Monthly Archives: November 2014

Another Dose of Prosecutorial Discretion

Here’s a footnote to my recent post on prosecutorial discretion. Of course, the Grand Jury verdict not to indict Darren Wilson in Ferguson was a product of prosecutor McCulloch’s decision to perform a non-directive prosecution accompanied by a “jury dump” without benefit of clear guidelines and instructions. This had the predictable result that the jury would carry on its own trial, not only absent vigorous prosecution, but by all accounts a prosecution that played more of the role of a defense attorney then a representative of law enforcement prosecuting a crime.

The way McCulloch proceeded in the case is almost never done by prosecutors and it illustrated perfectly the contrast between prosecution for me, and discretion for thee, the very mark of a legal system that is broken, failing to produce equal justice for all, under the law. This is perfectly acceptable to many Americans when it is not their ox that is being gored. So, we recently heard thunderous recriminations from the right over the President’s executive orders on immigration, but perpetual loud silence about the IRS’s failure to enforce the law prohibiting tax exemptions for claimed 501 (c) (4) organizations that are not exclusively engaged in social welfare activities. Now, we’re seeing rage against a prosecutor who obviously fixed an unjust outcome in a prosecution he did not want to engage is at all. The rage is justified, of course, and there are many lessons we can draw from Ferguson, but surely one of them is that we need to limit prosecutorial discretion. It gives prosecutors far too much power to ‘fix’ justice, which in various ways they do all the time.

The NYT Thinks Jailing the Banksters Would Cause a “Bind

By William K. Black
San Francisco California: November 24, 2014

Peter Henning, in his self-bowdlerized Dealbook feature he branded as “White Collar Watch” (note his deletion of the word “crime”) has come up with an article that illustrates that the New York Times is clueless about bank regulation. The good news is that once the fundamental error in their understanding of banking regulation is corrected the supposed dilemma that the Henning claims has placed the NY Fed in a terrible “bind” disappears. The title of Henning’s November 24, 2011 article has morphed during the course of the day into “Fed’s New ‘Cop on the Beat’ Role Put it in a Bind.” The title exemplifies three fundamental errors. First, the role of federal financial regulators as “regulatory cop on the beat” is not “new.” It has always been our paramount role as financial regulators. Second, Henning’s columns was prompted by William Dudley, the NY Fed’s President’s testimony before a Senate banking committee subcommittee in which he expressly refused to function as the “cop on the beat” our Nation vitally needs. Third, were Dudley to embrace the role of “cop on the beat” and perform it properly he and our Nation would escape the desperate “bind” we are in – not create a “bind.” Henning’s article tries to support the three errors encapsulated in his title in the reverse order, which I will track.

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How NPR Was Conned by Geithner into Censoring My Criticisms

By William K. Black
San Francisco, CA:  November 23, 2014

In December 2013 NPR interviewed me about one the great disgraces of the Obama administration – its refusal to prosecute either the officers or HSBC for laundering roughly $1 billion over the course of the decade for Mexico’s Sinaloa drug cartel.  The NPR story doesn’t name the cartel or inform the listener that it is one of the world’s most violent drug cartels, or that HSBC also routinely violated the money laundering laws on transactions involving tens of trillions of dollars, and covered up its numerous violations of U.S. sanctions on Iran and Burma.

The original NPR story presented my comments on Treasury’s opposition to brining criminal charges.  Those comments were subject to what NPR labeled a “clarification” which meant they were removed from the program.

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Dudley Do Wrong Rejects Being a “Cop” and Embraces “Foaming the Runways”

By William K. Black
San Fransisco, CA: November 22, 2014

William Dudley, the President of the NY Fed, is not a stupid man. He is, however, wholly unfit to be a regulator. He has now admitted that publicly. It is time for him to return to Goldman Sachs so that he can be replaced by someone expressly chosen to be a vigorous regulator who will embrace the most critical function of a financial regulator – to be the tough “regulatory cop on the beat.”

The story of Dudley’s ineptness has been mirrored by the New York Times’ inept coverage of the failures of one of the reporter Peter Eavis’ favorite sons on Wall Street. Eavis is a Brit with a B.A. in international history and politics. He has also been a pastor. He co-authored the epically incoherent column on the NY Fed’s most recent scandal, the leaking of confidential information by a NY Fed employee to a former NY Fed employee who had joined Goldman Sachs. I criticized that column in my November 20, 2014 article and provided some of the key missing facts and analytics.

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Prosecutorial Discretion: Plenty for Me; But None for Thee

Republican “strategists,” Party functionaries, and Congresspeople, are saying, with considerable emotion and rage, that the President’s Executive Order allowing undocumented immigrants goes beyond presidential authority under the Constitution in the areas of law enforcement and prosecutorial discretion, claiming that he must enforce the law without bias, in a manner consistent with his oath to uphold the Constitution. They’ve made similar claims in relation to his decision to delay for one year the requirement that employers with over 50 employees provide health care coverage or pay penalties, and have now gone to court to get relief from this “horrible” action relieving the financial burden on one of the Republicans supposed favorite constituencies, non-small businesses.

