The War against the Regulatory Cops on the Bank Beat

Will no one rid me of the accursed examiners?

The Wall Street Journal has long led the struggle against freer more efficient markets. Whatever its rhetoric, its policies favor crony capitalism. The latest example is the July 23, 2012 article: by Francesco Guerrera entitled “Too Many Cops on the Bank Beat.”

He begins the article with this question, which foreshadows the alternate reality the article inhabits. Bank examiners are not nannies and bankers are not children. The metaphor demonstrates the author’s lack of seriousness.

The article is repeatedly unclear, but his claim is that we have too many bank examiners. Here is what he thinks the bank examiner’s job is.

“I am not, of course, referring to the diaper-changing, lullaby-singing types. The financial baby sitters I have in mind wear suits, sit in cubicles and pore over spreadsheets.”

Examiners look at spreadsheets, but so do supervisors. Spreadsheets are easy to look at in the home office. Examiners’ add the greatest value when they talk to bankers of all levels, examine non-computerized documents, particularly loan and investment files, and inspect the real estate securing loans. Examiners evaluate managers’ candor, competence, and credibility. They develop expertise about markets, particularly for real estate. They ask tough questions, documents the answers, and challenge the answers by asking the vital follow-up questions and demanding supporting documentation.

Guerrera proposes to eliminate bank examiners. He views examiners as “an anachronism.”

“They are almost unheard of in other sectors. And they are fast becoming an anachronism that should be ended or at least sharply downsized.”

He proposes to replace them with office supervisors’ “stress tests” that analyze “hard data.”

“The success of recent “stress tests” of banks’ capital buffers has sparked a debate inside the Fed over the merits of these sectorwide, number-crunching exercises versus the traditional oversight that focuses on specific banks and on-site probes.

As Fed governor Daniel Tarullo told me: “Prudential regulators certainly need to maintain a presence at the largest bank-holding companies. But I think we may need to devote more of our supervisory resources to data-driven, comparative assessments of capital, liquidity and other conditions in these firms.”

This approach has the advantage of relying on hard data, making it more difficult for banks to hoodwink regulators through obfuscation or malice. It would also produce results that, unlike examiners’ assessments, are public and easily comparable by investors.

And, by reducing the number and the importance of on-site examiners, it would do away with the misleading notion that the banking system can be kept safe by dozens of people who “get their coffee, sit in their offices, and…don’t work for us,” as Goldman Sachs Group Inc. chief Lloyd Blankfein once put it.

The time has come to wean bankers off their nannies.”

The illusion that information supplied by banks constitutes reliable “hard data”

The idea that a Federal Reserve Governor who came from a non-regulatory background, is unlikely to have ever been part of an examination, and rarely works with examiners is the expert on conducting examinations should be facially preposterous. I will explain why when you know where Tarullo was getting his advice about examinations it is even more preposterous. The premise that stress tests have been shown to be “success[ful]” is delusional. The following entities failed catastrophically shortly after passing stress tests with flying colors: Fannie, Freddie, AIG, Lehman, AIG, the Big 3 Icelandic banks, and a series of Spanish banks. Fannie and Freddie described their stress test as being so extreme that they represented a “nuclear winter” scenario. The European stress tests deliberately excluded the banks’ exposure to sovereign risk – their greatest risk. The U.S. stress tests were a pure propaganda exercise designed to mislead the public. They ignored the banks’ massive unrecognized losses – their greatest risk. The Fed allowed our largest banks to conduct their own stress tests. We were all shocked to find that the banks passed their own tests. My students are jealous.

Banks frequently do not provide regulators with reliable “hard data.” Problem banks virtually never do so. They provide the regulators with data that overstate assets and liquidity and understate liabilities. They lie to their shareholders, creditors, employees, customers, and counter-parties. Accounting control frauds create the perverse incentives that ensure that the “independent professionals” they hire are not independent and do not provide reliable hard data. Appraisals, borrowers’ income, and net worth are grossly inflated and risk is dramatically understated by banks and their agents and professionals – appraisers, loan brokers, auditors, credit rating agencies, and their employees who construct and run their financial models.

