Tag Archives: #econ4the99

The Cost of Theoclassical Economics and Economists

By William K. Black
(Cross-posted from Benzinga)

Hernando de Soto is an extremely interesting Peruvian economist who is simultaneously deeply conservative and highly innovative. He published a column in the Washington Post on October 7, 2011 entitled “The Cost of Financial Ignorance” that caused me to reexamine “The Washington Consensus” [TWC].

I agree with de Soto, but his title would have been more accurate if it read: “The Costs of Theoclassical Economics and Economists.” The nature of the TWC is itself highly contested, so I will hold off providing “the” definition of TWC other than to warn that its originator and its proponents are engaged in historical revisionism to try to hide the damage TWC has done.

I agree with de Soto’s criticisms of financial deregulation. Indeed, I will (briefly) add to those criticisms. But de Soto’s argument that the deregulators violated TWC is not correct. Indeed, the opposite is true – TWC encouraged the disastrous deregulation. TWC had 10 points of supposed consensus. Three of them are of greatest relevance to de Soto’s column and my response.

John Williamson is a deficit hyper-hawk with the Peterson Institute for International Economics. The Peterson Institute’s mission, if you are a supporter, is to save the Republic from an avalanche of debt by making major cuts to Social Security, etc. Williamson created the ten-point TWC in preparation for a November 1989 conference as a purported statement of consensus policies favored by economists in the U.S. government, IMF, and the World Bank as to how best to spur development in Latin America.

Three of Williamson’s points are of particular relevance to de Soto’s column and my response. In reviewing them, I discovered that Williamson, stung and embittered by the criticism of TWC, began to rewrite the original points. That would have been fine; of course, if what he was doing was changing his recommendations based on the facts. However, Williamson, and now de Soto, are passing off the revisionist points of the TWC as if they were Williamson’s original points when the actual TWC doctrines contradict the revisionism and caused catastrophic crises. I will also show (briefly) that this revisionism establishes the validity of a broader criticism of TWC by economists such as Luiz-Carlos Bresser Pereira (Brazil’s former finance minister) that most distresses Williamson.

Williamson has created a revisionist history for two TWC policies that are the subject of this column. 


“However, the main rationale for privatization is the belief that private industry is managed more efficiently than state enterprises, because of the more direct incentives faced by a manager who either has a direct personal stake in the profits of an enterprise or else is accountable to those who do. At the very least, the threat of bankruptcy places a floor under the inefficiency of private enterprises, whereas many state enterprises seem to have unlimited access to subsidies. This belief in the superior efficiency of the private sector has long been an article of faith in Washington (though perhaps not held quite as fervently as in the rest of the United States), but it was only with the enunciation of the Baker Plan in 1985 that it became official US policy to promote foreign privatization. The IMF and the World Bank have duly encouraged privatization in Latin America and elsewhere since.” 


“Another way of promoting competition is by deregulation. This was initiated within the United States by the Carter administration and carried forward by the Reagan administration. It is generally judged to have been successful within the United States, and it is generally assumed that it could bring similar benefits to other countries.”

“Productive activity may be regulated by legislation, by government decrees, and case-by-case decision making. This latter practice is widespread and pernicious in Latin America as it creates considerable uncertainty and provides opportunities for corruption. It also discriminates against small and medium-sized businesses which, although important creators of employment, seldom have access to the higher reaches of the bureaucracy.” 

Williamson made his TWC proposals at a time when the three “de’s” – deregulation, desupervision, and de facto decriminalization had created the criminogenic environment that unleashed the epidemic of accounting control fraud that drove the second phase of the S&L debacle. The debacle was widely described as the nation’s worst financial scandal and Williamson’s original TWC article mentions it but ignores the accounting control fraud and its ties to financial deregulation.

