Author Archives: William Black

Fair Seas and Following Wind John McCain

William K. Black
May 15, 2018     Bloomington, MN

As a savings and loan regulator, on April 9, 1987, I experienced Senator John McCain at his very worst.  He, and his four Senate colleagues, collectively, the “Keating Five,” pressured my colleagues and me to withdraw our recommendation that our agency place Charles Keating’s Lincoln Savings and Loan into conservatorship.  Keating was looting Lincoln Savings and would soon defraud thousands of widows.  Lincoln Savings became the most expensive failure because the combination of the ‘Keating Five’ and Speaker of the House James Wright, Jr. successfully intimidated the new leadership of our regulatory agency.  The cowardly new leadership team refused even to consider our conservatorship recommendation and took the unprecedented action of removing our regulatory jurisdiction over Lincoln Savings.  Senator McCain and his colleagues acted badly for poor reasons and caused grave harm.  Senator McCain has said that his actions on behalf of Keating caused him greater pain than his North Vietnamese torturers.

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John Cochrane Loves the Rule of Law (Some Exceptions Apply)

By William K. Black
December 22, 2017     Bloomington, MN

As Brad DeLong aptly puts it, John Cochrane was once an economist.  Cochrane is now a right wing ideologue surrounded by similar ideologues at Hoover.  He is pushing his new chapter in a Hoover book entitled American Exceptionalism in a New Era.  His chapter’s title is “Law and the Regulatory State.”  I will be writing several articles responding to Cochrane’s chapter, but this first piece concentrates on one key belief that Cochrane said he held that we all agree with.  My point is that Cochrane is not living up to his claimed beliefs, which he summarized in his introduction.

To be a conservative—or, as in my case, an empirical, Pax-Americana, rule-of-law, constitutionalist, conservative libertarian—is pretty much by definition to believe that America is “exceptional”—and that it is perpetually in danger of losing that precious characteristic. Exceptionalism is not natural or inborn but must be understood, cherished, maintained, and renewed each generation—and its garden is always perilously unattended.

This first column shows that under Cochrane’s own reasoning the “danger” to the “precious” “rule of law” has never been greater in the last 50 years.  Instead of “cherish[ing]” and “maintain[ing]” the “garden,” Cochrane has chosen to leave it “perilously unattended” because of his fanatic partisanship.  Trump is ripping up and sowing salt in Cochrane’s “precious” “garden” and Cochrane stirs himself primarily to attack Trump’s critics.  Brad’s description requires amendment.  Cochrane was once an economist and once a self-described “rule-of-law constitutionalist, conservative libertarian.”  Now, he is an unexceptionable apologist for Trump’s authoritarianism, venality, and corruption.  Whatever remains of Cochrane is what you get when you burn a substance and retain only its most noxious waste gases. Continue reading

Modern Macro Got the 2008 Crisis Painfully Wrong

By William K. Black

December 19, 2017     Bloomington, MN

Lawrence J. Christiano was the lead author of the article announcing the Dilettante doctrine that I discussed in the first column in this series.  His ‘dilettante article’ claimed that modern macro got the last crisis so wrong because it ignored the ‘shadow’ financial sector.  I have found a 2008 article by him and two Minneapolis Fed co-authors that illustrates modern macro’s blindness to the shadow financial sector.  The article is entitled “Facts and Myths about the Financial Crisis of 2008” and the first footnote says that they wrote the article based on information available on October 25, 2008.  The purpose of the article was to demand that proponents of fiscal and monetary stimulus prove a specific “market failure” justifying stimulus.  Christiano and his co-authors agree that the Nation is in a “financial crisis” and that it could lead to a serious recession, but see no reason for the government to act.