Epidemics of accounting control fraud and the bubbles they hyper-inflate are the Achilles’ heel of econometrics, neo-classical economic theory, and neo-classical praxis. They all become perverse in the control fraud context. Accounting control fraud is a “sure thing” – it is guaranteed to lead to record reported (albeit fictional) income in the near term. This causes econometric studies to report mythical results. Whatever business practices best aid accounting fraud will have the strongest positive correlation with reported income – until the frauds collapse and the true (negative) “sign” of the correlation between accounting fraud and income emerges in the “hard data.” The real sign of the correlation emerges far too late for effective supervisory intervention and policy reforms that could end the criminogenic environment. During the critical years that the fraud epidemic and bubble could be stemmed, econometric studies based on “hard data” will support the worst possible policies. They will suggest that all is well – the frauds are highly profitable. Economists will argue that the agency should encourage the business practices that optimize accounting fraud. When there is an epidemic of accounting control fraud, econometricians will be the last to recognize idiosyncratic and systemic risk. Bank examiners will, as always, produce the earliest warnings of idiosyncratic and systemic risk and failures.

Any regulator who believes that the numbers provided by banks and their non-independent professionals are “hard data” is a regulator who will fail catastrophically. Believing that fiction is fact fits into two of the Fed’s greatest weaknesses – it relies on economists and econometrics to drive supervision and policy. The Federal Reserve economists believe in the perennially falsified economic dogma of markets that automatically exclude fraud.

The LIBOR and HSBC scandals simply confirm that the largest banks in the world will repeatedly violate the law and lie if they believe they can get away with it. The only entity that should consistently have the incentive to tell senior regulators the truth about problem and fraudulent banks are the examiners. Similarly, banks with honest senior leaders should love the independence of examines. Blankfein is right about examiners – they “don’t work for us.” That is why they are uniquely valuable. Examiners routinely speak truth to power. The author has no clue how rare and how valuable that is to an honest bank’s senior managers, to senior regulators, and the nation. The author also has idea how threatening a trait it is to the CEO running a control fraud.

Examiners (like Rangers) lead the way

Are examiners capable of spotting problems before they become disasters? Yes. George Akerlof and Paul Romer chose the following passage as the last paragraph of their 1993 article on accounting control frauds (“Looting: the Economic Underworld of Bankruptcy for Profit”) in order to emphasize the point they felt it was essential for economists to understand.

“Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself.”

The “regulators in the field who understood what was happening from the beginning” were the examiners. Doubling the number of examiners (to roughly 1500) who conduct field examinations (not “resident” examiners based at large banks – who invariably “marry the natives”) was the best investment we ever made as S&L regulators and was one of our highest priorities. Effective regulation comes from getting the facts – and judgments. The people in the field are closes to the key facts. Data provided by the industry is frequently false when it is provided by control frauds. Examiners are essential for kicking the tires and serving as the regulatory cops on the beat.

Akerlof and Romer were being polite about the economists. They did not give us “lukewarm support” in our struggle to protect the nation from the epidemic of S&L control fraud – they were our leading opponents. We, the leadership of the regulatory agency, believed our examiners. We used their findings about the nature and role of what criminologists now call “accounting control fraud” to establish the fraud “markers” that we could use to identify the frauds while they were still reporting record profits. We used those markers to demonstrate to judges and juries that the senior officers were engaged in fraud, not honest risk-taking. We also used our examiners’ findings to shape our re-regulation of the industry. We targeted the accounting control frauds’ Achilles’ heel by restricting growth. The growth rule led to the collapse of the frauds we were unable to close because we lacked the funding.

Examiners proved far ahead of anyone else in spotting the risks of nonprime lending. Our regional examiners began to warn urgently in 1990 that several Orange County, California S&Ls were engaged in grossly imprudent nonprime mortgage lending. We were the regional regulators with jurisdiction over California S&Ls and we responded to our examiners’ findings by using our normal supervisory powers in 1990-1991 to successfully drive these unsafe loans out of the industry before they caused any financial crisis. By examining the terrible cost of the ongoing crisis we can finally appreciate the extraordinary value of the S&L examiners’ success in identifying the risks of nonprime loans in 1990-1991.

Similarly, it was the OCC examiners, who examine national banks, who got liar’s loans correct in the current crisis. The FCIC report discloses that by 2005:

“The OCC was also pondering the [nonprime lending] situation. Former comptroller of the currency John C. Dugan told the Commission that the push had come from below, from bank examiners who had become concerned about what they were seeing in the field.