The original TWC did not recognize or warn of the risk of corrupt private parties (i.e., the CEOs running control frauds) that drive financial crises. TWC did the opposite; it provided strong, unambiguous support for deregulation. Indeed, he expressly argued that there was a consensus in Washington that deregulation, which had just caused the U.S.’s worst financial scandal in its history, was “successful.”  This supposed consensus on the success of deregulation ignores the severe crisis that the deregulation caused and the dramatic reregulation of the industry that we had implemented in 1983-86. It also ignores the adoption of the Financial Institution Reform, Recovery and Enforcement Act of 1989. FIRREA reregulated and “bailed out” the S&L industry. President Bush, who had chaired President Reagan’s Financial Deregulatory Task Force, had recognized the catastrophic error of the very consensus deregulatory policies that had led to the S&L debacle and drafted FIRREA to undue his errors. It is remarkable that Williamson presented a discredited deregulatory policy that had caused catastrophic losses and been repudiated by its leader as a desirable “consensus” policy that Latin America should adopt.

Williamson’s privatization discussion further confirms his fallacious theoclassical dogma that private elites could not be accounting control frauds and could not survive bankruptcy. The language he uses reveals the dogmatic nature of the consensus. He explains that it is “an article of faith” that the private sector is efficient (despite the S&L debacle) because of modern executive compensation and the discipline of bankruptcy. It is the combination of the powerfully perverse incentives produced by modern executive and professional compensation with the three “de’s” that combined to produce the criminogenic environments that drive our recurrent, intensifying financial crises.

Williamson’s failure to understand the multiple limits of bankruptcy’s limits in restraining financial crises driven by epidemics of accounting control fraud is total. First, individual accounting control fraud can delay bankruptcy for years and become massively insolvent through accounting fraud. Creditors do not discipline accounting control frauds – they fund their massive growth. Second, epidemics of accounting control fraud can hyper-inflate financial bubbles and simultaneously delay the collapse for many more years and cause the losses to become crippling. Third, once the fraud epidemic and bubble collapse bankruptcy is not stabilizing but systemically destabilizing.  Accounting control frauds, particularly if it hyper-inflates a bubble, can cause cascade failures as the losses they impose on their creditors can render them insolvent. Fourth, private sector banks, even investment banks with no deposit insurance, are frequently bailed out by the public sector when they are sufficiently politically connected or considered to be systemically dangerous institutions (SDIs) whose failures could trigger systemic collapses.

Here is how Williamson’s revisionist history of those same three points as he offered it on November 6, 2002. The title of the article shows that it was part of his effort to defend TWC: “Did the Washington Consensus Fail?”

8. Privatization. “This was the one area in which what originated as a neoliberal idea had won broad acceptance. We have since been made very conscious that it matters a lot how privatization is done: it can be a highly corrupt process that transfers assets to a privileged elite for a fraction of their true value, but the evidence is that it brings benefits when done properly.”

9. Deregulation. This focused specifically on easing barriers to entry and exit, not on abolishing regulations designed for safety or environmental reasons.”

I have no criticism of Williamson modifying his original 1989 views on privatization in a 2002 publication that acknowledges that he now has a better understanding of the risks of corruption causing privatization to become perverse. I fault him for claiming that his original statement of TWC covered only regulations restricting entry and exit. His 1990 paper does not limit his support of deregulation to easing entry barriers and it does not exempt safety and environmental rules. (I also fault him for not understanding that such regulations are essential to the safety of banking – easy entry poses critical risk.)

By April 22, 2009, Williamson had added to his historical revisionism in order to defend TWC from criticism that its policies had helped create the global crisis.

“Skeptics may also be inclined to point to the recommendation to deregulate. But in the days when Dan Quayle was Vice President I already made it clear that this was intended to endorse freeing entry and exit, rather than to advocate an absence of regulations intended to protect the consumer, or the environment, or to supervise the banking system. With that interpretation there is no contradiction.”

Williamson’s original TWC document did not “make it clear” that its deregulation recommendation excluded banking supervision.