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DSGE Dilettantes v. ADM God Devotees

By William K. Black

December 18, 2017     Bloomington, MN

The truly exceptional thing about ‘modern macroeconomics’ devotees is not that they are so consistently and horrifically wrong or that they persist in their errors – but their exceptional combination of arrogance and disdain for those who have dramatically better records and broader and more relevant expertise.  Kartik Athreya, the Richmond Fed’s Research Director, led the modern macro parade on June 17, 2010 with his blog (which he later withdrew in embarrassment) when he announced the Athreya Axiom of Absolute Arrogance.

So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure. But this is irrelevant. The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.

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It is Impossible to Compete with Unintentional Self-Parody: Trump and Opioids

By William K. Black
October 22, 2017      Kansas City, MO

This is the first in a series of columns I will write that are prompted by the joint 60 Minutes and Washington Post investigations of the role of Congress and the White House in making it far harder to sanction effectively companies selling massive numbers of opioids that they know will go largely to those addicted to opioids.  I will use the case study to illustrate many important points that criminologists know about elite white-collar crime and how to limit it and sanction perpetrators.

In this column, I introduce one of the most important concepts in white-collar crime – “seeming legitimacy.”  The most elite predators use the seemingly legitimate entities in the business, government, and non-profit sectors that they run as “weapons” of predation and “shields” against sanctions.  The criminology term for this is “control fraud.”  The same logic applies to non-criminal predation.  I will show in later columns in this series that Representative Marino (R, PA), the worst of the political shills for the opioid Predator Class, repeatedly spread the falsehood that the worst of the opioid predators could not be predators because they structured their firm as if it were “legitimate.”  As a former state and local prosecutor, Marino knows that CEOs running the largest frauds pose as seemingly legitimate firms because it optimizes control fraud.

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Cheap Sexism and Intellectual Dishonesty about Marriage

By William K. Black
October 2, 2017     Kansas City, MO

This is the second column in my series about win-win strategies to strengthen the family and countering the conservative culture warriors who use the family as a means to oppose win-win solutions that bring people together.  Mark Regnerus is one of the most notorious of these hard right culture warriors.  He is the disgraced pseudo-scholar who right-wing groups funded to try to gin up evidence that same sex marriage harmed children.  His efforts collapsed in an embarrassing spectacle that made clear that his dogmas rule his work.

Regnerus is back in the Wall Street Journal flogging his new book in an op ed entitled “Cheap Sex and the Decline of Marriage.”  He introduces his thesis with the claim that because unmarried heterosexual women are willing to have sex, tens of millions of men are no longer willing to marry.  If unmarried heterosexual women wish to improve their chances of getting married, they need to be virgins – and convince their sisters to remain virgins until marriage (at an average age of around 28 for college-educated women).

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The Job Guarantee Should Unite Anyone Interested in Strengthening Families

By William K. Black
Kansas City, MO     September 25, 2017

The University of Missouri – Kansas City recently hosted the first conference on Modern Monetary Theory (MMT) and a closely associated idea, a federally-backed job guarantee for everyone willing and able to work.  On September 25, 2017, the New York Times published an article exemplifying one of the applications of the job guarantee that would provide a win-win that should unite anyone interested in strengthening the family.  The title is “How Did Marriage Become a Mark of Privilege?”  Claire Cain Miller authored the column, and her key takeaway are in these two passages.

Fewer Americans are marrying over all, and whether they do so is more tied to socioeconomic status than ever before. In recent years, marriage has sharply declined among people without college degrees, while staying steady among college graduates with higher incomes.

Americans across the income spectrum still highly value marriage, sociologists have found. But while it used to be a marker of adulthood, now it is something more wait to do until the other pieces of adulthood are in place — especially financial stability. For people with less education and lower earnings, that might never happen.

These facts establish an obvious policy that could unite the public.  The combination of MMT full employment policies and the job guarantee is the best way to strengthen family financial stability.  The United States, which has a sovereign currency, can do that.  The European Union nations that lack a sovereign currency will frequently be unable to do so.  Jobs, not simply income, are essential to many humans’ happiness and sense of self-worth.  Unemployed American men, for example, do less housework than do employed American men.  Businesses are deeply reluctant to hire the unemployed, particularly if they have been unemployed for any significant time.  The cliché of males responding to unemployment through depression has considerable truth.

