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Yves here. In this Real News Network interview, Bill Black raises red flags about the nomination of former Goldman partner, later movie producer Steve Mnuchin as Treasury Secretary. The choice of Mnuchin is troubling particularly in light of the extremely aggressive financial services industry deregulation that experts believe the Republicans will pursue, such as the hobbling of the Consumer Financial Protection Bureau, curbs on SEC rulemaking and enforcement so severe as to render this already weak agency meaningless, the elimination of Dodd Frank and weakening of bank capital requirements.
AISAL NOOR: Welcome to The Real News Network. I’m Jaisal Noor, in Baltimore. During President-elect Trump’s campaign, he promised to take on banks like Goldman Sachs for ruining the lives of hardworking Americans. Here’s a clip.
DONALD TRUMP: The establishment has trillions of dollars at stake in this election. For those who control the levers of power in Washington and for the global special interests, they partner with these people that don’t have your good in mind.
(end video clip)
JAISAL NOOR: Well, Trump has chosen former Goldman banker, Steven Mnuchin and billionaire equity investor, Wilbur Ross to lead the Treasury and Commerce Departments. On Wednesday, they said the incoming administration “would make tax reform and trade pact overhauls top priorities as they seek a sustained pace of economic growth”. Mnuchin also signaled the desire to remove US mortgage finance companies Fannie Mae and Freddie Mac from government ownership, a move that could have wide-ranging ramifications for how Americans pay for their homes.
Well, now joining us to discuss this and more, from Kansas City, Missouri, is Bill Black. Bill 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, and the author of The Best Way to Rob a Bank is to Own One, and of course, he’s a regular contributor to The Real News. Thanks so much for joining us, Bill.
BILL BLACK: Thank you.
JAISAL NOOR: Bill, as we all know, Trump had promised to drain the swamp. Let’s start with Mnuchin. He spent 17 years at Goldman Sachs, and what’s not been widely reported is that he’s known as the Foreclosure King for heading the bank, IndyMac when it kicked tens of thousands of people out of their homes. What can you tell us about him?
BILL BLACK: He’s a second-generation Goldman Sachs, so you had a choice in the election between Hillary Clinton, who had incredibly close ties to Goldman Sachs, or Donald Trump who promised that that would end, and that his first major act is to appoint a top Goldman Sachs person, and is interviewing the managing director, as well, according to news reports.
So, yet another campaign promise that didn’t survive 10 days after an election.
JAISAL NOOR: And Mnuchin and Ross also criticized the financial reform legislation known as Dodd-Frank, passed after the financial crisis, they said it’s too complicated and cuts back lending. The Wall Street Journal reported that regional banks, in particular, have been lobbying for relief from Dodd-Frank, and Mnuchin said that’s the engine of growth for small- and medium-sized businesses. How do you respond to that?
BILL BLACK: Well, first, it of course hasn’t been much of an engine for growth, but that is the common rhetoric. What they failed to mention, of course, was that the Republican platform called for the return of Glass-Steagall, and one of Mnuchin’s first initiatives, he said, was to get rid of the only surviving portion along the lines of Glass-Steagall, dividing banks… trying to keep them out of speculation in derivatives through the so-called Volcker Rule. The Volcker Rule is sort of Glass-Steagall lite, and, again, the Republican platform says return Glass-Steagall heavy. Instead, well, that’s another one of those campaign things that are not going to happen, they’re going to go exactly the opposite direction. And they say it’s a top priority to get rid of the last remnants of Glass-Steagall philosophy.
JAISAL NOOR: And they’ve both also proposed cutting corporate tax rates from 35% to 15%, saying this will be an engine of growth. What’s your response to that?
BILL BLACK: Ah, yes, and then why don’t we then cut them to zero if they claim that this would double the growth rate in the United States? Why not bring it to zero and quintuple it, or something like that?
No, there’s no basis for believing that a country like the United States can achieve any such growth increases through such a mechanism. Tiny countries that want to become tax havens can do that, like Ireland, so this is going to kick off a competition and it’ll be exactly the opposite of what they’ve talked about: the competition will be to see who can charge the lowest corporate tax rate. We know that Ireland will react by going even lower than whatever Trump does.
So, basically, it means a tremendous reduction in taxation on corporations, and they’ll switch to taxing individuals and that will fall most heavily under their precepts under the working class. So, yeah, that’d be another one of those campaign promises.
JAISAL NOOR: And so talk a little bit about the role that Mnuchin played in the foreclosure crisis and the financial crisis, as well, when he was the head of IndyMac. It kicked something like 35,000 people out of their homes. It foreclosed on them. Some of these were reverse foreclosures. Now he’s going to be one of the most powerful people in Donald Trump’s administration and guiding a lot of the policy, and as we know, going to be trying to get rid of some of this regulation that came out of that.
BILL BLACK: Right. And this will be another one of those promises and such, and so these key appointees for Commerce and Treasury are folks that have worked closely in the past with the Paulsons of the world, and the George Soros of the world, who is the Great Demon, according to Trump, but these are allies of Soros.
IndyMac was one of the most notorious fraudulent lenders in America. It specialized in making liar’s loans and again, I want to emphasize that there’s testimony in front of the Federal Reserve by the top attorney generals, state attorney generals, who investigated these kinds of frauds. And they said that overwhelmingly the frauds came from the lenders, as opposed to the borrowers. And the incidence of fraud in these liar’s loans, according to the industry’s own anti-fraud experts, was 90%. So, what did these and Goldman Sachs decide to do? Well, create a fund to buy this most-notorious fraudulent entity, and did they do it so they could provide recompense to the victims of the fraud, the borrowers? No, of course not. They did it so that they could start this aggressive wave of foreclosing on the fraudulently originated loans double-victimizing the people that took out these loans.
And so they are probably the most notorious foreclosure in the United States and there are complaints saying that they did this disproportionately with regard to blacks and Latinos. But that would also follow naturally from being a specialist in liar’s loans, because they frequently, particularly in the last couple of years, 2006 and the first half of 2007, deliberately targeted blacks and Latinos for those kinds of loan fraud.
JAISAL NOOR: Thanks, Bill. We’re going to continue this conversation in Part 2 when we’ll take a closer look at Trump’s pick for Commerce Secretary, Wilbur Ross. Thanks so much for joining us.