Williamson is deeply embittered by criticisms of TWC. He refers to them as “foaming” at the mouth like rabid dogs. He dismisses economists who respect Keynes’ work as leftist cranks: “Left-wing believers in “Keynesian” stimulation via large budget deficits are almost an extinct species.” Williamson cites the following exchange as evidence that he had become a “global whipping boy” because he developed TWC.

“The other incident that I recall clearly occurred in Washington in 1993 but concerns a Brazilian, an ex-finance minister called Luiz-Carlos Bresser Pereira. He told me that just because I had invented the term, [that] did not give me the right to say what it meant. He still believes this and is still attacking it, as he told me two weeks ago when I was in Sao Paulo.”

Williamson thinks Bresser Pereira’s statement is obviously false, but the fact that Williamson has succumbed repeatedly to the temptation to improve his original statement of TWC via historical revisionism shows that Bresser Pereira’s warning to Williamson was correct. Williamson’s description of the means by which he determined the existence of a “consensus” also disqualifies him as the arbiter of judging what TWC really was.

“I looked around. I thought there was a broad agreement in Washington that these were good policies. And then I relied on the three people I asked to be discussants that spanned the range of ideological views in Washington: Allan Meltzer, Richard Feinberg and Stan Fischer. The most important reservation I got was from Feinberg, who thought I had misnamed it, that it should have been called the “Universal Convergence.””  

Think about Williamson’s exchange with Feinberg in late 1989. Williamson tells Feinberg that he thinks that there is a consensus in Washington, D.C. that a particular idea, e.g., deregulation is unambiguously good, and Feinberg responds that there isn’t a mere consensus – there’s universal agreement in favor of deregulation. Meanwhile, deregulation has just caused the U.S. to suffer its worst financial scandal, a scandal so severe that the President of the United States – formerly the leader of financial deregulation – changes his policies and reregulates the S&L industry. The top industry advocate of deregulation, Charles Keating of Lincoln Savings infamy, has been revealed to be a control fraud.  The S&L regulators have been reregulating for six years in a desperate effort to stem the epidemic of accounting control fraud. None of this penetrates the theoclassical bubble inhabited by Williamson and Feinberg. If the three economists Williamson chose as discussants truly “spanned the range of ideological views in Washington” then Washington has to start seeing other people. The narrow range of differences in the views of the scholars Williamson chose as his discussants for the conference made it easy for them to form a “consensus” and to conclude that all of “Washington” and “Latin America” shared that consensus. Williamson demonstrated his self-blindness with this conclusion:

“I submit that it is high time to end this debate about the Washington Consensus. If you mean by this term what I intended it to mean, then it is motherhood and apple pie and not worth debating.”

He thinks there really is a Universal Convergence in favor of theoclassical economic dogma and that his dogmas are universally good for the world and supported by all intelligent persons.

De Soto’s Revisionism about Property Rights 

De Soto’s column provides the revisionist interpretation of the tenth TWC point. Williamson originally phrased it this way:

Property Rights

“In the United States property rights are so well entrenched that their fundamental importance for the satisfactory operation of the capitalist system is easily overlooked. I suspect, however, that when Washington brings itself to think about the subject, there is general acceptance that property rights do indeed matter. There is also a general perception that property rights are highly insecure in Latin America (see, for example, Balassa et al. 1986, chapter 4).”

In 2002, Williamson used similar phrases to describe the tenth point.

“10. Property Rights. This was primarily about providing the informal sector with the ability to gain property rights at acceptable cost.”

Here is de Soto’s revisionism about the meaning of point ten of TWC. Note that under de Soto’s account of the facts, Bernanke is also guilty of historical revisionism about TWC. De Soto uncritically asserts that TWC was a great success in Latin America and that the U.S. needs to adopt TWC. Precisely the opposite was true – TWC’s policies deregulatory and privatization policies proved criminogenic in much of Latin America, just as they did in the U.S. S&L debacle. TWC led to such severe problems that electorates through most of Latin America have voted out of office TWC supporters. The U.S. crisis was driven by the criminogenic environment that TWC principles created.