On the other hand, the President’s unwillingness to investigate, prosecute and seek convictions against: Continue reading

MMT and the Next Growth Cycle

By Thornton Parker

Discussions on this forum generally treat MMT in isolation rather than in the context of other forces that drive an economy.   In Japan, for example, the sales tax increase to reduce the government’s deficit is widely seen as a recent cause of its lagging economy. But a bit of history shows a different picture.

At the end of World War II, the country was decimated. Many of its young men were dead; its industries and cities were in ruins; its people were humiliated and overwhelmed by two atomic bombs; even its religion was repudiated. An island nation, it had no local friends, little fuel, and almost no raw materials. The only thing it was rich in was poor people.

Most western economists believed it was destined to remain a basket case indefinitely. But the Japanese rejected that assessment, saying if that was what conventional economics predicted, they would invent their own economics. And they did just that.

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Note to Dudley: Everyone Questions the NY Fed’s Motives – For Good Reasons

By William K. Black
San Francisco, CA: November 20, 2014

The NY Fed and Goldman have combined again to produce fingers scraping on a moral blackboard. The story is – not – told coherently in a NY Times piece.

I’ll comment on only two aspects of the incoherent story. First, contrary to the NYT portrayal of the story, there is typically no ambiguity about whether regulatory information is confidential and there was no ambiguity about the particular information that we read (albeit, not in the NYT) that the NY Fed employee leaked to his former colleague after he joined Goldman Sachs.

Second, the NY Fed’s head, William Dudley’s, response to the latest scandal was “I don’t think anyone should question our motives.” I will argue that given the NY Fed’s intolerable institutional conflicts of interest, and the defense of continuing that conflict by the NY Fed’s leadership, e.g., Dudley, everyone should the regional Feds’ motives.

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Cochrane Demands that the Public Unilaterally Disarm while the Banksters Loot

By William K. Black
San Francisco, CA: November 19, 2014

(I’m participating in the annual meeting of the American Society of Criminology. I presented Wednesday on a panel honoring the 75th anniversary of Edwin Sutherland’s announcement of the concept of white-collar crime.)

 

John Cochrane has written an article with an initial sentence that should spark broad agreement: “confiscating wealth is ultimately about political power.” The banksters who led the frauds that caused the financial crisis “confiscate[ed]” immense wealth from the public and “their” firms’ customers, creditors, and shareholders. They did so with nearly complete impunity, which is “ultimately about political power,” indeed it defines the extraordinary nature of their power. The banksters’ confiscation of wealth has caused a dramatic increase in inequality, which has exacerbated the banksters’ domination of the levers of power. In a prior article, Cochrane stated that the financial crisis was driven by runs on financial institutions and that the runs were typically driven by elite accounting fraud.

“Not for nothing have most runs been sparked by an accounting scandal or fraud.”

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The New York Times Misses the Irony of Austerity and Economic Illiteracy

By William K. Black

The New York Times published a story by Liz Alderman dated November 17, 2014 entitled “As Japan Falls Into Recession, Europe Looks to Avoid It.” The article begins with a burst of (unattributed) economic illiteracy.

“Japan looked like the model for economic revival. Growth was back on track. The stock market was surging. Inflation, which had eluded Japan for decades, was even returning.

But Japan’s grand economic experiment, a combination of fiscal discipline and monetary stimulus, is collapsing. On Monday, the country unexpectedly fell into recession, a downturn that has painful implications for the rest of the world.

Japan’s unorthodox strategy was supposed to offer a road map for other troubled economies, notably Europe. Fiscal belt-tightening and tax increases, while leaning on the central bank to pump money into the economy, was expected to help overcome a malaise.”

In a prior column I gave mock praise to Alderman because after editorializing for eurozone austerity for years in her columns she finally admitted that “many economists” criticized those policies. I cautioned, however, that the NYT reporters, including Alderman, assigned to cover the eurozone “are austerians to the core.” Here comments about Europe and Japan prove my point. First, Japan did not look like “the model for economic revival” when it endorsed austerity through sharp increases in its sales tax. It looked like a model for a gratuitous recession. The stock market surge and moving towards achieving desirable levels of modest inflation occurred in part in response to the fiscal stimulus that the new Japanese government decided to replace with fiscal austerity. But other government policies were more important in explaining these results – and explaining why they were artificial. By announcing the rise in the sales tax from five to eight percent in advance the government spurred a sharp increase in consumption of durable goods prior to the increase. By moving government funds from safer investments to stock purchases the government spurred a rise in the stock market.

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Standard Chartered Is Outraged That It Is Treated Like A Criminal For Its Criminal Acts

By William K. Black

After a decade of committing tens of thousands of felonies that the U.S. government believes helped fund terrorism and Iran’s development of nuclear weapons, having the great fortune of settling the cases without any senior officers being prosecuted or its license to operate in the U.S. being pulled, having immediately violated the settlement agreement by lying about its prior actions, being discovered to have mislead the U.S. during the settlement negotiations, and being found to have continued to violate the same U.S. laws after entering into the settlement, one might think that Standard Chartered’s leaders would learn to keep their mouths shut and to obey the law at least until the settlement agreement restrictions lapse. Standard Charter’s senior leadership, however, is composed of the most arrogant and entitled class. When the bank’s Chairman of the Board is “Sir John Peace” entitlement (but no longer noblesse oblige) comes naturally. So, instead of mea culpa, the Standard Chartered mantra is: how dare you criticize us?

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