Author Archives: William Black

Mankiw Mendacity and Morality and his League of Failed Economists

By William K. Black
Quito: April 24, 2015

I met N. Gregory Mankiw for the first and only time in 1993 when he was a discussant for George Akerlof and Paul Romer’s paper on “Looting: The Economic Underworld of Bankruptcy for Profit.” The meeting was at Brookings, so it was attended by a wide range of economists. Brooking was by that time working closely with AEI on an anti-regulatory agenda, particularly in finance. Those of us old enough to recall when Brookings was referred to under Republican administrations as “the Democratic Party in exile” are very old. I attended as Akerlof and Romer’s specially invited guest because of my contributions to their article. The meeting taught me a great deal about Mankiw and the state of the economics academy.

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Obama & TPP: Every One That Doeth Evil Hateth the Light

By William K. Black
Quito: April 25, 2015

President Obama wants the world to know that he takes it personally that the Democratic Party’s base opposes his latest effort to sell out the people of the world to the worst corporations through the infamous Trans-Pacific Partnership (TPP) deal. Obama blurted out at a press conference a number of conservative Republican memes as his sole basis for pushing TPP. He then launched personal attacks on Senator Elizabeth Warren and labor leaders (without naming them). Obama, who is famous for keeping his cool when criticized by the GOP, is thin-skinned when criticized by Democrats. Obama never raged at the Republicans’ “death panel” attacks on him, but he raged at Warren as supposedly making an equivalently openly dishonest attack on TPP’s secret drafting process.

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Lanny Breuer’s Defense of Not Prosecuting HSBC and its Officers

By William K. Black
Quito: April 19, 2015

I have been researching the HSBC frauds for a column I am doing about Loretta Lynch, the U.S. Attorney who refused to prosecute HSBC or any of its officers for the largest and most destructive money laundering and anti-terror finance sanctions-busting in history and continues to fail to do so even though her own appointed monitor at HSBC reports that HSBC is not complying with the sweetheart deal Lynch gifted them and even though she is now aware (of something she should have been well aware of for years) that senior HSBC officials continued to violate the laws to aid the wealthy and criminal evade taxes while HSBC’s lawyers were negotiating the sweetheart deal with Lynch about other mass felonies.  That research caused me to reexamine Lanny Breuer’s statements at the press conference celebrating the great Department of Justice (DOJ) “victory” in failing to hold any HSBC officer or employee accountable and for the anti-regulators acting to ensure that the bank was not held accountable for those crimes in any meaningful fashion.

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La Lista Loca – Part 1

By William K. Black
IAEN, UMKC, U. Minnesota

This is the first column in a five-part series about money laundering. When you think about Ecuador and international financial regulation the fact that leaps out at you as bizarre is Ecuador’s presence on the short list of nations that purportedly have “strategic [money laundering/funding of terrorism] deficiencies that have not made sufficient progress in addressing the deficiencies….”  Algeria, Ecuador, and Myanamar (Burma) are the only three nations on the Financial Action Task Force (FATF) (GAFI, in Spanish) “gray” list.  There are two nations on the FATF “black list” for providing funding to terrorists – North Korea and Iran.

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The Media Fall for Hillary Clinton’s Gensler Gambit

By William K. Black
Quito: April 16, 2015

Richard Cordray (former Attorney General of Ohio), the head of the Consumer Finance Protection Bureau (CFPG) and Gary Gensler (a former disaster under Bill Clinton and Goldman Sachs) have been the two great appointments by President Obama in the field of finance.  Obama’s other appointments at Treasury, the financial regulatory agencies, and the (non) prosecutors who are supposed to specialize in financial prosecutions have been nightmarishly bad.

Gensler was another Rubinite from Goldman Sachs who, under Bill Clinton, helped destroy Brooksley Born’s effort to protect the nation from the financial derivatives that blew up AIG and much of the financial world through passage of the infamous Commodity Futures Modernization Act of 2000.  As Obama’s appointee to chair the Commodity Futures Trade Commission (CFTC), however, Gensler justly earned praise for attempting to restore effective regulation.  Gensler was a grave disappointment to Obama’s administration, which thought it was sending a reliably pro-finance Rubinite to run a fairly obscure agency he had helped emasculate.  When Gensler showed a spine Obama refused to reappoint him and replaced Gensler with Timothy G. Massad, a Timothy Geithner minion noted for his pro-industry views.  Massad’s claim to fame was being one of the principal unprincipled architects of the failed homeowner relief programs.  As I pointed out in my first Bill Moyers interview, failing (for the right political reasons) proves you are a reliable “team player” and gets you promoted in Washington, D.C.  As Geithner found out, succeeding gets you your walking papers.  Jesse Eisinger, as his norm, wrote a great piece about Massad when Obama nominated him in November 2013.  An alternative view can be found in the American Banker, which gave prominently space to an op ed praising Massad’s nomination written by the head of a firm that trains CFTC staff.

