Professor William Black:

Yes, particularly for the folks who are going to be reporting on these issues and hearings, almost always when we use the word "banks", we actually mean "bankers". It is really important to distinguish which is really being referred to. Banks do not feel; they are not real and they operate through bankers. When you hear "the banks became optimistic", you should say "No" and always focus on the bankers. The bankers are not the best friend of the banks. Throughout history, the greatest risk to a bank has always been the bank's CEO. The CEOs are the ones who caused the catastrophic losses throughout history. That does not mean that most bank CEOs are crooks. Do not go from that. Really catastrophic failures are very unusual in banking. When they occur, it is most commonly because of the banks' CEOs. That is what I was referring to when Deputy John Paul Phelan asked me about the auditors. If a bank could choose, it would choose very conservative and very reliable auditors, but banks do not choose auditors. Bankers do, and bankers want a clean opinion that shows they have record profits and, therefore, should get really big bonuses. Bankers will choose, and characteristically did throughout this entire system.

When there is a Gresham's dynamic, you will no longer get just episodic problems with bankers. You can get very widespread problems with bankers, which is why in the United Kingdom, for example, claimants on these products are winning over 80% of their claims. It became absolutely the norm. In fact, the testimony in front of your counterparts is that virtually all the profits that UK banks were reporting came from PPI.