Tag Archives: banksters

Timothy Curry: The Very Model of the Modern Failed Regulator

By William K. Black

I explained in a 2012 column as soon as Thomas Curry was publicly identified as the likely new head of the Office of the Comptroller of the Currency (OCC) why he was such a poor choice to be a regulatory leader. Curry is such a good example of Obama’s crew of failed agency heads because he is neither evil nor stupid. As I explain below, he views morality as a misnomer in banking. He is the rarity among Obama appointees, a true professional regulator. He is well within the top 50% of Obama’s (dismal) appointees in finance and regulation.

Curry is also an abject failure who should be cashiered immediately. No one had to order him to fail or intimidate him into failure. He represents anti-regulation as usual, which has been the pattern in finance since 1993. One can read his speeches and see that he has learned none of the essential lessons from the crisis and lacks even a dying ember in his belly, much less the raging fire required for regulatory success. We know from his record of failure as an FDIC director from January 2004 throughout the crisis that had he been the top federal regulator in the savings and loan debacle rather than Ed Gray cost of the debacle would have grown to trillions of dollars. At that level it would have hyper-inflated real estate bubbles and likely caused a severe recession.

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Jamie Dimon: U.S. Must Create a “Safe Harbor” Where JPM’s Corruption Is Not “Punished”

By William K. Black

I want to give a hat tip to a recent Wall Street Journal article that brought to my attention two damning admissions by JPMorgan’s (JPM) CEO and Chairman of the Board, Jamie Dimon.  The irony is that Dimon was lulled into making these admissions because he was basking in the perfect calm created by the confluence of Sorkin’s and CNBC’s storied sycophancy at the one place on earth where elite bankers feel most loved, honored, and protected – the annual meeting of the ultra-wealthy in Davos, Switzerland.  Sorkin was the only interviewer, so Dimon faced no risk of tough questions.  It may well have been this perfect setting that caused Dimon to let slip the mask and reveal two illustrative sins of elite bankers reported in the WSJ article.

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How the Rocket Scientists Aided the Senior Fraudulent Bank Officers

By William K. Black

In my first column in this two-part series I explained how the Department of Justice’s (DOJ) non-prosecutorial effort against the banksters’ frauds that caused the financial crisis had ended with a pathetic whimper uttered by Deputy Attorney General James Cole during his ritual exit interview with Bloomberg. Cole’s explanation for DOJ’s failure to prosecute a single senior banker for leading the three fraud epidemics that drove the financial crisis was that DOJ was “dealing with financial rocket science.” My first column made the point, which escaped DOJ and Bloomberg that if this were true it would presumably have been modestly important for DOJ to do something about the ability of “rocket scientists” to grow wealthy by leading the frauds that cost the U.S. $21 trillion in lost GDP and 10 million jobs. In my second column I explained why no rocket science was required to prosecute the senior bank officers that led the three most destructive epidemics of financial fraud. In light of a reader’s comment I promised to write this third piece on “rocket science” in the financial context.

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Liar’s Loans Ain’t “Rocket Science”

By William K. Black

In my first column in this two-part series I explained how the Department of Justice’s (DOJ) non-prosecutorial effort against the banksters’ frauds that caused the financial crisis had ended with a pathetic whimper uttered by Deputy Attorney General James Cole during his ritual exit interview with Bloomberg. Cole’s explanation for DOJ’s failure to prosecute a single senior banker for leading the three fraud epidemics that drove the financial crisis was that DOJ was “dealing with financial rocket science.” My first column made the point, which escaped DOJ and Bloomberg that if this were true it would presumably have been modestly important for DOJ to do something about the ability of “rocket scientists” to grow wealthy by leading the frauds that cost the U.S. $21 trillion in lost GDP and 10 million jobs. I also promised this column explaining why it was not true. In light of a reader’s comment I’ll add a third piece on “rocket science” in the financial context.

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Not with a Bang but a Whimper: DOJ Says it Cannot Prosecute “Rocket Science” Frauds

By William K. Black

This is the way the Department of Justice’s (DOJ) greatest strategic prosecutorial failure ends, not with a bang but a whimper that it is too hard to prosecute “rocket science” frauds.  The context is the ritual Bloomberg exit interview with the senior DOJ official going off to make his new fortune.  The lucky fellow this week is Deputy Attorney General James Cole.  This genre of interview is designed to allow the man in the revolving door to announce his great accomplishments as a prosecutor, or in this case, non-prosecutor.  Cole gamely claims that zero prosecutions constitutes a brilliant success because DOJ’s civil cases “have resulted in banks paying huge fines and altering their behavior.”

“Holder today praised Cole as his ‘indispensable partner’ since taking the deputy’s job in January 2011. ‘Jim’s leadership and ingenuity have been critical in attaining historic results on behalf of the American people,’ Holder said in a statement.”

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Krugman’s Bashes Progressives for Criticizing Obama on Grounds that He Criticizes Obama

By William K. Black

Paul Krugman’s admirers would never list modesty as one of his characteristics. He has written a column “In Defense of Obama” that begins by explaining that his criticisms of President Obama were correct, but that unidentified others’ criticisms of Obama constitute “trash talk.”

