC, which we had thought might be the dirtiest of the dirty. JAY: Now, the reason they’re subject to U.S.
regulatory authority is ’cause they do some banking in the U.S., and if you have one foot
here, you get–you come under U.S. regulations. Is that it? BLACK: Well, they do an estimated $250 billion
U.S. transactions a day out of their New York office. So it’s not like they have some itty-bitty
footprint here. The United States operation is critical to everything they do worldwide. And one of the things that the New York authorities
could do–they have not in the past done this, but they could remove the authority of Standard
Chartered to operate in the United States, and if they were to do that, that would be
by far the most significant penalty that has been imposed for money laundering, because–and
I know listeners and viewers will understand this one–guess what? None of these violations,
these really massive violations of the money laundering rules and laws by the giant banks,
has resulted in anybody going to prison in the recent era. JAY: Right. I should add just one piece of
context, which is not really a financial piece of this story, but we’ve reported this often
on The Real News, which is there absolutely no evidence, in fact, that Iran has a nuclear
weapons program. There is no evidence they’re in violation of the nuclear proliferation
treaty. The IAEA has no finding against them. And, in fact, the American intelligence agencies–all
of them–in the last report said there’s no evidence there’s an active weapons program.
And in spite of all that, there is these severe sanctions against Iran. But I guess the point
here is they are violating the law, and that’s–and whether it’s Iran or whether it’s justified
or not justified, the bank is still violating law and carrying on secret dealings, as we
know. This and other banks are doing it, and not just about Iran. They seem to be doing
it on a whole range of things. Anyway, what else have you got for us, Bill? BLACK: Well, two other things on Standard
Chartered. First, well before any suspicions about nuclear weapons, Iran, the issue was
its support for Hezbollah, and Iran makes, you know, very little effort to deny that
it is the leading funder for Hezbollah. So the United States considers Hezbollah a terrorist
organization. The second thing is viewers need to know that
the other U.S. banking agencies are in an uproar not against Standard Chartered, but
against the New York regulators, claiming that they don’t think there is a massive violation
and that the New York folks should not have gone ahead on their own. And so there’s quite
a war between the federal and state regulators. JAY: Well, what’s that about? BLACK: Well, from the perspective of the state
regulators, this is a continuation of the crisis that we’ve been going through for ten
years, where the federal regulators not only failed to take any action that was meaningful
against massive violations of law and the rules, but actually tried to prevent the states
from taking action, through what is called preemption. From the federal perspective,
they think that everybody in New York is running for higher office. And, of course, both Attorney
General Spitzer and Attorney General Cuomo became governors of New York on the basis
of, in large part, their record in going after the Wall Street crooks. So they’re very suspicious
the New York banking regulator has the same political ambitions. JAY: Well, there’s another political aspect,
too. I mean, here they’re going after them because of the Iran thing, but how–you know,
they don’t seem very serious about going after bilking of the American people through all
kinds of levels of fraud. BLACK: Well, that’s not necessarily fair about
the New York banking authorities. They have tended to be aggressive in multiple areas.
But it is true that there is next to no aggressiveness at the federal level–some exception. You’ve
got to give the Commodity Futures Trading Commission some credit for continuing to go
forward for years over British opposition and getting documents that helped bust the
Libor scandal. JAY: Yeah, I’m talking more about the Justice
Department. That’s what I have in mind. BLACK: Ah. Well, the Justice Department is
not involved in this action at all at this point. And that’s one of the questions: will
the Justice Department, which has vastly more resources than the New York State, actually
bring a prosecution? JAY: Right. Okay, what else you got for us
this week? BLACK: We have something from the heartland.
I’m here in Kansas City, Missouri, less than a mile from Kansas, and we have just had primary
elections here. And there has been an enormous development in Kansas in Republican politics,
and that is that there has been the wiping out of the moderate voice of Republicans in
Kansas. And those moderates had key positions in the leadership in the state legislature.
And so Governor Brownback, who is extremely conservative, helped lead this revolt. And
it did so in the context, in particular, of trying to get a dramatic change in taxation
in Kansas that’s going to have great effect on Kansas in multiple ways and are important
to the rest of the nation because Kansas may actually be quite a leader in some of these
movements. So what have they done? What they’ve done
is to deliberately make taxes–considerably greater inequality in their taxation system.
And they did so primarily by reducing taxes for wealthier people in Kansas and dramatically
increasing taxes for the working poor by eliminating the state earned income tax credit and starting
taxation at a much lower point in income than used to be in the past. So this is a income
transfer overwhelmingly from working-class people in–citizens of Kansas to the wealthiest
folks in Kansas. The effort to get this tax change and the
effort to wipe out the moderates in the Republican Party was led by the Chamber of Commerce in
Kansas, which was funded overwhelmingly by the Koch brothers. And why this is important is, first, it’s
going to cause significant fiscal problems down the road in Kansas, because it’s part
of a program to eliminate the income tax that is likely to lead to deficits unless we get
a very strong recovery quickly. And second, it’s going to really threaten Kansas’s claim
to fame–and if you are not from the heartland, you may not know that Kansas has really superb
elementary and secondary education in some of the suburbs near Kansas City and a really
superb university system. Well, all of that’s going to be imperiled by this change. And this change in politics is also going
to bring to power folks who are far more likely to oppose teaching of evolution as science.
And, of course, last time Kansas went this route it became more difficult for Kansas
students to get positions in major universities, you know, because people thought, you must
be from someplace kind of crazy, and such. So big doings. JAY: Now, Bill, so this was Republican primaries
that we’re talking about, where the more moderate Republicans were defeated? BLACK: This is Republican primaries. But these
are in exceptionally safe districts for Republicans. JAY: What are the demographics of those districts? BLACK: They vary, but it includes–so a brief
tour of Kansas. Kansas, as people probably think who are listening to this, is primarily
rural and agricultural. It doesn’t really have classic big cities. So one of its biggest
cities is really a suburb of Kansas City, Missouri–it’s Johnson County, which tends
to be more moderate. But increasingly, primary politics are dominated
by exceptionally conservative folks. So even in the more moderate sections of Kansas, the
Republican Party now is saying that a moderate cannot survive. So it’s these counties like Johnson County
that have the really good elementary and secondary systems. They’re very rich suburbs. They want
to send their kids to become doctors and lawyers and physicists and such. And so the assault
that’s going to come on education, and especially, of course, on evolution, will turn out to
be very bad. So what’s happening in Kansas is the rural
counties are overwhelmingly losing population. And they’re of course not only losing population,
but in many cases they lose their best and brightest kids. They go to university elsewhere
and they never come back to those rural areas. And that process is likely to increase. One of the wars in Kansas politics was about
illegal immigration, but in an odd way that the rest of the nation may not realize, because
the Republican Party in Kansas was split among those that were closest to business interests
who wanted no crackdown on illegal immigration and those who are more socially conservative
who wanted an intense crackdown on undocumented workers. JAY: Right. Right. So someone might send a
message that Dorothy might want to stay in Oz. BLACK: Well, in terms of Tom Frank’s book
What’s the Matter with Kansas?, it’s time for the update, you know, What’s Going to
Be the Matter with Kansas? They really are taking the crown jewels of Kansas, which has
been their educational system, and endangering them very badly. JAY: Alright. Thanks for joining us, Bill. BLACK: Thank you. JAY: And if you want to see more of Bill Black’s
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