By William K. Black
For every one that doeth evil hateth the light, neither cometh to the light, lest his deeds should be reproved. John: 3:20
The effort by corporate CEOs to dominate the global economy and global government is reaching the end-game stage. Corporate CEOs view government and democracy as their gravest threats and are constantly seeking to discredit and hamstring government and democratic decision-making. CEOs are particularly eager to discredit, destroy, or capture regulation and they have enlisted enormous support in both major U.S. parties and many of the world’s dominant parties for these efforts. President Obama has continued and made worse the effort of President Bush to betray our nation, our democracy, and our people through the secret, draft Trans-Pacific Partnership (TPP) agreement. In this first column on TPP I explain that while there is no realistic chance of convincing Obama to repudiate the TPP, there is a chance that the people of Chile will save our democracy and our national sovereignty.
By William K. Black
Step one: Understand the three “control fraud” epidemics that drove the crisis.
Control fraud occurs when the person that controls a seemingly legitimate entity uses it as a “weapon to defraud.” In finance, accounting is the “weapon of choice.” Lenders engaged in accounting control fraud display the four “ingredients” of the fraud “recipe.”
- Grow massively by
- Making loans at a premium yield that are so bad that they will produce losses
- Employing extreme leverage and
- Providing only trivial allowances for loan and lease losses (ALLL)
The recipe produces three “sure things.” The lender will report record profits in the near term, the controlling officers will promptly be made wealthy through modern executive compensation, and the firm will suffer catastrophic losses. The recipe is also an ideal means to hyper-inflate a financial bubble in real estate, which can delay loss recognition for many years. Minor variants on this recipe drove the savings and loan debacle and the Enron-era frauds.