Author Archives: William Black

The CFPB Arbitration Rule is Pro (Honest) Businesses

By William K. Black
July 11, 2017     Bloomington, MN

Politico has just published a column with a title and analytics that drive white-collar criminologists nuts:  “In a major setback for businesses, CFPB opens door to consumer class actions.”  Logically, the title should have read: “In an important step forward for consumers, investors, and honest bankers and lenders, CFPB begins to restore the rule of law to banking.”

The CFPB is the acronym for the Consumer Financial Protection Bureau.  The problem that led to CFPB to issue its new rule has six parts.  First, it is often profitable for lenders to abuse and defraud borrowers.  Second, lenders are able to do this because financial understanding is highly asymmetric.  Third, even if the borrower eventually spots the fraud or abuse it is rare that the typical borrower could profitably prove the fraud and recover enough funds in a lawsuit to (net of legal expenses) recover effectively and could never recover enough to deter future misconduct.  Fourth, the only potential legal remedy for the typical victim to recover and deter is the class action suit.

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Wall Street: It’s “Icky and Un-American” to ‘Short’ Frauds

By William K. Black
June 27, 2017     Bloomington, MN

The president of the New York Stock Exchange (NYSE) launched a coordinated attack on “shorts” that mirrored his rival’s (Nasdaq) attack.  The NYSE assault, however, used bizarre rhetoric.

“It feels kind of icky and un-American, betting against a company,” NYSE Group President Tom Farley told lawmakers in Washington Tuesday.

The heads of the NYSE and Nasdaq have appropriated the word “transparency” to support the effort to reduce the shorts’ effectiveness.  When the NYSE purports to champion “transparency” – the key to reducing fraud by the CEOs of the companies whose stocks they exchange – it is time for investors to grab their wallets and hold them tight.  The stock exchanges are very far from being champions of transparency when the question is what the CEOs of the listing companies should be required to disclose.  Sure enough, it turns out that the stock exchanges’ proposed anti-short “reform” is actually a means to try to reduce the reliability of the public disclosures made by the CEOs of firms on those stock exchanges.  A sophisticated stock fraudster wants the public to believe the firm is “transparent” because of its disclosures, but it is those very disclosures (when false) that turn that ‘transparency’ into an illusion designed to deceive the investor.  When shorts improve the reliability of the disclosures that the CEOs of firms listed on the stock exchanges make, they protect investors from fraud.  That makes honest “shorts” highly “American.”

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Those to Blame for the Grenfell Fire Victims Include Tony Blair

By William K. Black
June 26, 2017     Bloomington, MN

There are many people culpable for the mass loss of life in the Grenfell fire in London.  At this time, we know enough about the fire and its causes to be able to discuss these matters with sufficient confidence to draw preliminary conclusions.  As always, we should also keep in mind that we do not have all the facts so some of our conclusions must be tentative.

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BWU Makes Its Latest Lemon Award to the UK

By Bank Whistleblowers United
June 25, 2017

Bank Whistleblowers United (BWU) makes its non-coveted Lemon award to the United Kingdom (UK) for actions harming whistleblowers and the world.  BWU’s three principals are highly experienced financial experts with combined practical and academic experience of over 120 years.  We are each unemployable in finance because we warned internally at are places of work and then externally about grave misconduct by the most senior financial and regulatory leaders that would (and did) produce terrible losses.

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Barclays and Its Executives Are Charged With Conspiracy to Commit Fraud

NEP’s Bill Black appears on The Real News Network and says don’t expect much – sadly, the British Serious ‘Farce’ Office that brought about the charges may not have the wits to carry out the prosecution. You can view with transcript here.

People of Integrity Won’t Work for President Trump

By William K. Black
June 6, 2017     Bloomington, MN

Rupert Murdoch controls the Wall Street Journal and Fox News.  Even before he acquired the WSJ its editorial board was known for its members’ ultra-right wing fervor.  The acquisition intensified that fervor.  The editorial board’s fervor has infected the WSJ’s news pages.  That is the context essential to understanding the significance of its June 6, 2017 editorial eviscerating President Donald Trump.  They entitled their editorial “The Buck Stops Everywhere Else.”  Here is the most damning paragraph.   .