 “Federal Reserve Chairman Ben Bernanke said recently that, given the ongoing credit contraction, “advanced economies like the U.S. would do well to re-learn some of the lessons” that have led to success among emerging market economies. Ironically, those economies in the 1990s accepted 10 points for promoting economic growth that were known as the “Washington Consensus.”  

Advanced nations seem to have forgotten Point 10 of that consensus: how important documenting assets and transactions is to the creation of credit. Consider that most private credit is made up not of bills and coins, anchored in bank reserves, but in papers that establish rights over the assets, equity and liabilities that guarantee loans. Over the past 15 years, however, as they package, bundle and resell securities, Americans and Europeans have gradually undermined the reliability of the records that guarantee or make credit trustworthy — the deeds, titles, liens and other documentation that establish who owns what and how much, and who holds the risks.  

Not having reliable information reduces confidence, which in turn leads to credit contractions, fewer or smaller transactions, and declines in demand. And these cause employment and the value of assets to fall.” 

I agree with de Soto that transparency is vital and that anti-fraud provisions are essential if markets are to approach efficiency. I also agree that government must provide these functions. Contrary to theoclassical economics’ predictions, when we forbade effective regulation of financial derivatives the result was not efficient markets, an optimal level of disclosures, financial stability, or the exclusion of fraud. Theoclassical dogma, as was the norm, proved to be false.

The problem is that TWC did not embrace transparency and effective financial regulation. It proposed the opposite – deregulation – and its proponents did not serve as vigorous proponents of effective financial regulation in the U.S. or in Latin America. Economists stress the reliability of “revealed preferences” – not self-serving statements after the fact that rewrite history. The revealed preferences of Williamson during the lead up to the crisis demonstrate that he did not understand and strive to counter criminogenic environments, the perverse incentives of modern executive and professional compensation, epidemics of control fraud, Gresham’s dynamics, the hyper-inflation of financial bubbles, or the collapse of effective financial regulation led at agencies run by anti-regulators.

De Soto is correct that Williamson should have made point 10 of TWC far broader, embracing effective regulation as an essential component of effective and stable markets, but he knows that Williamson did not do so. Instead, point 10 simply held that private parties should be able to own property. De Soto errs in praising Bernanke. Bernanke was a strong anti-regulator, consistent with TWC. He appointed Patrick Parkinson as head of all Fed supervision. Parkinson is an anti-regulatory economist with no real supervisory or examination experience. Parkinson was the Fed’s lead economist urging Congress to remove the CFTC’s statutory authority to regulate credit default swaps (CDS).The effort to squash CFTC Chair Born’s proposed rule restricting CDS succeeded and created a regulatory black hole that contributed greatly to systemic risk for the reasons de Soto explained in his recent column. De Soto is correct that regulation and effective markets are not mutually exclusive choices. Rather, financial markets are better able to remain effective when regulation provides the necessary transparency and reduces fraud risks. Financial deregulation in the U.S. and the EU was the enemy of effective markets, honest bankers, customers, and shareholders. The fact that Bernanke thinks that the theoclassical anti-regulatory dogma contained in TWC was the solution rather than the problem in the U.S. demonstrates that he has failed to learn the most basic lessons about the crisis.

Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.
Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.

Follow him on Twitter: @WilliamKBlack

The Divine Right of Bank Profits: A Reading from the Book of B of A

By William K. Black

Bank of America’s (B of A’s) customers are furious at B of A’s $5 monthlyfee on debit cards.  The normal business’mantra is: “the customer is always right.” B of A, however, is a Systemically Dangerous Institution (SDI), so it ison a heavenly plane transcending the normal rules of business, markets, ormorality.  For B of A, the customer isalways slight(ed).  “I have aninherent duty as a CEO of a publicly owned company to get a return for myshareholders,” Brian Moynihan said.