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Jared Bernstein Shows the Costs of Not Understanding Sovereign Currencies

William K. Black
September 26, 2017      Kansas City, MO

UMKC has just hosted a well-attended conference on Modern Monetary Theory (MMT) and job guarantee (JG) programs in which the federal government would provide the funds for employer of last resort programs.  In conjunction, MMT and JG allow full employment to become the norm.  MMT is based on reality, it explains how the monetary system in a nation with a sovereign currency actually functions.  Most monetary theory taught in conventional economic classes is a fiction arising from carryovers from the era of the gold standard in which nations lacked a sovereign currency.

Jared Bernstein has just published an op ed in the New York Times entitled “Do Republicans Really Care About the Deficit.”  Republican elites, of course, have not really cared about federal budget deficits for decades.  That is a good thing that Democrats should embrace in a bipartisan spirit.  Bernstein, of course, is correct that the Republicans are hypocrites about federal budget deficits, pretending to care about them when the Democrats hold power and displaying their lack of any real care when Republicans hold power and the context is tax cuts for the wealthy.

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Trump Proves Again that it is Impossible to Compete with Unintentional Self-Parody

By William K. Black
September 5, 2017      Kansas City, MO

In my immediately prior article I discussed how Politico fell for Third Way’s dishonest discussion of how Democrats should brand themselves as the party committed to jobs.  I explained that progressive Democrats were the party of good jobs in part because they opposed fraudulent for-profit schools while President Trump, the Republicans, and the New Democrats were anti-jobs because they supported the rip offs.  Trump, having run a for-profit “university” so fraudulent that.it was not even a real university, is the most glaring patron of these frauds.

Trump appointed Betsy DeVos as Secretary of Education because she is a fierce enemy of public education and loves the for-profit frauds.  Recently, however, DeVos has taken a step so brazen that it adds proof to our family saying that it is impossible to compete with unintentional self-parody.  DeVos chose a prior executive of DeVry, a for-profit school sanctioned for its recurrent frauds, to head the Education Department’s “enforcement” unit responsible for disciplining fraudulent for-profit schools.  In any normal administration, this would be a scandal leading to investigations and resignations in disgrace.  Under Trump, the latest DeVos scandal is already a forgotten footnote in an administration in which absurdity and sleaze are constant companions.

Is Politico or Third Way More Divorced from Reality?

William K. Black
September 6, 2017     Kansas City, MO

The Wall Street wing of the Democratic Party (Third Way) is relentless in trying to bring back the days in which the Democratic Party’s leaders buried the Party in Wall Street’s pocket under the label “New Democrats.”  That period led President Clinton and Vice President Gore to implement disgraceful policies that made Wall Street executives fabulously wealthy at the expense of people.  To deliver on their promises to Wall Street, Clinton and Gore had to betray much of what the Democratic Party stood for.  Clinton and Gore’s destruction of effective financial regulation, which President Bush exacerbated, created the massively criminogenic environment that blew up the global economy.

I have written several times and documented that Third Way is a creature of, and devoted to, Wall Street’s CEOs.  Third Way’s con is describing itself as “centrist.”  Wall Street CEOs are not centrist.  They include the world’s most powerful and destructive predators and parasites.  The “left, right, center” metaphor does not apply to a group like Wall Street’s CEOs.  The latest media sucker to fall for Third Way’s con is PoliticoPolitico fell whole hog, calling Third Way a “center-left think tank.”  Fortunately, Google’s recent purge of New America Foundation scholars has proved that “think tanks” financed by elite corporate CEOs are oxymorons run by regular morons.  The one thing you can never do as a scholar at a faux “think tank” like Third Way is actually think – and then make public the perfidy of the corporate CEOs that fund the non-think tank.

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