Tag Archives: Control Fraud

NET 2 Black

INETeconomics’ Marshall Auerback interviews NEP’s Bill Black. Topic of discussion is the “f” word – fraud.

Zero Prosecutions Aren’t Few Enough – Wall Street Wants SEC Sanctions Reduced to DMV Points

By William K. Black
Kilkenny, Ireland: November 8, 2014

Wall Street’s full depravity was put on display in Joseph Fichera’s November 6, 2014 op ed in the New York Times. I hasten to add that the reason that the op ed is so revealing is that Fichera is one of the sometimes good guys who, for example, accurately warned that “auction-rate securities” were a dangerous scam and criticized JPMorgan’s odious abuse of Denver. When the Ficheras of the world join in Wall Street’s “race to the bottom” Federal Reserve Bank of New York’s President Dudley’s point about the corrupt culture that characterizes Wall Street is proven irrefutably.

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Thomas 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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IT’S OFFICIAL: TOO BIG TO FAIL IS ALIVE AND WELL

By L. Randall Wray

Thank heaven for Tom Hoenig, the only proven-honest central banker we’ve got. Yes, I know he’s moved on from the KC Fed to serve as Vice Chairman of the FDIC. He actually might do a lot more good over there, anyway.

In recent months, we’ve heard how Wall Street’s Blood-sucking Vampire Squids have reformed themselves. They no longer pose any danger to our economy. They’ve written “living wills” that describe how they’ll safely bury themselves without Uncle Sam’s help next time they implode.

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The Dangerous Lure of Austerity to Progressives Seeking to Reduce Pentagon Spending

By William K. Black

William K. Black

I spent today in Washington, DC presenting and attending a conference put together by Ralph Nader on left-right convergence.  The theme was that there were many issues on which large elements of the left and right agreed and could change existing policies if they worked together.  I spoke about the desirability of effective financial regulation to break the Gresham’s dynamic and prevent or at least minimize the damage of future financial crises and the desirability of prosecuting the elites that run financial “control frauds.”

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Why Does Refusing to Put Fraudulent Banks into Receivership Help the Economy?

By William K. Black

Conservative economists love “creative destruction.” They can’t wait to “get their Schumpeter on” when a business fails and thousands of workers lose their jobs. There is no more “creative destruction” conceivable than when we put a bank that has become a fraudulent enterprise into receivership, remove the controlling officers leading the fraud, and sell the bank through an FDIC-assisted acquisition. Indeed, the pinnacle of creative destruction would be doing this with a systemically dangerous institution (SDI) through a process that split the supposedly “too big to fail” bank into smaller components that (1) were no longer large enough to pose a systemic risk, (2) were more efficient than the bloated SDI, (3) no longer extorted a large (implicit) government subsidy that made real competition impossible, and (4) no longer had dominant political power via crony capitalism. Unlike the situation in which an SDI collapses suddenly in the midst of causing a global crisis when its frauds cause a liquidity crisis, it is vastly easier to put fraudulent SDIs in receivership in today’s circumstances. Unlike Arthur Anderson, the receivership power allows us to keep the enterprise alive and create more competitors rather than fewer.

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It’s Good – no – Great to be the CEO Running a Huge Criminal Bank

By William K. Black

Every day brings multiple new scandals.  At least they used to be scandals.  Now they’re simply news items strained of ethical content by business journalists who see no evil, hear no evil, and speak not about evil.  The Wall Street Journal, our principal U.S. financial journal ran two such stories today.  The first story deals with tax evasion, and begins with this cheery (and tellingly inaccurate) headline: “U.S. Banks to Help Authorities With Tax Evasion Probe.”  Here’s an alternative headline, drawn from the facts of the article: “Senior Officers of Goldman Sachs and Morgan Stanley Aided and Abetted Tax Fraud by Wealthiest Americans, Failed to Make Required Criminal Referrals, and Demanded Immunity from Prosecution for Themselves and the Banks before Complying with the U.S. Subpoenas: U.S. Department of Justice Caves in to Banker’s Demands Continuing its Practice of Effectively Immunizing Fraud by Most Financial Elites.”

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The New Book on Regulation I Just Decided to Write: Blame it on Monaco

By William K. Black

This is the third article in a series of columns devoted to financial regulation prompted by the comments of a Swiss academic at the XIIth Annual CIFA Forum in Monaco. (See first here and second here.)

Having spent 20 years as a non-academic professional, I still find it odd the directions in which a single speaker or writer can start an academic on a convoluted path of research that spans multiple disciplines and eras and produces a series of “light bulb” analytical moments. And that prompts a digression into a symptom of the problem illuminated by that series of moments that has led me to decide to write a book on regulation.

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Why Did George Kaufman, the Father of “Prompt Corrective Action” (PCA), Hate Ed Gray so Much that He Opposed Gray’s Embrace of PCA?

By William K. Black

This is the second installment of a series arising from my recent participation in CIFA’s XIIth Annual International Forum in Monaco.  The series was prompted by Dr. Hans Geiger’s rage at financial regulation in Europe – not at its pathetic weakness that produced the criminogenic environments through much of the Eurozone, but at the proposal that Swiss banks be required to make criminal referrals when they found evidence of likely criminality by their customers.  This inspired me to wonder why a requirement that has existed in the U.S. for over 30 years would lead to such raw animus against “bureaucrats” serving “big brother” (i.e., the democratically elected Swiss government).

Geiger is a member of the European Shadow Financial Regulation Commission, which I will call the “EU Shadow” for the sake of brevity.  I am familiar with the US Shadow.  There are interesting (if you are a fellow wonk) articles by members of the EU Shadow about its creation and its conception of what it intends to achieve and how it will do so.  I will refer to the 2004 article by the EU Shadow’s chairman, Harald A. Benink.

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Corporate CEOs Demand that they be Tipped Off When a Whistleblower Reports their Crimes

By William K. Black

I’m writing on the flight returning from the XIIth International CIFA Forum in Monaco. CIFA is an NGO.  It is a confederation of independent financial advisor organizations that works with the UN in promoting the protection of investors.  This means that their clients are often very wealthy and that many of the participants are speakers are very conservative or libertarians (or an admixture).  One of the speakers, Dr. Hans Geiger, gave an impassioned denunciation of “bureaucrats” (which turned out to mean anyone who worked for the government) and the imposition of a duty on bankers to file criminal referrals when they had a “reasonable suspicion” that their clients had committed certain crimes.  The official U.S. jargon for a criminal referral is “Suspicious Activity Reports” (SARS).  Geiger was particularly distressed that the banker would not be allowed to inform his client that he was making the criminal referral (which FATF terms “Suspicious Transaction Reports” (STRs)) under the standard 21 proposed by the Financial Action Task Force in 2012.

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