The agency began to consider issuing “guidance,” a kind of nonbinding official warning to banks, that nontraditional loans could jeopardize safety and soundness and would invite scrutiny by bank examiners. [Federal Reserve supervisor] Siddique said the OCC led the effort, which became a multiagency initiative” [FCIC 2010: 21].

The anti-regulators refused to act on the examiner’s warnings and findings

The “multiagency initiative” against nonprime lending was a joke. It relied on deliberately unenforceable “guidelines.” Greenspan and Bernanke continued to refuse to use the Federal Reserve’s unique statutory authority under HOEPA to ban loans they knew were endemically fraudulent “liar’s loans” [id.]. Like the federal S&L examiners in 1983, the OCC examiners in 2005 got it right about liar’s loans. The examiners can never ensure that the supervisors and regulators will take the necessary actions. The Bush administration, like most Clinton appointments as senior regulators, overwhelmingly appointed regulators because they were fierce opponents of regulation. They refuse to take effective regulatory, enforcement, and prosecutorial actions on the basis of the facts that the examiners documented. Those facts demonstrated an urgent need for the regulatory banks on liar’s loans. Dugan, Greenspan (and his successor Bernanke), Reich (the OTS director who was busy not regulating S&Ls), and even the FDIC refused to take effective action in response to the examiners’ findings. The WSJ author complained of the regulator acting like a “nanny.” That term comes closest to describing regulatory guidelines. They are as useless as incessantly urging one’s two-year old not to throw the Cheerios on the floor rather than taking them away from him when he throws them on the floor incessantly.

Why were the Federal Reserve, FDIC, and OTS examiners so ineffective in the ongoing crisis? First, none of them had the jurisdiction to examine the shadow bankers who made the overwhelming majority of fraudulent liar’s loans. Second, the Federal Reserve had the authority to examine the banks and bank affiliates who made and funded liar’s loans and Governor Gramlich and Federal Reserve examiners urged Greenspan to do so. He refused to allow the examiners to find the facts about nonprime lending [FCIC 2010: 95-96]. When examiners were finally given permission to make a limited review of mortgage lending by five of the systemically dangerous banks (by sending a request for information to five of the largest banks) they documented the astonishing danger. The largest banks were making enormous amounts of liar’s loans and the loans were frequently “layered risk” loans involving all the practices we have known for over a century produce greater losses. The supervisors briefed Greenspan on their findings and he, the senior economists, and some of the Federal Reserve Bank presidents were enraged – at the supervisors, who they personally attacked – for daring to criticize the largest banks [FCIC 2010: 172-173, 21]. Richard Spillenkothen, the Federal Reserve’s long-serving head of supervision, described in a lengthy written statement to the FCIC a similar example where the same usual suspects reacted to a supervisory briefing he had arranged on the disgraceful role the systemically dangerous banks played in aiding and abetting Enron’s accounting frauds by becoming enraged at the supervisors. Spillenkothen noted that the extreme reaction of the economists caused the supervisors to be reluctant to bring bank abuses to their attention. Spillenkothen also explains that the Federal Reserves’ desupervision produced what agency insiders and the industry called “Fed Lite” supervision.

The FDIC examiners did not have primary jurisdiction over more than a handful of the significant nonprime lenders. They were hamstrung during the crisis from using their “backup” jurisdiction by the extreme cuts in FDIC staffing (more than three-quarters from their peak staffing in the 1990s), the use of “early out” financial incentives to induce early retirements by the most expensive (and experienced) personnel, their sister agencies’ hostility towards the FDIC examining “their” institutions, and the MERIT examination system. MERIT is an acronym for a euphemism – Maximum Efficiency, Risk-Focused, Institution Targeted Examinations. The reality is that these were “exam-lite” procedures that led to ineffective examinations of smaller banks by the FDIC.

