Category Archives: William K. Black

The Wall Street Journal’s Incredible Claim that Banks Can’t “Game” Asset Values

By William K. Black

The Wall Street Journal has published a disingenuous editorial that claims that it is we should not worry about anti-regulatory leaders who produce a self-fulfilling prophecy of regulatory failure because they are chosen on the basis of their ideological opposition to effective regulation.  The WSJ’s position is that George Stigler supposedly proved that “regulatory capture” is “inevitab[le]” and that any need for financial regulation and supervision can be supplied by “simple laws that can’t be gamed” such as a 15% capital requirement.

“Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can’t be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital—an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris’s plan to automatically convert a portion of a bank’s debt into equity if the bank’s market value falls below a healthy level.”

No person did more to try to make financial regulation ineffective than did George Stigler, though Peter Wallison, Alan Greenspan, and Charles Calomiris were all in the running for that title.  No media organ tries so hard to destroy effective financial regulation as the WSJ.  Calomiris also ran his bank into the ground and was denounced by his brother as incompetent, so the suggestion that we take advice from him is a fine example of unintentional self-parody.

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Germany Demands Greater Austerity Because Three Recessions in Six Years are not Enough

By William K. Black

Things are going badly in the eurozone – as they have for six years due to Germany’s demand that “there is no alternative” (TINA) to austerity as the response to the Great Recession.  Austerity caused a gratuitous second Great Recession throughout the eurozone and threw nations with one-third of the eurozone’s total population into Great Depression levels of unemployment.  Austerity has now forced Italy into a third recession in six years and produced overall stagnation in the eurozone.  Germany, whose budget surplus has produced economic stagnation, has found a solution to the latest crisis caused by self-destructive austerity – greater austerity.  Better yet, as a Reuters column relates, Germany’s leaders are enraged that anyone would dare to question why it makes sense to reduce further already inadequate demand through austerity.

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NEP’s Bill Black appears on Bill Moyers Show

Bill Black appeared on Moyers & Company on October 3, 2014. The topic of discussion was a topic near and dear to Bill: Too Big to Jail?

EU Austerity as Frat House Hazing

By William K. Black

The European Union (EU) is stagnating because of austerity.  Austerity in response to the Great Recession has already, gratuitously, forced the eurozone into recession and roughly one-third of its population live in nations with Great Depression levels of unemployment.  Austerity has now thrown Italy into its third recession in six years and may well do so in France.  One might think that even the troika would respond to this track record of failure and anguish by deciding to stop smashing the eurozone’s economy with the hammer of austerity.

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The New York Times Admits that “Many Economists” Criticize EU Austerity

By William K. Black

Under the principle that one should bestow a special welcome on the tentative steps that the prodigal daughter takes to return to economic reality I write to praise Liz Alerman’s column entitled “France Produces a “No Austerity’ Budget, Defying E.U. Rules.”  The column contains a sentence that represents a breakthrough in the New York Times’ horrific (non) coverage of Eurozone austerity, its abject failure, its self-destructive nature, and its victims.

“But many economists believe that crimping spending during a downturn has impeded economic growth, which in turn has made it harder for those countries to reduce their deficits and debts.”

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The New York Times’ Thinks the EU Can “Afford” Mass Unemployment but Not “More Government Spending”

By William K. Black

Regular readers understand the three dynamics that drive economists crazy about the New York Times’ coverage of the troika’s infliction of austerity on the Eurozone.  The troika consists of the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Commission (EC).

  1. NYT reporters treat austerity as a response to the eurozone’s Great Recession as obviously the only possible response – they rarely discuss alternative policies or views
  2. The NYT refuses to inform its readers that economists overwhelmingly consider this malpractice and that it has caused catastrophic and gratuitous harm
  3. All of this is particularly bizarre given the NYT’s economist, the Nobel Laureate Paul Krugman, who writes regularly in the paper to explain why austerity is a disastrous response to the Great Recession.  The NYT eurozone writers routinely ignore Krugman (and anyone else who makes the same point).