BofA chief: We have a ‘right to make aprofit’

Moynihan’s statement demonstrates two of the verities of the ongoingfinancial crisis.  First, the CEOs of ourSDIs are terrible bankers, but they are superb at standup.  Second, much of the business press is sobrain dead or sycophantic that it now plays the role of the Washington Generalsas the hapless faux opponents of theHarlem Globetrotters (the SDIs’ CEOs). None of the reporters asked Moynihan the obvious questions:

·     Is that “return for my shareholders” supposed tobe positive?
·     Given that you and your predecessor (Ken Lewis)combined to cause your shareholders a 90% loss on their investments – nearlyone-half trillion dollars, when can we expect your resignation and return ofyour compensation in accordance with your “inherent duty” to thoseshareholders?

I found myself davening in awe atMoynihan’s chutzpah.  Only a handful of CEOs in history haveravaged “my” shareholders worse than the Lewis/Moynihan tandem.  How he had the nerve to sing a hymn ofself-praise to his devotion to those shareholders – and how the business presslet him get away with his sanctimonious chorus – is beyond my Midwesternsensibilities.

Bankof America once stood for the “little fellows”

Today, “Bank of America” is only a name appropriated by anacquirer for its marketing value.  In1904, Mr. Giannini founded the Bank of Italy in San Francisco, California.  The Bank of Italy was a radical departurefrom traditional commercial banking.  Itspecialized in making loans to the Italian-American entrepreneurs that ran manysmall businesses in California and in serving working class customers, many ofthe recent immigrants. Giannini eventually changed its name to Bank of America.
The real B of A was acquired in 1998 by NationsBank, aCharlotte, North Carolina bank founded by Southern elites to cater to Southernelites.  NationsBank changed its name toBank of America because of marketing considerations, but its managers – basedin Charlotte – control B of A.  The B ofA that Giannini proudly boasted was created to serve “the little fellows” wastransformed by the Charlotte-based CEOs into a typical SDI. 

 Lewis and Moynihan’s “One-Two” Knockout Punchagainst B of A’s Shareholders

Moynihan is a lawyer. His annual base salary is around $2 million.  He is CEO because his predecessor exercisedhis “inherent duty … to get a return for my shareholders” by producing aspectacularly negative return.  Moynihanwas named B of A’s CEO on December 16, 2009, replacing Ken Lewis, whose 2007compensation was roughly $20 million. Lewis was the man of massive ego and minimal talent and ethics whodecided that what would ensure B of A’s winning the race to the moral bottomamong the SDIs was acquiring the most notorious lender in the world –Countrywide – in 2008 for $4.1 billion. Banking has such an exceptional sense of irony that he was named “Bankerof the Year” in 2008.  If he had admittedto being a pedophile, would they have named him Banker of the Decade?     

B of A’s latest closing share price was $5.90 (10/7/11) v.the closing price of $15.10 on December 16, 2008 when Moynihan was namedCEO.  Endemic criminal conduct by B of Ain the mortgage foreclosure process, combined with the massive accounting fraudinherent in Countrywide’s operations combined to cause a loss of slightly over60% to the B of A shareholders. Moynihan’s claim that B of A’s losses were caused by the Dodd-Frank Actare false and pathetic.  If a juniorteller refused to accept responsibility for her $50 cash error and offered sucha lame excuse blaming others Moynihan would fire her on the spot. 