The OTS had the most extreme desupervision. The picture of “Chainsaw” Gilleran working hand in glove with the industry lobbyists to destroy S&L deregulation is the iconic image of the U.S. crisis. (See the 2003 annual report of the FDIC – they were proud to be industry hacks.) The OTS examiners often documented problems, but all you need to know is that the agency took the most notorious professional anti-regulator in America as a result of his actions in support of Charles Keating (who led the most infamous S&L control fraud) and promoted him multiple levels to be their most senior (anti) regulator for Countrywide, WaMu, and IndyMac. Collectively, this axis of evil made hundreds of thousands of fraudulent liar’s loans. The senior OTS anti-regulator (1) convinced Countrywide to change from OCC to OTS (non) regulation, (2) agreed with IndyMac that it could file false financial statements, and (3) overrode all examiner concerns and continued to allow Countrywide, WaMu, and IndyMac to make hundreds of thousands of fraudulent liar’s loans.

Economists and econometrics fail because they treat the frauds’ lies as “hard data”

It was the economists and supervisors in the regulatory offices who relied on the industry’s “hard data” and their economic dogmas and fantasies under which accounting fraud can be (implicitly) assumed out of existence who got this crisis so wrong. They got all the prior crises wrong for the same reason and they will get future crises wrong.

The regulatory officials who get our recurrent crises so wrong that their policies create the criminogenic environments that cause those crises to reoccur and grow massively larger are economists. They believe that information provided by banks and the banks’ agents are “hard data.” They dismiss facts found by the examiners and reported by honest appraisers and brokers as “merely anecdotal.” It is economists who purport that they employ “modern”, “sophisticated”, and “empirical” methodology (i.e., econometrics) and disparage examiners as “anachronisms” because they study facts. Econometricians, however, when they rely on information provided by banks often rely on anti-facts. Econometricians have consistently demonstrated an inability to distinguish between factual and anti-factual banking data. They rarely even discuss the risk of accounting fraud and implicitly assume it does not occur. Greenspan provided a classic example of this failure, opining that Charles Keating’s Lincoln Saving “posed no foreseeable risk of loss.” It was the most expensive S&L failure.

The faux stress tests that failing banks repeatedly pass with flying colors are the creation of economists. As President of the Federal Reserve Bank of New York, where he was supposed to regulate many of our largest banks, Timothy Geithner’s speeches concerning regulation present one solution for every regulatory concern – stress tests. He claimed that the SDIs had superb stress tests and were in wonderful shape – as they purchased and resold millions of fraudulent loans.

Federal Reserve economists were the principal, visceral opponents of efforts by Federal Reserve supervisors to convince the Governors to take action against the many large banks that aided and abetted Enron’s frauds and the endemically fraudulent liar’s loans that drove the ongoing crisis. Federal Reserve economists then acted as the principal, vociferous opponents of supervisory proposals to use the Federal Reserve’s unique statutory authority under the Home Ownership and Equity Protection Act of 1994 (HOEPA) to prohibit lenders from making endemically fraudulent liar’s loans.

Federal Reserve economists did not simply block vital reregulation. They were the partisans for the deregulation and desupervision of banks. They pushed the adoption of rules that emasculated the Glass-Steagall Act and then for the Gramm-Leach-Bliley Act which essentially repealed the law that had proven so successful in reducing abuses and failures. The Federal Reserve economists then turned to encouraging Congress to create a regulatory black hole prohibiting anyone to regulate credit default swaps (CDS). These three efforts occurred in the Clinton administration.

During the Bush administration, the Federal Reserve economists led the Basel II effort, over the opposition of the agency’s supervisors, to dramatically reduce the largest banks’ capital requirements. The Federal Reserve’s supervisors would never win a fight over capital requirements against the Board’s economists. Fortunately, the FDIC’s culture is dominated by examiners and supervisors instead of economists. The FDIC fought a tenacious and moderately successful rearguard action against the Federal Reserve economists who led the insane Basel II effort to radically reduce the SDIs’ capital requirements, allowing the obscene leverage that helped hyper-inflate the real estate bubbles, turbo charged the accounting control frauds, and massively increased failures and losses. European regulators engaged in such a crippling competition in laxity with each other and the U.S. that there was no equivalent of the FDIC to resist the Basel II insanity. The result was that large European banks had capital requirements roughly half as large as the American SDIs. This allowed them to have leverage ratios twice as large as American banks. Doubling leverage is likely to more than double losses because the risks arising from increased leverage do not grow linearly.