Specifically, Obama “came perilously close to doing terrible things to the U.S. safety net in pursuit of a budget Grand Bargain.” Obama sought to produce a self-inflicted disaster by desperately trying to reach a “Grand Bargain” with Republicans that would have inflicted austerity on our Nation in 2012, “slash[ed] Social Security and [raised] the Medicare [eligibility] age.” As even Krugman admits, we were saved from this catastrophe “only by Republican greed, the GOP’s unwillingness to make even token concessions” to achieve the Grand Bargain. What Krugman omits in the tale is that it was also a revolt by Democratic progressives against the Grand Bargain that saved Obama and the Nation.

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Deal Book Says Citi “Cannot Afford” to Run an Honest Bank in Mexico

By William K. Black

Deal Book, Andrew Ross Sorkin’s ethics-free paean to painless elite bank frauds – all the wealth and none of the accountability – has plumbed new depths in its coverage of Citi’s latest frauds.  It has literally written that Citi “cannot afford” to run an honest bank in Mexico.

I’ll put aside for another day the obvious point that Citi does not run an honest bank in the U.S. so the authors’ implicit assumption that Citi’s problems arise from a corrupt Mexican culture is false and bigoted.  For purposes of analysis only, I will discuss the logical implications of the Deal Book’s “Blame it on Mexico” thesis. That thesis does not lead the NYT authors to ask Citi’s leaders to discuss which of three options it chose given that it cannot afford to run an honest bank in Mexico.

  • To run an honest bank in Mexico anyway, or
  • To lead a movement to clean up banking and politics in Mexico, or
  • To stop banking in Mexico

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Hold Your Wallet When the Swedish Central Bank Prize Rewards “Clever”

By William K. Black

The Swedish Central Bank’s (the “Bank”) prize in economics has gone to Jean Tirole.  It is always good to test such an award by looking at the writings of the recipient in an area in which the reader has particular expertise.  In my case, that would include the Savings and Loan debacle, financial regulation, and control fraud.  Tirole’s book: The Theory of Corporate Finance was published on January 1, 2006 during the heart of the three raging epidemics of accounting control fraud that were hyper-inflating the world’s largest financial bubble and about to create the financial crisis and the Great Recession.

As I have long emphasized and will be explaining at greater length in a book about the failures of economics and economists as exemplified by far too many of the recipients of the Bank’s Prize, economics is the only discipline in which the understanding of the field’s subject of study has gone backwards.  In particular, the praxis recommended by economists has proven highly criminogenic and is the primary explanation for why we suffer recurrent, intensifying crises, the rise of crony capitalism that cripples democracy and ethics, and spiraling inequality and low growth in the regions that suffer the greatest predation by our parasitical financial centers.  Tirole wrote at the ideal time to judge his understanding of corporate finance as it was actively causing these catastrophes.

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We Now Know what Form of Bank Fraud at JPMorgan it Takes to Alarm President Obama

By William K. Black

President Obama called no emergency meeting when he learned that JPMorgan and 15 other of the world’s largest banks had rigged LIBOR for years – distorting the prices on over $300 trillion in transactions.  He called no emergency meeting when he learned that JPMorgan and over 20 other huge lenders fraudulently sold Fannie and Freddie hundreds of billions of dollars in toxic mortgages.  Same non-result when JPMorgan and a dozen huge banks rigged bids on the issuance of municipal debt to rip off hundreds of government entities.  Same non-result when the big banks filed hundreds of thousands of fraudulent affidavits in order to foreclose on homeowners illegally.  Same nothing when he learned that over 20 huge lenders made the Office of the Comptroller of the Currency’s (OCC) list as the “worst of the worst” lenders and that Attorney General Eric Holder refused to prosecute any of their senior bank officers who led the frauds.  Same nothing when he learned that our home mortgage lenders had created “an open invitation to fraud” through making millions of fraudulent liar’s loans.  Another big nothing when Obama learned that the same banks controlled by fraudulent officers had deliberately created a “Gresham’s” dynamic by blacklisting honest appraisers who refused to inflate appraisals.

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Capital “Can’t be Gamed” – Except Whenever the Bank CEO Wants To

By William K. Black

On October 6, 2014, the Wall Street Journal, only three days ago, published an editorial claiming that regulatory capture was “inevitab[le]” and that we should give up on regulation and rely instead on “simple laws that can’t be gamed” such as an increased capital requirement for banks.  I wrote a two piece response to the editorial.  What I just discovered (though it bears an October 7, 2014 date on the WSJ website) is that one day after the editorial claimed that asset and liability values (the inputs that define “capital”) “can’t be gamed” they presented data indicating that corporations frequently game asset values and that private auditors frequently fail to follow former audit procedures to detect and prevent the overstatement of asset values.  The title of the article is “Audit Deficiencies Surge” and the first two sentences contain the key data.

“Auditors at the largest U.S. accounting firms failed to follow proper procedures in more than four in 10 audits, according to the latest inspections by the U.S. government’s audit watchdog. That was more than double the rate four years earlier.”

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