On September 4, 2004, the FBI testified in open session before Congressabout an “epidemic” of mortgage fraud and predicted that it would cause afinancial “crisis” if it were not stopped. Countrywide because the epicenter of this epidemic, which was allowed torage and cause the ongoing U.S. financial crisis and the Great Recession.  On the first trading day (September 6, 2004)after the FBI’s testimony gave B of A’s managers (particularly Lewis andMoynihan) ample notice of the risk of endemic mortgage fraud, the closing pricefor B of A shares was $43.61.  From thatdate, B of A stock lost slightly over 85% of its value because of Lewis andMoynihan’s leadership. On May 24, 2006, the Mortgage Bankers Association (MBA)got around to sending to each of its members the 8th Periodic Report(dated April 2006) of its anti-fraud specialist contractor (MARI).  MARI reported that stated income loans were“an open invitation to fraudsters,” had a fraud incidence of “90 percent,” andthat “the stated income loan deserves the nickname used by many in theindustry, the ‘liar’s loan.’”  On the daythe MBA warned each of its members of this endemic fraud B of A’s stock priceclosed at $48.48.  The current stockprice represents nearly an 88% loss from May 24, 2006. 

These stock prices and percentage losses come from B of A’s site.  B of A, according to its most recent financial report, has 10.13 billionshares outstanding.  Using that figure,the loss to B of A’s shareholders from the three dates I have discussed (the2004 FBI warning, the 2006 MBA/MARI warning, and the date on which Moynihan wasappointed CEO) to the most recent close was, respectively, over $426 billion,$480 billion, and  $103 billion.  (See this source for shares outstanding.)

In plainer English, B of A’s CEOs have led the bank in amanner that has wiped out around 90% of the shareholders value – a loss ofnearly a half trillion dollars.  Lewisleft B of A as a wealthy man despite destroying shareholder wealth at aprodigious rate.  Moynihan is being madeever wealthier despite continuing that destruction of shareholder value. 

Worse, the destruction was avoidable.  It was ego, incompetence, and moral blindnessthat caused Lewis to acquire Countrywide and Merrill Lynch.  Both were notorious – before B of A acquiredthem – for their suicidal lending and investing.  It was Moynihan’s incompetence and moralblindness that allowed B of A to commit tens of thousands of felonies in thecourse of foreclosing through perjury on those who were often the victims ofCountrywide’s underlying fraudulent mortgages. Moynihan and Lewis are fitting leaders of the 1% (actually the top0.0001%). 

Don’tforget about Hans-Olaf Henkel – B of A’s Racist Adviser for Germany

On February 6, 2010 I sent“AnOpen Letter to Dr. Walter E. Massey Chairman,Bank of America President, emeritus, Morehouse College” regarding “Hans-OlafHenkel, Bank of America’s Senior Advisor in Germany.”  I have never received a response to thisletter, though Randy Wray and I did receive a response from a B of Arepresentative to another article we did on B of A’s foreclosure fraud.  I am not aware of any U.S. reporter followingup on the points I made in that letter. My web search indicates that Herr Henkel is still B of A’s senior Germanadviser.  Few Americans know HerrHenkel.  He is the most prominentbusiness elite in Germany and perhaps all of Europe.  His racist views, which I note below, arewell known to B of A’s senior officials throughout Europe.

Here are the two takeawayson B of A’s choice of senior advisers. He blames the U.S. economic crisis on the end of “redlining” – making itillegal to discriminate against blacks in housing finance.  Henkel’s open racism and embrace of fantasyabout the causes of the U.S. crisis instead of facts demonstrates the kind ofadvice B of A is receiving. 

Henkel also explicitlyembraced (using a German phrase meaning “without any quibble”), the followingbigoted rants Dr. Sarrazin (then a member of Germany’s central bank):    

DrThilo Sarrazin, a member of the executive board and head of the bank’s riskcontrol operations, told Europe’s culture magazine Lettre International thatTurks with low IQs and poor child-rearing practices were “conqueringGermany” by breeding two or three times as fast.

A large number of Arabs andTurks in this city, whose number has grown through bad policies, have noproductive function other than as fruit and vegetable vendors.
 Forty per cent of all birthsoccur in the underclasses. Our educated population is becoming stupider fromgeneration to generation. What’s more, they cultivate an aggressive andatavistic mentality. It’s a scandal that Turkish boys won’t listen to femaleteachers because that is what their culture tells them. 

