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The best way to rob a bank …

This U.S. advisory takes us to the set of an interview with an expert who calls the credit crisis nothing less than a case of fraud and deceit.

Being Bonnie or Clyde is not the answer (nor is being in the Boyd Gang, for those who prefer the homegrown variety of bank robber).

The answer lies in the title of a book called The Best Way to Rob a Bank is to Own One. The author is Mr. William K. Black, who lives and teaches in Missouri (home of the Frank and Jesse James Gang, but we’re sure that’s just a coincidence).

The former Director of the Institute for Fraud Prevention, Mr. Black pulls no punches in his dissection of the credit crisis. It is not just a scandal, he writes, but a clear case of fraud.

The veteran TV host Mr. Bill Moyers interviewed the author last month. The editor of Risk Factor Method of Investing, Mr. William John Kuhn, was sufficiently impressed to devote the pages he normally gives to a “Digest of Other Advisories” to the Moyers-Black exchange.

There’s some hot stuff in here, and we thought it worth a look. Perhaps if enough people take enough hard looks at what went wrong, things will get cleaned up — or is that asking too much?

Mr. Black spares neither Republicans nor Democrats in his scathing remarks, but he reserves the greatest part of his scorn for the Wall Street executives who perpetrated the crisis. He compares them to an earlier generation of 1930s financiers whose practices were equated to those of Al Capone and earned them the nickname “banksters.”

Here are the lowlights, as seen through Mr. Black’s eyes.

The essence of fraud

Fraud is deceit, says Mr. Black, and the essence of fraud is this. “I create trust in you, and then I betray that trust and get you to give me something of value.”

There’s no more corrosive acid against trust than fraud, he adds, especially when practiced at the top.

“The Bush administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that’s exactly what happened.” (The disciples of the late Mr. Milton Friedman will want to contest the notion that de-regulation was a root cause of the crisis, but Mr. Black has the floor.)

Look first at the specialty lenders, the subprime operators. They handed out loans technically called Alt-A, but more loosely, “liars’ loans” which basically means, “we don’t check,” says Mr. Black.

You tell us what your job is, what your income is and what your assets are, and we agree to believe you. “And by the way you get a better deal if you inflate your income and your job history and your assets.”

And of course all these loans were packaged into derivatives that spread through the financial world like a pandemic.

Fraud by intention

Mr. Moyers asks a leading question: “Is it possible that these complex instruments were deliberately created so swindlers could exploit them?”

Absolutely, replies Mr. Black. Exotic investments were created out of loans that were known to be “extraordinarily bad.” Yet they were given triple-A ratings, which indicate zero credit risk.

“This, of course, is a fraudulent exercise,” he comments. When Congress finally got around to investigating the ratings agencies, they found that the agencies never looked at the loans. The smallest of all the agencies, Fitch, admitted that “the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined.”

In short, both the lending company and the ratings agency were committing fraud by intention, sums up Mr. Moyers.

And then the investment bankers got in on the fun, says his guest. They sold these derivatives to the world, and the world wound up with 60 to 80 per cent losses, since they were virtually worthless.

Tell it to the F.B.I.

As far back as 2004, the F.B.I. was warning of an epidemic of mortgage fraud. But it wasn’t able to follow up, says Mr. Black.

Following the 9/11 attacks, 500 white-collar crime specialists in the Bureau were transferred to terrorism. No surprise there. But the Bush administration never replaced them.

Meanwhile, says the author, one “very good regulator,” Ms. Brooksley Born, was trying to introduce regulation against the toxic derivatives on the market. But Mr. Lawrence Summers (head of the Obama economic team), Mr. Robert Rubin (Secretary of the Treasury in the Clinton years) and Republican Senator Phil Gramm all stood up to block any such attempt.

A truly bipartisan effort to save the derivatives. And these were the derivatives that were at the heart of the AIG scandal, adds Mr. Black.

Taxpayers play the fool

AIG booked a lot of income by guaranteeing bad loans, says the author. And they paid huge bonuses on that income (far bigger than the retention and performance bonuses at AIG that have been hotly debated in recent months).

But of course the guarantee on those loans came due and AIG faced bankruptcy. But you don’t go bankrupt in the U.S., says Mr. Black acidly, because “the taxpayers play the fool.”

Both the Republican and Democratic Treasury Secretaries, Messrs. Henry Paulson and Timothy Geithner, conspired to dupe taxpayers, in this author’s opinion.

For instance, $5 billion in taxpayers’ bailout money was funnelled through AIG into the coffers of Swiss bank UBS to cover mortgage backed securities. But at the same time the U.S. government was bringing a criminal case against UBS for aiding criminal tax fraud against the U.S!

UBS ponied up a $780 million fine for tax fraud. But it still comes out more than $4 billion to the good in U.S. taxpayers’ money.

In the end, Mr. Black believes not nearly enough has been done to correct these abuses. A “fundamental lack of integrity” is at work. It’s time to get rid of the people who caused the problems, he says. And it’s time to find out about the real losses, instead of trying to cover them up.

There’s a good deal more in the interview. Click here to watch the full video.

It’s just one man’s version of events. Others may tell a different story, but it will never be a happy one.