Category Archives: William K. Black

Implicit Assumptions and Biases about Liar’s Loans Lead Journalists into Error

By William K. Black
Bloomington, MN: February 13, 2015

The website “538” has one claim to fame – interpreting data.  In the mortgage fraud context it got this horribly wrong in a way that should be an object lesson to the dangers of implicit assumptions that implicitly exclude alternative theories of causation.  This typically happens because of an unrecognized bias.  Ben Casselman and Andrew Flowers provided the object lesson in their discussion of a new study (behind a pay wall) by Atif Mian and Amir Sufi entitled “Fraudulent Income Overstatement on Mortgage Applications during the Credit Expansion of 2002 to 2005”

“What they found: Mortgage lending surged in low-income, less creditworthy areas of the U.S. between 2002 and 2005. But systemic differences between incomes reported on mortgage applications and incomes reported to the IRS indicate that much of this “subprime” lending was reliant on borrowers fraudulently overstating their income.

Why it matters: Between 2002 and 2005, there was a tsunami of money for prospective U.S. homebuyers. This surge of mortgage credit was strongest in less creditworthy, low-income areas. But some economists have argued that incomes of homebuyers were increasing in these areas. After all, by looking at income as reported on mortgage applications, the areas with lower credit scores seem to have robust growth of homebuyers’ income. But new research from Sufi and Mian — the authors of “House of Debt” who have written for FiveThirtyEight — confirms that, no, economic improvement wasn’t behind these improving income numbers. It was fraud. Specifically, the fraud of homebuyers overstating income.”

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Bill Black appears on Background Briefing

NEP’s Bill Black appears on Ian Masters’ Background Briefing discussing HSBC and the tax dodging it facilitated for its customers. You can listen here.

The City of London is so Criminogenic That It Boggles Even Its Banking Apologists

By William K. Black
Bloomington, MN: February 11, 2015

HSBC’s most recent scandal is the perfect holiday gift. Whatever genre of entertainment one favors – from blood diamonds to drug cartels to rollicking royals to sport stars HSBC was happy to aid the wealthiest stars of your genre to illegally evade their taxes. Taxes were once termed the price we paid for civilization, but they now represent the price the wealthy brag to each other about refusing to pay as they pillage civilization. Because the City of London “won” the “regulatory race to the bottom” it is the worst “vector” for the epidemic of sleaze led by our most elite bankers. Oh, sorry, I let reality intrude in that last sentence.

The “respectable” government people in the UK and the U.S. (and Ireland) insist that we are experiencing the first virgin crisis – consisting of hundreds of thousands of fraudulent transactions by bankers – in which not a single CEO of the largest banks knew that his bank was a massive criminal enterprise. The long-running (anti) morality play with an extended run in each of these three nations claims that we are experiencing the first “Virgin Crisis” conceived without sin in these bank C-Suites. In every case, the bank CEOs – paid like Croesus because they are financial geniuses and managerial wizards – has been bamboozled by the tiny folks in the banks’ “org charts.” Such a betrayal of the trust that the elite bank CEOs reposed in these unworthy junior officers and employees! The pain of the elite bank CEOs is palpable – having their reputation besmirched by their ungrateful and immoral lesser. We’ll put aside who it is that crafts the perverse incentives that created the City of London’s (and Wall Street’s) corrupt financial cultures for the same reason that the CEOs’ apologists put aside that unsettling question.

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Bank Lobbyists Still Fear Progressives and the Public

By William K. Black
Bloomington, MN: February 11, 2015

Don’t get cocky, but also don’t give up. Bank lobbyists are still whining about opposition from progressives to the lobbyists’ agenda to (again) gut financial regulation. The lobbyists don’t fear the Obama administration, they fear progressives and the public.

The story comes from one of the reliable voices of the plutocracy – Bloomberg – in a February 11, 2015 article entitled “Banks May Have Overplayed Their Hand Fighting Wall Street Regulation.”

The financial industry is finding that winning in Washington comes at a cost.

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Bill Black and Alexis Goldstein on HuffPost Live

NEP’s Bill Black appears along with Alexis Goldstein on HuffPost Live with Alyona Minkovski. They are discussing HSBC and it’s latest mess – helping rich customers hide billions of dollars and avoid paying millions of dollars in taxes. You can watch the interview here.

Geithner: “The End of Capitalism as We Know It”

By William K. Black
Bloomington, MN: February 10, 2015

Timothy Geithner’s penchant for speaking about things he does not care enough about to get right has led to him uttering many of the most cringe-worthy phrases about the economic crisis. The latest example is in David Axelrod’s new book about the Obama administration’s response to the financial crisis. This column was prompted by Sam Stein’s piece in the Huffington Post about Axelrod’s key points.