I’drather have East European Jews with an IQ that is 15pc higher than the Germanpopulation. 

It is an obscenity that abank that was formed to loan money to small, immigrant entrepreneurs of anoften hated religion (Catholicism), particularly Italian “fruit and vegetablevendors” is now choosing as its “senior adviser” in Germany a man who embracesthe vilest hates and lies that caused so much world misery.  Of course, this is modern German racismvariant in which Turks are so bad that even Jews (G-D forbid!) are preferable.

Here is how I ended my openletter:

Mr.Henkel is not simply a bigot.  Hissubstantive policy advice – deregulation and far higher executive compensation– makes him one of the principal German architects of the crisis.  He gave Bank of America awful advice. 

ButMr. Henkel’s saddest trait is hypocrisy. He is a serial hypocrite because his bigotry trumps the things hepurports to stand for.  His speakerbureau bio (self) describes him as “courageous.”  (He applauds Mr. Sarrazin’s screed asexemplifying courage.)  In the policycontext, courage is speaking truth to power when power does not want to hearthose truths.  Mr. Henkel flatters powerthrough the gospel of Social Darwinism. Mr. Henkel claims to be the champion of the “entrepreneur” – but treats“fruit and vegetable” entrepreneurs with contempt.  Mr. Henkel denounces “smears” against the“market system” but launches, and cheers, the vilest smears that have producedthe most monstrous crimes against humanity in world history.

Bankof America must not simply announce some face saving retirement (particularlyone thanking him for his service and paying him severance).  Bank of America needs to make a clearstatement about what it stands for.  DoesMr. Giannini or Mr. Henkel represent Bank of America?

Ioffer the following recommendations for your board’s consideration.  Mr. Henkel should be terminated for cause.  Immediately. Bank of America should review all policy advice it has received from himand his team and seek outside guidance from experts that (1) foresaw thecrisis, and (2) are not bigots.  Bank ofAmerica should review why its senior managers in Europe and the United Statestook no action while its “senior advisor” spread his hate for months.  Bank of America should announce a new $10million scholarship program for college and graduate students of limited financialmeans.  I suggest naming the program theGiannini awards. 

Given B of A’s failure totake any timely action even after my open letter made clear the urgent need toget rid of Henkel, I now urge B of A to fund the Giannini awards at a level of$100 million annually.  (That’s abouthalf the aggregate compensation B of A paid Ken Lewis for destroying hundredsof billions of dollars in shareholder value and ruining the lives of millionsof defrauded home borrowers.)

I urge the protestorsoccupying Wall Street and other financial centers to demand that B of A fireits racist-in-chief adviser, help the homeowners it defrauded, and stop allforeclosure fraud.  I ask businessreporters to rediscover their canines. Get a good grip, don’t let go, and tear into the real “mobs” that areattacking the American economy – the accounting control frauds likeCountrywide. 

Bill Black is an Associate Professor of Economics and Law atthe University of Missouri-Kansas City. He is a white-collar criminologist, a former financial regulator, andthe author of The Best Way to Rob a Bankis to Own One.  He can now befollowed on Twitter:  @WilliamKBlack

How I tracked down The Market

By Dr. Gal Noir*
I have been working as an undercover investigator of hijackedeconomic truths for many years. It doesn’t pay much, I work long hours, but Isleep well at night. It is the nagging questions that help me get up in themorning and do what I do. What is the economy for? Where has the middle classgone? Why have manufacturing jobs fled the US? Why is CEO-to-worker pay ratio471:1 in the US, while it is only 20:1 in Canada?  Why haven’t we wiped out unemployment once andfor all? No, really. Permanently! Why do we have child hunger, mass poverty,and stunning income inequality in the richest country in the world? Andeverywhere I turn, I keep getting the same answers: “Because The Market said so! Because this is how The Market works. Because these are thelaws of The Market.”