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How the “Super Crunchers” Became the “Super Torturers” of Finance Data

By William K. Black

Some books have spectacularly bad timing, like Moral Markets: The Critical Role of Values in the Economy, which was published in 2008 as a celebration of market and their nourishment of high ethical values.  The book has many interesting chapters and I recommend it, but even lifelong market apologists now refer to the “corrupt culture of banking.”  Ian Ayres, a brilliant professor of law and economics at Yale, published his book Super Crunchers: Why Thinking-By-Numbers is the New Way To Be Smart to critical acclaim on August 28, 2007.  Ayres’ book is an ode to how much better decision-making becomes when it is made empirically on the basis of very large data rather than through human judgment.  There is a great deal of support in the literature for that thesis, and the result is one of the reasons why behavioral economics has become increasingly dominant.  The general idea is that humans bring significant, unexamined biases to our decisions and that systems that rigorously examine the data are superior because they avoid these biases.  That general idea continues to have considerable support and I have no personal problem with the general idea.

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Capitalism’s Defender Unknowingly Indicts the Banksters

By William K. Black
Quito: April 13, 2015

Johan Norberg, of Cato, wrote a book in 2009 entitled Financial Fiasco.  Norberg is an Austrian School economist and the author of In Defense of Global Capitalism (2001).  As his 2009 book demonstrates, however, the quintessential global capitalists were preparing to blow up the global capitalist system in an orgy of “accounting control fraud” at the time he wrote his “Defense.”

He agrees that Fannie and Freddie were used by their controlling officers as accounting control frauds in order to enrich themselves through lush executive compensation.  He aptly explains President Bush’s hypocrisy about Fannie and Freddie.

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Hillary Remains Clueless About Regulation on the 28th Anniversary of the Keating Five Meeting

By William K. Black
Quito: April 9, 2015

The Clintons’ Unlearned Lessons of the Keating Five Meeting

On April 9, 1987, twenty-eight years ago today, my colleagues and I from the Federal Home Loan Bank of San Francisco (FHLBSF) met with five senators at the behest of the most notorious savings and loan (S&L) fraud – Charles Keating.  Keating was looting Lincoln Savings through classic “accounting control fraud” techniques.  Our examiners and enforcement investigation led by Anne Sobol (detailed from Litigation Division) had discovered and documented some of Keating’s worst frauds.  Keating, desperate to prevent our recommendation that the federal agency place Lincoln Saving into conservators (removing Keating from power), used the five senators to try to pressure us into taking no enforcement action against Lincoln Savings and its officers for the largest violation of rules in the history of our agency.

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Response to a Distressed Libertarian Reader about Discrimination

By William K. Black
Quito: April 8, 2015

Well, the key to getting strong responses from readers is now clear.  All I need to do is violate the standard rule on the three subjects to avoid to increase the chances of polite conversation – sex, religion, and politics.  My series of three articles on Indiana’s original Act authorizing discrimination discusses each of those subjects.  I thank Andrew for commenting on my third installment, which addressed the op ed in the Wall Street Journal urging “libertarians” to come forward to lead the charge to repeal all laws banning discrimination in private contracts.  Merchants, landlords, and employers should all be allowed to discriminate against any group without the necessity of creating a religious pretext for that discrimination.  I urged libertarians who were not nostalgic for the return of Jim Crow and the Klan’s embrace of discrimination to write and express their support for laws banning discrimination against groups in the marketplace.  None has taken up my invitation, but I thank “Andrew” for writing to express his support for the repeal of laws banning discrimination against disfavored groups in the marketplace.

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Responding to Two Commenters on my Series on Indiana’s Effort to Embrace Discrimination

By William K. Black
Quito: April 8, 2015

At this juncture, I have written three columns about the effort to enact laws allowing discrimination by merchants.  I have received two thoughtful critiques by readers that I would like to respond to.  I thank them for their responses.  The first comment was in response to my first article.

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