If this pattern continues, Mr. Trump may find himself running an Administration with no one but his family and the Breitbart staff. People of talent and integrity won’t work for a boss who undermines them in public without thinking about the consequences. And whatever happened to the buck stops here?

In addition to the obvious slam, consider several aspects of the content, tone, and timing of the editorial.  They published it on the anniversary of D-Day, a day of courage and personal responsibility.  Dwight D. Eisenhower, the Allied commander of the invasion and future president of the United States, took a large gamble on the weather clearing enough to allow the invasion to occur.  The editorial, appropriately, given tight word count limits, did not explain what so many adult Americans recall – the last sentence of Eisenhower’s statement to the public in the event the invasion failed.  He personally drafted the statement.

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Dodd-Frank Was Designed to Fail – and Trump Will Make it Worse

By William K. Black
April 17, 2017     Bloomington, MN

William Cohan’s April 14, 2017 column in the New York Times discusses Daniel Tarullo’s swan song talk on bank regulation.  Here are the key passages from that column for the first half of my discussion.

Much to the relief of Wall Street executives, who feared and hated him in equal measure, Daniel K. Tarullo left his powerful perch on the Federal Reserve Board of Governors last week, but not before delivering one last lecture on how big banks should be regulated in his absence.

His swan song was pretty surprising, all things considered. It also went largely unnoticed, much like Mr. Tarullo himself during his eight years at the Federal Reserve. Many people have never heard of him, even though his decisions affected their lives in ways big and small.

Once described as the “Wizard of Oz,” for the power he wielded behind the scenes, Mr. Tarullo was appointed to the Federal Reserve by President Barack Obama in January 2009. At the Fed, Mr. Tarullo took over the important responsibility of regulating the big Wall Street banks, a job that, understandably, had been the purview of the president of the Federal Reserve Bank of New York. The oversight moved to Washington from New York in the wake of the financial crisis.

“It was obvious that a lot in the U.S. regulatory system had not worked particularly well before the crisis,” Mr. Tarullo said in a 2015 interview with The Wall Street Journal.

Cohan was writing about a different subject, one I discuss briefly in the second half of this article, so he did not discuss the insanity described in these four paragraphs.  Here is the short version of that insanity.

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Ecuadorians Reject Neoliberalism in Presidential Race

NEP’s Bill Black appears on Rising Up With Sonali talking about Ecuadoreans and their choice of continuity by choosing a left-leaning government over a neo-liberal agenda in recent Presidential elections.

President of Richmond Fed Leaks Insider Information and Goes Free

NEP’s Bill Black appears on The Real News Network discussing the investigation into leaking of inside information and how it shows how banks and the Federal Reserve are riddled with conflicts of interest. You can view here with transcript.

Reality Virus Infects Kansas Legislators, Brownback Immune

By William K. Black
March 28, 2017      Bloomington, MN

The good news is that the Kansas legislature, the land of the lunatics, experienced an outbreak of the reality virus (first diagnosed and named by Steve Keen among neoclassical economists).  The bad news is that the Kansas’ Crazy-in-Chief, Governor Sam Brownback, has proven immune to the virus.

Brownback decided to put Art Laffer in charge of Kansas’ taxation policy.  Even neoclassical economists roll their eyes when it comes to Laffer’s claims that dramatic tax decreases lead to significantly increased net tax revenues.  Laffer’s batting average on this claim is .000 and his “proof” of his claim is a graph (the “Laffer curve”) that he drew that contradicts reality.  Brownback knew that Laffer was batting .000 on his claims and that Laffer never drops his claims when reality (repeatedly) falsifies his graph.  To no one’s surprise, Brownback’s tax cuts produced a fiscal disaster for Kansas.

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