We Must Not Speak Uncomfortable Truths to Power: Why I Won’t be Briefing Congress about Derivatives

The Big Picture- By William K. Black

When I was the Deputy Director of FSLIC, House Banking Committee Chairman St Germain was helping Speaker Wright hold the FSLIC recapitalization bill hostage to extort favors for Texas control frauds, including Don Dixon’s Vernon Savings (which was providing prostitutes to the State of Texas’ top S&L regulator and was building towards having 96% of its ADC loans in default – which is why we referred to it as “Vermin”). The attack on our agency was that we were mad dogs biased against Texas S&Ls and causing the Texas crisis by closing too many insolvent but well-run Texas S&Ls. Our response had many elements, but one of our principal points was that the Texas S&Ls we were closing were typically control frauds. At this juncture, St Germain’s staffers made a mistake. They requested that we testify on a host of issues, but the invite letter had a zinger, premised on an article saying that the Feds were slow to prosecute frauds in the Southwest. The invite specifically called for us to respond and discuss the role of fraud in the Southwest. We used the opportunity to explain the extensive role of fraud in Texas S&L failures.

The day of the hearing…

[THE BIG PICTURE]

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