“Axelrod was ‘livid’ when he found out that Geithner and [Larry] Summers ‘had quietly lobbied’ against an amendment to the stimulus that would have restricted the payment of bonuses at firms that received bailout funds. Those bonuses had become a huge political sore point for the administration, but the finance guys argued that retroactive steps to claw back the money would have violated existing contracts.

‘This would be the end of capitalism as we know it’ Geithner told Axelrod, to which Axelrod says he responded: ‘I hate to break the news, Mr. Secretary, but capitalism isn’t trading very high right now.’”

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Hensarling Loves Clinton’s Worst Deregulatory Blunders

By William K. Black
Bloomington, MN: February 9, 2015

This the second in a series of columns about Jeb Hensarling and Peter Wallison – the Nation’s chief myth makers about the causes of our financial crisis. Hensarling is the Chairman of the House Financial Services Committee and a leader in the effort to gut the Dodd-Frank Act’s few effective provisions. Wallison is one of the primary architects of the three “de’s” (deregulation, desupervision, and de facto decriminalization) that made the banking environment so criminogenic that it caused the fraud epidemics that hyper-inflated the bubble and drove the financial crisis.

In this second column I focus on Hensarling’s embrace of Bill Clinton and Al Gore’s worst anti-regulatory blunders. Their overall blunder was “Reinventing Government,” a broad assault on regulation and government effectiveness. In the financial sphere, Clinton and Gore embraced a fatal concept (the regulatory “race to the bottom”), two specific legislative acts of deregulation, and the growth of systemically dangerous institutions (SDIs) that were “too big to fail.” Each of these blunders contributed to the most recent crisis and unless corrected will contribute to future crises. Hensarling celebrates each of these anti-regulatory blunders as superb policies.

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Hensarling: Regulations (and Condoms) Don’t Work if You Don’t Use Them

By William K. Black
Bloomington, MN: February 8, 2015

I am writing a series of columns about the Republican fantasy team of apologists for the elite banksters. Jeb Hensarling (R, TX), chair of the House banking committee that is taking the lead in trying to further deregulate banking and Peter Wallison, one of the chief architects of the most recent banking crisis, are teaming up to flog Wallison’s book. The book attempts to convince its readers that Wallison’s leadership of the effort to push the three “de’s” – deregulation, desupervision, and de facto decriminalization – played no role in creating the criminogenic environment that produced the three most destructive epidemics of financial fraud in history. Hensarling is hosting Wallison’s book unveiling.

They are the perfect fantasy team because they inhabit a fantasy world of their own construction that rests on a foundation of non-facts with appalling logical leaps. This first column begins with a brief introduction to how crazy Hensarling is – and recall that he is the Republican Party’s leader on financial issues. George Akerlof and Paul Romer, in their classic 1993 article “Looting: The Economic Underworld of Bankruptcy for Profit,” explained that the 1982 federal deregulation law was “bound to produce looting.”

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Oral Testimony of William K. Black

Note: This oral testimony was delivered on February 5, 2015 in Dublin, Ireland before the Oireachtas’ Joint Committee of Inquiry into the Banking Crisis.  These are my prepared remarks.  My actual oral testimony differed considerably.  A transcript is available from the Inquiry, as is complete video.

To:       Joint Committee of Inquiry into the Banking Crisis
From:   William K. Black
Date:     February 3, 2015

Oral Testimony of William K. Black


Thank you for the invitation to assist Ireland as you face among the most important questions Ireland and many other nations must answer correctly if we are to put a stop to our recurrent, intensifying financial crises. I am William K. Black and I come to you wearing four disciplinary and three institutional “hats.” My primary appointment is in economics with a joint appointment in law at the University of Missouri-Kansas City. I am a white-collar criminologist and a former senior financial regulator. My research specialties include elite white-collar crime and corruption, regulation, and financial crises. I am the Distinguished Scholar in Residence for Financial Regulation at the University of Minnesota’s Law School. I am a professor at the Instituto de Altos Estudios Nacionales es la Universidad de Posgrado del Estado in Quito, Ecuador. My testimony, of course, is solely my personal views rather than the official position of any of these universities.

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Bill Black appears on The Real News Network discussing Greece

NEP’s Bill Black appeared on The Real News Network (TRNN) discussing the Syriza victory in Greece despite what WSJ and NYT would like us to think. The video is below. I you would like to see the video and transcript, it is here.