Basel II’s radical reduction in the SDIs’ capital requirements was premised on the myth that their proprietary financial models provided “hard data” on their assets, liabilities, and risk exposure.

“In a 2003 speech, Fed Vice Chairman Roger Ferguson praised “the truly impressive improvement in methods of risk measurement and management and the growing adoption of these technologies by mostly large banks and other financial intermediaries” [FCIC 2010: 53].”

The reality is that SDI models typically produced asset and risk valuations that were “marked to fantasy” in order to maximize executive compensation and hide risks and losses from creditors, shareholders, counter-parties, and regulators. Economists at the Federal Reserve consistently evinced the most extreme suspension of disbelief in this tragicomic theatre of the absurd. As with John F. Kennedy’s joke about Washington, D.C., the financial models combined Southern efficiency and Northern charm. They also added a dash of the opposite of Latin American “magic realism.” Latin American novelists employ magical motifs to uncover a deeper realism about the most important aspects of the human condition. The financial models were examples of “magical unrealism” – constructed on a foundation of fantasy assumptions designed by the shallowest of individuals to routinely tell the shallowest of lies for the shallowest of purposes. The culture worshipped money. The culture was so banal that even the concept of evil disappeared. Read the emails in which the Barclays traders discuss their fraudulent Libor submissions and trades. They know that they are engaged in fraud and that it is important that the public not learn that they are manipulating Libor, but there is not even a hint that integrity, reputation, or law should impose any restraint on their engaging in fraud if doing so will increase their wealth.

It was simple for the senior officers to create the perverse compensation incentives that ensured that the callow traders and “quants” would routinely violate the law. This is not to say that there are no honest traders. The key points are that the SDIs do not need every trader, appraiser, or auditor to be willing to violate the law or aid and abet such violations. A relatively small percentage of dishonest traders, appraisers, or auditors can produce endemic fraud. Over time, the most honest employees will tend to leave the most fraudulent operations.

The Federal Reserve supervisors suffered the inevitable penalty for their good deeds in attempting to alert the agency to the developing crisis. Their sin was embarrassing the Federal Reserves’ leadership, its economists, and the ideological dogmas both groups shared. In 2009, Bernanke appointed Patrick M. Parkinson, a Federal Reserve economist who had no examination or supervision expertise, to head supervision. Greenspan used Parkinson to take the lead in pushing Congress to adopt the Commodities Futures Modernization Act of 2000, which removed any regulatory power by the CFTC over credit default swaps (CDS). Parkinson assured Congress that CDS would pose no supervisory concerns because financial markets self-correct if they are examined and supervised. CDS, of course, proved disastrous. Parkinson’s record of getting the most important economic and supervisory issue he ever dealt with as wrong as it is possible to get an issue wrong led Bernanke to appoint him as the agency’s top regulator. Bernanke then displayed a British sense of humor by explaining that he appointed Parkinson because he was an economist, not a supervisor or examiner, which would make the agency more multidisciplinary. No federal agency is more dominated by economists – and performs so badly because of that domination – than the Federal Reserve. Parkinson’s appointment assured Bernanke that he would never have to hear the unfiltered views of pesky supervisors. The single most appalling revelation of the Financial Crisis Inquiry Commission is that on both occasions that the Federal Reserves’ supervisors asked for an opportunity to brief the Governors and senior staff about severe supervisory dangers the Governors and senior economists came away from the meeting enraged – at their supervisors – for criticizing the largest banks for aiding fraud. What better way to prevent any repetition of hearing such criticism than to appoint one of the economists most notorious for embracing the myth that the biggest banks do no wrong as the top supervisor.

Parkinson led the farce that was the stress tests and then retired after failing abjectly as a pseudo-supervisor. Note that Bernanke, in praising Parkinson upon his retirement, did not claim that he had taken effective supervisory action against any of the systemically dangerous institutions (SDIs).

“Pat has been an exemplary leader, helping to build a more multidisciplinary and analytical approach to supervision and regulation, including instituting annual capital planning and stress tests for major financial institutions and helping to forge strong international agreements on bank capital through his participation on the Basel Committee….”

It does not appear to have even entered Bernanke’s contemplation that a real supervisor would take a useful supervisory action against an SDI rather than allowing them to conduct sham stress tests designed to as propaganda.

