Category Archives: William K. Black

What Banks Should Expect in the Future

By William K. Black

Bill talks with CCTV America about the future expectations for Banks.

The 11th Lesson We Need to Learn from Charles Keating’s Frauds: Bring back Glass-Steagall

By William K. Black

On April 2, 2014, as news broke of the death of Charles Keating, the most infamous savings and loan fraud, I posted an article entitled “Ten Lessons We Must Learn from Charles Keating.”   (The April 2 date was ironic, because it was the 27th anniversary of the meeting at which the senators who would become known as the “Keating Five” began to seek to intimidate the savings and loan regulators on Keating’s behalf.)

I failed to explain perhaps the most important lesson we should have learned from Keating and Lincoln Savings.  One of the subtle aspects of the savings and loan debacle that is often overlooked is that we ran a real world test of the importance of the provisions of the 1933 Banking Act known as the Glass-Steagall Act.  Glass-Steagall prohibited “commercial” banks that received federal deposit insurance (created by the same 1933 banking act) from owning equity positions in nearly all financial assets (“investment banking”).  With very limited exceptions, a commercial bank could not own real estate, companies, or stock in companies.  (Banking regulators, hostile to Glass-Steagall despite its immense success, would later add many exceptions.)  The ideas behind Glass-Steagall’s separation of “banking” from “commerce” always made eminent sense from conservative and progressive perspectives.  Commercial banks received a federal subsidy through deposit insurance, so it made no sense for them to be allowed to compete against regular businesses that lacked that subsidy.  It would distort markets to allow such a subsidy. 

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Slate’s Civil War about Bigotry and Markets

By William K. Black

Slate is having a healthy, but incomplete, debate about the uproar about Brendan Eich’s resignation from Mozilla.  Eich donated $1000 to the successful campaign to adopt “Proposition 8” in California in 2008.  Prop 8, until it was struck down, banned marriage equality for gays.  William Saletan published a satirical article suggesting that everyone be “purge[d]” who contributed to Prop 8.

Other columnists, such as Mark Stern, weighed in to remind readers about the cruelty of the often homophobic TV ad campaign used by Prop 8 supporters.  Stern makes the point that much of the campaign was designed to picture gays as recruiting straight children.  This column (eventually) discusses why Eich stepped down, but it begins by explaining why neoclassical economists have such a terrible track record in understanding discrimination and its remedies.

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Nobel Schizophrenia over the Georges: Stigler and Akerlof

By William K. Black

In a recent column I focused on three brief passages from George Akerlof and Paul Romer’s 1993 article (“Looting: The Economic Underworld of Bankruptcy for Profit”) that had they been listened to would have prevented the fraud epidemics that drove our recent financial crises.

Here is one of those three passages.  Notice how unequivocal they were in their statements about causality.

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Heard (but not understood) On the Street: The WSJ and Deflation

By William K. Black

A brief update is in order after my three part series on how the troika (the ECB, EU, and the IMF) was acting contrary to its stated policies on deflation, Mario Draghi’s (the head of the ECB) confession that he favored deflation in the eurozone periphery because he wanted these nations to have lower prices and wages so that they could increase exports, and the disgraceful reporting of the subject in the New York Times and the Wall Street Journal.  The WSJ’s Heard on the Street” feature is out with an April 3, 20014 story on deflation that epitomizes each of these defects.  The title of the article foreshadows the analytical black hole that follows: “Inflation, Euro Test Draghi’s Resolve at ECB.”

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The Kamikaze Economics and Politics of Forcing Austerity on the Ukraine

By William K. Black

We all understand why Russia is waging economic war on the Ukraine, but why is Obama doing so?  The New York Time’ web site has posted a remarkable Reuters story (dated April 5, 2014) entitled “Ukraine PM Says Will Stick to Austerity Despite Moscow Pressure.”

“The Kiev government will stick to unpopular austerity measures ‘as the price of independence’ as Russia steps up pressure on Ukraine to destabilise it, including by raising the price of gas, Prime Minister Arseny Yatseniuk told Reuters.”

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Three Passages From Akerlof & Romer’s 1993 Article That Should Have Prevented The Crisis

By William K. Black

This is the first installment of a series of articles about the media, finance industry, political, and Department of Justice (DOJ) reaction to Michael Lewis’ new book about high frequency trading (HFT).  The media ballyhooed the book as if it were an amazing revelation of a fact of surpassing importance.  The industry demonized the book and Lewis.  DOJ immediately announced it had begun a criminal investigation and the SEC it had multiple investigations pending.  Whether the industry or Lewis is correct about HFT practices (which he asserts are lawful) is unimportant for some purposes.  My series will focus on the difference between the frenzied DOJ, political, and media reaction to Lewis’ criticism of allegedly lawful HFT practices and the “yawn” reaction of these same groups to the vastly more damaging criminal frauds runs by our elite financial leaders that caused the financial crisis is astronomical, ludicrous, and disastrous.  Similarly, the reaction of these three groups to the finding by multiple investigations that 16 of the largest banks in the world committed crimes by setting LIBOR rates through frauds and cartels (the largest cartel, by several orders of magnitude, in history) was less than a yawn, as I described in prior articles.

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The Black Fraud and Finance Report

The Black Fraud and Finance Report on the Real News Network. Bill is discussing Charles Keating.

Ten Lessons We Must Learn from Charles Keating

By William K. Black

I knew Charles Keating, the head of Lincoln Savings, in my capacity as a financial regulator and as the subject of his wrath.  His fraud schemes and the manner in which they targeted our system’s vulnerabilities in an era before Citizens United made the corruption of politicians by fraudulent CEOs child’s play remain the play book for the world’s most destructive financial frauds.  Our failure to learn the ten lessons has caused immense suffering.  Keating’s life, and the great harm he caused, will not have been in vain if we step back and use the occasion of his death to reflect on the changes we need to make.

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The New York Time’s Disgraceful Reporting about Deflation

By William K. Black

This is the third and final installment of a series of columns discussing the latest harmful policies and articles about eurozone deflation.  This column discusses the March 31, 2014 article in the New York Times entitled “Another Worrisome Drop in Euro Zone Inflation.”  I have already discussed the extraordinary sentence in the article in which the head of the European Central Bank (ECB), Mario Draghi, is cited as claiming that deflation is desirable for eurozone nations suffering Great Depression levels of unemployment.  Draghi claims that deflation will cause reductions in working class wages and prices that will lead to increased exports and economic recoveries.  I explained in prior columns that this is contrary to the ECB’s written policies and economic theories and the views of virtually all economists.  The NYT article does not report these facts.

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