Tag Archives: Financial crisis

Scotland Should Reject Independence and Form a Joint Football Team with England?

By William K. Black

I’ve explained in prior columns that the groups opposing Scotland reclaiming its independence have been feverishly switching from threats to bribes as the polls on the likely vote on independence became a toss-up.  My favorite proposed bribe was suggested by “Lord Prescott” – a Labor “Peer.”

“Lord Prescott also suggested a combined England and Scotland football team.

‘Perhaps if England and Scotland together had one team, we could at last beat the Germans – who knows?’ he said.”

Continue reading

Three Passages From Akerlof & Romer’s 1993 Article That Should Have Prevented The Crisis

By William K. Black

This is the first installment of a series of articles about the media, finance industry, political, and Department of Justice (DOJ) reaction to Michael Lewis’ new book about high frequency trading (HFT).  The media ballyhooed the book as if it were an amazing revelation of a fact of surpassing importance.  The industry demonized the book and Lewis.  DOJ immediately announced it had begun a criminal investigation and the SEC it had multiple investigations pending.  Whether the industry or Lewis is correct about HFT practices (which he asserts are lawful) is unimportant for some purposes.  My series will focus on the difference between the frenzied DOJ, political, and media reaction to Lewis’ criticism of allegedly lawful HFT practices and the “yawn” reaction of these same groups to the vastly more damaging criminal frauds runs by our elite financial leaders that caused the financial crisis is astronomical, ludicrous, and disastrous.  Similarly, the reaction of these three groups to the finding by multiple investigations that 16 of the largest banks in the world committed crimes by setting LIBOR rates through frauds and cartels (the largest cartel, by several orders of magnitude, in history) was less than a yawn, as I described in prior articles.

Continue reading

Ten Lessons We Must Learn from Charles Keating

By William K. Black

I knew Charles Keating, the head of Lincoln Savings, in my capacity as a financial regulator and as the subject of his wrath.  His fraud schemes and the manner in which they targeted our system’s vulnerabilities in an era before Citizens United made the corruption of politicians by fraudulent CEOs child’s play remain the play book for the world’s most destructive financial frauds.  Our failure to learn the ten lessons has caused immense suffering.  Keating’s life, and the great harm he caused, will not have been in vain if we step back and use the occasion of his death to reflect on the changes we need to make.

Continue reading

Warren Mosler’s talk in Chianciano, Italy, January 11, 2014

By Alexandria J E Angus

Warren Mosler gave this talk in Chianciano, Italy, on January 11, 2014 at the Chianciano Conference entitled Oltre L’Euro: La Sinistra. La Crisi. L’Alternativa. In English: Beyond The Euro: The Left. The Crisis. The Alternative [Google translation]. The video is embedded below, but you have to listen to a realtime translation in Italian, which doubles the listening time. I thought this talk important enough to transcribe, if not deliciously subversive on the part of Warren Mosler who offers Italians a way to save their economy. The transcription follows below the video.

Mosler describes how Italy (or any of the 17 EU countries that use the Euro) can leave the European Union safely if the EU persists, as it insists on doing, in impoverishing their country and citizens.

The subheads in blue are mine, not Mosler’s, and are designed to assist reading. Some terms Mosler refers to in the body text relate specifically to the Italian economy, and I can’t identify them because I don’t know their Italian names.

Enjoy.

Continue reading

Arnold Kling’s Cunning Hairdresser Theory of the Financial Crisis

By William K. Black

Arnold Kling is a libertarian economist who once worked for Freddie Mac.  This article discusses a blog and an article he wrote about the causes of the crisis.  Both (unintentionally) illustrate key theoclassical economic positions critical to understanding the origins of the crisis.  Kling’s blog was in response to a January 29, 2013 post by Thomas J. Sugrue.  Sugrue provided data demonstrating that blacks and Latino homeowners suffered far greater wealth losses in the crisis than did whites.  This upset Kling, who responded:

Continue reading

Creating Effective Regulation is the Imperative Issue at the Federal Reserve

By William K. Black
(Cross posted at Benzinga.com)

The only positive aspect of the public contest to pick a successor for Ben Bernanke that the White House has inexplicably sparked is that economists are acknowledging that the next head of the Fed must act to create (not “restore”) effective regulation by the agency.  It is long past time to have a serious discussion about the collapse of regulation by the Fed.  In this column I make the first of what will become four points.  First, the consequences of the Fed’s regulatory collapse have proven catastrophic for our Nation.  Second, the Fed’s supervisory structure inherently creates a conflict of interest identical to the one that existed in the Savings and Loan (S&L) debacle until Congress and the President decided the conflict was intolerable and eliminated it in 1989.  Third, the supervisory culture of the Fed ensures recurrent supervisory failure – and the Fed’s economists are largely responsible for these failures.  Fourth, the Fed’s economists’ dogmas and ignorance of fraud mechanisms have combined to create to create intensely criminogenic environments.  The Fed does not simply fail to prevent the epidemics  of control fraud that cause our recurrent, intensifying financial crises – its policies are so perverse that they aid the fraud epidemics.

Continue reading

The New York Times is Wowed that Obama’s Six Rubinites Support Larry Summers

By William K. Black

The Obama administration, for reasons that pass all understanding, has been running a campaign of leaks disparaging one of Obama’s few senior female appointees, Janet Yellen.  Her high crimes include not being a protégée Bob Rubin and doing exceptionally well in economic forecasting.  Rubin wants the job of Fed Chair to go to his top protégée, Larry Summers.  Yellen, as Vice Chair of the Fed stands in the way of Rubin’s ambitions.  (Rubin is too toxic to take the Chair directly.)  The administration has been leaking primarily to the New York TimesBinyamin ApplebaumHis latest article contains this remarkable statement, without analysis.

Continue reading

Two Sentences that Explain the Crisis and How Easy it Was to Avoid

By William K. Black

Everyone should read and understand the implications of these two sentences from the 2011 report of the Financial Crisis Inquiry Commission (FCIC).

“From 2000 to 2007, [appraisers] ultimately delivered to Washington officials a petition; signed by 11,000 appraisers…it charged that lenders were pressuring appraisers to place artificially high prices on properties. According to the petition, lenders were ‘blacklisting honest appraisers’ and instead assigning business only to appraisers who would hit the desired price targets” (FCIC 2011: 18).

Those two sentences tell us more about the crisis’ cause, and how easy it was to prevent, than all the books published about the crisis – combined.  Here are ten key implications.

Continue reading

The Truthseeker: Looting of America

NEP’s William Black and Stephanie Kelton appear on RT’s Truthseeker. This episode focuses on the looting of America.

 

The latest failed effort to blame the Community Reinvestment Act for Accounting Control Fraud

By William K. Black
(Cross posted at Benzinga.com)

Introduction

The latest effort to blame the Community Reinvestment Act (CRA) for the epidemic of accounting control fraud that drove the crisis is an econometric study by Sumit Agarwal, Efraim Benmelech, Nittai Bergman, and Amit Seru (“the authors”) (“ABBS 2012”).  The study does not prove its thesis.  The fact that the authors claim it proves causality makes obvious their controlling biases.  Their title is “Did the Community Reinvestment Act (CRA) Lead to Risky Lending?”  Their abstract answers: “Yes, it did.”  They claim that their econometric study proves causality – which is impossible given their methodology.  The authors were taught from their freshman years that an econometric study of this nature could not prove causality.  Errors this basic and embarrassing demonstrate the crippling grip of the authors’ biases.

Continue reading