The massive, wholly avoidable harm caused by “bleeding the patient” to make him well (austerity in response to a recession) for the people of the eurozone is stark, but typically minimized or wholly ignored by the NYT reporters.  Roughly one-third of the population of the eurozone lives in nations with Great Depression levels of unemployment.

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A “Perfectly Legal” Scam is Perfectly Unacceptable to Real Bank Supervisors

By William K. Black

Whatever else comes out of the release of the audio tapes by Carmen Segarra, they have harmed the reputation of Mike Silva, the long-term senior supervisor at the Federal Reserve Bank of New York (FRBNY). The (lengthy) excerpts below are taken from the This American Life program and are necessary to understand the context.

Mike Silva I have to tell you that night that the reserve fund broke the buck and we got that word…

Jake Bernstein It was a moment when it looked like the financial system was going to come crashing down. Big firms were frantically calling the Fed, terrified that economic

Armageddon had arrived. When this happened, Silva was chief of staff for Tim Geithner who, at the time, was president of the New York Fed.

Mike Silva And when I realized that nobody had any idea how to respond to that, I went into the bathroom and threw up. Because I realized this is it, it’s just this small group of people, and right now at this moment we have no clue. I never want to get close to that moment again.

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The New York Times Claims that Opposing EU Austerity Leads to Anti-Semitism

By William K. Black

I have written a series of columns describing the New York Times’ horrific coverage of austerity and the Great Recessions and Great Depressions that it has gratuitously inflicted on the people of the eurozone.  I thought I was safe from such coverage, however, reading a NYT column entitled “Europe’s Anti-Semitism Comes Out of the Shadows.”  Silly me.

It turns out that opposition to austerity is a key cause of Anti-Semitism – at least in the imagination of NYT reporters.

“With Europe still shaking from a populist backlash against fiscal austerity, some Jews speak of feeling politically isolated, without an ideological home.”

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Note to New York Times: EU Austerity is the Problem

By William K. Black

In the latest example of the New York Times’ reporters’ inability to read Paul Krugman, we have an article claiming that the “Growing Imbalance Between Germany and France Strains Their Relationship.”  The article begins with Merkel’s major myth accepted as if it were unquestionable reality.

“It was a clear illustration of the dysfunction of the French-German partnership, the axis that for decades kept Europe on a united and dynamic track.

In Berlin this month, Chancellor Angela Merkel, riding high after nine years in power, delivered a strident defense in Parliament of austerity, which she has been pushing on Europe ever since a debt crisis broke out in 2009.”

No, not true on multiple grounds.  First, the so-called “debt crisis” was a symptom rather than a cause.  The reader will note that the year 2008, when the Great Recession became terrifying, has somehow been removed from the narrative because it would expose the misapprehension in Merkel’s myth.  Prior to 2008, only Greece had debt levels given its abandonment of a sovereign currency that posed a material risk.  The EU nations had unusually low budgetary deficits leading into the Great Recession.  Indeed, that along with the extremely low budgetary deficits of the Clinton administration (the budget went into surplus near the end of his term) is likely one of the triggers for the Great Recession.

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The New York Times’ Coverage of EU Austerity Remains Pathetic

By William K. Black

I have explained in depth why the New York Times’ coverage of the EU troika’s infliction of austerity on the eurozone is dishonest and routinely indifferent to the suffering of the peoples of much of the periphery who have been forced into a second Great Depression.  The latest travesty was in an article entitled “French Premier’s Push Toward Center Opens Rift on the Left.”

The article focuses on the betrayal of the people of France and his own Party by President Hollande, but you won’t learn that by reading the article.  Instead, you’ll learn that Hollande is following the pattern of Tony Blair.  Of course, the article doesn’t mention four things about Hollande’s copying Blair’s neo-liberalism, slavish devotion to big finance, his view of even the most helpful and desirable budget deficits as undesirable, and his betrayal of labor.

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