“[Michael S.] Gibson is an economist who began his career at the Federal Reserve in 1992 in the Banking Section of the Division of International Finance. He moved to the Trading Risk Analysis Section in the Division of Research and Statistics in 1999 and was selected chief of that section in 2000.”

Gibson was chief of “Trading Risk Analysis Section” from 2000 throughout the crisis. Among the Federal Reserve’s copious regulatory failures, its failure to understand the enormous increase in idiosyncratic and systemic trading risk is surely one of its most complete and destructive failures. Bernanke the failed regulator and economist has chosen a failed economist (Gibson) who lacks the requisite skills, experience, and mindset to be an effective supervisor to replace a failed economist (Parkinson) who became a failed pseudo-spervisor because he lacked the requisite skills, experience, and mindset. The Federal Reserve’s concept of merit is distinctive. It should now be clear why Governor Tarullo told the WSJ author that:

“Prudential regulators certainly need to maintain a presence at the largest bank-holding companies. But I think we may need to devote more of our supervisory resources to data-driven, comparative assessments of capital, liquidity and other conditions in these firms.”

When Tarullo, who had no prior experience as an examiner or supervisor, seeks advice on examination and supervision from the Federal Reserve’s top “supervisor” he is getting advice from failed economists posing as supervisors. They, inevitably, tell him that econometric studies are the key to effective supervision because such studies are “data-driven.” Except, of course, the “data” are self-reported by the banks and are anti-facts when there are accounting control frauds. The fact that the Federal Reserve’s top pseudo-supervisors are telling Tarullo that the agency should reduce its use of examiners to find facts and should rely even more than the Federal Reserve already does on faux “data” provided by the banks demonstrates how little they understand about bank examination, fraud, and data. The fact that Tarullo believes the failed economists turned pseudo-supervisors demonstrates that examination still strives unsuccessfully to be even a tertiary priority at the Federal Reserve.

The anti-regulators won prior wars on examiners – and produced recurrent disasters

Neither the WSJ author, Tarullo, nor whatever failed economist is telling Tarullo that information provided by the industry constitutes “hard data” is aware that we have heard this refrain before. President Reagan’s task force on financial deregulation, chaired by Vice President Bush, recommended cutting the number of examiners and relying primarily on data provided by the banks and S&Ls. The Reagan administration immediately cut the number of S&L regulators. The results were disastrous. California and Texas cut dramatically the number of their S&L examiners and supervisors. The results were disastrous.

The nonprime industry did something analogous. They reduced their reliance on loan underwriters and substitute reliance on automatic underwriting systems. These were grotesquely unsophisticated systems that typically ignored and facilitated fraud by the lenders and their agents. They were invariably called “sophisticated” systems. Their testing was farcical. To ensure the worst of both worlds, the fraudulent lenders’ managers could always override the automatic underwriting system and use “exception” authority to approve the worst loans. Countrywide was a classic example of a faux automatic underwriting system surrounded by tens of thousands of flaky exceptions. The results were disastrous. Experienced human underwriters invariably found copious bad nonprime mortgage loans. The fraudulent lenders (and purchasers) treated underwriters who displayed competence and integrity as the enemy. The results were disastrous.

The FDIC and the OTS cut the number of their examiners and sought to rely far more on the data provided by the industry. The results were disastrous. The Basel II economists who encouraged the SDIs and their regulators to rely on the SDIs’ proprietary models believed that doing so would allow “sophisticated” banking and regulatory decisions to be made on the basis of “hard data” that were far more reliable than examiners. The results were disastrous.

I doubt that there are five economists in the world who know this consistent history of disastrous failure. The chance that the pseudo-supervisors advising Tarullo knows of the failed history of efforts to substitute reliance on industry-supplied information as “hard data” for the judgment and expertise of examiners is nil.

Bernanke’s latest excuse for appointing econometricians as his top pseudo-supervisor is “systemic risk.” Bernanke is right to worry about systemic risk given his abject failure in recognizing it. Examiners are vital for identifying systemic risk at the earliest possible juncture. They have by far the best track record in identifying such risks. Econometricians are the worst possible group to rely on in spotting systemic risk precisely because they assume away fraud and treat anti-facts supplied by the control frauds as if they were “hard data.”

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